Supreme Court Directs Payment of Damages in Public Premises Eviction Case: Bengal Chemicals vs. Ajit Nain (2019)

Date of the Judgment: July 9, 2019
Citation: 2019 INSC 692
Judges: R. Banumathi, J. and A.S. Bopanna, J.
Can a tenant, whose lease has expired, continue to occupy a public premise without paying rent? The Supreme Court addressed this issue in a case involving Bengal Chemicals and Pharmaceuticals Limited and a tenant, Ajit Nain. The court directed the tenant to pay damages for use and occupation of the premises while the matter is reconsidered by the Estate Officer. The judgment was delivered by a two-judge bench comprising Justice R. Banumathi and Justice A.S. Bopanna.

Case Background

Bengal Chemicals and Pharmaceuticals Limited, a Government of India enterprise, owns a property in Kolkata. Ajit Nain was a lessee of a portion of this property, which included a three-storied building and open space, where he ran a Montessori school named Harvard House. The lease agreement, dated August 21, 1995, commenced on June 1, 1993, for a period of 21 years, with an initial monthly rent of Rs. 55,000. The lease expired on May 31, 2014.

Before the lease expired, Ajit Nain requested a renewal, and a meeting was held on May 20, 2014. Bengal Chemicals proposed new terms on May 30, 2014, including a rent of Rs. 50 per sq. ft., with a 10% increase every two years, and a three-year lease period. Ajit Nain did not agree to these terms. After the expiry of the lease, Ajit Nain continued to occupy the premises without paying rent, except for a deposit of Rs. 25,00,000 as per the High Court’s order.

Timeline

Course of Proceedings

Initially, the High Court of Calcutta dismissed a writ petition filed by Ajit Nain. Subsequently, a Division Bench of the High Court directed the appointment of a new Estate Officer and ordered Ajit Nain to deposit Rs. 25,00,000 towards damages. The newly appointed Estate Officer issued a show-cause notice to Ajit Nain, who then filed another writ petition, which was also dismissed. An appeal was filed against this dismissal. While the appeal was pending, the Estate Officer passed an eviction order. The High Court then set aside the eviction order and remitted the matter back to the Estate Officer for fresh consideration. Bengal Chemicals appealed this decision to the Supreme Court.

Legal Framework

The case involves the Public Premises (Eviction of Unauthorized Occupants) Act, 1971. Section 2(e) of the Act defines “public premises.” The relevant sections of the Act are:

• Section 2(e) of the Public Premises (Eviction of Unauthorized Occupants) Act, 1971 defines public premises as “any premises belonging to, or taken on lease or requisitioned by, or on behalf of, the Central Government.”
• Section 4(2)(b)(ii) of the Public Premises (Eviction of Unauthorized Occupants) Act, 1971 deals with the issuance of show cause notice to an unauthorized occupant.
• Section 5(1) of the Public Premises (Eviction of Unauthorized Occupants) Act, 1971 empowers the Estate Officer to make an order of eviction.
• Section 7(2) and 7(2A) of the Public Premises (Eviction of Unauthorized Occupants) Act, 1971 deals with the assessment of damages for unauthorized occupation.
• Section 9 of the Public Premises (Eviction of Unauthorized Occupants) Act, 1971 provides for an appeal against the order of the Estate Officer to the District Judge.

Arguments

Arguments by the Appellants (Bengal Chemicals):

• The tenant, Ajit Nain, was running a school on the premises for commercial purposes without paying rent since June 1, 2014.
• The Estate Officer had correctly determined that Ajit Nain was an unauthorized occupant and passed the eviction order under Section 5(1) and Section 7(2) & (2A) of the Public Premises (Eviction of Unauthorized Occupants) Act, 1971.
• Ajit Nain should have filed an appeal against the Estate Officer’s order before the District Judge under Section 9 of the Public Premises (Eviction of Unauthorized Occupants) Act, 1971, and the writ petition was not maintainable.

Arguments by the Respondent (Ajit Nain):

• The High Court correctly set aside the eviction order due to the previous Estate Officer’s involvement in the proceedings.
• Sufficient opportunity was not provided to the tenant, and the damages fixed by the Estate Officer were arbitrary.
• The sudden increase in rent from Rs. 21 per sq. ft. to Rs. 50 per sq. ft. was unreasonable.
• Ajit Nain had always been ready to pay a reasonable rent and had deposited Rs. 25,00,000 and paid electricity charges, showing his bona fides.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues but addressed the following:

• Whether the High Court was correct in remitting the matter back to the Estate Officer.
• Whether the tenant should pay damages for use and occupation of the premises.

Treatment of the Issue by the Court

Authorities

The judgment does not explicitly cite any cases or books.

Judgment

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to ensure fairness and due process. The Court emphasized that the tenant should be given a sufficient opportunity to present his case before the Estate Officer. The court also considered the fact that the tenant had been occupying the premises for a long period without paying rent, and thus directed him to pay a reasonable amount as damages for use and occupation, pending final determination by the Estate Officer.

