10 December 2004
Supreme Court


Case number: C.A. No.-007988-007988 / 2004
Diary number: 63737 / 2002



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



[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way of fixed deposits  in the name of the appellant and directed to be retained with the  Court and not permitted to be withdrawn by either party until  the appeal was finally decided.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



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



       (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



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



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



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.



       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



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.