Doctrine of merger does not have the effect of postponing the date of termination of tenancy

To sum up, our conclusions are:-
(1) while passing an order of stay under Rule 5 of Order 41 of the Code of Civil Procedure,
1908, the appellate Court does have jurisdiction to put the applicant on such reasonable terms
as would in its opinion reasonably compensate the decree-holder for loss occasioned by delay
in execution of decree by the grant of stay order, in the event of the appeal being dismissed and
in so far as those proceedings are concerned. Such terms, needless to say, shall be
reasonable;
(2) in case of premises governed by the provisions of the Delhi Rent Control Act, 1958, in view
of the definition of tenant contained in Clause (I) of Section 2 of the Act, the tenancy does not
stand terminated merely by its termination under the general law; it terminates with the passing
of the decree for eviction. With effect from that date, the tenant is liable to pay mesne profits or
compensation for use and occupation of the premises at the same rate at which the landlord
would have been able to let out the premises and earn rent if the tenant would have vacated the
premises. The landlord is not bound by the contractual rate of rent effective for the period
preceding the date of the decree;
(3) the doctrine of merger does not have the effect of postponing the date of termination of
tenancy merely because the decree of eviction stands merged in the decree passed by the
superior forum at a latter date.

Equivalent Citation: 2005(3)BomCR274, 2005(1)CTC53, 115(2004)DLT531(SC), JT2004(10)SC410,
(2005)2MLJ1(SC), (2005)141PLR643, 2004(10)SCALE345, (2005)1SCC705
IN THE SUPREME COURT OF INDIA
Civil Appeal No. 7988 of 2004 (Arising out of S.L.P. (C) No. 6415 of 2002)
Decided On: 10.12.2004
Appellants: Atma Ram Properties (P) Ltd.
Vs.
Respondent: Federal Motors Pvt. Ltd.
Hon'ble Judges:
R.C. Lahoti, C.J. and G.P. Mathur, J.




Tenancy - Delhi Rent Control Act, 1958 - Sections 14(1), 38, 38(3) - Appellant owner of
suit premises, a non residential commercial premises admeasuring 1000 sq. feet situated
in Connaught Circus, New Delhi – Suit premises let out to respondent on a monthly rent
of Rs 371.90 p. per month since year 1944 – Initiation of eviction proceeding by appellant
alleging subletting of premises by respondent – Eviction order passed by Additional
Rent Controller on ground of subletting – Appeal – Tribunal directing stay of eviction
subject to condition of respondent depositing in Court Rs. 15,000 per month in addition
to contractual rent – Writ petition – Allowed by High Court setting aside condition
imposed by Tribunal –Appeal to Supreme Court –Allowing appeal held that while passing
an order of stay under Rule 5 of Order 41 of the Code of Civil Procedure, 1908, appellate
Court has jurisdiction to put applicant on such reasonable terms as would in its opinion
reasonably compensate decree-holder for loss occasioned by delay in execution of
decree by grant of stay order, in the event of appeal being dismissed and in so far as
those proceedings are concerned - In view of definition of tenant contained in clause (1)
of Section 2, tenancy does not stand terminated merely by its termination under general
law, it terminates with the passing of decree for eviction – Tenant, with effect from that
date is liable to pay mesne profits or compensation for use and occupation of premises
at same rate at which landlord would have been able to let out the premises and earn rent
if tenant would have vacated the premises – Since tenant had been paying Rs 371.90 p as
rent of premises since 1944 and since value of real estate and rent rates had been
skyrocketed since that day , Tribunal was justified in putting tenant on term of payment
of Rs 15,000 per month as charges for use and occupation during pendency of appeal –
Since no fault could be found with approach adopted by Tribunal – Impugned judgment
of High Court set aside and that of Tribunal restored
JUDGMENT
R.C. Lahoti, C.J.
1. Leave granted.
2. The suit premises are non-residential commercial premises admeasuring approximately 1000
sq. ft. and situated in Connaught Circus, New Delhi. The premises are owned by the appellant
and held on tenancy by the respondent on a monthly rent of Rs. 371.90p. per month. The
tenancy had commenced sometime in the year 1944 and it appears that ever since then the rent
has remained static. Admittedly, the provisions of the Delhi Rent Control Act 1958, (hereinafter
'the Act', for short) are applicable to the premises.
