M/S Salvo Furniture vs Shri Kartar Singh Dhillon & Others on 27 April, 2012

[Cites 6, Cited by 1]

Punjab-Haryana High Court

M/S Salvo Furniture vs Shri Kartar Singh Dhillon & Others on 27 April, 2012

1. This order shall dispose of two petitions bearing CR No.2117 of 2012 & CR No.2118 of 2012. Both the petitions emanate from the orders of the Appellate Authority, Chandigarh of even date dated 14.03.2012 whereby mesne profits of the premises in question bearing SCO No.20, Madhya Marg, Sector 26, Chandigarh have been determined at `3,00,000/- for the ground floor in CR No.2117 of 2012 and a sum of `75,000/- for the basement of the said premises in CR No.2118 of 2012 during the pendency of the appeals and the tenant has been directed to make these payments from the date of the ejectment order, i.e., 31.10.2011.

2. The ejectment applications were filed by the respondent- landlord under Section 13 of the East Punjab Urban Rent Restriction CR No.2117 of 2012 2 (Extension to Chandigarh) Act, 1974 for eviction of the tenant from the ground-floor and basement of SCO No.20, Madhya Marg, Sector 26, Chandigarh. The ground-floor of the said premise had been let out in the year 1977 at a monthly rent of `3,350/- and the amount of rent has been enhanced to `5000/-. Similarly, for the basement, the premises had been taken on rent in the year 1981 at a monthly rent of `1300/- which was enhanced to `2,200/- per month and accordingly, total rent payable was `7,200/- for the premises in question. The premises were required for the bona fide use and occupation of the son of the landlord and the 2nd floor was also used by the son but his business did not flourish and in the year 1999, landlord No.1 had started the business of Gym on the 2nd floor but the said floor was not suitable for the said business, and therefore, the said business had to be stopped. The ejectment application was allowed by the Rent Controller on 31.10.2011 and accordingly, the appeals came to be filed before the Appellate Authority, Chandigarh.

3. Before the Appellate Authority, applications were filed for assessment of mesne profits for the premises in question and on the strength of the judgment of Hon'ble Apex Court in M/s Atma Ram Properties (P) Ltd. Vs. Federal Motors (P) Ltd. (2005) 1 SCC 705 & Anderson Wright & Co. Vs. Amar Nath Roy & others (2005) 6 SCC 489 that the contractual rate of rent had to come to an end after the eviction order and the premises in question was situated in the heart of the city and were on the Madhya Marg, the road dividing the City and therefore, was a hub of major eating places and restaurants and was pulsating with activities and was one of the most expensive areas, and therefore, rent of `5,00,000/- should be paid for the ground floor. Similar application regarding the basement was also filed CR No.2117 of 2012 3 in which it was pleaded that the rent of the entire basement should be `1,50,000/-. In the said application, a list of as many as 10 commercial shops were mentioned which were located on the said road starting from Sector 7, Chandigarh to Sector 26 which is on the same street. The said applications were resisted by filing replies which was mainly devoted to the merits of the case regarding the genuineness and bona fide requirement of the landlord and his son who was an Advocate.

4. Keeping in view the pleadings of the parties, the Appellate Authority allowed the application of the landlord and directed that the tenant was liable to pay mesne profits @ `3,00,000/- per month from the order of eviction and further, he would continue to make payment by the 10th of every month. The operation of the eviction order would remain stayed subject to the said payments. The landlord was, however, not entitled to withdraw these amounts of mesne profits except the rate of rent which the petitioner-tenant was paying and the balance was to remain lying with the Rent Controller. Similarly, in the case pertaining to the basement, the rate of mesne profits was assessed @ `70,000/- per month against the claim of `1,50,000/- and accordingly, the applications were disposed of after taking into consideration the lease deed of SCO No.14, Sector 26, Chandigarh to notice that the rent was `5,77,500/- per month with increase of 10% per year and the lease deed of SCO No.30, Sector, 26, Madhya Marg, Chandigarh that the rate of rent was more than `5 lacs and that the tenant had failed to place on record any lease deed controverting the contention of the landlord. Resultantly, the present 2 revision petitions have been filed challenging the said orders.

