Mesne Profits in CPC

When someone wrongfully occupies property that does not belong to them, they not only deprive the rightful owner of their possession but also of potential profits that could have been earned. This compensation, known as mesne profits, serves to rectify the financial loss incurred by the rightful owner due to the wrongful possession. Mesne profits in CPC include not only the actual profits received by the occupier but also those that could have been obtained with reasonable effort.

In this article, we discuss the concept of mesne profits, its calculation, legal implications and the principles courts follow when awarding this compensation.

Meaning and Scope of Mesne Profits in CPC

According to Section 2(12) of the Code of Civil Procedure, 1908, “mesne profits” of a property refer to the profits that the person in wrongful possession of such property actually received or could have received with ordinary diligence, along with interest on such profits. However, it does not include profits due to improvements made by the person in wrongful possession.

Mesne profits in CPC become relevant in cases of unlawful occupation or wrongful possession of property by someone who is not the rightful owner. In such cases, the owner is entitled not only to the restoration of the property through a suit to recover possession but also to damages for wrongful possession.

The court may award mesne profits under CPC to the rightful owner in these circumstances. Mesne profits can be claimed against a trespasser, a mortgagor after a decree for foreclosure or redemption has been passed against them, a tenant holding the property even after being served a notice to quit or a person against whom a decree of possession has been passed.

To determine mesne profits, the court considers not what the plaintiff has lost but what the defendant has or could have gained reasonably with ordinary diligence from the wrongful possession. The court typically determines the amount of mesne profits based on factors such as the market value of the property, the duration of wrongful possession and other relevant circumstances. Evidence presented by both parties is considered by the court to arrive at a fair amount of mesne profits under CPC to be awarded.

Conditions for Claiming Mesne Profits

Two conditions must be met to bring a claim for mesne profits under CPC:

• The possession of the property must be unlawful and unauthorised.
• The person must have received benefits or profits through such possession.

It is important to note that profits received through improvements made to the property by the wrongful possessor are not considered mesne profits. The possessor is also not entitled to claim expenses incurred due to improvements from the owner, as they are legally considered trespassers.

According to Order 2 Rule 4 of the Code, a claim for mesne profits must be joined with a suit for the recovery of possession of the property and no separate claim will be entertained.

Who Can Mesne Profits Be Claimed Against?

An individual becomes liable for mesne profits in CPC when they possess and enjoy the benefits derived from an immovable property that does not legally belong to them. This includes:

• Tenants who refuse to leave after being served a notice to vacate the property.
• Trespassers.
• Mortgagors who continue to possess the mortgaged property after a decree of foreclosure has been passed against them.
• Mortgagees who are still in possession of the property after a decree of redemption.
• Any other person against whom a decree of possession has been passed.

If the plaintiff is dispossessed by several persons, each of them will be held liable to pay mesne profits in CPC, regardless of whether they are in actual possession or have received any benefits from the property.

The court may hold trespassers jointly liable and have their respective rights pleaded in a separate suit for contribution to ascertain the liability of each of them.

For example, if ‘A’ owns a farmhouse and ‘B’, ‘C’, ‘D’ and ‘E’ wrongfully claim possession, with only ‘C’ actually living on the premises, ‘A’ is entitled to bring a suit for recovery of possession and a claim for mesne profits against all four of them.

Another example is if ‘K’ owns a house and ‘M’ claims possession, collects rents and then builds more rooms to convert it into a guest house, the profits from this improvement are not considered mesne profits in CPC.

Calculation of Mesne Profit

Mesne profits are calculated based on the specific circumstances of each case, as interpreted by the courts of law. There is no fixed rule for assessing mesne profits and the assessment is left to the discretion of the courts. Here are some case laws that illustrate how mesne profits have been calculated in different scenarios:

M/S. Hindustan Motors Ltd. v. M/S. Seven Seas Leasing Ltd (2018)

In this case, the Delhi High Court calculated mesne profits from May 1998 to August 1999. The tenant, who had occupied the property from 1986 to 1998, handed over the premises during the lawsuit. The court based its calculation on the period from the filing of the suit in May 1998 to the date the possession was returned in August 1999.