3. Sometime in the year 1992, the appellant initiated proceedings for the eviction of the
respondent on the ground available under Clause (b) of Sub-section (1) of Section 14 of the Act
alleging that the respondent had illegally sublet the premises to M/s. Jay Vee Trading Co. Pvt.
Ltd. and the sub-tenant was running its showroom in the premises. Vide order dated 19.3.2002,
the Additional Rent Controller, Delhi held the ground for eviction made out and ordered the
respondent to be evicted. The respondent preferred an appeal under Section 38 of the Act. By
order dated 12.4.2001, the Rent Control Tribunal directed the eviction of the respondent to
remain stayed but subject to the condition that the respondent shall deposit in the Court Rs.
15,000/- per month, in addition to the contractual rent which may be paid directly to the
appellant. The deposits were permitted to be made either in cash or by way of fixed deposits in
the name of the appellant and directed to be retained with the Court and not permitted to be
withdrawn by either party until the appeal was finally decided. Raising a plea that the
respondent could not have been directed during the pendency of the proceedings at any stage
to pay or tender to the landlord or deposit in the Court any amount in excess of the contractual
2rate of rent, the respondent filed a petition under Article 227 of the Constitution putting in issue
the condition as to deposit Rs. 15,000/- per month imposed by the Tribunal. By order dated
12.2.2002, which is impugned herein, the learned single Judge of the High Court has allowed
the petition and set aside the said condition imposed by the Tribunal. The effect of the order of
the High Court is that during the pendency of appeal before the Tribunal the respondent shall
continue to remain in occupation of the premises subject to payment of an amount equivalent to
the contractual rate of rent. Feeling aggrieved, the landlord (appellant) has filed this appeal by
special leave.
4. Ordinarily this Court does not interfere with discretionary orders, more so when they are of
interim nature, passed by the High Court or subordinate Courts/Tribunals. However, this appeal
raises an issue of frequent recurrence and, therefore, we have heard the learned counsel for the
parties at length. Landlord-tenant litigation constitutes a large chunk of litigation pending in the
Courts and Tribunals. The litigation goes on for unreasonable length of time and the tenants in
possession of the premises do not miss any opportunity of filing appeals or revisions so long as
they can thereby afford to perpetuate the life of litigation and continue in occupation of the
premises. If the plea raised by the learned senior counsel for the respondent was to be
accepted, the tenant, in spite of having lost at the end, does not loose anything and rather
stands to gain as he has enjoyed the use and occupation of the premises, earned as well a lot
from the premises if they are non-residential in nature and all that he is held liable to pay is
damages for use and occupation at the same rate at which he would have paid even otherwise
by way of rent and a little amount of costs which is generally insignificant.
5. Shri K. Ramamurthy, the learned senior counsel for the appellant submitted that once a
decree or order for eviction has been passed, the tenant is liable to be evicted and if he files an
appeal or revision and opts for retaining use and occupation of the premises, he should be
prepared to compensate the landlord by paying such amount as the landlord would have been
able to earn in the event of the premises being vacated and, therefore, the superior court,
passing an order of stay, acts well within its discretionary jurisdiction by putting on terms the
appellant who seeks an order of stay. On the other hand, Shri Ranjit Kumar, the learned senior
counsel appearing for the respondent, defended the order of the High Court by raising several
pleas noticed shortly hereinafter.
6. The order of eviction passed by Rent Controller is appealable to the Rent Control Tribunal
under Section 38 of the Act. There is no specific provision in the Act conferring power on the
Tribunal to grant stay on the execution of the order of eviction passed by the Controller, but
Sub-section (3) of Section 38 confers the Tribunal with all the powers vested in a Court under
the Code of Civil Procedure, 1908 while hearing an appeal. The provision empowers the
Tribunal to pass an order of stay by reference to Rule 5 of Order 41 of the Code of Civil
Procedure 1908 (hereinafter 'the Code', for short). This position was not disputed by the learned
senior counsel appearing for either of the parties.
