The Bombay High Court has clarified that a tenant’s unilateral offer to surrender possession, without formal compliance with the Civil Procedure Code, cannot extinguish liability for mesne profits. This judgment reinforces the procedural rigor required in property disputes involving statutory corporations and underscores the necessity of judicial intervention to effectuate transfer of possession.
Background & Facts
The Dispute
The dispute centers on mesne profits claimed by the Board of Trustees of the Port of Bombay (Respondent No. 1) against the legal heirs of Zainuddin Abdulkadar Raja (Petitioners) for unauthorized occupation of Plot No. 322C, measuring 154.82 sq. mtrs., located in Mumbai. The Port Trust initiated an eviction suit in 1978, which culminated in a decree on 02.08.1989, recognizing the Port Trust’s right to claim mesne profits after vacant possession was obtained.
Key Facts
- The suit-plot was originally occupied by the Petitioners under a lease or tenancy arrangement.
- On 15.09.1982, the Petitioners sent a registered letter (Exh-K) to the Docks Manager of the Port Trust, stating they were "not interested in the suit-plot" and wished to surrender it, requesting possession be taken w.e.f. 01.10.1982.
- The letter explicitly stated that liability for rent would cease from 01.10.1982 if the Port Trust failed to take possession.
- On 16.09.1982, the Port Trust responded internally with a conditional no-objection, subject to payment of arrears, eviction of hutment dwellers, and delivery of vacant possession.
- On 21.09.1982, internal records confirmed the plot was vacant except for a watchman’s hut, occupied by the Petitioners’ watchman.
- On 07.10.1982, Port Trust officers noted the eviction suit was still pending and that possession could only be obtained after a decree was executed.
- The Petitioners did not file any application in the pending eviction suit to seek a court order for surrender of possession.
- The Petitioners’ watchman continued to occupy the plot until the Port Trust obtained actual physical possession on 28.01.1987, pursuant to court order.
- The Port Trust claimed mesne profits at escalating rates: Rs. 904.15/month (June 1978 - January 1982), Rs. 993.94/month (February 1982 - January 1983), and Rs. 3,818.49/month (February 1983 - January 1987).
Procedural History
- 1978: Eviction suit (L.E.&C. Suit No. 118/156) filed by Port Trust against Petitioners.
- 02.08.1989: Trial Court decreed the suit, holding that possession had been received and mesne profits were recoverable.
- 25.04.1990: Port Trust filed Misc. Notice No. 480/1990 for computation of mesne profits.
- 16/17.06.1998: Small Causes Court awarded mesne profits of Rs. 23,142.51 with interest at 10% p.a. till 31.08.1981 and 15% p.a. thereafter.
- 27.02.2001: Appellate Bench of Small Causes Court allowed Port Trust’s appeal, setting aside the Trial Court’s order and awarding full claim of mesne profits till 28.01.1987.
- 08.08.2001: Writ Petition filed under Articles 226 and 227 of the Constitution; stayed pending deposit of Rs. 2 lakhs.
- 22.12.2025: Judgment reserved.
- 08.05.2026: Judgment pronounced.
Relief Sought
The Petitioners sought quashing of the Appellate Court’s order dated 27.02.2001, arguing that mesne profits should not be payable after 01.10.1982, as possession had been offered and refused. They also challenged the quantum of mesne profits claimed from February 1983 onwards as arbitrary and unsupported.
The Legal Issue
The central question was whether a tenant’s unilateral offer to surrender possession through a letter to the landlord, without seeking a court order under Order XX Rule 12(1)(c)(ii) of the Civil Procedure Code, 1908, constitutes a valid surrender that extinguishes liability for mesne profits thereafter.
Arguments Presented
For the Petitioner
Learned counsel contended that the registered letter dated 15.09.1982 constituted a clear and unequivocal offer to surrender possession, and the Port Trust’s failure to act within the stipulated timeframe rendered the surrender effective from 01.10.1982. Reliance was placed on Shambhu Nath Khettri, Chhagmull Agarwalla, and Kumari Asha Parekh to argue that mesne profits require wrongful possession, and where the landlord unreasonably refuses to accept surrender, liability ceases. It was submitted that the Petitioners had no obligation to approach the court during a pending suit to effectuate surrender, and that the continued presence of the watchman was passive and not indicative of active wrongful possession.
