L. Kochivareed Vs. P. Meriappa Gounder
& Ors [1979] INSC 31 (7 February 1979)
SARKARIA, RANJIT SINGH SARKARIA, RANJIT SINGH
TULZAPURKAR, V.D.
SEN, A.P. (J)
CITATION: 1979 AIR 1214 1979 SCC (3) 150
ACT:
Mesne Profits-Liability for mesne profits,
principle of-Section 2(12) of the Code of Civil Procedure 1908 (Act V of 1908).
Civil Procedure Code, 1908, Order XX Rule 12-
Construction of decree explained-Nature of the decree of the Court dated April 22, 1958 clarified.
Words and Phrases-"Whichever event first
occurs" in Rule 12(1)(C)(iii) of order XX C.P.C.-Meaning of Civil
Procedure Code. S. 144-Scope of.
HEADNOTE:
Meriappa Gounder respondent No. 1 in C.A.
466/69 and appellant 1 in C.A. 2375/69 filed a suit on August 23, 1950 in the
District Court, Trichur, for specific performance of an agreement dated May 22,
1950 made by one Soliappa Chettiar. The said Soliappa Chettiar pleaded
inability to perform the contract in view of the refusal of one Neelakanta Iyer
a lessee of the factory to give up possession. Pending the suit Late
Kochivareed, husband of the appellant in C.A. 466/69 obtained an assignment of
the lease from Neelakanta Iyer on March 5, 1951. On March 8, 1951 Soliappa
Chettiar executed a sale deed of the suit property in favour of one George Thatil,
a nephew of Kochivareed. In the course of the proceedings the trial court
appointed a Receiver to manage the suit property. On March 21, 1951, Late
Kochivareed obtained a lease, of the suit property at a rent of Rs. 15,000/-for
a period of one year which was renewed for another year from the Receiver and a
sum of Rs. 30,000/- SO collected as rent for two years was deposited in the
Court by the Receiver.
The District Court on August 28, 1952 decreed
the suit for specific performance and mesne profits at a reduced rate of Rs.
15,000/- per annum, instead of at Rs. 30,000/- per annum as claimed. Against
the decree two appeals were filed in the High Court by Kochivareed and George
Thatil. The High Court allowed the appeals and dismissed the suit by its judgment
dated March 21, 1953. The appeal filed by Meriappa Gounder (CA 129/56) was
allowed by this Court as per its judgment and decree dated April 22, 1958.
On the question of the liability of the mesne
profits, the present appeals arose out of interpretation of the direction (e)
of this Court's decree dated April 22, 1958.
Allowing the appeals by certificate in part
the Court
HELD: 1. Mesne profits being in the nature of
damages, no invariable rule governing their award and assessment in every case
can be laid down and the "Court may mould it according to the justice of
the case". Even so one broad basic principle governing the liability for
mesne profits is discernible 59 from section 2(12) of the Code of Civil
Procedure which defines 'mesne profits' to mean 'those profits which the person
in wrongful possession of property actually received or might with ordinary
deligence have received therefrom together with interest on such profits, but
shall not include profits due to improvements made by the person in wrongful
possession." [68G-H, 69A] Wrongful possession of the defendant is the very
essence of a claim for mesne profits and the very foundation of the defandant's
liability therefor, Generally, the person in wrongful possession and enjoyment
of the immovable property is liable for mesne profits. But, where the
plaintiff's dispossession, or his being kept out of possession can be regarded
as a joint or concreted act of several persons, each of them who participants
in the Commission of that act would be liable for mesne profits even though he
was not in actual possession and the profits were received not by him but by
some of his confederates.
Possession through another, such as a tenant
may be sufficient to create liability for mesne profits, if such possession is
wrongful. [69A-C and G]
2. In such a case, where the claim for mesne
profits is against several tresoassers who had combined to Keep the plaintiff
out of possession, it Is open to the Court to adopt either of the two courses.
It may by its decree hold all such trespassers jointly and severally liable for
mesne profits leaving them to have their respective rights adjusted in a
separate suit for contribution; or it may, if there is proper material before
it ascertain and apportion the liability of each of them on a proper
application made by the defendant during the same proceedings. [69C-D]
3. A decree under Order XX Rule 12 of C.P.C.,
directing enquiry into mesne profits, howsoever expressed must be construed to
be a decree directing the enquiry in conformity with the requirements of Rule
12(1)(c), 80 that the decreeholder is not entitled to mesne profits for a
period (commencing from the date of the institution of the suit) extending
beyond three years from the date of the preliminary decree. [69E-Fl Chitturi
Subhanna v. Kudappa Subbanna, [1965] 2 SCR 661; referred to.
4. The words "whichever event first
occurs" in sub clause (c)(iii) of clause I of Rule 12 of Order XX Civil
Procedure Code imply that the maximum period for which future mesne profits can
be awarded is three years from the date of the decree for possession and mesne
profits, finally passed. The period of three years is to be computed from the
date of decree of this Court i.e. from April 22, 1958 and it will expire on the
date on which possession was delivered or relinquished by the defendant in
favour of the decreeholder pursuant to that decree. In other words, the decree
mentioned in sub clause (iii) of clause (c) would be the appellate decree dated
April 22, 1958 of this Court. The period of three years mentioned in the said
subclause is, therefore, to be reckoned from April 22, 1958. [73G-H, 74A- B]
5. Section 144 of the Code of Civil
Procedure, in terms, says that for the purpose of the restitution, the Court
may make any orders, including orders for the payment of interest, damages
compensation and mesne profits which are properly consequential on variation or
reversal of the decree. [77A-B] There is nothing in the decree, dated April 22,
1958 of this Court which expressly or by implication, prohibits the payment of
interest on the sum of 60 Rs. 30,000/- withdrawn by defendant 3 by way of
restitution. The trial court had rightly allowed interest.