7. Sub-rule (1) and (3) of Rule 5 of Order 41 of the Code read as under:-
"Rule 5 Stay by Appellate Court
(1) An appeal shall not operate as a stay of proceedings under a decree or order appealed from
except so far as the Appellate Court may order, nor shall execution of a decree be stayed by
reason only of an appeal having been preferred from the decree; but the Appellate Court may
for sufficient cause order stay of execution of such decree.
Xxx xxx xxx xxx
(3) No order for stay of execution shall be made under Sub-rule (1) or Sub-rule (2) unless the
court making it is satisfied ___
3(a) that substantial loss may result to the party applying for stay of execution unless the order is
made;
(b) that the application has been made without unreasonable delay; and
(c) that security has been given by the applicant for the due performance of such decree or
order as may ultimately be binding upon him.
xxx xxx xxx xxx"
8. It is well settled that mere preferring of an appeal does not operate as stay on the decree or
order appealed against nor on the proceedings in the court below. A prayer for the grant of stay
of proceedings or on the execution of decree or order appealed against has to be specifically
made to the appellate Court and the appellate Court has discretion to grant an order of stay or
to refuse the same. The only guiding factor, indicated in the Rule 5 aforesaid, is the existence of
sufficient cause in favour of the appellant on the availability of which the appellate Court would
be inclined to pass an order of stay. Experience shows that the principal consideration which
prevails with the appellate Court is that in spite of the appeal having been entertained for
hearing by the appellate Court, the appellant may not be deprived of the fruits of his success in
the event of the appeal being allowed. This consideration is pitted and weighed against the
other paramount consideration: why should a party having succeeded from the Court below be
deprived of the fruits of the decree or order in his hands merely because the defeated party has
chosen to invoke the jurisdiction of a superior forum. Still the question which the Court dealing
with a prayer for the grant of stay asks to itself is: Why the status quo prevailing on the date of
the decree and/or the date of making of the application for stay be not allowed to continue by
granting stay, and not the question why the stay should be granted.
9. Dispossession, during the pendency of an appeal of a party in possession, is generally
considered to be 'substantial loss' to the party applying for stay of execution within the meaning
of Clause (a) of Sub-rule (3) of Rule 5 of Order 41 of the Code. Clause (c) of the same provision
mandates security for the due performance of the decree or order as may ultimately be passed
being furnished by the applicant for stay as a condition precedent to the grant of order of stay.
However, this is not the only condition which the appellate Court can impose. The power to
grant stay is discretionary and flows from the jurisdiction conferred on an appellate Court which
is equitable in nature. To secure an order of stay merely by preferring an appeal is not the
statutory right conferred on the appellant. So also, an appellate Court is not ordained to grant an
order of stay merely because an appeal has been preferred and an application for an order of
stay has been made. Therefore, an applicant for order of stay must do equity for seeking equity:
Depending on the facts and circumstances of a given case an appellate Court, while passing an
order of stay, may put the parties on such terms the enforcement whereof would satisfy the
demand for justice of the party found successful at the end of the appeal. In South Eastern
Coalfields Ltd. v. State of M.P. and Ors., MANU/SC/0807/2003 : AIR2003SC4482 , this Court
while dealing with interim orders granted in favour of any party to litigation for the purpose of
extending protection to it, effective during the pendency of the proceedings, has held that such
interim orders, passed at an interim stage, stand reversed in the event of the final decision
going against the party successful in securing interim orders in its favour; and the successful
party at the end would be justified in demanding compensation and being placed in the same
situation in which it would have been if the interim order would not have been passed against it.
The successful party can demand (a) the delivery to it of benefit earned by the opposite party
under the interim order of the High Court, or (b) compensation for what it has lost, and to grant
such relief is the inherent jurisdiction of the Court. In our opinion, while granting an order of stay
under Order 41 Rule 5 of the CPC, the appellate court does have jurisdiction to put the party
seeking stay order on such terms as would reasonably compensate the party successful at the
end of the appeal in so far as those proceedings are concerned. Thus, for example, though a
decree for payment of money is not ordinarily stayed by the appellate Court, yet, if it exercises
its jurisdiction to grant stay in an exceptional case it may direct the appellant to make payment
of the decretal amount with interest as a condition precedent to the grant of stay, though the
4decree under appeal does not make provision for payment of interest by the judgment-debtor to
the decree-holder. Robust commonsense, common knowledge of human affairs and events
gained by judicial experience and judicially noticeable facts, over and above the material
available on record - all these provide useful inputs as relevant facts for exercise of discretion
while passing an order and formulating the terms to put the parties on. After all, in the words of
Chief Justice Chandrachud, speaking for the Constitution Bench in Olga Tellis and Ors. v.
