Supreme Court Clarifies Tenant’s Obligations During Eviction Appeals under Madhya Pradesh Accommodation Control Act: Heera Traders vs. Kamla Jain (22 February 2022)

Case Background

The case involves two appeals with a common respondent, Kamla Jain, who is the landlady. In one appeal, the tenant, Pooja Collections, occupied a non-residential space of 150 square feet since 1975, with a monthly rent of Rs. 847. In the other appeal, Heera Traders occupied a 100 square feet non-residential space with a monthly rent of Rs. 622.

The landlady filed suits for eviction under Section 12(1)(a), (c), (f), and (h) of the Madhya Pradesh Accommodation Control Act, 1961, seeking eviction and mesne profits. The trial court decreed the suits for eviction under Section 12(1)(f) and (h). The first appeals by the tenants were dismissed on 25.03.2014. Subsequently, the tenants filed second appeals and sought interim stay of eviction.

The High Court, on 17.03.2020, directed the appellants to pay mesne profits at the rate of Rs. 18,000 per month from the date of the decree by the lower appellate court until the disposal of the second appeals. This order is the subject of the appeals before the Supreme Court.

Timeline:

Legal Framework

The core legal issue revolves around the interpretation of Section 13 of the Madhya Pradesh Accommodation Control Act, 1961. This section outlines the conditions under which a tenant can receive protection against eviction.

Section 13 of the Act states:

“13. When tenant can get benefit of protection against eviction. – [(1) On a suit or any other proceeding being instituted by a landlord on any of the grounds referred to in Section 12 or in any appeal or any other proceeding by a tenant against any decree or order for his eviction, the tenant shall, within one month of the service of writ of summons or notice of appeal or of any other proceeding, or within one month of institution of appeal or any other proceeding by the tenant, as the case may be, or within such further time as the Court may on an application made to it allow in this behalf, deposit in the Court or pay to the landlord, an amount calculated at the rate of rent at which it was paid, for the period for which the tenant may have made default including the period subsequent thereto up to the end of the month previous to that in which the deposit or payment is made ; and shall thereafter continue to deposit or pay, month by month by the 15th of each succeeding month a sum equivalent to the rent at that rate till the decision of the suit, appeal or proceeding, as the case may be.”

The section was substituted in 1983. Before the substitution, the provision did not include appeals or proceedings initiated by the tenant. The substituted section extends the protection to tenants even when they appeal against eviction orders, provided they comply with the deposit requirements.

The Act also defines “tenant” in Section 2(i), which excludes any person against whom an order or decree for eviction has been made.

Arguments

The appellants (tenants) contended that the High Court did not properly interpret Section 13 of the Madhya Pradesh Accommodation Control Act, 1961. They argued that the present version of Section 13, which was substituted in 1983, protects a tenant even during the pendency of an appeal against an eviction order, as long as they deposit the agreed rent. They maintained that the decisions of the Supreme Court in Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd. [ (2005) 1 SCC 705] and State of Maharashtra v. M/s. Super Max International Pvt. Ltd. [(2009) 9 SCC 772], which relate to the Delhi Rent Control Act and the Bombay Rent Act, respectively, should not apply to cases under the Madhya Pradesh Act due to the specific provisions of Section 13.

The appellants argued that Section 13 protects a tenant from eviction as long as they deposit the agreed rent, even during an appeal. They emphasized that the High Court should not have directed them to pay mesne profits at a rate higher than the agreed rent.

The respondent (landlady) argued that the definition of “tenant” in the Madhya Pradesh Act is similar to that in the Delhi Rent Control Act, and thus, the principle established in Atma Ram Properties and Super Max International should apply. According to this principle, once an eviction order is passed, the tenant ceases to be a tenant and becomes an unauthorized occupant, liable to pay mesne profits. The respondent further contended that Section 13 only protects tenants from eviction on the ground of arrears of rent if they continue to pay the rent. For other grounds of eviction, the appellate court is justified in ordering a reasonable amount as rent as a condition for stay of eviction.

The respondent also pointed out that Section 13(1) does not use the word ‘rent’ but speaks of ‘an amount calculated at the rate of rent.’ This, according to the respondent, implies that the amount payable after the eviction order is not necessarily rent, but a compensation for use and occupation.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether Section 13 of the Madhya Pradesh Accommodation Control Act, 1961, protects a tenant from paying mesne profits during the pendency of an appeal against an eviction order, provided they deposit the agreed rent?
2. Whether the principles laid down in Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd. and State of Maharashtra v. M/s. Super Max International Pvt. Ltd., which allow for the imposition of market rent as a condition for stay of eviction, apply to cases under the Madhya Pradesh Act?
3. Whether the Appellate Court can impose any condition other than the deposit of the amount which is the rent which was being paid as a condition for stay of eviction.

