HEADNOTE
Directorate of Estates, Ministry of Housing and Urban Affairs v. Rajiv Sarin & Ors.
Court: High Court of Delhi
Bench: Hon’ble Mr. Justice Anil Kshetarpal and Hon’ble Mr. Justice Amit Mahajan
Date of Judgment: January 20, 2026
Case Number: RFA(OS)(COMM) 34/2025
Laws Involved:
Commercial Courts Act, 2015 (Section 2(1)(c), Section 11); Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (Sections 7, 14, 23); Limitation Act, 1963 (Section 14, Article 51); Code of Civil Procedure, 1908
Keywords: Mesne profits, SAFEMA, Commercial Court jurisdiction, limitation, unauthorised occupation, government tenancy
Summary
The Delhi High Court partly allowed an appeal filed by the Directorate of Estates against a decree awarding mesne profits to private owners for unauthorised occupation of a commercial flat in Ansal Bhawan, New Delhi. While upholding the maintainability of the commercial suit and rejecting objections based on SAFEMA, the Court recalculated the period for which mesne profits could be awarded by applying principles of limitation and exclusion under Section 14 of the Limitation Act. The Court held that the prolonged occupation by the Government after quashing of SAFEMA proceedings constituted a continuing and recurring wrong, but limited recovery of mesne profits to the period from 23 September 2016 to 2 July 2020. The decree was accordingly modified while affirming the reasoning of the Commercial Court on jurisdiction, liability, and computation methodology.
Court’s decision
The Delhi High Court partly allowed the appeal filed by the Directorate of Estates. While affirming the Commercial Court’s findings on maintainability, jurisdiction, and liability of the Government for unauthorised occupation, the Court modified the decree by restricting the award of mesne profits to the period from 23 September 2016 to 2 July 2020. The impugned judgment was upheld in all other respects.
Facts
The dispute concerned Flat No. 1108, Ansal Bhawan, Kasturba Gandhi Marg, New Delhi, owned by the plaintiffs and leased to a government department. Rent was paid until April 1999, after which payment stopped following forfeiture proceedings initiated under SAFEMA against the plaintiffs’ predecessor. The forfeiture order was later quashed by the Delhi High Court in 2014 for lack of jurisdiction, and proceedings were formally closed in 2016. Despite this, possession was retained by the Government until July 2020. The plaintiffs instituted a commercial suit seeking mesne profits for unauthorised occupation from 1999 to 2020, which was decreed by the Commercial Court.
Issues
The principal issues before the Division Bench were:
(i) whether the civil suit was maintainable as a commercial dispute;
(ii) whether SAFEMA barred civil remedies for mesne profits;
(iii) whether the suit abated due to death of one plaintiff; and
(iv) the period for which mesne profits could legally be awarded in light of limitation.
Appellant’s arguments
The Union of India contended that the Commercial Court lacked jurisdiction as the property was not used for trade or commerce. It was argued that SAFEMA barred civil proceedings and granted immunity to the Government for actions taken in good faith. The appellant further argued that upon forfeiture, ownership vested in the Government, disentitling the plaintiffs from claiming rent or mesne profits. Limitation was also urged as a bar to recovery for the earlier period.
Respondents’ arguments
The plaintiffs argued that the property was leased and used exclusively for commercial purposes, squarely attracting Section 2(1)(c)(vii) of the Commercial Courts Act. They contended that once SAFEMA proceedings were quashed, their proprietary rights revived and the Government’s continued possession became unauthorised. Reliance was placed on earlier writ court orders restoring possession and reserving liberty to claim mesne profits and interest before the civil court.
Analysis of the law
The Court analysed the definition of “commercial dispute” under the Commercial Courts Act and held that leasing of immovable property for exclusive commercial use squarely falls within its ambit, even when one party is the State. On SAFEMA, the Court held that Section 14 bars only challenges to forfeiture proceedings and does not exclude independent civil claims for mesne profits, especially after forfeiture orders have been quashed. The Court reiterated that exclusion of civil jurisdiction must be construed narrowly.
Precedent analysis
The Bench relied on Supreme Court jurisprudence on continuing and recurring wrongs, including Rushibhai Jagdishbhai Pathak v. Bhavnagar Municipal Corporation, to hold that unauthorised occupation gives rise to recurring causes of action. The Court also relied on decisions interpreting Section 14 of the Limitation Act liberally, including Shakti Tubes Ltd. v. State of Bihar, to exclude time spent bona fide pursuing writ remedies while computing limitation.
Court’s reasoning
The Court held that the Government’s continued occupation after quashing of SAFEMA proceedings lacked legal justification and attracted liability for mesne profits. However, applying limitation principles, the Court excluded the period during which writ proceedings were pending and held that mesne profits could be claimed only for three years prior to institution of the writ petition. Based on lease deeds produced on record, the Court recalculated mesne profits for the period 23 September 2016 to 2 July 2020 and adjusted amounts already paid.
Conclusion
The appeal was partly allowed. The decree of the Commercial Court was modified to limit mesne profits to ₹67,13,340 with interest at 6% per annum for the period from 23 September 2016 to 2 July 2020. The findings on jurisdiction, maintainability, and liability were affirmed.
Implications
This judgment clarifies that Government authorities can be held liable for mesne profits for unauthorised occupation of private property even after statutory proceedings are quashed. It reinforces liberal application of Section 14 of the Limitation Act where parties bona fide pursue writ remedies, while simultaneously ensuring that limitation principles are not diluted beyond statutory bounds.
Case law references
- Rushibhai Jagdishbhai Pathak v. Bhavnagar Municipal Corporation – Defined continuing and recurring wrongs. Applied.
- Shakti Tubes Ltd. v. State of Bihar – Time spent in writ proceedings can be excluded under Section 14 of the Limitation Act. Relied upon.
- Deena v. Bharat Singh – Interpreted “other cause of like nature” under Section 14. Applied.
FAQs
1. Can mesne profits be claimed against the Government after SAFEMA proceedings are quashed?
Yes. Once forfeiture proceedings are set aside, civil remedies for unauthorised occupation revive.
2. Does SAFEMA bar all civil suits relating to forfeited property?
No. Section 14 bars only matters determinable under SAFEMA, not independent claims for compensation.
3. How is limitation applied in mesne profit cases involving writ proceedings?
Time spent bona fide pursuing writ remedies can be excluded under Section 14 of the Limitation Act.