The Supreme Court has observed that the tenant who continues to be in possession of the property even after the expiry of the lease shall be liable to pay mesne profits to the landlord.

A Bench of Justice KM Joseph and Justice PS Narasimha also held that the tenant continuing in possession after the expiry of the lease may be treated as a tenant at sufferance, which status is higher than that of a mere trespasser.

The Court thus noted –

"A tenant continuing in possession after the expiry of the lease may be treated as a tenant at sufferance, which status is a shade higher than that of a mere trespasser, as in the case of a tenant continuing after the expiry of the lease, his original entry was lawful. But a tenant at sufferance is not a tenant by holding over. While a tenant at sufferance cannot be forcibly dispossessed, that does not detract from the possession of the erstwhile tenant turning unlawful on the expiry of the lease. Thus, the appellant while continuing in possession after the expiry of the lease became liable to pay mesne profits."

In this case, Respondent-Plaintiff had demised the centrally air-conditioned 2nd, 3rd, and 4th floors of a building and a non-airconditioned guest house at 9th floor to Indian Oil Corporation Ltd – Appellant. The lease was to subsist for a period of 21 years commencing from the date when the said floors were handed over to the Appellant lessee.

Further, a supplementary lease deed which was also duly registered on September 9, 1969, which had brought about certain modifications in the original lease deed dated November 12, 1968.

The Respondent's case was that the 2nd and 3rd floors came to be handed over to him on September 12, 1969 and the possession of the 4th floor was handed over December 18, 1969.

It was alleged that there was a failure on the part of the Appellant to join and cooperate with the Respondent in the matter of finalization, execution, and registration of an appropriate document of the lease in regard to the 2nd, 3rd, and 4th floors.

An earlier suit was also filed in the year 1978 which ended in a compromise between the parties. The cause of the litigation was that the Appellant had failed to hand over the vacant possession of the demised floors to the Respondent upon the expiry of the lease deed.

Possession was handed over only in the year 1994. Resultantly, the Respondent alleged that the Appellant was in wrongful possession of the demised floors after the expiry of the lease in 1990 or alternatively from 1991 till 1994.

Consequently, the Respondent claimed mesne profits in respect of all the demised floors in dispute.

ASG Madhavi Divan appeared for the Appellant while Senior Counsel AM Singhvi appeared for the Respondent before the Apex Court.

  • The issues that were dealt with by the Court were –

i) Whether the documents styled as agreement dated November 21, 1968 and the supplementary agreement dated September 12, 1969 constituted a lease.

ii) Whether the possession of 2nd and 3rd floors were handed over on September 17, 1969 and 4th floor stood handed over on November 4, 1970.

The Apex Court noted that as found by the Single Judge and also the Division Bench that as there were no documents to show the exact date, the Appellant was put in possession of the 2nd and 3rd floors and fixed September 17, 1969 as the starting point.

The Bench with respect to the date of delivery of possession of 4th floor, noted –

"As far as the 4th floor is concerned, in view of the findings by the High Court that the possession of the 4th floor was handed over on 04.11.1970 and the same not being questioned before us, we can safely proceed on the basis that the 4th floor was handed over on 04.11.1970."

Further, as regards issue (i), the Bench held –

"We would think that the findings rendered by the High Court is a plausible view and we would, therefore, take the view that possession of 2nd and 3rd floors was handed over on 17.09.1969 and 4th floor stood handed over on 04.11.1970."

The Court noted the next contention of the Appellant that in the development in the year 1977, the Respondent put an end to the lease dated 17.11.1968 and transformed the Appellant into a monthly tenant and what is more relevant, it entitled it to the benefits under the West Bengal Tenancy Act.

In this context, the Court concurred with the findings of the High Court that in not choosing to exercise the option of the prior determination and instead of allowing the lease to run to its full course, the Appellant cannot take refuge under the 'Tenancy Act.'

Additionally, the Court dealt with the issue of whether the suit is barred by Limitation Act in relation to mesne profits beyond 3 years of the suit.

The Court in this context observed that the plea of limitation was not pressed before the Single Judge. The Single Judge had framed the issue as to whether the Suit is barred by limitation. The Judge went on to hold that the suit is within the period of limitation. Before the Division Bench also, the plea was not raised by the Appellant.

It was only before the Apex Court that the plea of limitation was raised.

The Bench noted that the plea was based on the case that a suit of mesne profits is governed by Article 51 of the Limitation Act, 1963.

The Court in this context held –

"If a claim for mesne profits is one, which accrues from day-to-day and it is a continuing one and if the suit for mesne profits would fall to be decided under Article 113 of the Limitation Act, then, since the cause of action is a continuing one, the suit may not be barred as regards any part of the claim as contended by the appellant."

Furthermore, the Court also held that once the lease comes to end, the tenant becomes a tenant at sufferance. He cannot be dispossessed, except in accordance with law. But he cannot, in law, have any right or interest anymore. Even though under Section 108 of the Transfer of Property Act, if there is no contract to the contrary, the tenant may have the right, under Section 108(j), to transfer his interest absolutely or even by sub-lease or mortgage, when the lease expires by afflux of time, his interest as lessee would come to an end.

Thus, the Court held that on the expiry of lease the tenant who remains a tenant at sufferance, would have no right to transfer.

Accordingly, the Court dismissed the appeals.

Cause Title – Indian Oil Corporation Ltd. v. Sudera Realty Pvt. Ltd.

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