Court’s Decision
The Delhi High Court, presided by Justice Sachin Datta, dismissed an appeal challenging the trial court’s decree of possession and mesne profits in favour of the landlord concerning a commercial property in the Karol Bagh area.
The Court reaffirmed that a tenant in settled possession cannot dispute the ownership or title of the landlord during the subsistence of tenancy and cannot continue to occupy the premises after termination of lease. The Court observed:
“Once a tenancy stands validly terminated, continued possession of the tenant becomes unauthorized, and the landlord is entitled to possession and mesne profits for wrongful occupation.”
The Court held that the lease agreement was validly terminated, that the appellant’s possession had become illegal, and that the trial court rightly decreed eviction and compensation. Consequently, the Regular First Appeal (Commercial) was dismissed, affirming the trial court’s findings in entirety.
Facts
The dispute arose from a registered lease agreement executed in 2018 for a commercial shop premises in Delhi, under which the respondent (landlord) had let out the property to the appellant (tenant) for a fixed term of three years, renewable by mutual consent.
After expiry of the initial term, the landlord refused to renew the tenancy and issued a legal notice of termination under Section 106 of the Transfer of Property Act, 1882 (TPA). Despite repeated reminders, the tenant failed to vacate the premises and continued occupying it without paying enhanced rent or acknowledging the landlord’s right to re-enter.
The landlord thereafter filed a commercial civil suit seeking possession, arrears of rent, and mesne profits under Section 7 of the Commercial Courts Act, 2015, read with Section 108(q) and 111(a) of the TPA, claiming that continued possession amounted to unlawful enrichment and obstruction of ownership rights.
The trial court decreed the suit, holding that the tenancy had ended by efflux of time and that the landlord’s termination notice was valid. The tenant, aggrieved, approached the High Court in appeal contending that the landlord was not the true owner and that the relationship of landlord-tenant was not established beyond doubt.
Issues
- Whether the appellant could dispute the landlord’s title while continuing to occupy the premises.
- Whether the termination of tenancy under Section 106 of the Transfer of Property Act was legally valid.
- Whether the trial court correctly awarded mesne profits for unauthorized occupation after expiry of tenancy.
Petitioner’s (Appellant’s) Arguments
The appellant contended that the landlord had no locus to file the eviction suit, asserting that ownership of the premises was under dispute and that a third party claimed interest in the property. The appellant alleged that rent receipts were issued by a manager and not the landlord directly, thereby creating doubt regarding ownership.
It was argued that the lease had been orally extended and that the landlord had accepted rent even after the expiry of the term, implying renewal by conduct under Section 116 of the TPA. The appellant further claimed that since possession had been peacefully enjoyed for years, eviction without adjudicating ownership amounted to denial of due process and commercial disruption.
Reliance was placed on Ramesh Chand v. Uganti Devi (2010 SCC OnLine Del 1746), where it was held that mere acceptance of rent after expiry of lease can create a new tenancy if intention is established. The appellant thus sought setting aside of the decree on grounds of lack of ownership proof, procedural lapses, and non-quantification of mesne profits.
Respondent’s (Landlord’s) Arguments
The landlord, represented through counsel, argued that the tenant was estopped under Section 116 of the Indian Evidence Act, 1872, from denying the landlord’s title once possession was taken under a lease.
It was further submitted that the termination notice was duly served and that the appellant had failed to vacate despite multiple reminders. The landlord emphasized that the tenant’s occupation after termination was unlawful and without consent, attracting liability for mesne profits till actual delivery of possession.
The respondent relied on K.K. Dewan v. Brij Mohan (1990) 1 SCC 222, where the Supreme Court held that a tenant’s denial of landlord’s title does not create ownership rights in himself, and on Skyline Education Institute v. S.L. Vaswani (2010) 2 SCC 142, emphasizing that possession after lease termination becomes illegal regardless of disputes over ownership.
The landlord further argued that the Commercial Division of the Court had jurisdiction since the property generated substantial rental income exceeding ₹1 crore annually, thus satisfying the commercial valuation threshold under Section 2(1)(c)(vii) of the Commercial Courts Act.
Analysis of the Law
The Court undertook an extensive review of Section 106, 111(a), and 116 of the Transfer of Property Act, 1882, alongside Section 116 of the Indian Evidence Act, reiterating that:
“A tenant, having entered under a landlord, is estopped from denying that landlord’s title so long as he has not surrendered possession.”
The Court clarified that acceptance of rent after expiry of tenancy does not by itself renew a lease, unless both parties intend to continue the tenancy. The doctrine of “holding over” under Section 116 TPA requires explicit acceptance of tenancy by the landlord, which was absent in the present case.
The Bench also relied upon Sections 108(q) and 111(g) of the TPA to underscore that once the landlord validly terminates the lease, possession must be restored, failing which the tenant becomes a wrongful occupant liable for mesne profits.
Precedent Analysis
- Ramesh Chand v. Uganti Devi (2010 SCC OnLine Del 1746) — Distinguished. The Court held that renewal by conduct requires positive intention by the landlord, which was missing here.
- K.K. Dewan v. Brij Mohan (1990) 1 SCC 222) — Applied. Reiterated that a tenant cannot challenge the landlord’s title while remaining in possession.
- Skyline Education Institute v. S.L. Vaswani (2010) 2 SCC 142) — Applied. Established that possession after lease termination becomes unlawful.
- Payal Vision Ltd. v. Radhika Choudhary (2012) 11 SCC 405) — Cited to affirm that a lease stands terminated by efflux of time and does not require fresh notice unless renewed by contract.
The Court harmonized these precedents to hold that the appellant’s possession was wholly unauthorized after termination, and that the landlord’s ownership need not be proved beyond tenancy documents once relationship of tenancy is admitted.
Court’s Reasoning
The Court reasoned that the tenant’s acceptance of the landlord-tenant relationship in pleadings and payment of rent estopped him from questioning ownership. It emphasized that mere dispute over title cannot defeat a claim for possession, since tenancy rights derive from lawful permission, not ownership claims.
The Court observed:
“It is a settled proposition that once a tenancy stands determined, the tenant has no right to remain in possession, nor can he claim renewal without mutual consent.”
It further held that the trial court correctly quantified mesne profits based on prevailing market rates and that the decree was consistent with statutory principles and judicial precedents.
The Court dismissed the appellant’s argument of oral extension as unsupported by evidence and reaffirmed that commercial tenancies require written renewal, especially when governed by registered lease agreements.
Conclusion
The High Court dismissed the appeal, affirming the trial court’s decree of possession and mesne profits. It held that:
“The appellant’s continued occupation of the property after termination of lease was illegal, and his challenge to the landlord’s title was impermissible.”
The Court concluded that the relationship of landlord and tenant was undisputed, that the lease stood validly terminated, and that the landlord was entitled to possession and damages until recovery of the premises.
The appeal was thus dismissed with costs, and the execution of the decree was directed to proceed expeditiously.
Implications
- Reaffirms the principle that a tenant cannot deny the landlord’s title while in possession.
- Clarifies that mere acceptance of rent after expiry does not renew a lease without intent.
- Strengthens judicial consistency on termination under Section 106 TPA and liability for mesne profits.
- Reinforces jurisdiction of Commercial Courts over high-value tenancy disputes.
- Serves as caution for tenants relying on informal renewals or oral arrangements in commercial leases.