Treatment of the Issue by the Court

Authorities

Judgment

Authorities Viewed by the Court:

✓ Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd. [(2005) 1 SCC 705]: The Court followed this authority, stating that with the passing of the eviction order, the tenant becomes an unauthorized occupant and is liable to pay mesne profits.

✓ State of Maharashtra v. M/s. Super Max International Pvt. Ltd. [(2009) 9 SCC 772]: The Court followed this authority, holding that the appellate court can stay the execution of an eviction order on terms, including a direction to pay monthly rent at a higher rate than the contractual rent.

✓ Shyamcharan Sharma v. Dharamdas [(1980) 2 SCC 151]: The Court followed this authority, noting that the court has a discretion to extend the time to pay defaulted rent instead of striking out the tenant’s defense.

✓ Sobhagyamal and another v. Gopal Das Nikhra [(2008) 3 SCC 788]: The Court used this authority to clarify that the protection under Section 12(3) of the Act is a one-time protection.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to balance the rights of both landlords and tenants while interpreting the provisions of the Madhya Pradesh Accommodation Control Act, 1961. The court emphasized that while Section 13 aims to protect tenants, it should not be interpreted to deprive landlords of their rights, especially after an eviction order has been passed. The court’s reasoning was also influenced by the principle that once an eviction order is passed, the tenant becomes an unauthorized occupant.

Fact:Law Ratio

The Court’s reasoning was more inclined towards the legal interpretation of the provisions and the application of established legal principles as opposed to the factual matrix of the case.

Logical Reasoning

Issue 1: Whether Section 13 protects tenants from paying mesne profits during appeals if they deposit agreed rent?

Issue 2: Whether the principles of Atma Ram and Super Max apply to the Madhya Pradesh Act?

Issue 3: Whether the Appellate Court can impose any condition other than the deposit of the amount which is the rent which was being paid as a condition for stay of eviction?

Key Takeaways

• Tenants must continue to pay rent: During the pendency of an appeal against an eviction order under the Madhya Pradesh Accommodation Control Act, tenants are required to deposit the agreed rent as per Section 13 of the Act.
• No automatic stay of eviction: Depositing the agreed rent does not automatically stay the eviction order. Tenants must seek a stay order from the appellate court.
• Appellate court can impose conditions: The appellate court has the power to impose conditions for granting a stay of eviction, which can include the payment of mesne profits (market rent) in addition to the agreed rent.
• Tenant becomes unauthorized occupant: Once an eviction order is passed, the tenant ceases to be a tenant and becomes an unauthorized occupant, making them liable to pay mesne profits.
• Balancing of rights: The judgment emphasizes the need to balance the rights of both landlords and tenants, ensuring that landlords are not unduly deprived of their rights.

Directions

The Supreme Court modified the High Court’s order and issued the following directions:

1. The appellants were granted five weeks to deposit the entire amount as per the High Court’s order, after adjusting any amounts already deposited. This amount will also subsume the amounts paid/payable under Section 13 of the Act.
2. The respondent (landlady) was permitted to withdraw rent at the rate of Rs. 10,000 per month from the deposited amount.
3. The respondent was allowed to withdraw Rs. 10,000 per month from the amount to be deposited by the appellants, on such terms to be fixed by the High Court.

Development of Law

The ratio decidendi of this case is that while Section 13 of the Madhya Pradesh Accommodation Control Act, 1961, mandates the deposit of agreed rent during the pendency of an appeal against an eviction order, it does not prevent the appellate court from imposing additional conditions for stay of eviction, such as the payment of mesne profits. This judgment clarifies that the principle established in Atma Ram Properties and Super Max International applies to cases under the Madhya Pradesh Act, meaning that a tenant becomes an unauthorized occupant after an eviction order is passed and is liable to pay mesne profits.

This judgment reinforces the position that the appellate court has the power to impose conditions for granting a stay of eviction, which can include the payment of mesne profits in addition to the agreed rent. This is a change from the previous position where it was argued that the deposit of agreed rent under Section 13 would protect the tenant from further financial obligations.

Conclusion

The Supreme Court’s judgment in Heera Traders vs. Kamla Jain clarifies the obligations of tenants during eviction appeals under the Madhya Pradesh Accommodation Control Act, 1961. While Section 13 of the Act requires tenants to deposit the agreed rent during the pendency of an appeal, it does not prevent the appellate court from imposing additional conditions for stay of eviction, such as the payment of mesne profits. The court emphasized that once an eviction order is passed, the tenant becomes an unauthorized occupant and is liable to pay mesne profits. This judgment balances the rights of both landlords and tenants, ensuring that landlords are not unduly deprived of their rights while also providing a clear framework for tenants seeking a stay of eviction.