Sumer Corporation vs Vijay Anant Gangan

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 7774 OF 2022 (@ SLP (C) No. 16019 of 2020)

Sumer Corporation …Appellant(s)

Versus

Vijay Anant Gangan & Ors. …Respondent(s)

JUDGMENT

M.R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned order passed

by the High Court of Judicature at Bombay dated 05.11.2020 in Civil

Revision Application No. 357 of 2017 by which while admitting the

revision application preferred by the contesting respondents herein –

original revisionists against the judgment and decree passed by the

Appellate Bench of the Court of Small Causes at Mumbai and while

staying the judgment and decree passed by the Appellate Bench, the

High Court has directed the respondent No. 1 - original revisionist to Signature Not Verified

deposit Rs. 2,50,000/- per month towards the compensation / mesne Digitally signed by NIRMALA NEGI Date: 2022.11.09 17:25:04 IST Reason:

profit, the original lessor has preferred the present appeal.

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2. At the outset, it is required to be noted that the property in question

is situated in Worli area of Mumbai, which is in the heart of the city, at a

very prominent place. The land on which the superstructure is

constructed by the lessor was leased by the lessee by Lease Deed

dated 16.08.1949 for a period of 30 years. The original lessee erected a

building comprising of ground and four upper storeys, known as

“Garment House”. In front of the “Garment House”, there were two

chawl-like structures having about 20 tenements. According to the

original plaintiffs – lessors, on or about 22.01.1968, after the death of the

original lessor, his legal heirs entered into a supplementary indenture of

lease permitting the original lessee to demolish the old structures

standing on the property and erect new structures. The duration of the

supplementary lease was for a period of 98 years commencing from

01.02.1968.

2.1 On or about 01.04.1987, the original lessee died. The original

lessee executed a last will and testament creating inter alia a charitable

trust and appointing the appellant herein and one Amritlal Gordhandas

Jajal as executors and trustees. That thereafter in or about 1988, the

eviction proceedings were initiated. By judgment and decree dated

25.06.2004, the Trial Court dismissed the suit. The decree was

challenged by the original plaintiffs before the Appellate Bench of the

2 Court of Small Causes. During the pendency of the appeal, one Sumer

Corporation, claiming to be a transferee of the suit property from the

legal heirs of the original lessors by a registered deed of conveyance,

applied for joinder to the appeal. By its judgment and order dated

04.05.2017, the Appellate Bench of the Small Causes Court allowed the

appeal and set aside the decree passed by the Trial Court and decreed

the suit ordering eviction of the defendants (including the original

revisionist).

2.2 Being aggrieved, the contesting respondents herein – original

revisionist has filed the revision application before the High Court.

During the pendency of the Civil Revision Application (CRA), the

appellant – Sumer Corporation applied for impleadment and was added

as respondent No. 19 to the CRA.

2.3 At this stage, it is required to be noted that the appellant herein –

Sumer Corporation, respondent No. 19 before the High Court is claiming

to have right, title and interest in the suit property (lease) pursuant to the

deed of conveyance executed in the year 2008 for a sale consideration

of Rs. 5.50 crores.

2.4 By the impugned order, while admitting the revision application

preferred by the original revisionist, who is aggrieved of the decree

3 passed by the Appellate Bench of the Small Causes Court and while

staying the eviction decree passed by the Appellate Bench, the High

Court has directed the original revisionist to deposit Rs. 2,50,000/- per

month towards compensation as a condition of stay. The High Court has

further directed the original revisionist to furnish a security for the arrears

of compensation payable from 02.04.2018 and till the date of the

impugned order and a sum of Rs. 77,55,000/- as by deposit of a fixed

deposit receipt of like amount endorsed in favour of the Registrar

General of the High Court at Bombay. The High Court has further

directed that the aforesaid compensation shall be payable w.e.f. the date

of passing of the order by the Court, i.e., on or before 10 th day of each

succeeding month beginning from December 2020.

2.5 Feeling aggrieved and dissatisfied with the impugned order of

interim compensation, the original respondent No. 19 has preferred the

present appeal.

3. Shri C.U. Singh, learned Senior Advocate appeared on behalf of

the appellant and Shri Shekhar Naphade, learned Senior Advocate has

appeared on behalf of the contesting respondent – original revisionist.

Shri Siddhartha Dave, learned Senior Advocate has appeared on behalf

of some of the respondents, who also claim right, title and interest in the

property in question.

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4. Shri C.U. Singh, learned Senior Advocate appearing on behalf of

the appellant has vehemently submitted that in the facts and

circumstances of the case, the High Court has committed a very serious

error in directing the original revisionist to deposit the compensation @

Rs. 2,50,000/- per month only while staying the judgment and order

passed by the Appellate Bench.