6. The decree dated April 22, 1958 of this
Court was a composite decree, partly final, and party preliminary. It was final
in so far as it granted the reliefs of specific performance and possession on
deposit of the price by the Plaintiff. It was preliminary in as much as it
directed an inquiry with regard to the assessment of mesne profits and as to
who out of the defendants was/were liable for payment of those mesne profits.
But? it laid down in no uncertain terms that only such of the defendants would
be liable for mesne profits "as may have been in possession of the property".
This direction in the decree means that only the defendant or defendants found
in actual possession and enjoyment of the property would be liable for mesne
profits.
[70A-C] In the instant case:
(a) The third defendant was in sole, actual
possession and control of the suit property from March 3, 1951, when he
obtained the alleged assignment of lease in his favour from Neelakanta Iyer. In
terms of the decree of this Court, therefore defendant 3 alone is liable for
mesne profits in respect of the period he was in possession (excepting the
period during which the property was under the management of the Court
Receiver). [71E-F] (b) The contention that the possession of defendant 2 was
the legal possession of an owner while that of defendant 3 was derivative
possession of a lessee or licensee under the former is not correct, since at no
stage, in the Courts below defendant 3 took up the position that he was in
derivative possession of the property under defendant 2. Nor was there even a
whisper in the pleadings that defendant 2 and defendant 3 were
joint-tortfeasors and therefore jointly and severally liable for mesne profits.
[69H, 70C, G] (c) There is nothing in the decree of this Court dated April 22
1958, indicating that the amount deposited by the plaintiff towards the price
should have been sel off against the liability of defendant 3 for mesne
profits. On the contrary, it allowed deduction of the amounts found due against
defendant 1 and defendant 2 from the deposit of Rs. 85.000/- to be made by the
plaintiff towards the price, and further directed that after such deduction,
the balance of such deposit made by the plaintiff, if any, shall be paid to the
third respondent (defendant 2) who is the assignee of the second respondent
(defendant 1) pendente lite. [71F-H] (d) The plaintiff was not bound to suffer
a set off in favour of defendant 3, merely because defendant 2 or his assignee
withdrew the price deposited by the plaintiff without furnishing any security
for its refund or adjustment towards the liability of defendant 3, there being
no evidence whatever, on record to show that such withdrawal was the result of
any collusion or conspiracy between the plaintiff and defendant 2 and defendant
3. Even assuming that both defendants 2 and 3 were liable for mesne profits
jointly and severally, then also, the plaintiff could at his option. recover
the whole of the amount of mesne profits from either of them; and how such
inter se liability of the defendants was to be adjusted or apportioned was a
matter between the defendants only. [72A-C] (e) Defendant 3 entered into
possession of suit property under a-l assignment of sham lease from Neelakanta
Iyer on March 5, 1951 during the 61 pendency of the plaintiffs suit, which was
instituted on August 25, 1950. The A plaintiff had deposited Rs. 50,000/-
sometimes after the presentation of the plaint. Under the agreement of the
sale, dated May 22, 1950 made by defendant 1 in favour of the plaintiff, the
total sale considerations was fixed @ Rs. 90,003/-. Out of it Rs 5,003/- had
been paid to defendant I on the very date of the agreement. It was further
stipulated that out of the balance, Rs. 50,000/- would be paid by the
plaintiff-purchaser at the time of the registration of the sale deed which was
to be executed and registered on or before July 15, 1950. It was further
stipulated that on payment of the further sum of Rs. 50,000/- the plaintiff
would be entitled to be put in possession of the suit property. Thus when
defendant 3 entered into possession, first under the garb of an assignee of
sham lease from Neelkanta Iyer, and then further purchased the property with
his on funds in favour of defendant 2 pendente lite, he was fully conscious
that he was purchasing a litigation. His possession was therefore wrongful qua
the plaintiff from its inception [72E-H] (f) Disallowance of the claim for
deduction for interest on the deposit of Rs. 50,000 which the plaintiff had
withdrawn on August 19, 1953 and had redeposited on 9-2- 1959 is incorrect. The
defendant is entitled to interest @ 6% per annum for the said period, after
deduction the interest for the period during which the property was under the
management of the Receiver. [74D-E] (g) The plaintiff`s claim for mesne profits
@ the rate of Rs. 25,000/- has correctly been negatived. Since the plaintiff
did not object to the lease granted by the Receiver to defendant 3 on an annual
rental of Rs. 15,000/- and since he did not produce any other reliable
evidence, the High Court was not wrong in holding that the mesne profits should
be on the basis of this rental value of Rs. 15,000/- [76A-C] (h) The plaintiff,
in view of the long drawn out litigation is entitled to interest @ 6% per annum
upto March 29, 1959. [76E-F]
CIVIL APPELLATE JURISDICTION: Civil Appeal
Nos. 466 and 2375 of 1969.
From the Judgment and Order dated 6-8-78 of
the Kerala High Court in Appeal Suit Nos. 27/63 and 245/63.
K. S. Ramamurthy, Miss Pushpa Nambiar and A.
S. Nambiar for the Appellant in C.A. 466/69 and R 1 in C.A. 2375/69.
P. Govindan Nair, S. Balakrishnan and K. L.
Rathi for R. 1 in C.A. 466/69 and Appellant in CA 2375/69.
N. Sudhakaran, S. L. Aneja and K. L. Aneja
for RR 2-3, in C.A. 466/69 and For RR 3-4-in C.A. 2375/69.
The Judgment of the Court was delivered by
SAKARIA, J.-These two appeals on certificate arise out of execution petition
No. 118 of 1962 on the file of the Subordinate Judge, Trichur, filed by P.