Bombay Municipal Corporation and Ors. - MANU/SC/0039/1985 : AIR1986SC180 , -
"commonsense which is a cluster of life's experiences, is often more dependable than the rival
facts presented by warring litigants".
10. Shri Ranjit Kumar, the learned senior counsel for the respondent, submitted that during the
pendency of the appeal the tenant-appellant cannot be directed to pay any amount over and
above the amount of contractual rent unless and until the decree or order of eviction has
achieved a finality because, in view of the protection of rent control legislation enjoyed by the
tenant, he shall continue to remain a tenant and would not become a person in unlawful
possession of the property until the decree has achieved a finality from the highest forum upto
which the litigation is pursued. Reliance was placed on the decision of this Court in Smt.
Chander Kali Bai and Ors. v. Shri Jagdish Singh Thakur and Anr., MANU/SC/0366/1977 :
[1978]1SCR625 , followed in Vashu Deo v. Balkishan, MANU/SC/0021/2002 : [2002]1SCR171
. This submission raises the following two issues:- (i) in respect of premises enjoying the
protection of rent control legislation, when does the tenancy terminate; and (ii) upto what point
of time the tenant is liable to pay rent at the contractual rate and when does he become liable to
pay to the landlord compensation for use and occupation of the tenancy premises unbound by
the contractual rate of rent?
11. Under the general law, and in cases where the tenancy is governed only by the provisions of
Transfer of Property Act, 1882, once the tenancy comes to an end by determination of lease
under Section 111 of the Transfer of Property Act, the right of the tenant to continue in
possession of the premises comes to an end and for any period thereafter, for which he
continues to occupy the premises, he becomes liable to pay damages for use and occupation at
the rate at which the landlord could have let out the premises on being vacated by the tenant. In
the case of Chander Kali Bai & Ors. (supra) the tenancy premises were situated in the State of
Madhya Pradesh and the provisions of the M.P. Accommodation Control Act, 1961 applied. The
suit for eviction was filed on 8th March 1973 after serving a notice on the tenant terminating the
contractual tenancy w.e.f. 31st December 1972. The suit came to be dismissed by the trial
Court but decreed in first appeal decided on 11th August, 1975. One of the submissions made
in this Court on behalf of the tenant-appellant was that no damages from the date of termination
of the contractual tenancy could be awarded; the damages could be awarded only from the date
when an eviction decree was passed. This Court took into consideration the definition of tenant
as contained in Section 2(i) of the M.P. Act which included "any person continuing in possession
after the termination of his tenancy" but did not include "any person against whom any order or
decree for eviction has been made". The court, persuaded by the said definition, held that a
person continuing in possession of the accommodation even after the termination of his
contractual tenancy is a tenant within the meaning of the M.P. Act and on such termination his
possession does not become wrongful until and unless a decree for eviction is passed.
However, the Court specifically ruled that the tenant continuing in possession even after the
passing of the decree became a wrongful occupant of the accommodation. In conclusion the
Court held that the tenant was not liable to pay any damages or mesne profits for the period
commencing from 1st January 1973 and ending on 10th August 1975 but he remained liable to
pay damages or mesne profits from 11th August 1975 until the delivery of the vacant
possession of the accommodation. During the course of its decision this Court referred to a
decision of Madhya Pradesh High Court in Kikabhai Abdul Hussain v. Kamlakar, 1974 MPLJ
485, wherein the High Court had held that if a person continues to be in occupation after the
termination of the contractual tenancy then on the passing of the decree for eviction he
becomes a wrongful occupant of the accommodation since the date of termination. This Court
opined that what was held by the Madhya Pradesh High Court seemed to be a theory akin to
the theory of "relation back" on the reasoning that on the passing of a decree for possession,
the tenant's possession would become unlawful not from the date of the decree but from the
5date of the termination of the contractual tenancy itself. It is noteworthy that this Court has not
disapproved the decision of the Madhya Pradesh High Court in Kikabhai Abdul Hussain's
case but distinguished it by observing that the law laid down in Kikabhai Abdul Hussain's
case was not applicable to the case before it in view of the definition of 'tenant' as contained in
the M.P. Act and the provisions which came up for consideration of the High Court in Kikabhai
Abdul Hussain's case were different.