Square Four Assets Management & Reconstruction Co. P. Ltd. v. Orient Beverages Ltd. & Ors. (2017)

The Calcutta High Court, in this case, determined mesne profits from May 17, 2016, to May 25, 2017. The defendant, a tenant, had sub-leased the premises to a third person who did not vacate after the expiry of the lease term. Although the defendant had handed over the premises on the expiry date (September 30, 2015), the sub-lessee vacated it on May 25, 2017.

Therefore, the court calculated mesne profits in CPC from the date of the suit’s institution (May 17, 2016) to the date of the sub-lessee’s vacation (May 25, 2017) and ordered an inquiry for this period.

Laljee Shahay Singh And Others Decree-Holders, v. F.C Walker And Others (1902)

In this case, the Calcutta High Court held that mesne profits for raiyati land should be calculated based on fair rent, not the value of production from the land. Both the original owner and the trespasser are considered rent receivers, so the calculation should be based on fair rent.

The New India Assurance Co. Ltd. v. M/s. M. Gulab Singh & Sons P. Ltd (2018)

In this case, the Delhi High Court considered the trial court’s assessment of mesne profits, which involved different rates for different periods based on lease deeds. The court noted that the lease deeds exhibited by the respondent were relevant, as they were prepared based on the premise and aligned with 50% of the period for calculating mesne profits (from 2005 to 2010).

The court stated that if mesne profits are evaluated based on the rent payable for the property or similar premises in the area, it is considered an honest assessment. The Delhi High Court upheld the trial court’s decision in determining the value of the mesne profits in CPC payable by the appellant.

Dr. JK Bhakthavasala Rao v. Industrial Engineers, Nellore (2005)

In this case, the Andhra Pradesh High Court laid down two important criteria for assessing mesne profits when only factual questions are involved in fixing damages for occupation and usage of a building. These criteria are:

• Assessing the location, nature and surrounding features of the property.
• Examining premises with similar traits in the surrounding area.

In conclusion, there is no uniform criteria for assessing the value of mesne profits in CPC, as each case is unique. However, courts generally consider mesne profits in CPC to be net profits derived after deducting necessary expenditures. While rent used to be a determining factor, it has been rejected by Indian courts over time. The key factor remains that profits must have been acquired by the wrongful possessor with due diligence.

Circumstances When Mesne Profit is Not Granted In CPC

While we have discussed situations where mesne profits in CPC have been granted to the original owner due to wrongful possession, it is also important to understand the circumstances where mesne profit has been disallowed by courts. Here are some scenarios:

Joint Family Property and Joint Possession: In cases where the property in question is a joint family property and both the appellant and the respondent are joint owners, the appellant cannot claim mesne profits. The Telangana High Court, in Smt. Subashini vs S. Sankaramma (2018), ruled that if both parties are joint owners, the respondent is not in wrongful possession as he is also an owner.

Absence of Court Order or Decree: The Income Tax Appellate Tribunal, in Krishna N Bhojwani, Vs. Assessee (2021), disallowed the grant of mesne profits in CPC because there was no order or decree by any civil court to give effect to mesne profits. A court order is a prerequisite for granting mesne profits.

Section 144 of the Code of Civil Procedure Not Applicable: In Murti Bhawani Mata Mandir REP. Through Pujari Ganeshi Lal (D) Through LR vs. Rajesh & Ors (2019), the Supreme Court observed that Section 144 of the Code of Civil Procedure, 1908, is not applicable if there is no decree or order by the trial court to vest possession in the appellant or to mandate the respondent to hand over possession.

Lack of Sufficient Evidence: The burden of proof rests on the claimant of wrongful possession to provide sufficient evidence before the court. Without adequate evidence, the claim for mesne profits in CPC may be disallowed.

