Tenants must pay compensation to landlords from eviction date: SC

New Delhi: The Supreme Court, in a judgment delivered on Wednesday, stated that tenants should pay the compensation to landlords for occupying the latter's premises from eviction date.
From the date of the decree of eviction, the tenant is liable to pay 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 bench of Justices MR Shah and MM Sundresh observed.

In this case, while admitting the revision application preferred by the tenant, who is aggrieved of the eviction decree, the High Court directed the Tenant to deposit Rs 2,50,000/- per month towards compensation as a condition of stay. To arrive at this figure, the High Court considered the amount paid by the purchaser of the property in question (Sumer Corporation). Thus, the Corporation challenged this order before the Apex Court.

Disagreeing with this method adopted by the High Court, the Apex Court bench, by referring to the decision in Atma Ram Properties (P) Ltd. Vs. Federal Motors (P) Ltd., (2005) 1 SCC 705 and State of Maharashtra and Anr Vs. SuperMax International Private Limited and Ors., (2009) 9 SCC 772., observed:

"If the approach adopted by the High Court is accepted and/or approved, in a given case, it may happen that the lessor might have purchased the property forty years back and/or long back and if the said approach is considered and thereafter the monthly compensation is determined, the same cannot be said to be a reasonable compensation...As observed and held by this Court in the case of Atma Ram Properties (P) Ltd (supra), from the date of the decree of eviction, 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 bench observed that the High Court was required to determine the compensation 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 court, while remanding the case back to High Court, observed thus:

In a revision / appeal preferred by the tenant, who has suffered an eviction decree, the appellate / revisional court while staying the eviction decree can direct the tenant to pay the compensation for use and occupation of the tenancy premises upon the contractual rate of rent and such compensation for use and occupation of the premises would be 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.

In a revision / appeal preferred by the tenant, who has suffered an eviction decree, the appellate / revisional court while staying the eviction decree can direct the tenant to pay the compensation for use and occupation of the tenancy premises upon the contractual rate of rent and such compensation for use and occupation of the premises would be 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.

(Inputs from Live Law)