Meriappa Gounder (hereinafter referred to as the plaintiff) to execute the,
decree of the Supreme Court in C.A. 129/56 62 passed on April 22, 1958. The
common facts, out of which these appeals arise, are as follows:
The plaintiff filed a suit on August 23, 1950
in the District Court, Trichur, for 'specific performance of an agreement,
dated May 22, 1950, made by Soliappa Chettiar (hereinafter referred to as
defendant 1) to sell a factory known as "Sivakami Tiles Works", for a
consideration of Rs. 90,003/-. The plaintiff made an advance payment on that
very date of a sum of Rs. 5,003/- to defendant 1. It was stipulated in the
agreement that the sale deed must be executed and registered on or before July
15, 1950. It was further provided that out of the balance of sale
consideration, Rs. 50,000/- would be paid by the plaintiff at the time of the
registration and for the remaining Rs.
35,000/-, the plaintiff was to execute a
mortgage of the suit property to be redeemed on or before May 31, 1951. It was
further agreed that on payment of Rs. 50,000/- at the time of registration, the
plaintiff would be put in possession of the suit property. The plaintiff
pleaded that he was ready and willing to perform his part of the agreement, but
came to know that defendant 1 was trying to evade his obligation under the
agreement. Accordingly, the plaintiff sent a registered notice, dated July 7,
1950, through his lawyer to defendant 1, to which the latter replied the same
day, that the factory was in possession of one Neelakanta Iyer as lessee, who
had refused to give up possession and therefore, it had become impossible to
give effect to the agreement to sell the factory, as giving possession to the
plaintiff was a condition precedent to the execution of the sale deed. The
plaintiff further pleaded that the suit property was really in possession of
defendant 1 and the alleged lease. in favour of Neelakanta Iyer was a sham
transaction and a device to evade payment of income tax, and hence defendant 1
was bound to carry out the terms of the agreement to sell.
The suit was contested by defendant 1 (who
originally was the sole defendant). - His case was that, although there was an
agreement to sell the suit property, it had been made clear at the time when
negotiation for sale was going on, that the factory was in the possession of
Neelakanta Iyer as lessee and that it was a condition precedent to the sale
that Neelakanta Iyer would surrender his right under the lease and give up
possession and that if he refused to do so, the agreement to sell would not be
given effect to. The defendant urged Neelakanta Iyer to surrender the
possession, but he refused to do so. In the circumstances" the contract
for sale had become incapable of performance. He denied that the lease in
favour of Neelakanta was a sham transaction.
63 Pending the suit, T. V. Kochivareed (the
deceased husband of the A appellant, Lucy Kochivareed in C.A. 466/69) obtained
an assignment of the lease (Ex. D-3) from Neelakanta Iyer on March 5, 1951.
Since Kochivareed was later on, when the suit was pending in the Supreme Court
impleaded as defendant 3, for the sake of convenience the appellant in C.A.
466/69, will hereinafter be referred to as defendant 3 On March 8, 1951,
defendant 1 executed a sale deed of the suit property in favour of George
Thatil, who is the nephew of defendant 3, and will hereinafter be referred to
as defendant 2. Like defendant 3, he also joined as defendant 2 at his own
request, when the appeal was pending in this Court.
On December 23" 1950, the Court
appointed a Receiver to manage the suit property. On March 21, 1951, defendant
3 obtained a lease of the suit property at a rent Or Rs. 15,000/- for a period
of one year from the Receiver. The term of the lease was extended for one more
year and two years' rent, amounting to Rs 30,000/- was collected and deposited
in the Court by the Receiver.
The District Court, Trichur, on August 28, 1952,
decreed the suit for specific performance and mesne profits at a reduced rate
of Rs. 15,000/- per annum, instead of Rs. 30,000/- per annum claimed by the
plaintiff.
Against the decree of the Trial Court, two
appeals were filed in the High Court-one by defendant 3 and the other by
defendant 2. The High Court allowed the appeals and dismissed the plaintiff's
suit by a judgment dated March 31, 1953.
Aggrieved, the plaintiff filed C.A. 129/56 in
this Court. The plaintiff' appeal was allowed by this Court as per its judgment
and decree, dated April 22, 1958.
Since a good deal of argument centers round
the construction of this Court's decree, dated April 22, 1958, it will be
pertinent to extract here the material part of that decree.
"(a) That the appellant herein do
deposit within thirty days of the receipt in the decree of this Court the sum
of Rs. 85,000/- in the District Court of Trichur and that on the aforesaid
amount being deposited the said District Court of Trichur do forthwith give
notice thereof to the respondents abovenamed and that on the aforesaid amount
of Rs. 85,000/- being deposited respondents Nos. 2 and 3 herein, namely S. M.
R. Solaiyappa Chettiar and George Thatil do within 30 64 days from the date of
receipt of the notice of the said deposit execute and register a sale deed in
favour of the plaintiff (Appellant) in respect of the suit property.
(b) ..................
(c) That the respondents above-named do pay
to the appellant the cost incurred by him in the Court of the District Judge,
Trichur, in Suit No. 183 of 1950 and the costs incurred by him in the former
High Court of...........
(d) ..................
(e) .... AND THIS COURT DOTH FURTHER DE CLARE
that appellant shall be entitled to:
(a) mesne profits against such of the respondents
(Is may have been in possession of the property except during the period that
the property was in the custody and management of the receiver appointed by the
trial court;
(b) the net sum collected by the Receiver
during his management; and (c) credit for all such sums as he may have advanced
to the receiver under the direction of the Court for the management of
property;
AND THIS COURT DOTH ACCORDINGLY DIRECT that
the trial Court do hold an enquiry about the mesne pro fits and such sums as
may be found to be due on inquiry against the second and third respondents in
respect of the mesne profits be deducted from the amount to be deposited in
cash in the Court by the appellant aforesaid in accordance with clause (a)
supra, and do direct the payment of the remaining amount, if any, to the third
respondent (defendant 2) who is the assignee of the second respondent
(defendant 1) pendent lite;" (Emphasis supplied) On September 12, 1958,
the plaintiff filed an application in the District Court for execution of the
said decree, dated April 22, 1958" in respect of all the reliefs allowed
thereunder. After the decree-holder had deposited a sum of Rs. 85,000/-, as
directed in the decree, the execution application was eventually made over to
the Subordinate Judge, Trichur. As per the decree, the sale deed was executed
on March 16" 1959! by the Court on behalf of defendants 1 and 2 in favour
of 65 the plaintiff and the possession of the property in consequence thereof
was delivered to him on March 29. 1959.