5. Counsel for the petitioner has vehemently contended that the CR No.2117 of 2012 4 tenant was only paying `7,200/- and the jump in the mesne profits is too exorbitant and it would not be possible for the tenant to deposit the said amount and has placed reliance upon the judgment of the Hon'ble Supreme Court in State of Maharashtra & another Vs. Super Max International Pvt.Ltd. (2009) 9 SCC 772 to contend that the mesne profits were excessive, fanciful and it was a bonanza for the landlord. On the other hand, counsel for the landlord-respondent contended that the law has been settled by the Hon'ble Apex Court in Atma Ram Properties (P) Ltd. (supra) and Anderson Wright & Co. (supra) and even the observations of the Hon'ble Apex Court in State of Maharashtra (supra) to support the principle that once the eviction order has been passed, the contractual rate of rent comes to an end. Reliance is also placed upon subsequent judgment of the Hon'ble Apex Court in Mohammad Ahmad & another Vs. Atma Ram Chauhan & others (2011) 7 SCC 755 wherein the Hon'ble Supreme Court laid down various guidelines which were to be taken into consideration while fixing the mesne profits.

6. A perusal of the pleadings of the parties go on to show that the landlord has given details of 10 shops which were situated on the same road which is called 'The Madhya Marg' in Chandigarh and which is considered the dividing road between the northern and southern part of the town. The details of the establishments on the said road which has now emerged as a restauranting hub have been given in the application which are as under:

1. SCO No.1 Sector 7, Madhya Marg, Chandigarh-

"Smoke House Deli (Restaurant)".

2. SCO No.20,Sector 7, Madhya Marg, Chandigarh- M/s "Springwell Mattresses Pvt. Ltd".

3. SCO No.14, Sector 26, Madhya Marg, Chandigarh -

CR No.2117 of 2012 5

"Kava Lounge".

4. SCO No.18, Sector 26, Madhya Marg, Chandigarh -

"Manor Restaurant".

5. SCO No.35, Sector 26, Madhya Marg, Chandigarh -

"Oven Fresh".

6. SCO No.39, Sector 26, Madhya Marg, Chandigarh -

"Barbecue Nation".

7. SCO No.40, Sector 26, Madhya Marg, Chandigarh -

"Mainland China".

8. SCO No.42, Sector 26, Madhya Marg, Chandigarh -

"The Lobby".

9. SCO No.43, Sector 26, Madhya Marg, Chandigarh -

"Tao Restaurant".

10.SCO No.47, Sector 26, Madhya Marg, Chandigarh -

"Noodle Bar".

7. In order to buttress his submission, counsel for the respondent has also placed on record compilation of registered lease deeds of the shops mentioned at S.No.1, 2, 3 & 7. The shop at Sr.No.1, situated at SCO No.1, Sector 7, Madhya Marg, Chandigarh, though not in the same sector but on the same road and at a distance of not more than 1 ½ kms. has a registered lease deed which was executed on 17.09.2010 for the ground-floor, let out to a restaurant called 'Smoke House, Deli' and the monthly lease amount of the said premises are `7,50,000/- per month and from 01.10.2011 to 30.09.2012, the rate of rent was to be at `7,87,500/- per month. Similarly, for the establishment at S.No.2, bearing SCO No.20, Sector-7, Madhya Marg, Chandigarh let out to M/s Springwell Mattresses Pvt. Ltd. which is closure in proximity towards the premises in question, the rate of rent for the ground-floor, front-portion, as per the lease deed dated 22.11.2010 was to be a sum of `3,00,000/- per month with an increase of 5% after every 12 months, and therefore, the rent as on 15.11.2011 was to be `3,15,000/- per CR No.2117 of 2012 6 month. Similarly, for the shop at S.No.3, bearing SCO No.14, Sector 26, Chandigarh, which is 5 showrooms away from the premises in question, vide registered lease deed dated 15.10.2009 let out to 'Kava Lounge', the rate of rent for the entire basement portion and entire ground-floor was to be `5,50,000/- per month and from 15.10.2011, rate of rent was to be at `5,77,500/- as per the enhancement of 5% per year. Similarly, for the shop at Sr.No.7, situated at SCO No.40, Sector 26, Chandigarh which has been let out to 'Mainland China' vide registered lease deed dated 30.07.2009, rent was to run at a sum of `5,50,000/- from 01.11.2009 and from the period 01.08.2011 to 31.07.2012, rent was fixed at a sum of `6,06,375/- for ground floor and basement. In contrast to the said registered lease deeds, no document has been placed on record by the tenant to show that the mesne profits as propounded by the landlord are not factually correct. The position of law regarding mesne profits is no longer res integra from the date of pronouncement of the Hon'ble Apex Court in case of Mohammad Ahmad (supra) and the following guidelines have been laid down while up- holding the yardstick adopted by the Single Judge in that case who had taken into account the prevalent market rental of the premises. The principles laid down in Mohd.Ahmad (supra) case reads as under:

