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Case Summary: Atma Ram Properties (P) Ltd v/s Federal Motors (P) Ltd

Case Summary
Facts of the case:
  • The suit sites are non-residential, commercial buildings in Connaught Circus, New Delhi, measuring almost 1000 square feet. The premises are owned by the appellant, and the respondent has had a continued tenancy there for a monthly rate of Rs. 371.90p. The tenancy had started in 1944, and the rent has stayed the same ever since.
  • The appellant filed a petition for eviction against the respondent in 1992, using the grounds provided by Clause (b) of Subsection (1) of Section 14 of the Delhi Rent Control Act 1958. The petition claimed that the respondent had wrongfully leased the property to M/s. Jay Vee Trading Co. Pvt. Ltd., and as a result, the sub-tenant was operating its showroom there.
  • In accordance with an order from the extra rent controller in Delhi dated March 03, 2001, the respondent was to be evicted and the bottom was held for eviction. Respondent chose to appeal in accordance with Section 38 of the Act.
  • By ruling dated April 12, 2001, the Rent Control Tribunal ordered the respondent's eviction to be postponed, but only on the condition that the respondent deposit in the court an additional Rs.15,000 per month in addition to the agreed-upon rent that can be paid to the appellant.
  • The respondent filed a petition under Article 227 of the Constitution challenging the requirement to deposit Rs 15,000 per month, contending that the respondent could not have been ordered at any point during the course of the proceedings to pay or tender to the landlord or deposit in court any amount in excess of the contractual rate of rent.

    The petition was granted and the condition imposed by the Tribunal was revoked by order dated 12-2-2002, which is being challenged in this case. The ruling of the High Court has the result that the respondent may continue to use the property while the appeal is pending before the Tribunal, provided that they pay a sum equal to the agreed-upon rental rate.
  • Feeling aggrieved, the landlord (appellant) has filed this appeal by special leave.
Supreme Court's Observation:
The judgement answered three questions that arised out of the case, which were:
  1. Whether the appellate court have jurisdiction to put applicant on such reasonable terms as, put by tribunal in this case.
  2. What would be an apt definition of tenant and whether tenancy stand terminated by termination under general law?
  3. Whether the doctrine of merger have the effect of postponing the date of termination of tenancy.

To the first issue, Supreme Court held that, 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 insofar as those proceedings are concerned. Such terms, needless to say, shall be reasonable.

It further stated that, 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.[1]

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 a 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.[2]

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.[3]

W.r.t. the second issue, the court held that 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.

The court also found itself with the agreement with the decision of Nagpur High Court that 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.[4]

And regarding the final issue, court observed that 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 later date.

Thus, 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 respondent tenant is allowed six weeks' time, calculated from today, for making deposits and clearing the arrears up to the date consistent with the order of the Rent Control Tribunal.[5]

  1. Para 9 of the judgement
  2. Ibid.
  3. Ibid.
  4. Para 13 of the judgement
  5. Para 21 of the judgement

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