Thereafter, the plaintiff filed Miscellaneous
Petition No. 229/60 in the Trial Court. Before the Court, defendant 3 on
November 11, 1958, filed objections that he was not iliability for mesne
profits, as he was never in possession and occupation of the suit property. He
further contended that his liability for mesne profits, if any. was limited to
the period commencing from the date of notice of the deposit in Court of the
amount of Rs. 85,000/- till the date of delivery of possession and that the
plaintiff was not entitled to interest on mesne profits, or on costs by way of
restitution. Defendant 2 contended that he was not liable, for mesne profits as
he had never been in possession and management of the suit property, and that
the entire liability, if at all any, for mesne profits was that of defendant 3,
who had been in exclusive possession of the property.
On December 22, 1962, the court of first
instance passed orders in respect of mesne profits, costs etc. It found that
defendant 1, 2 and 3 were jointly and severally liable to the plaintiff for a
sum of Rs. 10,162.67 on account of costs of the Trial Court and the Supreme
Court.
The Court further found that defendant 2 was
separately liable to pay to the plaintiff, a sum of Rs. 11,941.63 consisting of
three items, namely, Rs. l, 239.02 on account of costs recovered by defendant 2
from decree-holder and payable by former with interest by way of restitution,
Rs. 2,577.01 on account of-costs in the High Court, and Rs. 8125/-on account of
mesne profits from the factory from the date of suit till date of Ex. D-3. The
aggregate! amount under these two heads came to Rs. 23,103.70, which was
allowed to be set off against Rs. 85,000/- deposited in Court by the plaintiff
and the balance was directed to be paid to the second defendant's mother, his
assignee.
Apart from the sum of Rs. 10,162.67 jointly
and severally payable by the third and second respondents, the District Court
found that the third defendant was separately liable to pay the plaintiff a sum
of Rs. l 57.086.81 consisting of these items:
(a) Rs. 7,298.l0, by way of restitution on
account of costs recovered from the decree-holder including interest thereon;
(b) Rs. 39,975.00 Rent deposited and
withdrawn by him together with interest thereon;
(c) Rs. 1,177.00, costs payable by him for
the appeal in the High Court; and 66 (d) Rs. 1,08,636.71 net mesne profits
payable by him from April 1, 1963 to the date of delivery of possession, during
which period, he was found to be in possession and management. After giving
credit of a sum of Rs. 48,321 deposited by the third defendant in Court on
March 9, 1959, a net sum of Rs. 1,08,765.81 was directed to be realised by the
plaintiff from the estate of defendant 3 in the hands of his legal
representative (appellant in C.A. 466/69). By the same order, the Court
dismissed Misc. Petition No. 229/60 that had been filed by the plaintiff for
determination of the extent of waste committed upon the property by defendant
3.
Aggrieved by that Judgment and Order, Lucy
Kochivareed, wife of defendant 3, as well as the plaintiff and the second
defendant, preferred appeals in the High Court of Kerala. By a common judgment,
dated August 6, 1968, the High Court partly allowed the appeals filed
respectively, by the plaintiff and the legal representatives of defendant 3;
but dismissed the appeal (A.S. 248/63) filed by defendant 2. The High Court,,
inter alia, affirmed the finding of the Trial Court that the third defendant
was in sole and exclusive possession of the suit property during the period in
question. The Trial Court's findings with regard to the quantum of mesne
profits per year, were not found satis factory. The High Court assessed the
mesne profits at a flat rate of Rs. 15,000/- per year and determined the
obligations of the parties accordingly. The High Court further found that the
second and third defendants were jointly and severally liable to pay Rs.
10,200/- by way of costs, and the second defendant alone was liable to pay Rs.
i 1,000/ by way of restitution, costs in the High Court and mesne profits to
the plaintiff, and that the aggregate of Rs.
21,200/- be set off against the sum of Rs.
85,000/- deposited by the plaintiff and the balance be paid to the mother of
defendant 2.
Aggrieved by the judgment, dated August 8, 1968,
of the High Court, Lucy Kochivareed, wife of the deceased defendant 3, has
filed Civil Appeal 466 of 1969; while the plaintiff has preferred Civil Appeal
No. 2375 of 1969.
Both the appeals will be disposed of by this
common judgment.
We will first take up Civil Appeal 466 of
1969 filed by the widow of defendant 3.
The main contention of Mr. K. S. Ramamurthy,
learned counsel for the appellant (Luci Kochivareed), is that if the decree,
dated April 22, 1958, passed by this Court in C.A.
129/56 is properly construed in the 67 light
of the material on record and the law on the subject, then three consequences
inevitably follow:
(i) Both defendant 2 and defendant 3 would be
deemed to be in possession of the suit property during the period in question.
The possession of defendant 2 was juridical or legal possession of an owner, he
being the purchaser of the property from defendant l; while that of defendant 3
was on actual permissive possession with the consent of defendant
2. Defendant 2 and defendant 3 being in the
position of joint-tort-feasors would be jointly and severally liable for mesne
profits or compensation.
