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CASE NO.:

Appeal (civil) 7988 of 2004

PETITIONER:

M/s. Atma Ram Properties (P) Ltd.

RESPONDENT:

M/s. Federal Motors Pvt. Ltd.

DATE OF JUDGMENT: 10/12/2004

BENCH:

CJI R.C. LAHOTI & G.P. MATHUR

JUDGMENT:

J U D G M E N T

[Arising out of S.L.P.(C) No.6415 of 2002]

R.C. Lahoti, CJI

Leave granted.

The suit premises are non-residential commercial premises

admeasuring approximately 1000 sq. ft. and situated in

Connaught Circus, New Delhi. The premises are owned by the

appellant and held on tenancy by the respondent on a monthly

rent of Rs.371.90p. per month. The tenancy had commenced

sometime in the year 1944 and it appears that ever since then

the rent has remained static. Admittedly, the provisions of the

Delhi Rent Control Act 1958, (hereinafter 'the Act', for short) are

applicable to the premises.

Sometime in the year 1992, the appellant initiated

proceedings for the eviction of the respondent on the ground

available under Clause (b) of sub-Section (1) of Section 14 of

the Act alleging that the respondent had illegally sublet the

premises to M/s. Jay Vee Trading Co. Pvt. Ltd. and the sub-

tenant was running its showroom in the premises. Vide order

dated 19.3.2002, the Additional Rent Controller, Delhi held the

ground for eviction made out and ordered the respondent to be

evicted. The respondent preferred an appeal under Section 38 of

the Act. By order dated 12.4.2001, the Rent Control Tribunal

directed the eviction of the respondent to remain stayed but

subject to the condition that the respondent shall deposit in the

Court Rs.15,000/- per month, in addition to the contractual rent

which may be paid directly to the appellant. The deposits were

permitted to be made either in cash or by way of fixed deposits

in the name of the appellant and directed to be retained with the

Court and not permitted to be withdrawn by either party until

the appeal was finally decided. Raising a plea that the

respondent could not have been directed during the pendency of

the proceedings at any stage to pay or tender to the landlord or

deposit in the Court any amount in excess of the contractual rate

of rent, the respondent filed a petition under Article 227 of the

Constitution putting in issue the condition as to deposit

Rs.15,000/- per month imposed by the Tribunal. By order dated

12.2.2002, which is impugned herein, the learned single Judge

of the High Court has allowed the petition and set aside the said

condition imposed by the Tribunal. The effect of the order of the

High Court is that during the pendency of appeal before the

Tribunal the respondent shall continue to remain in occupation of

the premises subject to payment of an amount equivalent to the

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contractual rate of rent. Feeling aggrieved, the landlord

(appellant) has filed this appeal by special leave.

Ordinarily this Court does not interfere with discretionary

orders, more so when they are of interim nature, passed by the

High Court or subordinate Courts/Tribunals. However, this

appeal raises an issue of frequent recurrence and, therefore, we

have heard the learned counsel for the parties at length.

Landlord-tenant litigation constitutes a large chunk of litigation

pending in the Courts and Tribunals. The litigation goes on for

unreasonable length of time and the tenants in possession of the

premises do not miss any opportunity of filing appeals or

revisions so long as they can thereby afford to perpetuate the

life of litigation and continue in occupation of the premises. If

the plea raised by the learned senior counsel for the respondent

was to be accepted, the tenant, in spite of having lost at the

end, does not loose anything and rather stands to gain as he has

enjoyed the use and occupation of the premises, earned as well

a lot from the premises if they are non-residential in nature and

all that he is held liable to pay is damages for use and

occupation at the same rate at which he would have paid even

otherwise by way of rent and a little amount of costs which is

generally insignificant.

Shri K. Ramamurthy, the learned senior counsel for the

appellant submitted that once a decree or order for eviction has

been passed, the tenant is liable to be evicted and if he files an

appeal or revision and opts for retaining use and occupation of

the premises, he should be prepared to compensate the landlord

by paying such amount as the landlord would have been able to

earn in the event of the premises being vacated and, therefore,

the superior court, passing an order of stay, acts well within its

discretionary jurisdiction by putting on terms the appellant who

seeks an order of stay. On the other hand, Shri Ranjit Kumar,

the learned senior counsel appearing for the respondent,

defended the order of the High Court by raising several pleas

noticed shortly hereinafter.