Initial Possession Not Wrongful: In Union of India (UOI) and Ors v. Banwari Lal and Sons (2004), the Supreme Court held that if a person’s possession of property was not wrongful initially but later assumed a wrongful character, only fair rent of the property will be provided, not mesne profits.

These circumstances are based on interpretations of judgments by Indian courts and are not exhaustive. Each case is unique and subject to the specific facts and circumstances involved.

Judicial Standpoint on Mesne Profits

The calculation of mesne profits does not adhere to a fixed rule but requires a case-by-case assessment. The Calcutta High Court, in Casyab Pvt. Ltd. v. Central Bank of India, emphasised that assessing mesne profits may involve some guesswork based on available materials and evidence. There is no uniform standard for assessment, but a comparative analysis of factors like the nature, location, accessibility, age and condition of the property can be relevant.

To be granted mesne profits in CPC, the plaintiff must provide evidence supporting their claim and explicitly plead for it in the plaint. The Supreme Court, in Ganapati Madhav Sawant (Dead) through his Lrs. v. Dattur Madhav Sawant, clarified that under Order XX Rule 12 of the CPC, the court can only order an inquiry into mesne profits if the plaintiff specifically prays for it in the suit. Failure to do so will result in the court being unable to grant mesne profits.

Evidence is crucial for a successful claim of mesne profits in CPC, even if it is not conclusive. Parties must provide evidence to support or reject the claim. In Ramakka v. Nagesam, the Madras High Court stated that the burden of proof lies with the plaintiff to adduce evidence supporting the claim for mesne profits. Without evidence, the claim cannot be determined and the claim fails due to its absence.

The burden of proof and onus of proof in an application for ascertaining mesne profits lies initially with the plaintiff. However, the onus may shift depending on the weight of the evidence adduced by each party. The defendant bears the onus of proving the amounts actually received, as that information is within their knowledge. If both parties present evidence, the court determines the profits based on that evidence.

Mesne profits in CPC are not awarded arbitrarily but require a thorough assessment based on evidence and legal provisions. The courts apply principles of fairness and justice in determining the amount of mesne profits to be awarded in each case.

Principles in Awarding Mesne Profits In CPC

When awarding mesne profits, the court follows several principles to ensure fairness and justice:

• The profits considered are those made by the person in wrongful possession of the property.
• The goal is to restore the status quo before the wrongful dispossession of the decree-holder.
• The court considers the potential uses to which the decree-holder could have put the property if they were in possession.

Interest and Deductions of Mesne Profits In CPC

Section 2 Clause 12 of the Civil Procedure Code specifies that mesne profits must include any interest received during the wrongful possession. The court determines the rate of interest, which should not exceed 6% per annum, based on all relevant information.

When computing mesne profits, deductions are made from the gross profit of the defendant in wrongful possession. These deductions include costs of cultivation and reaping crops, government revenue and charges for collecting rent.

Burden of Proof

In a suit for mesne profits in CPC, the burden of proof lies with the claimant. The plaintiff must prove their lawful ownership of the property and that they are being deprived of their right to enjoy it due to the defendant’s wrongful possession.

The plaintiff must also prove the profits they might have received with ordinary diligence.

Power of Court in Suit Relating to Mesne Profits

Under Order 20 Rule 12, when there is a suit for the recovery of possession, the court has the discretion to pass several types of decrees:

• For possession of immovable property.
• For collection of mesne profits or directing an inquiry into mesne profits.

A preliminary decree directing an inquiry into mesne profits acquired before the suit was instituted.

Directing an inquiry into mesne profits in CPC acquired until possession is returned or relinquished and before 3 years from the decree.

Conclusion

Mesne profits in CPC is the profits or benefits derived from immovable property while wrongfully in possession by a person who is not the rightful owner. These profits include actual gains received or those that could have been received with ordinary diligence, along with any interest on such profits.

Mesne profits are relevant in cases of unlawful occupation or wrongful possession, where the rightful owner is entitled not only to regain possession but also to claim damages for the period of wrongful possession. The assessment and award of mesne profits aim to compensate the owner for the losses incurred due to the wrongful occupation of their property.