This being the case, the plaintiff was bound
to suffer a set off to the purchase price (Rs. 85,000/-) deposited by him,
against his claim for mesne profits against defendant
3. But after the decree of this Court, the
plaintiff in pursuance of a collusion between him and defendant 2, allowed the
High Court to cancel the security given by defendant 2 for withdrawal of Rs.
62,900/- out of the purchase price deposited by the plaintiff. The plaintiff
was thus precluded by his conduct from claim- in that much amount from
defendant 3. After setting off the entire deposit of Rs. 85,000/-, defendant 3
will be liable only, for the balance of the mesne profit, jointly with
defendant 2.
(ii) The plaintiff's right to possession of
the property under the decree accrued when he deposited the price in Court and
thereafter obtained the conveyance in his favour on March 16, 1959. The
possession of defendants 2 and 3 as against the plaintiff became wrongful only
from the date on which the conveyance was executed in his favour, at any rate
on the date (September 12, 1958) on which he fully deposited the price in
Court.
(iii) The period for which the mesne profits
have been awarded., is to be restricted to the one permissible under Order XX
Rule 12(1) (c) of the Code of Civil Procedure. Such period in the light of this
provision would be the one commencing from the date the institution of the suit
and ending on the expiration of three years from the date of the decree of the
Trial Court. The expression "the decree", occurring in the aforesaid
clause (according to the counsel) means the decree of the Trial Court. In other
words, the maximum period for which mesne profits can be awarded-and would be
deemed to have been awarded-is three years from the date of the decree of the
Trial Court; and the Courts below were wrong in awarding mesne profits for a
period of more than six years, commencing from the date of the institution of
the suit till the delivery of possession in accordance with the decree of this
Court to the plaintiff.
68 Upon the above premises, Mr. Ramamurthy
maintains that the plain tiff will not be entitled to any mesne profits because
his right to possession did not accrue within three years of the date of the
decree of the Trial Court. Such a right, according to the counsel, accrued to
the plaintiff only on April 22, 1958 when his amended suit for specific
performance and possession and future mesne profits was decreed. In the
alternative, as already noticed, counsel submits that mesne profits could not
be awarded for any period prior to the date (September 12, 1958) on which the
plaintiff deposited the price, because his right to possession accrued on that
date and not earlier In support of his contentions, Shri Ramamurthy has cited a
decision of this Court in Chitturi Subbanna v.
Kudapa Subbanna & Ors.(l) He has also
referred to some other rulings, wherein some general principles have been
enunciated as to who can be made liable for mesne profits.
On the other hand, Mr. Govindan Nair, learned
counsel for the plaintiff, submits that the. decree" dated April 22, 1958
of this Court is crystal-clear. There is no ambiguity in it. Read in the light
of this Court's judgment, it unmistakably shows that whosoever, out of the
defendants was/were in actual possession, would be liable for the mesne profits
from the date of the suit till the delivery of possession. It is pointed out
that in the courts below, the positive stand taken by defendant 3 was that he
was never in possession of the Suit property and therefore, was not liable for
mesne profits. It was never the case of defendant 3 that he was in derivative
possession under defendant 2.
Counsel submits that defendant 3 should not
be allowed to take a stand diametrically opposed to the one taken by him in the
courts below. It is further submitted that the decree of this Court was final
decree so far as it laid down that the liability for the mesne profits shall be
fixed on the basis of the defendant found in actual possession of the suit
property.
Before dealing with the contentions canvassed
on both sides, it will be profitable to notice the general principles relating
to the liability formesne profits.
Mesne profits being in the natural of
damages, no invariable rule governing their award and assessment in every case,
can be laid down and "the Court may mould it according to the justice of
the case". Even so, one broad basic principle governing the liability for
mesne profits is discernible from Section 2(12) of the Code of Civil Procedure
which defines 'mesne profits' to mean "those profits which the person in
wrongfil possession of property actually received or might with ordinary (1)
[1965] 2 S.C.R. 661.
69 diligence have received therefrom together
with interest on such profits, but shall not include profits due to
improvements made by the person in wrongful possession".
From a plain reading of this definition, it
is clear that wrongful possession of the defendant is the very essence of a
claim for mesne profits and the very foundation of the defendant's liability
therefor. As a rule, therefore, liability to pay mesne profits goes with actual
possession of the land. That is to say, generally, the person in wrongful
possession and enjoyment of the immovable property is liable for mesne profits.
But, where the plaintiff's dispossession, or his being kept out of possession
can be regarded as a joint or concerted act of several persons, each of them
who participates in the commission of that act would be liable for mesne
profits even though he was not in actual possession and the profits were
received not by him but by some of his confederates.
ln such a case where the claim for mesne
profits is against several trespassers who combined to keep the plaintiff out
of possession; it is open to the Court to adopt either of the two courses. It
may by its decree hold all such trespassers jointly and severally liable for
mesne profits, leaving them to have their respective rights adjusted in a
separate suit for contribution; or, it may, if there is proper material before
it, ascertain and apportion the liability of each of them on a proper
application made by the defendant during the same proceedings.
Another principle, recognised by this Court
in Chitturi Subbanna v. Kudapa Subbanna (ibid) 'is that a decree under Order XX
Rule 12 of the Code, directing enquiry into mesne profits, howsoever expressed,
must be construed to be a decree directing the enquiry in conformity with the
requirements of Rule 12(1)(c), so that the decree-holder is not entitled to
mesne profits for a period (commencing from the date F of the institution of
the suit) extending beyond three years from the date of the preliminary decree.
Again, possession through another, such as a
tenant, may be sufficient to create liability for mesne profits if 'such
possession is wrongful.
We will now deal with the contentions
advanced by Mr. Ramamurthy, in the light of these principles.