The order of eviction passed by Rent Controller is

appealable to the Rent Control Tribunal under Section 38 of the

Act. There is no specific provision in the Act conferring power on

the Tribunal to grant stay on the execution of the order of

eviction passed by the Controller, but sub-Section (3) of Section

38 confers the Tribunal with all the powers vested in a Court

under the Code of Civil Procedure, 1908 while hearing an appeal.

The provision empowers the Tribunal to pass an order of stay by

reference to Rule 5 of Order 41 of the Code of Civil Procedure

1908 (hereinafter 'the Code', for short). This position was not

disputed by the learned senior counsel appearing for either of

the parties.

Sub-Rule (1) and (3) of Rule 5 of Order 41 of the Code

read as under:-

"R.5 Stay by Appellate Court

(1) An appeal shall not operate as a stay

of proceedings under a decree or order

appealed from except so far as the Appellate

Court may order, nor shall execution of a

decree be stayed by reason only of an appeal

having been preferred from the decree; but the

Appellate Court may for sufficient cause order

stay of execution of such decree.

Xxx xxx xxx xxx

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(3) No order for stay of execution shall

be made under sub-rule (1) or sub-rule (2)

unless the court making it is satisfied ___

(a) that substantial loss may result to the

party applying for stay of execution

unless the order is made;

(b) that the application has been made

without unreasonable delay; and

(c) that security has been given by the

applicant for the due performance of

such decree or order as may ultimately

be binding upon him.

xxx xxx xxx xxx"

It is well settled that mere preferring of an appeal does not

operate as stay on the decree or order appealed against nor on

the proceedings in the court below. A prayer for the grant of

stay of proceedings or on the execution of decree or order

appealed against has to be specifically made to the appellate

Court and the appellate Court has discretion to grant an order of

stay or to refuse the same. The only guiding factor, indicated in

the Rule 5 aforesaid, is the existence of sufficient cause in favour

of the appellant on the availability of which the appellate Court

would be inclined to pass an order of stay. Experience shows

that the principal consideration which prevails with the appellate

Court is that in spite of the appeal having been entertained for

hearing by the appellate Court, the appellant may not be

deprived of the fruits of his success in the event of the appeal

being allowed. This consideration is pitted and weighed against

the other paramount consideration: why should a party having

succeeded from the Court below be deprived of the fruits of the

decree or order in his hands merely because the defeated party

has chosen to invoke the jurisdiction of a superior forum. Still

the question which the Court dealing with a prayer for the grant

of stay asks to itself is: Why the status quo prevailing on the

date of the decree and/or the date of making of the application

for stay be not allowed to continue by granting stay, and not the

question why the stay should be granted.

Dispossession, during the pendency of an appeal of a party

in possession, is generally considered to be 'substantial loss' to

the party applying for stay of execution within the meaning of

clause (a) of sub-rule (3) of Rule 5 of Order 41 of the Code.

Clause (c) of the same provision mandates security for the due

performance of the decree or order as may ultimately be passed

being furnished by the applicant for stay as a condition

precedent to the grant of order of stay. However, this is not the

only condition which the appellate Court can impose. The power

to grant stay is discretionary and flows from the jurisdiction

conferred on an appellate Court which is equitable in nature. To

secure an order of stay merely by preferring an appeal is not the

statutory right conferred on the appellant. So also, an appellate

Court is not ordained to grant an order of stay merely because

an appeal has been preferred and an application for an order of

stay has been made. Therefore, an applicant for order of stay

must do equity for seeking equity. Depending on the facts and

circumstances of a given case an appellate Court, while passing

an order of stay, may put the parties on such terms the

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enforcement whereof would satisfy the demand for justice of the

party found successful at the end of the appeal. In South

Eastern Coalfields Ltd. Vs. State of M.P. & Ors., (2003) 8

SCC 648, this Court while dealing with interim orders granted in

favour of any party to litigation for the purpose of extending

protection to it, effective during the pendency of the

proceedings, has held that such interim orders, passed at an

interim stage, stand reversed in the event of the final decision

going against the party successful in securing interim orders in

its favour; and the successful party at the end would be justified

in demanding compensation and being placed in the same

situation in which it would have been if the interim order would

not have been passed against it. The successful party can

demand (a) the delivery to it of benefit earned by the opposite

party under the interim order of the High Court, or (b)

