Understanding the fine line of distinction between Mesne Profits and Interim Compensation

Introduction

Under Order XX Rule 12 of Civil Procedure Code, 1908 (“the Act”), the court may pass a decree directing an inquiry as to the rent or mesne profits from the date of institution of the suit until the delivery of the possession to the owner. Sec 2(12) of the Act defines, “mesne profits” as those profits which a person in wrongful possession of the property actually received or might with ordinary diligence have received from that property. Whereas, interim compensation is the compensation provided by the appellate court to compensate the decree-holder (eviction decree) for the loss occasioned by delay in execution of the decree by the grant of stay order under Order XLI Rule 5 of the Act. Although the code does not provide a clear definition for “interim compensation” nor explicitly uses the term, it largely differs from mesne profits, a distinction which the courts should consider carefully while deciding a case.

However, with courts taking the liberty to use these terms interchangeably or one in the place of another, a great deal of inconsistency is prevalent among the decisions of different courts on the same point of law. This has also resulted in ambiguity with respect to the application of the concept of mesne profits and interim compensation. This article discusses the uncertainties revolving around the usage of both the concepts as well as the problem with using them synonymously. The article also highlights the need to understand the distinction between the two terms.

Courts’ ambiguous approach

While both the concepts are provided under different provisions of the Act, for unknown reasons, the courts over the years have either wrongly referred one in place of another or used them as substitutes to each other.

Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd. (“Atma Ram Properties”) is the quintessential case where the court erroneously referred to the compensation under Order XLI Rule 5(3)(c) as mesne profits. The Rent Control Tribunal upon an appeal preferred by the respondent-tenant had stayed the eviction of the tenant and asked him to deposit Rs. 15000 per month to the court, in addition to the contractual rent. This additional deposit was the main point of contention.

The court held that an applicant for order of stay must do equity for seeking equity and referring to Order XLI Rule 5(3), rightly observed that a compensation furnished by the applicant is a condition precedent for grant of an order of stay. The court pointed that the consideration that an appellant should not be deprived of the fruit of his success in the event of the appeal being allowed, is weighed against the other consideration that the party who has a decree from the lower court in his favour should not be deprived of it just because an appeal is preferred by the other party. Therefore, it was held that compensation may be allowed to the decree-holder for loss occasioned by delay in execution of decree due to order of stay, in case the appeal is dismissed. The court relied on Marshall Sons & Co. Ltd. v. M/S Sahi Oretrans Ltd., where a reasonable compensation for delay in execution of the decree was upheld but wrongly termed as mesne profits. Although the court in Atma Ram Properties was right in upholding the position of law under Order XLI Rule 5, it erred in addressing the interim compensation under the said provision as mesne profits.

Moreover, as per Order XX Rule 12(1)(c) the mesne profits are calculated from the date of institution of the suit until the delivery of possession to the decree-holder. The compensation provided in Atma Ram Properties was a mere interim compensation which was allowed from the date of grant of an order of stay on the execution of a decree which is a condition precedent for the grant of the stay. Further, in the case of Mohd. Amin v. Vakil Ahmad, it was held that if mesne profits are not claimed in the plaint itself then the court cannot award them on its own. If the additional deposit in the Atma Ram Properties was mesne profits as has been termed by the courts, then it could not have been awarded by the tribunal on its own volition unless it was claimed by the plaintiff-landlord, which it wasn’t.

In 2019, however, the Bombay High Court in the case of Previn Govind Sharma v. Dinyar Jal Jamshedji (“Previn Govind Sharma”) stated that there exists a clear distinction between mesne profits and interim compensation and, interpreted the ratio of Atma Ram in the correct light. The court held that the stay on a decree comes at a premium which is called interim compensation under Order XLI Rule 5 and has nothing to do with mesne profits under Order XX Rule 12. Unlike the court in Atma Ram Properties, the Bombay High Court did not make an error in terming interim compensation as mesne profits and clearly laid down that the court was not determining the latter. It further went on to discuss Order XLI Rule 5 in detail and observed that it involves an element of ad hocism and discretion and, the provision is a step-in-aid in appeal proceedings which keeps both the parties on the same footing. Moreover, the court also held that the interim arraignment does not prevent the landlord from invoking Order XX Rule 12. This implies that the court recognised that the decree-holder (landlord) can claim mesne profits apart from interim compensation provided by the court.

Although the court in Atma Ram Properties has laid down principles for interim compensation, it has used the term mesne profits. The court in Previn Govind Sharma however, has rightly applied the ratio while determining interim compensation and differentiated between mesne profits and interim compensation.

Need for clarity

The need for laying down a clear distinction between mesne profits and interim compensation is evident from the way courts have very casually used the terms interchangeably. While it is not the courts who are at a loss when they apply one concept and call it another, it is the litigating parties who may face substantial loss due to the erroneous approach of the courts. When the two concepts have already been enshrined under different provisions of the Act, there is a need for courts to provide differences between them by interpreting the provisions in the correct light.

A step in this direction has been taken by the court in the decision of Previn Govind Sharma. The court in the case recognises that the two are separate compensation: on the one hand, mesne profits are to be awarded only if they are claimed under Order XX Rule 12; on the other hand, the court has the discretionary power under Order XLI Rule 5 to provide interim compensation for the stay on the execution of a decree.

The fact that both the compensations can be awarded simultaneously was rightly upheld in Previn Govind Sharma. However, the same could not have been possible in Atma Ram for instance. In that case, the suit for eviction was instituted in 1992 and on 19th march 2001 eviction decree was passed in favour of the landlord. Because the court mistakenly termed the interim compensation provided from 12th April 2001 till the pendency of the appeal as mesne profits under Order XLI Rule 5, the landlord was deprived of his right to claim mesne profits under Order XX Rule 12 from the date of institution of the suit i.e. somewhere in 1992 till he got the possession of his land.

Although, the 2019 Bombay High Court judgment is the right way forward, the fact that it cannot overrule a Supreme Court judgment (Atma Ram Properties) cannot be overlooked. Atma Ram Properties has wrongly used the term mesne profits in place of interim compensation while discussing Order XLI Rule 5, however, its ratio is still relied upon by the courts. Therefore, there is a need for defining that fine line of distinction between mesne profits and interim compensation either by way of judicial interpretation or legislative action.


ABOUT THE AUTHORS

Parnika Goswami

Parnika

Parnika Goswami is a third-year undergraduate student pursuing B.A. LL.B. (Hons.) from National Law University, Jodhpur. She is interested in Commercial Transactions and Public International Law.

Pratyaksh Sikodia

Pratyush

Pratyaksh Sikodia is a third-year undergraduate student pursuing B.A. LL.B. (Hons.) from National Law University, Jodhpur. He has an inclination towards Criminal Law. He aspires to become a civil servant.

3 thoughts on “Understanding the fine line of distinction between Mesne Profits and Interim Compensation

  1. The Article Understanding the fine line of distinction between Mesne Profits and Interim Compensation is informative. Congrats.

    Like

  2. The Article Understanding the fine line of distinction between Mesne Profits and Interim Compensation is informative.

    Like

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