The first argument, as already noticed, is
that both defendants 2 and 3 were in possession of the suit property during the
period in question. It is contended that the possession of defendant 2 was the
legal possession of an owner while that of defendant 3 derivative possession of
a lessee or licensee under the former.
70 A perusal of the decree dated April 22,
1958, of this Court, extracted in a foregoing part of this judgment, show's
that it was a composite decree, partly final, partly preliminary. It was final
in so far as it granted the reliefs of specific performance and possession on
deposit of the price by the plaintiff. It was preliminary inasmuch it directed
an inquiry with regard to the assessment of mesne profits, and as to who out of
the defendants was/were liable for payment of those mesne profits. But, it laid
down in no uncertain terms that only such of the defendants would be liable for
mesne profits "as may have been in possession of the property".
Construed in conformity with the legal principles enunciated above, this
direction in the decree, means that only the defendant or defendants found in
actual possession and enjoyment of the property would be liable for mesne
profits.
In the courts below, at no stage, defendant 3
took up the position that he was in derivative possession of the property under
defendant 2. On the contrary, in his objection-petition filed before the
District Court on November 11, 1958, defendant 3 emphatically asserted that he
"is not liable for mesne profits for the suit property as he was never in
pos session and occupation of the same".
Defendant 3 further vehemently pleaded that
it was never intended at any time that he (defendant 3) "should be a
lessee of the property nor was he a lessee at any time". In para 3 of his
petition, defendant 3 further pleaded that the purchase of the factory was made
in favour Of defendant 2, with money advanced by him (defendant 3), and the
intention then was that the suit property should be worked by defendant 2 with
funds advanced by defendant 3 who should be "recouped from the profits
accrued from the proper-y or otherwise in respect of the purchase money
advanced by him as also the advances for the working expenses". In
paragraph 5, he further pleaded that "in any event he cannot be held liable
for any amount more than what is stipulated in the lease deed (EX. I) in favour
of Neelakantha Iyer".
There is not even a whisper in the pleadings
that defendant 2 and defendant 3 were joint-tort-feasors and therefore, jointly
and severally liable for mesne profits.
The plea now pressed into argument by Mr.
Ramamurthy is thus a complete somersault of the position that had been taken in
the courts below.
The Court of first instance after an
exhaustive.
consideration of the overwhelming evidence,
oral and documentary, on record reached the finding that ever since March 5,
1951, defendant 3 was, while defendant 71 2 was not, in actual control,
management and possession of the suit property, and therefore, in terms of the
decree dated April 22, 1958 of this Court, defendant 3 alone would be liable
for mesne profits of the property. In appeal, the High Court found that
"the Court below was perfectly right in holding that the 3rd defendant was
in sole and exclusive possession during the period in question and it is idle for
him 3 to pretend otherwise". Indeed, the third defendant himself had
repeatedly admitted in various documents that he was in possession. In his
application, Ex 77(a), made in the Court of first instance, on March 7, 1951,
the defendant admitted that he was in possession in pursuance of assignment of
lease made. in his favour by Neelakantha Iyer on March 5, 1951. This lease has
been found by this Court to be a sham transaction. Further, defendant 3 on
March 21, 1951, executed a lease in favour of the Receiver appointed by the
Court. In this cease also, he admitted that he had been in possession of the
property since March 5, 1951. The lease executed by defendant 3 in favour of
the Receiver ensured for a period of two years on a yearly rental of Rs.
15,000/- and he deposited Rs. 30,000/'-
therefor as rental in Court. Then, the Bank accounts of the factory (except for
a short period from March 25, 1953 to November 11, 1954) were throughout in the
name of the third defendant as lessee thereof.
We have absolutely no reason to differ from
this concurrent finding of the courts below that the third defendant was in
sole, actual possession and control of the suit property from March 3, 1951,
when he obtained the alleged assignment of the lease in his favour from Neelakantha
Iyer. In terms of the aforesaid decree of this Court, therefore, defendant 3
alone is liable for mesne profits in respect of the period he was in
p(excepting (excepting the period during which the property was under he
management of the Court Receiver).
As regards the appellant's contention that
the amount deposited by the plaintiff towards the price should have been set
off against the liability of defendant 3 for mesne profits, it may be observed
that, there is nothing in the decree, dated April 22, 1958, of this Court which
say's that such a set off should be allowed. On the contrary, it allowed
deduction of the amounts found due against defendant 1 and defendant 2 from the
deposit of Rs. 85,000/- to be made by the plaintiff towards the price, and
further directed that after such deduction, the balance of such deposit made by
the plaintiff" if any, shall be paid "to the third 1 respondent
(defendant 2) who is the assignee of the 'second respondent (defendant l )
pendente lite." 72 Assuming arguendo, that both defendants 2 and 3 were,
liable for mesne profits jointly and severally, then also, the plaintiff could,
at his option, recover the whole of the amount of mesne profits from either of
them; and how such inter se liability of the defendants was to be adjusted or
apportioned, was a matter between the defendants only. The plaintiff was not
bound to suffer a set off in favour of defendant 3, merely because defendant 2
or his assignee withdrew the price deposited by the plaintiff without furnishing
any security for its refund or adjustment towards the liability of defendant 3,
there being no evidence, whatever, on record to show that such withdrawal was
the result of any collusion or conspiracy between the plaintiff and defendant 2
against defendant 3.
Assuming further, for the sake of argument,
that defendant 2 and defendant 3 were' both acting in concert to keep the
plaintiff out of pos session, it was not necessary for the courts below to
decide the issue with regard to apportionment of liability and its adjustment
between defendants 2 and 3. Indeed, the adoption of such a course would have
militated against the finding that defendant 3 alone was in exclusive
possession and control of the suit property ever since March 5, 1951.
We therefore, negative the first contention
of the appellant.
