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Indian Oil Corporation Ltd. vs Sudera Realty Private Limited

Civil Appeal · 2022 INSC 928Decided 6 Sept 2022
Civil Appeal No.6199 of 2022
K.M. Joseph · Pamidighantam Sri Narasimha

Background

Sudera Realty had leased the 2nd, 3rd and 4th floors of a Kolkata building to Indian Oil Corporation (IOC) for 21 years starting from the date possession was handed over. After the lease period expired, IOC allegedly stayed in wrongful possession for several more years before finally vacating in 1994. Sudera Realty sued for mesne profits (compensation for the value of wrongful occupation) at the rate of Rs.31 per square foot per month, and the trial court and, on appeal, the Calcutta High Court's Division Bench (with some modification to the start date of the lease) ruled largely in the landlord's favour. IOC appealed to the Supreme Court, arguing among other things that its possession was not "wrongful" and that a large part of the claim was time-barred under Article 51 of the Limitation Act.

Decision Breakdown

The Supreme Court held that a valid registered lease did exist from 1968/1969, that IOC became a "tenant at sufferance" once the 21-year term expired (with no fresh tenancy created merely by the landlord's without-prejudice acceptance of occupation charges), and that IOC was therefore liable to pay damages for unauthorised occupation. On limitation, the Court held that the landlord's claim was not for "profits" strictly within the meaning of Article 51 of the Limitation Act (which requires proving actual profits received by the wrongful occupant) but was really a claim for damages measured by the rent the landlord could have earned by re-letting the premises: a claim governed instead by the residuary Article 113, which has a longer limitation period. Finding no merit in IOC's appeals, the Court dismissed them, leaving each side to bear its own costs.

Lesson Learnt

When a tenant overstays after a lease expires, merely continuing to pay and the landlord accepting money "without prejudice" does not create a new tenancy: the tenant becomes a tenant at sufferance liable for damages measured at market rate, and such a claim for damages for wrongful occupation is treated under the general (longer) limitation period rather than the shorter period for suits to recover specific "profits."

Official source (sci.gov.in)View Judgment (PDF)

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