MESNE PROFITS UNDER THE CODE OF CIVIL PROCEDURE, 1908
FEATUREDLAW
An amount payable by a person in possession or occupation of land in circumstances when that person has no right to be in possession or occupation.[1]
Mesne profits are the monies payable by the person in possession or occupation to the person who has a better right to possess or occupy. They are calculated as the value of remaining in possession or occupation for the relevant period.
Mesne profits in CPC, 1908 includes not only the actual profits received by the occupier but also those that could have been obtained with reasonable effort.
Meaning and Scope of Mesne Profits in CPC, 1908:
According to Section 2(12)[2] of the Code of Civil Procedure, 1908, “mesne profits” of a property refer to the profits that the person in wrongful possession of such property actually received or could have received with ordinary diligence, along with interest on such profits. However, it does not include profits due to improvements made by the person in wrongful possession.
Mesne profits in CPC become relevant in cases of unlawful occupation or wrongful possession of property by someone who is not the rightful owner. In such cases, the owner is entitled not only to the restoration of the property through a suit to recover possession but also to damages for wrongful possession.
The court may award mesne profits under CPC, 1908 to the rightful owner in these circumstances. Mesne profits can be claimed against a trespasser, a mortgagor after a decree for foreclosure or redemption has been passed against them, a tenant holding the property even after being served a notice to quit or a person against whom a decree of possession has been passed.
To determine mesne profits, under the CPC, 1908, the court considers not what the plaintiff has lost but what the defendant has or could have gained reasonably with ordinary diligence from the wrongful possession. The court typically determines the amount of mesne profits based on factors such as the market value of the property, the duration of wrongful possession and other relevant circumstances. Evidence presented by both parties is considered by the court to arrive at a fair amount of mesne profits under CPC to be awarded.
OBJECT OF MESNE PROFITS UNDER THE CPC, 1908:
· Every person has a right to possess his property .And when he is deprived of such right by another person; he is not only deprived of the restoration of possession of his property, but also damages for wrongful possession from that person. The mesne profit, under the CPC, 1908, is thus a compensation paid to the real owner.
· The object awarding a decree for Mesne profit is to compensate the person who has been kept out of the possession and deprived out of enjoyment of his property even though he was entitled to possess therefrom.
PERSON TO CLAIM THE MESNE PROFIT UNDER THE CPC, 1908:
An individual becomes liable for mesne profits in CPC when they possess and enjoy the benefits derived from an immovable property that does not legally belong to them.
This includes:
1. Tenants who refuse to leave after being served a notice to vacate the property.
2. Trespassers.
3. Mortgagors who continue to possess the mortgaged property after a decree of foreclosure have been passed against them.
4. Mortgagees who are still in possession of the property after a decree of redemption.
5. Any other person against whom a decree of possession has been passed.
If the plaintiff is dispossessed by several persons, each of them will be held liable to pay mesne profits in CPC, regardless of whether they are in actual possession or have received any benefits from the property. The court may hold trespassers jointly liable and have their respective rights pleaded in a separate suit for contribution to ascertain the liability of each of them.
ILLUSTRATIONS:
· If ‘A’ owns a farmhouse and ‘B’, ‘C’, ‘D’ and ‘E’ wrongfully claim possession, with only ‘C’ actually living on the premises, ‘A’ is entitled to bring a suit for recovery of possession and a claim for mesne profits against all four of them.
· If ‘K’ owns a house and ‘M’ claims possession, collects rents and then builds more rooms to convert it into a guest house, the profits from this improvement are not considered mesne profits in CPC.
Calculation of Mesne Profit under the CPC, 1908:
Mesne profits are calculated based on the specific circumstances of each case, as interpreted by the courts of law. There is no fixed rule for assessing mesne profits and the assessment is left to the discretion of the courts. However there is an interest rate put up to 6% as it varies from case to case and circumstances.
There are some case laws that illustrate how mesne profits have been calculated in different scenarios:
· Square Four Assets Management & Reconstruction Co. P. Ltd. v. Orient Beverages Ltd. & Ors. (2017)[3]
The Calcutta High Court, in this case, determined mesne profits from May 17, 2016, to May 25, 2017. The defendant, a tenant, had sub-leased the premises to a third person who did not vacate after the expiry of the lease term. Although the defendant had handed over the premises on the expiry date (September 30, 2015), the sub-lessee vacated it on May 25, 2017.
Therefore, the court calculated mesne profits in CPC, 1908 from the date of the suit’s institution (May 17, 2016) to the date of the sub-lessee’s vacation (May 25, 2017) and ordered an inquiry for this period.
· The New India Assurance Co. Ltd. v. M/s. M. Gulab Singh & Sons P. Ltd (2018)[4]
In this case, the Delhi High Court considered the trial court’s assessment of mesne profits, which involved different rates for different periods based on lease deeds. The court noted that the lease deeds exhibited by the respondent were relevant, as they were prepared based on the premise and aligned with 50% of the period for calculating mesne profits (from 2005 to 2010).