This takes us to the second and third points
pressed into argument by Mr. Ramamurthy. It is to be noted that defendant 3
entered into possession of the suit property under an assignment of sham lease
from Neelkantha Iyer on March 5, 1951 during the pendency of the plaintiff's
suit which was institute`d on August 25, 1950. The plaintiff had deposited Rs.
50,000/- some time after the presentation of the plaint Under the agreement for
sale, dated May 22, 1950, made by defendant 1 in favour of the plaintiff, the
total sale consideration was fixed at Rs. 90,003/-. Out of it, Rs. 5,003/- had
been paid to defendants on the very date of the agreement. It was further
stipulated that out of the balance, Rs. 55.000/- would be paid by the
plaintiff- purchaser at the time of the registration of the sale deed which was
to be executed and registered on or before July 15, 1950. It was further
stipulated that on payment of the further sum of Rs. 50,000/-, the plaintiff
would be entitled to be put in possession of the suit property. Thus, when
defendant 3 entered into possession, first, under the garb of an assignee of a
sham lease from Neelakantha Iyer, and then further purchased the property with
his own funds in favour of defendant 2, pendente lite, he was fully conscious
that he was purchasing a litigation. His possession was,, therefore, wrongful
qua the plaintiff from its very inception 73 The material part of Rule 12(1) of
Order XX of the Code of Civil procedure, provides:
"Where a suit is for the recovery of
possession of immoveable property and for rent or mesne profits, the Court may
pass a decree- (a) for the possession of the property;
(b) ...................
(ba) ..................
(c) directing an inquiry as to rent or mesne
profits from the institution of the suit until- (i) the delivery of possession
to the decree-holder, (ii) the expiration of possession by the judgment debtor
with notice to the decree-holder through the Court, or (iii)the expiration of
three years from the date of the decree, whichever event first occurs." D
Mr. Ramamurthy argued, if we may say so with respect, somewhat inconsistently,
that the word "decree" in sub- clause (iii) of clause (c) of the
aforesaid rule 12(1), means the decree for possession and mesne profits which
the trial court ought to have passed, and that in this view of the matter, the
period of three years mentioned in sub- clause (iii) will be counted from
August 28, 1952, the date of the trial court's decree, whereby mesne profits at
the reduced rate of Rs. 15,000/- instead of Rs. 30,000/- per annum claimed by
the plaintiff, were awarded. In that view of the matter, according to the
counsel, the plaintiff was not entitled under the law to get a decree for mesne
profits beyond August 27, 1955. It is pointed out that since the plaintiff had,
as a result of the acceptance of the defendants' appeal and dismissal of his
suit by the High Court, withdrawn the deposit of Rs. 50,000/- on August 19,
1953 and he had not redeposited the amount until February g, 1959, he was not
then entitled to possession and, in consequence, to any mesne profits during
this period.
The argument is certainly ingenious, but
untenable, being founded on fallacious premises. The period of three years
mentioned in sub-clause (iii) of clause (c) of Rule 12(1) is to be computed
from the date of the decree of this Court, i.e. from April 22, 1958 and it will
expire on the date on which possession was delivered or relinquished by the
defendant in favour of the decree-holder pursuant to that decree. In other
words, the decree mentioned in sub- clause 6-196SCI/79 74 (iii) of the
aforesaid clause (c), would be the appellate decree, dated April 22, 1958, of
this Court. The period of three years mentioned in the said sub-clause is,
therefore, to be reckoned fro`m April 227 1958. The words "whichever event
first occurs" in sub-c1ause (iii) imply that the maximum period for which
future mesne profits can be awarded, is three years from the date of the decree
for possession and mesne profits, finally passed. The courts below, therefore,
while holding that defendant 3 was liable to pay mesne profits for a period of
about 6 years commencing from March 5, 1951/March 21, 195l till the delivery of
possession in September, 1958 (less the period during which the property was
under the management of the Receiver), were acting in conformity with the law
and the terms of the decree, dated April 22, 1958, of this Court.
We, therefore, reject these contentions,
also.
Another contention canvassed by Mr.
Ramamurthy was that the courts below have wrongly disallowed deduction for
interest on the deposit of Rs. 50,000/-, which the plaintiff had withdrawn on
August 19, 1953 and had redeposited on February 9, 1959. It appears to us that
in all fairness, the defendant is entitled to deduction for interest for the
period from August 19, 1953 to February 9, 1959 on the sum of Rs. 50,000/-,
which, at ,6 per cent per annum, after deducting the interest for the period
during which the property was under the management of the Receiver.
(According to the agreed calculations made
the counsel for the parties it works out to Rs. 14,000/- approximately. We see
no reason why deduction of this amount be not allowed from the mesne profits
assessed against defendant 3.
We will now take up Civil Appeal No. 2375 of
1969 filed by the plaintiff Mr. Govindan Nair, learned counsel for the
plaintiff- appellant. has contended- (i) that mesne profits ought to have been
awarded at the Rate of Rs. 25,000/- per annum. The High Court was in error in
awarding the same at the rate of Rs. 15,000/-;
(ii) that the High Court was not justified in
reducing the rate on interest from 6 per cent per annum awarded by the Trial
Court to 4 per cent per annum;
(iii) that interest at 6 per cent per annum
was rightly awarded by the court of first instance on the sum of Rs. 30,000/-,
which was two years rental paid by defendant 3, under the lease taken from the
Receiver for the period from August 19, 1953 to March 9, 1959, and the High
Court was in error in disallowing that interest; and 75 (iv) that the Courts
below were not justified in denying costs to the plaintiff in the inquiry as to
mesne profits or in appeal arising therefrom.
We will deal with these contentions ad
seriatim.
