Non-Deposit Of Arrears & Regular License Fee May Entail Striking Off Defence Under Clause 2 Of Order XV-A Of CPC (Bombay Amendment): Supreme Court

The Appeal before the Apex Court was filed against the order of the Bombay High Court passed in exercise of its jurisdiction under Article 227 of the Constitution.

The Division Bench of Justice J.K. Maheshwari and Justice Vijay Bishnoi held, “After expiry of the period of license, when the premises was not vacated and license fee with proportionate increase was not paid, as such he has become a gratuitous licensee and the gratuitous licensee cannot take his defense in a suit filed by the licensor seeking eviction and arrears of rent until arrears and regular rent has been paid. However, in our view, it was the duty of the Court to exercise its discretion and pass an order with respect to arrears and regular rent in terms of Order XV-A of CPC (Bombay Amendment), as discussed above. Otherwise, the non-deposit of arrears and regular license fee may entail striking off the defense in terms of Clause 2 of Order XV-A of CPC (Bombay Amendment).”

Advocate Rohan Thawani represented the Appellant while AOR Krishan Kumar represented the Respondent.

Factual Background

The appellants (licensors) and the respondent (licensee) executed a Leave and License Agreement for a period of thirty-six months. In terms of the Agreement, the license fee was stipulated to increase at the rate of 7% annually. When, after expiry of the said period, the respondent did not vacate the premises, the appellants filed a Suit before the Trial Court under Section 41 of the Maharashtra Rent Control Act, 1999, read with the Presidency Small Causes Courts Act, 1882, praying for recovery of vacant and peaceful possession and to pay Rs. 1,39,56,905 as arrears of license fee as well as mesne profits.

Upon notice and entering an appearance, the respondent filed a Suit after about two and a half years before the Trial Court seeking relief to declare it as the tenant of the premises. On filing the said Suit, the appellants filed an Application under Order XXXIX, Rules 1 and 2 of CPC, in their suit for recovery of possession, to restrain the respondent from alienation and also to grant mesne profits. The Trial Court directed the payment of liquidated damages at the rate of Rs. 10,000 per day, in terms of the Agreement. Being aggrieved with the orders of the Trial Court and the Appellate Court, the respondent invoked the jurisdiction under Article 227 of the Constitution. The High Court vide the impugned judgement did not interfere with the order of grant of injunction, however, it set aside the direction to pay Rs 10,000 per day as liquidated damages. Challenging the same, the appeal came to be filed before the Apex Court.

Reasoning

The Bench explained the ingredients necessary to apply Order XV-A of CPC (Bombay Amendment), which the lessor or licensor filing a suit for eviction and the said suit consisting of a prayer with or without arrears of rent or license fee and future mesne profit. The Bench made it clear that in such a suit, there must be a direction on account of arrears up to the date of the order by the court and on such direction, the defendant would have to deposit such amount as ordered within the time specified. The Bench further held that in case of any default made by the lessee or licensee, the defence can be struck off following the procedure as prescribed in Rule 2. The amount so deposited will have to be paid to the plaintiff, it added.

“In this view, it can be inferred that the said amendment was brought with the well-intended object that in a suit based on lessor-lessee or licensor-licensee relationship for eviction and arrears of rent, the Court, in exercise of its discretion, can direct the lessee or licensee, as the case may be, to pay arrears of regular rent or license fee, as the case may be and further payment of month to month rent or license fee, otherwise, the defense of the licensee can be struck off”, it held.

On a perusal of the facts of the case, the Bench noticed that in terms of the clauses of the Agreement, the respondent had admittedly paid the rent as specified in Clause 2 of the Agreement with proportionate increase, during the period in which the agreement was in vogue. After expiry of the period of the license, when the premises were not vacated and the license fee with proportionate increase was not paid, as such, he became a gratuitous licensee.

The Bench was of the view that the High Court, by interfering with the said orders, was not justified in not directing payment of the arrears and regular rent or license fee in terms of Order XV-A of CPC (Bombay Amendment). Considering that since the Agreement and its clauses were not in dispute, and during its subsisting period of three years, the licensee had paid the license fee as agreed with a proportionate increase, the Bench held that a direction for payment of arrears and the regular license fee deserved to be issued.

Thus, allowing the appeal in part, the Bench maintained the order of grant of injunction with a further direction to the licensee to pay the license fee after adjusting the amount paid in terms of the order passed in the suit for declaration of tenancy, within two months.

Cause Title: Atul J Doshi v. Pramukh Properties and Developers Pvt Ltd (Neutral Citation: 2025 INSC 1345)

Appearance

Appellant: Advocate Rohan Thawani, AOR Pooja Dhar

Respondent: AOR Krishan Kumar

Click here to read/download Judgment