4.1 It is vehemently submitted by Shri C.U. Singh, learned Senior

Advocate appearing on behalf of the appellant that the method adopted

by the High Court while determining the monthly compensation is

untenable and unsustainable. It is submitted that the High Court has

determined the monthly compensation by considering the amount paid

by the appellant for the purchase of the property in question, i.e.,

Rs. 5.50 crores and considering 6.5% return.

4.2 It is submitted that market value of the property at which the lessor

and/or its subsequent purchaser acquired the property could not be the

basis for fixing the monthly compensation. It is submitted that as per the

settled position of law, the valuation of the property on the date of decree

can be the relevant consideration for the purpose of determining the

monthly compensation.

5 4.3 Relying upon the decision of this Court in the case of Atma Ram

Properties (P) Ltd. Vs. Federal Motors (P) Ltd., (2005) 1 SCC 705

(para 19), it is vehemently submitted by Shri C.U. Singh, learned Senior

Advocate appearing on behalf of the appellant that as observed by this

Court while passing an order of stay, the Appellate Court does have

jurisdiction to put the applicant on such reasonable terms as would in its

opinion reasonably compensate the decree-holder for loss occasioned

by delay in execution of decree by the grant of stay order, in the event of

the appeal being dismissed. It is further submitted that as observed by

this Court the tenant is liable to pay mesne profits / compensation for

use and occupation of the premises at the same rate at which the

landlord would have been able to let out the premises and earn rent if

the tenant would have vacated the premises. The landlord is not bound

by the contractual rate of rent effective for the period preceding the date

of the decree.

4.4 It is submitted by Shri C.U. Singh, learned Senior Advocate

appearing on behalf of the appellant that in the present case, the

appellant produced and relied upon the valuation report of one

Mr. Maniyar, who worked out the monthly compensation on the basis of

the value of the property. It is submitted that as per the Valuation Report

of Mr. Maniyar, the compensation could have been arrived at

6 Rs. 67,76,038/- per month. It is submitted that, however, ignoring the

detailed Valuation Report, of Mr. Maniyar, the High Court has

determined a very meagre amount towards compensation, i.e., Rs.

2,50,000/- per month with respect to the lands located in the heart of the

city - at Worli and which is in the prime location. It is submitted that

therefore, fixing the compensation at Rs. 2,50,000/- per month with

respect to such a huge land situated in the prime location would be

unreasonable and therefore the same is liable to be interfered with by

this Court.

4.5 Shri C.U. Singh, learned senior counsel appearing on behalf of the

appellant has submitted that the decision of this Court in the case of

Atma Ram Properties (P) Ltd. (supra) has been subsequently followed

by this Court in the case of State of Maharashtra and Anr. Vs. Super

Max International Private Limited and Ors., (2009) 9 SCC 772. It is

submitted that in the subsequent decision in the case of Super Max

International Private Limited and Ors. (supra), this Court has again

reiterated the law laid down in the case of Atma Ram Properties (P)

Ltd. (supra).

4.6 Making above submissions, it is prayed to allow the present

appeal.

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5. Shri Shekhar Naphade, learned Senior Advocate appearing on

behalf of the respondent No. 1- original revisionist has while opposing

the submissions made on behalf of the appellant has submitted that the

power of the Appellate Court to award the compensation while staying

the decree of eviction is not disputed. However, he has submitted that

the compensation, which may be awarded shall be reasonable and may

not be excessive, even as observed by this Court in the case of Atma

Ram Properties (P) Ltd. (supra) and Super Max International Private

Limited and Ors., (supra). It is submitted that in the present case, the

superstructure has been constructed by the lessee and only the land

was leased. It is submitted that the decree has been passed with

respect to the land and not with respect to the superstructure. It is

submitted that therefore while fixing the monthly compensation, the

aforesaid aspect is required to be borne in mind.

5.1 It is submitted that in the present case, by giving a detailed

reasoning, the Hon’ble High Court has discarded and/or not believed the

valuation report of Mr. Maniyar, relied upon by the appellant. It is

submitted that while determining compensation @ Rs. 67,76,038/-, the

valuer has relied upon and had taken into consideration the Ready

Reckoner rate of the land with applicable permissible FSI. It is submitted

that thereafter and after discarding the valuation report relied upon by 8 the appellant, considering the fair rate of return on the amount invested

by the appellant @ 6.5% per annum comes out to Rs. 19,50,000/-.

Therefore, the Hon’ble High Court has rightly determined the monthly

compensation @ Rs. 2,50,000/-, which can be said to be a reasonable

monthly compensation, which is not required to be interfered with by this

Court.