Contention (i):
In this connection, Mr. Nair drew our
attention to Exhibits D-8 to D-15, which are Balance Sheets and Profit &
Loss Accounts of the Sivakami Tile Works, relating to the period from March 31,
l953 to November S, 1958. These documents were prepared at the instance of the
third defendant for the purposes of his Income-tax returns. The High Court
found that these Balance Sheets and Profit & Loss Accounts prepared for
Income-tax puropses were suspicious documents and by themselves were not proof of
the profits derived. Mr. Nair has no quarrel with this finding. He, however,
contended That the High Court ought to have worked out the real profits by
taking into account the quantity of clay purchased according to these
documents. In this connection, it is submitted that according to the evidence
produced on the side of the plaintiff about five candies of clay are required
for producing 1000 small tiles and even according to the evidence of the second
defendant as C.P.W. 2, 51 to 6 candies are required for 1000 small tiles.
We are not impressed by this argument. The
High Court has fully considered the evidence produced on the side of the
plaintiff. It noted that the plaintiff, also, had not produced any cogent
evidence to show what were the profits earned by him by working the factory in
dispute for the period of one year preceding the date of his examination. By
the time plaintiff appeared in the witness-box, he had been working this
factory for about one year.
In the alternative, Mr. Nair submitted that even
during the period of two years when the Receiver was there and defendant 3
worked the factory as a lessee under the former, he had made a profit of Rs.
22,000/-. Our attention has, also been drawn to the document (Ex. D-8), that
the income for the first year ending 1952 was Rs. 20,000/-. The point pressed
into argument is that the highest profit made by him according to these Balance
Sheets and Profit & Loss Accounts during any year by defendant 3, should be
taken as the rate for calculating the mesne profits.
The contention does not appear to tenable.
Once it was found that these Balance Sheets and Profit & loss Accounts were
not reliable, nor the evidence produced by the plaintiff, the only reliable
evidence left on the file was the rate at which the factory was leased out 76
by the Receiver to defendant 3. When the lease for the second year was granted
to defendant 2 by the Receiver on a rental of Rs. 15,000/-, the plaintiff
should have objected that the rent was less or he could himself take the lease
on paying higher rent. The High Court was, therefore, not wrong in holding that
this rent fixed under the lease granted by the Receiver represented the real
rental value of the factory during the year in question and in the absence of
any other reliable evidence for assessing the profits actually earned or which,
with due diligence, could have been earned the mesne profits may reasonably be
fixed at Rs. 15,000/- per annum.
We, therefore, negative the first contention
of Mr. Nair, Contention (ii):
The Trial Court had awarded interest at the
rate of 6 per cent per annum on the mesne profits assessed by it. The High
Court reduced that rate to 4 per cent, with the observation that having regard
to all the circumstances of the case, including that the plaintiff had the use
of the sum of Rs. 85,000/- which he was to pay towards the price of the
property a rate of 4 per cent per annum would be reasonable and just.
Even Mr. Ramamurthy has not been able to
support this reduction in the rate of interest. It was after a long drawn out
litigation that the plaintiff got possession of the property. The Trial Court,
therefore rightly awarded the interest at the rate of 6 per cent per annum.
We, therefore, accept this contention and
direct that interest as part of the mesne profits assessed in this case, shall
be payable at the rate of 6 per cent per annum upto March 29, 1959 when
possession was delivered in pursuance of the decree of this Court, to the plain
tiff and further interest at 6 per cent per annum on the outstanding amount
shall be payable till the date of payment.
Contention (iii):
A sum of Rs. 30,000/-, being the rent
collected by the Receiver from the third defendant, was deposited in Court.
This amount was withdrawn by the third
defendant on August 19, 1953 following the dismissal of the plaintiff's suit,
by the High Court. When the plaintiff's appeal succeeded in this Court and a
decree was passed in his favour by this Court, then defendant 3 re-deposited
the sum of Rs. 30,000/-, only on March 9, 1959. The Trial Court had awarded
interest at 6 per cent per annum on this amount of Rs. 30,000/- for the period
from August 19, 1953, the date on which the defendant withdrew that deposit,
until March 9, 1959, the date when he re-deposited the sum. The High Court has
disallowed interest on this account 77 for the aforesaid period on the ground
"that the Supreme Court does not award that".
We are unable to agree with this reasoning.
It overlooked the fact that interest on the sum of Rs. 30,000/- was being
claimed under Section 144 of the Code of Civil Procedure, by way of
restitution. Section 144 in terms says that for the purpose of the restitution,
the Court may make any orders, including orders for the payment of interest,
damages, compensation and mesne profits which are properly consequential on
variation or reversal of the decree. There is nothing in the decree, dated
April 22, 1958, of this Court which expressly or by implication prohibited the
payment of interest on this sum, by way of restitution. The Trial Court had
rightly allowed interest on amount for this period at 6 per cent per annum, and
we restore the same direction.
Contention (iv):
The argument is that costs have been unfairly
denied to the plaintiff by the Courts below. We do not agree. The Courts below
could not have been oblivious of' the fact that defendant 3 has since died and
the respondent is his widow.
We, therefore, do not want to interfere with
the discretion of the Courts below in the matter of costs.
For the foregoing reasons, we, partly allow
the plaintiff's appeal (Civil Appeal No. 2375 of 1969) to the extent indicated
above, with proportionate costs. We will dismiss the defedant's appeal (Civil
Appeal No. 466 of 1969) except to the extent that the defendant shall be
allowed a set off in the sum of Rs. 14,000/-, being the interest on the sum Or
Rs. 50,000/- for the period from August 19, 1953 (the date of the withdrawal of
the deposit by the plaintiff) to the date when he redeposited it. Interest on
the outstanding amount at 6 per cent per annum shall be payable till the date
of payment. In Civil Appeal 466 of 1969, however, the parties will bear their
own costs in this Court.
CA 2375/69 allowed in part. CA 466/69 S.R.
dismissed with modifications.
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