The Court’s reasoning was based on the following points:

• The lease had expired on May 31, 2014, by efflux of time.
• The tenant had not paid rent since June 1, 2014, except for the deposit of Rs. 25,00,000 as per the High Court’s order.
• The tenant was taking adjournments in the proceedings before the Estate Officer on the ground of pendency of the appeal before the High Court.
• Sufficient opportunity should be given to the tenant to present his defense.
• The order of the High Court remitting the matter to the Estate Officer has to be maintained.
• The tenant should pay a reasonable amount as damages for use and occupation as an interim measure.

The Court stated: “In our view, sufficient opportunity has to be given to respondent No.1 and the order of the High Court remitting the matter to the Estate Officer therefore, has to be maintained, however, subject to respondent No.1 paying the reasonable amount as damages by way of interim measure for use and occupation.”

The Court also noted: “Without prejudice to the contentions of both the parties, we direct respondent No.1 to pay an amount of Rs.2,50,000/- per month as damages for use and occupation from June, 2014 till May, 2018. From June, 2018, respondent No.1 shall pay an amount of Rs.3,00,000/- per month.”

The Court further clarified: “The damages stated above is tentative. The Estate Officer after providing opportunity to both the parties shall determine the appropriate quantum of damages and the payment presently made shall remain adjustable either way, dependent on the quantum to be decided.”

There was no minority opinion in this case.

Key Takeaways

• Tenants occupying public premises after the expiry of their lease are liable to pay damages for use and occupation.
• Estate Officers must provide sufficient opportunity to tenants to present their case before passing eviction orders.
• The amount of damages payable by a tenant for unauthorized occupation is subject to final determination by the Estate Officer.
• The High Court can remit a matter back to the Estate Officer for reconsideration if the principles of natural justice are not followed.

Directions

The Supreme Court gave the following directions:

1. The tenant shall pay Rs. 2,50,000 per month as damages for use and occupation from June 2014 to May 2018, and Rs. 3,00,000 per month from June 2018 onwards, until the matter is disposed of by the Estate Officer.
2. The arrears payable by the tenant (after deducting Rs. 25,00,000 already deposited) shall be paid in three equal installments, with the first installment due by August 31, 2019, and the next two by the end of October and December 2019, respectively.
3. The damages are tentative, and the Estate Officer shall determine the final quantum of damages after providing an opportunity to both parties.
4. After the tenant deposits the entire arrears, the Estate Officer shall take up the matter and determine the final damages.
5. The appellant is permitted to withdraw the deposited amount of Rs. 25,00,000 and the electricity charges.
6. Upon deposit of the first installment of arrears, the appellant shall ensure the supply of water if it has been disconnected.
7. Failure to deposit any installment of arrears or the monthly damages shall result in the tenant forfeiting the right to defend and the Estate Officer shall pass an order of eviction.

Development of Law

The ratio decidendi of this case is that tenants occupying public premises after the expiry of their lease are liable to pay damages for use and occupation, and that the Estate Officer must provide sufficient opportunity to tenants to present their case. This case reinforces the principles of natural justice and the need for fair procedure in eviction proceedings under the Public Premises (Eviction of Unauthorized Occupants) Act, 1971.

Conclusion

The Supreme Court disposed of the appeals by affirming the High Court’s decision to remit the matter back to the Estate Officer. It directed the tenant to pay tentative damages for use and occupation of the premises, emphasizing the need for a fair hearing and due process. The court also laid down specific directions regarding the payment of arrears and the future conduct of the proceedings before the Estate Officer.

Category

Parent Category: Public Premises (Eviction of Unauthorized Occupants) Act, 1971
Child Category: Section 2(e), Public Premises (Eviction of Unauthorized Occupants) Act, 1971
Child Category: Section 4(2)(b)(ii), Public Premises (Eviction of Unauthorized Occupants) Act, 1971
Child Category: Section 5(1), Public Premises (Eviction of Unauthorized Occupants) Act, 1971
Child Category: Section 7(2) and 7(2A), Public Premises (Eviction of Unauthorized Occupants) Act, 1971
Child Category: Section 9, Public Premises (Eviction of Unauthorized Occupants) Act, 1971
Parent Category: Eviction Law
Child Category: Unauthorized Occupation
Child Category: Damages for Use and Occupation
Parent Category: Property Law
Child Category: Lease Agreements
Child Category: Public Premises

FAQ

Q: What happens if a tenant continues to occupy a public premise after their lease expires?
A: The tenant becomes an unauthorized occupant and is liable to pay damages for use and occupation of the premises.

Q: Can an Estate Officer evict a tenant without giving them a chance to be heard?
A: No, the Estate Officer must provide sufficient opportunity to the tenant to present their case before passing an eviction order.

Q: What is the process for determining the amount of damages for unauthorized occupation?
A: The Estate Officer determines the amount of damages after providing an opportunity to both parties to present their case.

Q: What should a tenant do if they believe the Estate Officer’s order is unfair?
A: The tenant can file an appeal before the District Judge under Section 9 of the Public Premises (Eviction of Unauthorized Occupants) Act, 1971.

Q: What was the Supreme Court’s decision in this case?
A: The Supreme Court directed the tenant to pay tentative damages for use and occupation and ordered the Estate Officer to reconsider the matter after providing a fair hearing to the tenant.