(i)The tenant must enhance the rent according to the terms of the agreement or at least by ten per cent, after every three years and enhanced rent should then be made payable to the landlord. If the rent is too low ( in comparison to market rent), having been fixed almost 20 to 25 years back then the present market rent should be worked out either on the basis of valuation report or reliable estimates of building rentals in the surrounding areas, let out on rent recently.

(ii)Apart from the rental, property tax, water tax, maintenance CR No.2117 of 2012 7 charges, electricity charges for the actual consumption of the tenanted premises and for common area shall be payable by the tenant only so that the landlord gets the actual rent out of which nothing would be deductible. In case there is enhancement in property tax, water tax or maintenance charges, electricity charges, then the same shall also be borne by the tenant only.

(iii)The usual maintenance of the premises, except major repairs would be carried out by the tenant only and the same would not be reimbursable by the landlord.

(iv)But if any major repairs are required to be carried out then in that case only after obtaining permission from the landlord in writing, the same shall be carried out and modalities with regard to adjustment of the amount spent thereon, would have to be worked out between the parties.

(v)If the present and prevalent market rent assessed and fixed between the parties is paid by the tenant then the landlord shall not be entitled to bring any action for his eviction against such a tenant at least for a period of 5 years and the tenant shall enjoy immunity from being evicted from the premises.

(vi)The parties shall be at liberty to get the rental fixed by the official valuer or by any other agency, having expertise in the matter.

(vii)The rent so fixed should be just, proper and adequate, keeping in mind the location, type of construction, accessibility to the main road, parking space facilities available therein, etc. Care ought to be taken that it does not end up being a bonanza for the landlord.

8. This Court in Surender Kumar Vs. Rattan Lal 2006 (2) PLR 200 has held that while fixing mesne profits, registered lease deeds are a valid parameter and a good tool-bar to fix mesne profits. It has been held that the assessment should be on the basis of some relevant material and the CR No.2117 of 2012 8 tenant should be protected so that the amount which has been deposited can be refunded in case the appeal is successful. The relevant paragraph of the said judgment reads as under:

"9. The other question that requires consideration is the mode of determination of the mesne profits or compensation payable. In this respect, it is appropriate to note that the same is to be done on the basis of materials placed on record by the parties. The parties would be at liberty to place cogent evidence by way of recent registered lease deeds of the locality to show their amount of rent which is payable. It is on the basis of such convincing material that a provisional assessment of the compensation/damages which the tenant is liable to pay the landlord pending his appeal or revision against an order of ejectment, can be determined. This provisional assessment that has been made would be subject to adjudication at the time of final disposal of the appeal or revision as the case may be. If the final adjudication by the appellate or revisional Court in respect of the damages or compensation payable by the tenant is at variance with the provisional order, the landlord would be liable to reimburse or refund the excess amount deposited by the tenant and in case of deficient deposit, the tenant shall be liable to make good the deficient amount. In fact in Atma Ram Properties case (supra), the Hon'ble Supreme Court held that reversal of interim orders passed at the interim stage due to final decision going against the party securing the interim order in its favour would entitle the successful party to demand (a) restitution of benefit earned by the opposite party under the interim orders or (b) compensation for what it has lost."