compensation for what it has lost, and to grant such relief is the

inherent jurisdiction of the Court. In our opinion, while granting

an order of stay under Order 41 Rule 5 of the CPC, the appellate

court does have jurisdiction to put the party seeking stay order

on such terms as would reasonably compensate the party

successful at the end of the appeal in so far as those

proceedings are concerned. Thus, for example, though a

decree for payment of money is not ordinarily stayed by the

appellate Court, yet, if it exercises its jurisdiction to grant stay in

an exceptional case it may direct the appellant to make payment

of the decretal amount with interest as a condition precedent to

the grant of stay, though the decree under appeal does not

make provision for payment of interest by the judgment-debtor

to the decree-holder. Robust commonsense, common knowledge

of human affairs and events gained by judicial experience and

judicially noticeable facts, over and above the material available

on record - all these provide useful inputs as relevant facts for

exercise of discretion while passing an order and formulating the

terms to put the parties on. After all, in the words of Chief

Justice Chandrachud, speaking for the Constitution Bench in

Olga Tellis and Ors. Vs. Bombay Municipal Corporation and

Ors. \026 (1985) 3 SCC 545, - "commonsense which is a cluster of

life's experiences, is often more dependable than the rival facts

presented by warring litigants".

Shri Ranjit Kumar, the learned senior counsel for the

respondent, submitted that during the pendency of the appeal

the tenant-appellant cannot be directed to pay any amount over

and above the amount of contractual rent unless and until the

decree or order of eviction has achieved a finality because, in

view of the protection of rent control legislation enjoyed by the

tenant, he shall continue to remain a tenant and would not

become a person in unlawful possession of the property until the

decree has achieved a finality from the highest forum upto which

the litigation is pursued. Reliance was placed on the decision of

this Court in Smt. Chander Kali Bai & Ors. Vs. Shri Jagdish

Singh Thakur & Anr., (1977) 4 SCC 402, followed in Vashu

Deo Vs. Balkishan, (2002) 2 SCC 50. This submission raises

the following two issues:- (i) in respect of premises enjoying the

protection of rent control legislation, when does the tenancy

terminate; and (ii) upto what point of time the tenant is liable to

pay rent at the contractual rate and when does he become liable

to pay to the landlord compensation for use and occupation of

the tenancy premises unbound by the contractual rate of rent?

Under the general law, and in cases where the tenancy is

governed only by the provisions of Transfer of Property Act,

1882, once the tenancy comes to an end by determination of

lease under Section 111 of the Transfer of Property Act, the right

of the tenant to continue in possession of the premises comes to

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an end and for any period thereafter, for which he continues to

occupy the premises, he becomes liable to pay damages for use

and occupation at the rate at which the landlord could have let

out the premises on being vacated by the tenant. In the case of

Chander Kali Bai & Ors. (supra) the tenancy premises were

situated in the State of Madhya Pradesh and the provisions of

the M.P. Accommodation Control Act, 1961 applied. The suit for

eviction was filed on 8th March 1973 after serving a notice on the

tenant terminating the contractual tenancy w.e.f. 31st December

1972. The suit came to be dismissed by the trial Court but

decreed in first appeal decided on 11th August, 1975. One of the

submissions made in this Court on behalf of the tenant-appellant

was that no damages from the date of termination of the

contractual tenancy could be awarded; the damages could be

awarded only from the date when an eviction decree was

passed. This Court took into consideration the definition of

tenant as contained in Section 2(i) of the M.P. Act which included

"any person continuing in possession after the termination of his

tenancy" but did not include "any person against whom any

order or decree for eviction has been made". The court,

persuaded by the said definition, held that a person continuing

in possession of the accommodation even after the termination

of his contractual tenancy is a tenant within the meaning of the

M.P. Act and on such termination his possession does not

become wrongful until and unless a decree for eviction is passed.

However, the Court specifically ruled that the tenant continuing

in possession even after the passing of the decree became a

wrongful occupant of the accommodation. In conclusion the

Court held that the tenant was not liable to pay any damages or

mesne profits for the period commencing from 1st January 1973

and ending on 10th August 1975 but he remained liable to pay

damages or mesne profits from 11th August 1975 until the

delivery of the vacant possession of the accommodation. During

the course of its decision this Court referred to a decision of

Madhya Pradesh High Court in Kikabhai Abdul Hussain Vs.

