Delhi High Court: In a civil suit seeking damages of mesne profits, loss of market rent and the damages arising out of outstanding property tax, along with pendente lite and future interest, etc., Purushaindra Kumar Yadav, J.*, stated that the plaintiffs were able to sufficiently establish that the occupation of Defendant 1 over the suit property for the period from 1-5-1999 to 2-7-2020 was illegal.
Thus, the Court concluded that the plaintiffs were entitled to mesne profits amounting to Rs. 1,76,79,550, to be paid by the defendants. Further, the Court awarded an interest at the rate of 6% p.a., on the mesne profits from the start of the illegal occupation to the date of handover.
Background
On 1-9-1976, the plaintiff leased out the suit property to Defendant 1. Thereafter, lease agreements were executed, which stood expired on 25-11-1995. On 5-8-1998, Defendant 3-Competent Authority under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (‘SAFEMA’) forfeited the suit property. Resultantly, with effect from 1-5-1999, Defendant 1 stopped paying the rent to the plaintiffs, citing that the suit property was forfeited.
The Division Bench of the Court, vide judgment dated 1-12-2014, quashed the order of forfeiture holding the same to be without jurisdiction. Despite the aforesaid judgment, Defendant 1 failed to hand over the possession of the suit property to the plaintiffs, and consequently, the plaintiffs filed a fresh writ petition. The Court vide order dated 16-7-2020 directed Defendant 1 to hand over the possession of the suit property and to pay arrears of rent from 1-5-1999 to 2-7-2020, based on the last admitted rent, i.e., Rs. 20,500 per month.
Analysis, Law, and Decision
1. Whether the occupation of Defendant 1 of suit property, for the period 1-5-1999 to 2-7-2020 was illegal?
The Court relied on Deepak Agro Foods v. State of Rajasthan, (2008) 7 SCC 748, a perusal of the order of this Court dated 1-12-2014 and the order of the Government of India dated 28-3-2016 indicated that proceedings under SAFEMA and the forfeiture order was nullified on the ground of lack of jurisdiction. Consequently, the provisions of Section 23 of the SAFEMA became inapplicable under the circumstances of the present case.
The Court stated that a bare reading of Section 23 of the SAFEMA, indicated that it only applied when an action was undertaken in good faith or in accordance with the Act or the Rules made thereunder. In instances where a governmental authority claims good faith in the occupation of an individual’s property, it must convincingly demonstrate that such occupation was based on an honest belief of legal or statutory entitlement and not marred by any malicious intent.
In the present case, the Court observed that the possession of the suit property was restored to the plaintiffs on 2-7-2020, i.e., seven years after the forfeiture order was quashed. Thus, in the absence of any bona fide conduct or reasonable explanation being offered by the defendants for their continuous possession of the property in question, without paying the rent, would not be amenable to be protected under the doctrine of good faith.
Thus, the Court concluded that the possession and occupation of the suit property by the defendants could not be justified under Section 23 of the SAFEMA. Holding otherwise, would mean stretching the doctrine of good faith to an extent where an illegal action which had already been found to be impermissible in law would be impliedly approved by this Court.
The Court stated that it was conscious of the fact that immovable property, for an individual, was not merely a corporeal asset or a physical manifestation of ownership. It constituted a fundamental pillar of economic security, social identity, and personal dignity. The right to property, though no longer a fundamental right, continued to occupy a sacrosanct position within the democratic framework as a constitutional and legal right under Article 300-A of the Constitution.
The Court stated that, the State being a constitutional authority and repository of public trust, was duty-bound to protect, rather than transgress, the civil rights of its citizens, including the right to property. The powers of the State were not plenary or absolute but were circumscribed by constitutional and statutory limitations. Any executive or legislative action that seeks to divest a citizen of property without due process, in the absence of an enabling law, would fall foul of Article
Thus, the Court stated that the plaintiffs were able to sufficiently establish that the occupation of Defendant 1 over the suit property for the period from 1-5-1999 to 2-7-2020 was illegal.
2. Whether the plaintiffs were entitled to Rs.2,20,70,954 towards damages, mesne profits and loss of market rent for the period May 1999 to 2-72020 due to such illegal occupation and whether the plaintiffs were entitled to interest?
The Court stated that it was well settled that a property owner was entitled to claim compensation for unlawful deprivation of possession of immovable property, and such a remedy was available even in cases where the impugned forfeiture was held to be without jurisdiction. In the present case, it already stands conclusively established that the suit property remained in the unlawful possession of the defendants from 1-5-1999 to 2-7-2020.
Upon consideration of the lease deeds adduced by the plaintiffs, delineating property areas and corresponding lease values over the period spanning 2005 to 2020, the Court undertook a year-wise computation of the per sq. ft. valuation. Thus, the Court concluded that the plaintiffs were entitled to mesne profits amounting to Rs. 1,76,79,550, to be paid by the defendants. Further, the Court awarded an interest at the rate of 6% p.a., on the mesne profits from the start of the illegal occupation to the date of handover.
3. Whether the plaintiffs were entitled to a sum of Rs. 9,89,077 towards outstanding maintenance charges, including water charges, for the relevant period?
The Court stated that the possession of the defendants, not being under a valid lease but as unlawful occupants asserting a claim of title, could not give rise to any contractual liability for the payment of maintenance charges, in the absence of a fresh legal or contractual arrangement imposing such an obligation. Even otherwise, the plaintiffs have already been held entitled to mesne profits, which, by their very nature, were intended to encompass any unjust enrichment derived by the defendants to the detriment of the plaintiffs during the period of unauthorised occupation.
Thus, the Court held that the plaintiffs were not entitled to the claimed maintenance charges of Rs. 9,89,077.
4. Whether the plaintiffs were entitled to sum of Rs. 43,53,912 towards outstanding property tax for the relevant period and whether the defendants were not liable to pay property tax?
The Court stated that the continued possession of the defendants, in the absence of a formal lease or document stating that the defendants were to reimburse the property tax, could not automatically give rise to liability for statutory dues. Further, the Court stated that it was a trite principle that property tax was a statutory burden imposed upon the recorded owner of the property, independent of occupancy. The plaintiffs, being the registered owners for municipal purposes, were primarily liable for such dues.
Furthermore, even according to the unsigned lease placed on record by the defendants, the responsibility for paying government taxes was assigned to the plaintiffs. Although the defendants admitted that no lease was in effect after 1995, the obligation to pay the property and government taxes remained with the plaintiffs, as they were the rightful owners. Thus, the Court held that the plaintiffs were not held entitled to payment of the property tax.
[Rajiv Sarin v. Estates Directorate, 2025 SCC OnLine Del 2891, decided on 2-5-2025]
*Judgment by Justice Purushaindra Kumar Yadav
Advocates who appeared in this case:
For the Plaintiffs: Sidhant Kumar, Manya Chandok and Om Batra, Advocates.
For the Defendants: Vikrant N. Goyal, Nitin Chandra, Aditya Shukla and Nishu, Advocates.
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