12. Reliance, by the learned counsel for the respondent, on the case of Vashu Deo (supra) is
misconceived, inasmuch as, in that case the Court was dealing with the rule of estoppel of
tenant for holding that the tenant was estopped from disputing the title of his landlord so long as
he continued in possession of the tenancy premises and until he had restored the landlord into
possession.
13. In Shyam Sharan v. Sheoji Bhai and Anr., MANU/SC/0365/1977 : [1978]1SCR710 , this
Court has upheld the principle that the tenant continuing in occupation of the tenancy premises
after the termination of tenancy is an unauthorized and wrongful occupant and a decree for
damages or mesne profits can be passed for the period of such occupation, till the date he
delivers the vacant possession to the landlord. With advantage and approval, we may refer to a
decision of the Nagpur High Court. In Bhagwandas v. Mst. Kokabai, AIR 1953 Nag 186, the
learned Chief Justice of Nagpur High Court held that the rent control order, governing the
relationship of landlord and tenant, has no relevance for determining the question of what
should be the measure of damages which a successful landlord should get from the tenant for
being kept out of the possession and enjoyment of the property. After determination of the
tenancy, the position of the tenant is akin to that of a trespasser and he cannot claim that the,
measure of damages awardable to the landlord should be kept tagged to the rate of rent
payable under the provisions of the rent control order. If the real value of the property is higher
than the rent earned then the amount of compensation for continued use and occupation of the
property by the tenant can be assessed at the higher value. We find ourselves in agreement
with the view taken by the Nagpur High Court.
14. Placing reliance on the decision of this Court in Kunhayammed and Ors. v. State of
Kerala and Anr., MANU/SC/0432/2000 : [2000]245ITR360(SC) , Shri Ranjit Kumar, the learned
senior counsel submitted that the decree of trial Court merges in the decree of the appellate
Court and, therefore, the tenant shall continue to remain a tenant (and shall not become an
unlawful occupant), until the passing of decree by the highest Court because the decree would
achieve a finality only when the proceedings have finally terminated and then the decree of trial
Court shall stand merged in the decree of the appellate Court, the date whereof only would be
relevant for determining the nature of occupation of the tenant. We are not impressed.
15. In Kunhayammed & Ors. (supra), this Court, on an elaborate discussion of the available
authorities, held that once the superior Court has disposed of the lis before it either way, i.e.
whether the decree or order under appeal is set aside or modified or simply confirmed, it is the
decree or order of the superior Court, Tribunal or authority which is the final, binding and
operative decree or order wherein merges the decree or order passed by the court, tribunal or
the authority below. However, this Court has also observed that the doctrine of merger is not of
universal or unlimited application. In spite of merger the actual fact would remain that it was the
decree or order appealed against which had directed the termination of tenancy with effect from
which date the tenant had ceased to be the tenant, and the obligation of the tenant to deliver
possession over the tenancy premises came into operation though the same remained
suspended because of the order of stay.
16. We are, therefore, of the opinion that the tenant having suffered a decree or order for
eviction may continue his fight before the superior forum but, on the termination of the
proceedings and the decree or order of eviction first passed having been maintained, the
tenancy would stand terminated with effect from the date of the decree passed by the lower
forum. In the case of premises governed by rent control legislation, the decree of eviction on
being affirmed, would be determinative of the date of termination of tenancy and the decree of
6affirmation passed by the superior forum at any subsequent stage or date, would not, by
reference to the doctrine of merger have the effect of postponing the date of termination of
tenancy.
17. In the Delhi Rent Control Act 1958, the definition of 'a tenant' is contained in Clause (I) of
Section 2. Tenant includes 'any person continuing in possession after the termination of his
tenancy' and does not include 'any person against whom an order or decree for eviction has
been made'. This definition is identical with the definition of tenant dealt with by this Court in
Chander Kali Bai & Ors. case (supra). The tenant-respondent herein having suffered an order
for eviction on 19.3.2001, his tenancy would be deemed to have come to an end with effect from
that date and he shall become an unauthorized occupant. It would not make any difference if
the order of eviction has been put in issue in appeal or revision and is confirmed by the superior
forum at a latter date. The date of termination of tenancy would not be postponed by reference
to the doctrine of merger.