Accordingly, keeping in view the principles laid down by the Hon'ble Apex Court that the Appellate Authority has to be alive to the fact that it is depriving the landlord from the fruits of the decree and is postponing its orders of eviction, the Court has to put the tenant on such terms so as to CR No.2117 of 2012 9 direct him to compensate the landlord by payment of reasonable amount. The Hon'ble Apex Court in the State of Maharashtra (supra) has held as under:

"66. The Rent Act was the socio-legal response to certain historical developments, namely, the acute shortage of housing in the aftermath of the World War, the great influx of refugees in a number of States of the Union following the partition of the country and the massive migration inside the country from rural areas to the urban centres as a result of rapid urbanisation. All these developments that took place almost at the same time skewed the law of supply and demand totally in favour of the landlord. The need of the hour, therefore, was to protect the tenant, who would have otherwise been left completely at the mercy of the landlord. The legislature intervened and brought in the Rent Act, severely restricting the grounds for enhancement of rent and for eviction of the tenant from the rented premises, thus regulating the relationship between the landlord and the tenant beyond the general law under the Transfer of Property Act, 1882. In this regard the Court responded in equal, if not greater measures. But after about three quarters of a century and three generations later when things are no longer the same and the urban centres are faced with newer problems, some of those having their origin in the Rent Act itself, there is the need to take a relook on the Court's attitude towards the relationship between the landlord and the tenant and to provide for a more level ground in the judicial arena."

9. Accordingly, keeping in view the fact that 2 showrooms, mainly, SCO No.14, Sector 26, Madhya Marg, Chandigarh and SCO No.40, Sector 26, Chandigarh are paying `5,77,500/- from October, 2011 and `6,03,675/- from 01.08.2011 for basement and ground-floor for running CR No.2117 of 2012 10 restaurants, viz., Kava Lounge and Mainland China, it cannot be said that the amount of `3,75,000/- fixed by the Appellate Authority is fanciful, excessive or arbitrary in any manner. The premises in question are stated to be 4400 sq.yards on the ground-floor and 2400 sq.yards on the basement which works-out to only Rs.55/- per sq.yards. Admittedly, the tenant has not enhanced the rent from 1977 and 1981 and as per the first principle laid down in Mohammad Ahmad's case (supra) if the rent is too low in comparison to the present market rent, then the present market rent has to be worked-out on the basis of premises let out on rent recently which has been done by referring to the registered lease deeds. The premises are also located on the same road and the type of construction, the location and accessibility to the main road and the parking space facilities are identical and this fact is not disputed by the counsel for the petitioner also. Accordingly, keeping in view the said factors, no fault can be found with the well reasoned orders passed by the Appellate Authority, and accordingly, the said orders are up-held. The Appellate Authority has also taken care to ensure that the amount deposited is not released to the landlord and in case of success of appeal, it is liable to be refunded back to the tenant and thus, the interest of the tenant has been protected to that extent and thus the landlord is only entitled to the amount due as per the contractual rent. Since the amount of arrears had to be deposited within a month from the impugned order, i.e., 14.03.2012, the petitioner is given liberty to deposit the said amount by 15.05.2012 and the other conditions imposed by the Appellate Authority shall remain the same.

10. Counsel for the tenant, however, contends that the Appellate Authority may take substantial time to dispose of the appeal and the same is CR No.2117 of 2012 11 fixed for 28.05.2012 and he would have to continue paying high mesne profits, and therefore, prays that a direction be issued to the Appellate Authority to decide the appeal within a time-bound frame. The request of the tenant is justified on this account. Accordingly, the Court of Ms.Preeti Sahni, Appellate Authority, Chandigarh is directed to decide the appeals No.77 & 78 of 26.11.2011 titled as M/s Salvo Furniture Vs. Kartar Singh Dhillon & another on the next date of hearing which is 28.05.2012, if possible, or latest by 31.07.2012.

10. Accordingly, CR No.2117 of 2012 and CR No.2118 of 2012 are dismissed and orders dated 14.03.2012 passed by the Appellate Authority, Chandigarh are up-held.


27.04.2012                                       (G.S.SANDHAWALIA)
sailesh                                                JUDGE

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