5.2 Making above submissions, it is prayed to dismiss the present

appeal.

6. Shri Siddhartha Dave, learned Senior Advocate appearing on

behalf of the proforma respondent, who was also claiming some right,

title and interest in the property in question has supported the appellant.

7. Having heard the learned Senior Advocates appearing on behalf of

the respective parties and having gone though the impugned order

passed by the High Court determining the monthly compensation @

Rs. 2,50,000/-, we are of the opinion that the approach adopted by the

High Court is not a sound principle of law to form the basis for

determining the compensation in this case. In the present case, while

determining the monthly compensation, the High Court has considered

the fair rate of return @ 6.5% annually on the amount for which the

appellant purchased the property in the year 2008, i.e., Rs. 5.50 crores.

9 The aforesaid could not have been the basis while determining the

monthly compensation. If the approach adopted by the High Court is

accepted and/or approved, in a given case, it may happen that the

lessor might have purchased the property forty years back and/or long

back and if the said approach is considered and thereafter the monthly

compensation is determined, the same cannot be said to be a

reasonable compensation. The aforesaid would be contrary to the law

laid down by this Court in the case of Atma Ram Properties (P) Ltd.

(supra) and further reiterated by this Court in the case of Super Max

International Private Limited and Ors., (supra).

7.1 As observed and held by this Court in the case of Atma Ram

Properties (P) Ltd. (supra), from the date of the decree of eviction, the

tenant is liable to pay mesne profits or compensation for use and

occupation of the premises at the same rate at which the landlord would

have been able to let out the premises and earn rent if the tenant would

have vacated the premises. The landlord is not bound by the contractual

rate of rent effective for the period preceding the date of the decree. 7.2 The decision in the case of Atma Ram Properties (P) Ltd.

(supra) has been subsequently followed by this Court in the case of

Super Max International Private Limited and Ors., (supra). In the

said decision, it is further observed and held that in fixing the amount

10 subject to payment of which the execution of the order/decree is stayed,

the Court would exercise restraint and would not fix any excessive,

fanciful or punitive amount. Therefore, in a revision / appeal preferred

by the tenant, who has suffered an eviction decree, the appellate /

revisional court while staying the eviction decree can direct the tenant to

pay the compensation for use and occupation of the tenancy premises

upon the contractual rate of rent and such compensation for use and

occupation of the premises would be at the same rate at which the

landlord would have been able to let out the premises and earn rent if

the tenant would have vacated the premises. In the present case, the

High Court has not done that exercise and has determined the

compensation considering the market value / value at which original

respondent No. 19 acquired the rights of the suit property for a sum of

Rs. 5.50 cores and thereafter, considering estimated return @ 6.5% per

annum, the High Court has determined/awarded the compensation for

use and occupation of the premises by the tenant @ Rs. 2,50,000/- per

month. The aforesaid method adopted by the High Court while

determining the compensation cannot be accepted. The High Court was

required to undertake exercise and to determine the compensation at the

same rate at which the landlord would have been able to let out the

premises and earn rent if the tenant would have vacated the premises.

11 7.3 Under the circumstances, the matter is to be remanded to the High

Court for fresh determination of the compensation for use and

occupation of the premises by the tenant, who has suffered the eviction

decree, during the pendency and the final disposal of the revision

application by the High Court.

8. In view of the above and for the reasons stated above, the present

appeal succeeds in part. The impugned judgment and order passed by

the High Court determining the compensation for the use and occupation

of the premises by the tenant @ Rs. 2,50,000/- per month is hereby

quashed and set aside. The matter is remitted back to the High Court to

determine the compensation for the use and occupation of the premises

in question by the tenant / lessee afresh and taking into consideration

the observations made hereinabove. For that purpose, the parties may

be permitted to lead the evidence on the rate of rent that would have

been earned by the landlord / lessor, if the lessor would have been able

to let out the premises and earn rent if the tenant would have vacated

the premises. The aforesaid exercise be completed within a period of

six months from the date of the receipt of the present order. Till a fresh

decision on remand is taken by the High Court, by way of interim

arrangement and subject to further decision that may be taken by the

High Court on remand, we direct the respondent No. 1 to deposit the

12 compensation at-least @ Rs. 2,50,000/- per month from the date of

passing of the eviction decree, however, as observed hereinabove, the

same shall be subject to the final decision / determination of

compensation on remand.

Present appeal is accordingly partly allowed to the aforesaid

extent. No costs.

………………………………….J. [M.R. SHAH]

NEW DELHI; ………………………………….J. NOVEMBER 09, 2022. [M.M. SUNDRESH]

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