Kamlakar, 1974 MPLJ 485, wherein the High Court had held

that if a person continues to be in occupation after the

termination of the contractual tenancy then on the passing of the

decree for eviction he becomes a wrongful occupant of the

accommodation since the date of termination. This Court opined

that what was held by the Madhya Pradesh High Court seemed

to be a theory akin to the theory of "relation back" on the

reasoning that on the passing of a decree for possession, the

tenant's possession would become unlawful not from the date of

the decree but from the date of the termination of the

contractual tenancy itself. It is noteworthy that this Court has

not disapproved the decision of the Madhya Pradesh High Court

in Kikabhai Abdul Hussain's case but distinguished it by

observing that the law laid down in Kikabhai Abdul Hussain's

case was not applicable to the case before it in view of the

definition of 'tenant' as contained in the M.P. Act and the

provisions which came up for consideration of the High Court in

Kikabhai Abdul Hussain's case were different.

Reliance, by the learned counsel for the respondent, on the

case of Vashu Deo (supra) is misconceived, inasmuch as, in

that case the Court was dealing with the rule of estoppel of

tenant for holding that the tenant was estopped from disputing

the title of his landlord so long as he continued in possession of

the tenancy premises and until he had restored the landlord into

possession.

In Shyam Sharan Vs. Sheoji Bhai & Anr., (1977) 4 SCC

393, this Court has upheld the principle that the tenant

continuing in occupation of the tenancy premises after the

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termination of tenancy is an unauthorized and wrongful occupant

and a decree for damages or mesne profits can be passed for the

period of such occupation, till the date he delivers the vacant

possession to the landlord. With advantage and approval, we

may refer to a decision of the Nagpur High Court. In

Bhagwandas Vs. Mst. Kokabai, AIR 1953 Nagpur 186, the

learned Chief Justice of Nagpur High Court held that the rent

control order, governing the relationship of landlord and tenant,

has no relevance for determining the question of what should be

the measure of damages which a successful landlord should get

from the tenant for being kept out of the possession and

enjoyment of the property. After determination of the tenancy,

the position of the tenant is akin to that of a trespasser and he

cannot claim that the measure of damages awardable to the

landlord should be kept tagged to the rate of rent payable under

the provisions of the rent control order. If the real value of the

property is higher than the rent earned then the amount of

compensation for continued use and occupation of the property

by the tenant can be assessed at the higher value. We find

ourselves in agreement with the view taken by the Nagpur High

Court.

Placing reliance on the decision of this Court in

Kunhayammed & Ors Vs. State of Kerala & Anr., (2000) 6

SCC 359, Shri Ranjit Kumar, the learned senior counsel

submitted that the decree of trial Court merges in the decree of

the appellate Court and, therefore, the tenant shall continue to

remain a tenant (and shall not become an unlawful occupant),

until the passing of decree by the highest Court because the

decree would achieve a finality only when the proceedings have

finally terminated and then the decree of trial Court shall stand

merged in the decree of the appellate Court, the date whereof

only would be relevant for determining the nature of occupation

of the tenant. We are not impressed.

In Kunhayammed & Ors. (supra), this Court, on an

elaborate discussion of the available authorities, held that once

the superior Court has disposed of the lis before it either way,

i.e. whether the decree or order under appeal is set aside or

modified or simply confirmed, it is the decree or order of the

superior Court, Tribunal or authority which is the final, binding

and operative decree or order wherein merges the decree or

order passed by the court, tribunal or the authority below.

However, this Court has also observed that the doctrine of

merger is not of universal or unlimited application. In spite of

merger the actual fact would remain that it was the decree or

order appealed against which had directed the termination of

tenancy with effect from which date the tenant had ceased to be

the tenant, and the obligation of the tenant to deliver possession

over the tenancy premises came into operation though the same

remained suspended because of the order of stay.

We are, therefore, of the opinion that the tenant having

suffered a decree or order for eviction may continue his fight

before the superior forum but, on the termination of the

proceedings and the decree or order of eviction first passed

having been maintained, the tenancy would stand terminated

with effect from the date of the decree passed by the lower

forum. In the case of premises governed by rent control

legislation, the decree of eviction on being affirmed, would be

determinative of the date of termination of tenancy and the

decree of affirmation passed by the superior forum at any

subsequent stage or date, would not, by reference to the

doctrine of merger have the effect of postponing the date of

termination of tenancy.

