Case Note & Summary
The petitioner, Safset Agencies Private Ltd., a company dealing in art, was a licensee under a Leave and Licence Agreement dated 25 September 2006 with the respondents, who are partners of M/s. Gosalia Enterprises, in respect of premises at Bharat Chambers, Mumbai. The license was for 60 months from 25 September 2006 to 24 September 2011, with a license fee of Rs.3,00,000/- per month. Disputes arose regarding payment of license fees, leading to termination notices by the respondents. The petitioner filed a suit for declaration of tenancy and fixation of standard rent, while the respondents filed a suit for recovery of possession and arrears. The Small Causes Court dismissed the petitioner's suits and decreed the respondents' suit on 17 December 2022, directing the petitioner to vacate and pay compensation at Rs.6,00,000/- per month from 1 May 2009 till vacation. The petitioner appealed, and the Appellate Bench of Small Causes Court, by order dated 5 June 2023, stayed the decree subject to the petitioner depositing Rs.6,00,000/- per month from termination of license till decree and Rs.17,95,000/- per month from decree till appeal decision. The petitioner challenged this condition. The High Court examined whether the principle in Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd., which allows courts to direct deposit of fair market rent as a condition for stay in eviction cases involving protected tenants, applies to licensees. The court noted that in the case of a licensee, possession becomes unlawful from the date of termination of license, unlike a protected tenant where it becomes unlawful only after decree. The court held that the Appellate Court erred in splitting the period of unlawful occupation and directing deposit of contractual compensation for one period and fair market rent for another. The High Court modified the condition, directing the petitioner to deposit Rs.6,00,000/- per month from the date of termination of license till disposal of the appeal, instead of the higher amount. The petition was partly allowed.
Headnote
A) Civil Procedure - Stay of Execution - Order 41 Rule 5 CPC - Pre-condition of Deposit - The Appellate Court directed the licensee to deposit contractual compensation up to the date of decree and fair market rent thereafter as a condition for stay of eviction decree. The High Court held that the principle of Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd. applies to licensees as well, but the Appellate Court erred in splitting the period of unlawful occupation. The licensee's possession becomes unlawful from the date of termination of license, and the court cannot direct deposit of contractual rent for one period and fair market rent for another. The condition was modified to require deposit of contractual compensation at Rs.6,00,000/- per month from the date of termination till disposal of appeal. (Paras 1, 2, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43)
Issue of Consideration
Whether the Appellate Court can direct deposit of fair market rent as a pre-condition for grant of stay to an eviction decree in a suit between licensor and licensee, where the licence fees and damages are contractually agreed upon.
Final Decision
Petition partly allowed. The condition imposed by the Appellate Bench is modified to require the petitioner to deposit Rs.6,00,000/- per month from the date of termination of license till disposal of the appeal, instead of the split rate.
Law Points
- Appellate Court's power to impose conditions for stay under Order 41 Rule 5 CPC
- Distinction between licensee and tenant under Rent Control Legislation
- Applicability of Atma Ram Properties principle to license cases
- Mesne profits from date of termination of license