The court stated that if mesne profits are evaluated based on the rent payable for the property or similar premises in the area, it is considered an honest assessment. The Delhi High Court upheld the trial court’s decision in determining the value of the mesne profits in CPC payable by the appellant.
Circumstances When Mesne Profit is Not Granted in CPC, 1908:
There have been situations where mesne profits in CPC have been granted to the original owner due to wrongful possession, it is also important to understand the circumstances where mesne profit has been disallowed by courts. Here are some scenarios:
· Joint Family Property and Joint Possession: In cases where the property in question is a joint family property and both the appellant and the respondent are joint owners, the appellant cannot claim mesne profits. The Telangana High Court, in Smt. Subashini vs S. Sankaramma (2018)[5], ruled that if both parties are joint owners, the respondent is not in wrongful possession as he is also an owner.
· Absence of Court Order or Decree: The Income Tax Appellate Tribunal, in Krishna N Bhojwani, Vs. Assesse (2021)[6], disallowed the grant of mesne profits in CPC because there was no order or decree by any civil court to give effect to mesne profits. A court order is a prerequisite for granting mesne profits.
· Section 144 of the Code of Civil Procedure Not Applicable: In Murti Bhawani Mata Mandir REP. Through Pujari Ganeshi Lal (D) Through LR vs. Rajesh & Ors (2019),[7] the Supreme Court observed that Section 144 of the Code of Civil Procedure, 1908, is not applicable if there is no decree or order by the trial court to vest possession in the appellant or to mandate the respondent to hand over possession.
Principles in Awarding Mesne Profits in CPC, 1908:
When awarding mesne profits, the court follows several principles to ensure fairness and justice:
1. The profits considered are those made by the person in wrongful possession of the property.
2. The goal is to restore the status quo before the wrongful dispossession of the decree-holder.
3. The court considers the potential uses to which the decree-holder could have put the property if they were in possession.
Burden of Proof under the Mesne Profits under the CPC, 1908:
In a suit for mesne profits in CPC, the burden of proof lies with the claimant. The plaintiff must prove their lawful ownership of the property and that they are being deprived of their right to enjoy it due to the defendant’s wrongful possession.
The plaintiff must also prove the profits they might have received with ordinary diligence.
RECENT LANDMARK JUDGMENTS OF THE MESNE PROFIT UNDER THE CPC, 1908:
1. M/s Skyland Builders P. Ltd v. Income Tax Officer (2020)[8]
The Delhi High Court, in the case, of M/s Skyland Builders P. Ltd v. Income Tax Officer (2020) made a remarkable decision on mesne profits by holding that mesne profits received by the lawful owner on account of illegal possession of his immovable property will be considered as a revenue receipt and therefore will be a taxable subject-matter under Section 21 (1) [9]of the Income Tax Act.
2. Nazir Mohamed vs. J.Kamala and Ors (2020)[10]
The Supreme Court of India, in this case, observed that a decree of possession of immovable property does in no way follow a decree of declaration of ownership automatically. The burden of justifying the allegation of wrongful possession exists solely on the plaintiff. If he fails to prove his allegations on the defendant, the Court shall presume the possession to be adverse by its nature.
Conclusion as the Ending of the Mesne Profits as observed under the CPC, 1908:
If Section 2(12) of the Code is assessed, it can be made clear that there exist a lot of fundamental questions that the provisions fail to address. While the provision specifies mesne profits for wrongful possession of a property that originally belongs to someone else, it does not lay down the parameters on the basis of which mesne profit is supposed to be allowed by the courts. Not only this, the provision remains silent when it comes to the rate of interest that is supposed to be imposed along with mesne profit, leaving the entire responsibility on the courts.
These profits include actual gains received or those that could have been received with ordinary diligence, along with any interest on such profits.
Mesne profits are relevant in cases of unlawful occupation or wrongful possession, where the rightful owner is entitled not only to regain possession but also to claim damages for the period of wrongful possession.
The assessment and award of mesne profits aim to compensate the owner for the losses incurred due to the wrongful occupation of their property.
We see a variety of methods adopted by the courts to calculate mesne profits. Although uniform criteria cannot be laid down as the provision has presumed, one cannot ignore that specificity is the essence of any legislation. Thus there arises a need to address these questions and provide logical solutions for better implementation.
[1] https://www.lexisnexis.co.uk/legal/glossary/mesne-profits
[4] M_S_Gulab_Singh_Sons_Pvt_Ltd_vs_The_New_India_Assurance_Co_Ltd_on_9_October_2009.PDF
[5] https://indiankanoon.org/doc/38581429/
[6] https://indiankanoon.org/doc/2926869/
[7] https://indiankanoon.org/doc/79478139/