For the Respondent
Counsel for the Port Trust argued that the letter dated 15.09.1982 was merely an expression of wish, not a legal surrender. No formal application was made under Order XX Rule 12(1)(c)(ii) CPC to record relinquishment before the court. The watchman’s hut remained on the premises, indicating continued control. The Port Trust’s internal communications showed conditional willingness to accept possession, contingent on clearing arrears and removing encroachments - conditions not fulfilled. The Appellate Court correctly held that possession was only legally transferred on 28.01.1987, when actual physical possession was obtained under court order.
The Court's Analysis
The Court undertook a meticulous review of the legal framework governing surrender of possession under the CPC. It emphasized that mesne profits are recoverable only for the period of wrongful possession, and that wrongful possession must be established by the claimant. However, the burden of proving cessation of possession lies with the tenant seeking to absolve liability.
"It is necessary for the Petitioners to follow the route provided under law and surrender possession, which is not done. Therefore the possession cannot be deemed to be surrendered by 30.09.1982 as argued by the Petitioners."
The Court distinguished the cited precedents. In Shambhu Nath Khettri, the plaintiff had not taken a stand that surrender must be through court, whereas here, the suit was pending and the law provided a clear mechanism under Order XX Rule 12(1)(c)(ii). The Court held that the Petitioners’ failure to invoke the court’s authority during the pendency of the suit rendered their unilateral act legally ineffective.
The Court further noted that the presence of the watchman’s hut after 01.10.1982 was not a passive state but an active retention of control, constituting wrongful possession. The Port Trust’s conditional response did not amount to acceptance of surrender, and the Petitioners could have moved the court to seek a direction for delivery of possession.
Regarding the quantum of mesne profits, the Court acknowledged that the Appellate Court had erred by not directing the Port Trust to recalculate the monthly rate for February 1983 - January 1987 in accordance with the Kirloskar formula and the precedent in AIR 2001 Bom 26. The Court observed:
"The Appellate Bench... did not direct anything about the figure and giving credit if the amount works out lesser than claimed. To that extent the impugned order requires interference."
Thus, while upholding the principle of liability till actual possession, the Court mandated a recalculation with potential credit to the Petitioners.
The Verdict
The petition was dismissed in part and allowed in part. The Appellate Court’s order dated 27.02.2001 was confirmed, holding the Petitioners liable for mesne profits until 28.01.1987. However, the Port Trust was directed to recalculate the monthly mesne profits for the period February 1983 to January 1987 using the Kirloskar formula as referenced in AIR 2001 Bom 26, and to grant credit to the Petitioners if the recalculated amount is less than the claimed Rs. 3,818.49 per month. The Rs. 2 lakh deposit made in court shall be released upon such recalculation, with interest. The operation of this order is stayed for four weeks.
What This Means For Similar Cases
Surrender of Possession Requires Judicial Record
- Practitioners must file an application under Order XX Rule 12(1)(c)(ii) CPC during a pending suit to record surrender of possession; mere correspondence with the landlord is insufficient.
- In eviction or mesne profits cases, tenants cannot rely on informal letters to extinguish liability - judicial record is mandatory.
Wrongful Possession Is Presumed Until Proven Otherwise
- The burden of proving cessation of possession lies with the tenant; passive retention (e.g., watchman’s hut) is treated as active wrongful possession.
- Landlords are not obligated to accept surrender unless formalized through court process, even if they delay response.
Quantum of Mesne Profits Must Be Justified by Formula
- Claims for escalating mesne profits must be substantiated by a recognized formula or market data, and courts must direct recalculation if challenged.
- Where precedent (e.g., Kirloskar formula) governs rent escalation, courts must ensure credit is given if actual computation is lower than claimed.