18. That apart, it is to be noted that the appellate Court while exercising jurisdiction under Order
41 Rule 5 of the Code did have power to put the tenant-appellant on terms. The tenant having
suffered an order for eviction must comply and vacate the premises. His right of appeal is
statutory but his prayer for grant of stay is dealt with in exercise of equitable discretionary
jurisdiction of the appellate Court. While ordering stay the appellate Court has to be alive to the
fact that it is depriving the successful landlord of the fruits of the decree and is postponing the
execution of the order for eviction. There is every justification for the appellate Court to put the
tenant-appellant on terms and direct the appellant to compensate the landlord by payment of a
reasonable amount which is not necessarily the same as the contractual rate of rent. In
Marshall Sons & Co. (I) Ltd. v. Sahi Oretrans (P) Ltd. and Anr., MANU/SC/0079/1999 :
[1999]1SCR311 , this Court has held that once a decree for possession has been passed and
execution is delayed depriving the judgment-creditor of the fruits of decree, it is necessary for
the Court to pass appropriate orders so that reasonable mesne profits which may be equivalent
to the market rent is paid by a person who is holding over the property.
19. To sum up, our conclusions are:-
(1) while passing an order of stay under Rule 5 of Order 41 of the Code of Civil Procedure,
1908, the appellate Court does have jurisdiction to put the applicant on such reasonable terms
as would in its opinion reasonably compensate the decree-holder for loss occasioned by delay
in execution of decree by the grant of stay order, in the event of the appeal being dismissed and
in so far as those proceedings are concerned. Such terms, needless to say, shall be
reasonable;
(2) in case of premises governed by the provisions of the Delhi Rent Control Act, 1958, in view
of the definition of tenant contained in Clause (I) of Section 2 of the Act, the tenancy does not
stand terminated merely by its termination under the general law; it terminates with the passing
of the decree for eviction. With effect from that date, the tenant is liable to pay mesne profits or
compensation for use and occupation of the premises at the same rate at which the landlord
would have been able to let out the premises and earn rent if the tenant would have vacated the
premises. The landlord is not bound by the contractual rate of rent effective for the period
preceding the date of the decree;
(3) the doctrine of merger does not have the effect of postponing the date of termination of
tenancy merely because the decree of eviction stands merged in the decree passed by the
superior forum at a latter date.
20. In the case at hand, it has to be borne in mind that the tenant has been paying Rs. 371.90p.
rent of the premises since 1944. The value of real estate and rent rates have skyrocketed since
that day. The premises are situated in the prime commercial locality in the heart of Delhi, the
capital city. It was pointed out to the High Court that adjoining premises belonging to the same
landlord admeasuring 2000 sq. ft. have been recently let out on rent at the rate of Rs. 3,50,000/-
7per month. The Rent Control Tribunal was right in putting the tenant on term of payment of Rs.
15,000/- per month as charges for use and occupation during the pendency of appeal. The
Tribunal took extra care to see that the amount was retained in deposit with it until the appeal
was decided so that the amount in deposit could be disbursed by the appellate Court
consistently with the opinion formed by it at the end of the appeal. No fault can be found with the
approach adopted by the Tribunal. The High Court has interfered with the impugned order of the
Tribunal on an erroneous assumption that any direction for payment by the tenant to the
landlord of any amount at any rate above the contractual rate of rent could not have been made.
We cannot countenance the view taken by the High Court. We may place on record that it has
not been the case of the tenant-respondent before us, nor was it in the High Court, that the
amount of Rs. 15,000/- assessed by the Rent Control Tribunal was unreasonable or grossly on
the higher side.
21. For the foregoing reasons, the appeal is allowed. The order of the High Court is set aside
and that of the Tribunal restored with costs incurred in the High Court and in this Court.
However, the tenant-respondent is allowed six weeks' time, calculated from today, for making
deposits and clearing the arrears upto the date consistent with the order of the Rent Control
Tribunal.
8

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