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In the Delhi Rent Control Act 1958, the definition of 'a

tenant' is contained in clause (l) of Section 2. Tenant includes

'any person continuing in possession after the termination of his

tenancy' and does not include 'any person against whom an

order or decree for eviction has been made'. This definition is

identical with the definition of tenant dealt with by this Court in

Chander Kali Bai & Ors. case (supra). The tenant-respondent

herein having suffered an order for eviction on 19.3.2001, his

tenancy would be deemed to have come to an end with effect

from that date and he shall become an unauthorized occupant.

It would not make any difference if the order of eviction has

been put in issue in appeal or revision and is confirmed by the

superior forum at a latter date. The date of termination of

tenancy would not be postponed by reference to the doctrine of

merger.

That apart, it is to be noted that the appellate Court while

exercising jurisdiction under Order 41 Rule 5 of the Code did

have power to put the tenant-appellant on terms. The tenant

having suffered an order for eviction must comply and vacate

the premises. His right of appeal is statutory but his prayer for

grant of stay is dealt with in exercise of equitable discretionary

jurisdiction of the appellate Court. While ordering stay the

appellate Court has to be alive to the fact that it is depriving the

successful landlord of the fruits of the decree and is postponing

the execution of the order for eviction. There is every

justification for the appellate Court to put the tenant-appellant

on terms and direct the appellant to compensate the landlord by

payment of a reasonable amount which is not necessarily the

same as the contractual rate of rent. In Marshall Sons & Co.

(I) Ltd. Vs. Sahi Oretrans (P) Ltd. & Anr., (1999) 2 SCC

325, this Court has held that once a decree for possession has

been passed and execution is delayed depriving the judgment-

creditor of the fruits of decree, it is necessary for the Court to

pass appropriate orders so that reasonable mesne profits which

may be equivalent to the market rent is paid by a person who is

holding over the property.

To sum up, our conclusions are:-

(1) while passing an order of stay under Rule 5 of Order 41 of

the Code of Civil Procedure, 1908, 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 and in so far as those proceedings

are concerned. Such terms, needless to say, shall be

reasonable;

(2) in case of premises governed by the provisions of the Delhi

Rent Control Act, 1958, in view of the definition of tenant

contained in clause (l) of Section 2 of the Act, the tenancy

does not stand terminated merely by its termination under

the general law; it terminates with the passing of the

decree for eviction. With effect from that date, 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;

(3) the doctrine of merger does not have the effect of

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postponing the date of termination of tenancy merely

because the decree of eviction stands merged in the

decree passed by the superior forum at a latter date.

In the case at hand, it has to be borne in mind that the

tenant has been paying Rs.371.90p. rent of the premises since

1944. The value of real estate and rent rates have skyrocketed

since that day. The premises are situated in the prime

commercial locality in the heart of Delhi, the capital city. It was

pointed out to the High Court that adjoining premises belonging

to the same landlord admeasuring 2000 sq. ft. have been

recently let out on rent at the rate of Rs.3,50,000/- per month.

The Rent Control Tribunal was right in putting the tenant on

term of payment of Rs.15,000/- per month as charges for use

and occupation during the pendency of appeal. The Tribunal

took extra care to see that the amount was retained in deposit

with it until the appeal was decided so that the amount in

deposit could be disbursed by the appellate Court consistently

with the opinion formed by it at the end of the appeal. No fault

can be found with the approach adopted by the Tribunal. The

High Court has interfered with the impugned order of the

Tribunal on an erroneous assumption that any direction for

payment by the tenant to the landlord of any amount at any rate

above the contractual rate of rent could not have been made.

We cannot countenance the view taken by the High Court. We

may place on record that it has not been the case of the tenant-

respondent before us, nor was it in the High Court, that the

amount of Rs.15,000/- assessed by the Rent Control Tribunal

was unreasonable or grossly on the higher side.

For the foregoing reasons, the appeal is allowed. The

order of the High Court is set aside and that of the Tribunal

restored with costs incurred in the High Court and in this Court.

However, the tenant-respondent is allowed six weeks' time,

calculated from today, for making deposits and clearing the

arrears upto the date consistent with the order of the Rent

Control Tribunal.