"Short Notes on Mesne Profits”

Introductory:-

The word ‘Mesne Profits” can be understood as rents or profits accruing during the rightful owner’s exclusion from his land. Justice Low of the British Columbia Court of Appeal adopted these words relating to “Mesne profits. According to His Lordship, Mesne Profits are profits of land taken by a tenant in wrongful possession from the time that the wrongful possession commenced to the time of the trial of an action of ejectment brought against him.” unless we understand the meaning of ‘ownership’, it is difficult to understand the word ‘Mesne Profits’ because the fundamental object of passing Mesne Profits is to compensate the actual owner of the property for all the loss he has suffered. According to Austin, “ownership means a right which avails against everyone who is subject to the law conferring right to put thing to user of infinite nature”. Hibbert defines, “ownership involves four rights and those are the rights of using the thing, excluding others from using it, the disposal of thing and the destruction of thing. In Blacks Law Dictionary, ownership has been defined as “collection of rights of rights to use & enjoy property, including the right to transmit it to others”.

Section 2 (12) of the Civil Procedure Code,1908 has defined ‘Mesne Profits’ as thus:-

“Mesne profits” of property means those profits which the person in wrongful possession of such property actually received or might with ordinary diligence have received therefrom, together with interest on such profits, but shall not include profits due to improvements made but the person in wrongful possession;

From this definition, it is known that “Mesne profits” are the profits, which the person in wrongful possession actually earned or might have earned with ordinary diligence. According to Section 2(12) a person becomes entitled to mesne profits only when he has the right to obtain possession but another person whose occupation is unauthorized keeps him deprived of that possession. The main condition for passing mesne profits is unlawful possession of the occupant of the property. It is also known from this section that Mesne Profits include interest on such profits. But, this definition explicitly excludes any profit earned due to improvement in the property made by the person in unlawful possession of such property. I will now show two illustrations which help us to understand the word ‘Mesne Profits’ more clearly.

Illustration no.1:-

A is in wrongful possession of B’s house. He receives profits from such property. Such profits are known as ‘Mesne Profits’. In this case, the profits received by A in wrongful possession of the property or the property which have been received from it, together with interest on such profits.

Illustration no. 2:-

A a trespasser, claims B’s house and collects rent. This is Mesne Profits. He digs a bore-well in the land, constructs a group house and gives it for rent. The profits from the well and newly constructed building are not Mesne Profits.

Mesne Profits: Meaning:-

This definition was taken from the explanation added in section 211 of the Code of 1887. the concept of improvement are newly added to the definition. The Andhra Pradesh High Court in Mahant Narayana Dossjee Varu vs The Board Of Trustees1, it was held that under the express terms of the definition, mesne profits are profits received by a person in wrongful possession and they are made up of two items (i) profits received by him or might have been received by him with ordinary diligence and (i) interest on such profits. In Law of Damages & Compensation by Kameshwara Rao2, the learned author states that right to mesne profits presupposes a wrong whereas a right to rent proceeds on the basis that there is a contract. But there is an intermediate class of cases in which the possession though not wrongful in the beginning assumes a wrongful character when it is unauthorisedly retained and in such cases, the owner is not entitled to claim mesne profits but only the fair rent. (See Union Of India vs M/S Banwari Lal & Sons (P) Ltd3). Also see:- Marshall Sons vs. Sahi Oretains4, and Atma Ram Properties Vs. Federal Motors.

Interest on mesne profits:-

As I discussed above, Mense profits includes interest on such profits and interest shall be allowed when computing the mesne profits. The rate of interest payable is not fixed and it depends upon the discretion of the court subject to the limitation that it may not exceed 6% per annum. See. Sri Ramnik Vallbhdas Madhvani Vs. Taraben Pravinlal Madhvani, (2004) 1 SCC 497; Lucy Kochuvareed v. P. Mariappa Gounder, AIR 1979 SC 1214; Gopal Krishna Vs Meenakshi, AIR 1967 SC 155; Mahant Narayana Vs. Board of Trustee, AIR 1965 SC 1231; R.S.Madanappa Vs. Ramachandra, AIR 1965 SC 1812; Raja Bhupendra Narayan Singh Bahadur Vs. Maharaj Bhadur Singh, AIR 1952 SC 201.

In Sri Ramnik Vallbhdas Madhvani Vs. Taraben Pravinlal Madhvani, (2004) 1 SCC 497, the Apex Court held that A mistake has been committed by the High Court in calculation of interest on mesne profits. Interest has to be calculated on yearly basis because the amount of mesne profits on which interest is to be awarded has to be arrived at on year to year basis. Mesne profits for the first year would be from 5th May, 1969 to 4th May, 1970, for the second year it will be from 5th May 1970 to 4th May, 1971 and so on. It keeps adding on from year to year. The total amount of mesne profits found due by the High Court on the basis of the Commissioner’s report comes to Rs 38,41,920. This amount is the total of mesne profits calculated on a yearly basis. Interest cannot be allowed on the whole amount from the beginning. Interest had to be worked out on amounts falling due towards mesne profits on a yearly basis i.e. on the amount of mesne profits which could be taken to be due to the plaintiff at the end of each successive year.

Interest is a part of mense profits:-

The Privy Council in Kedarnath Goenka v. Bapeswari Prasad Singh, ILR 16 Pat 382′ (AIR 1937 PC 143) (H) considered the definition of mesne profits in Section 2 (12). Civil Procedure Code and made the following observations at page 387 (of ILR Pat): (at p 145 of AIR): “Indeed, the Indian Law makes interest on mesne profits an integral part of mesne profits”. In Kalidas Bakshit v. Saraswati Dasi, ILR 1942-2 Cal 268 : AIR 1943 Cal 1) (I) the suit was for possession and mesne profits. After the preliminary decree was passed, there was an enquiry into mesne profits under Order 20, Rule 12, C. P. C. It was argued that interest should not be awarded. Mitter J. observed at page 287 (of ILR Cal): (at p. 11 of AIR) :”We do not see why the plaintiff should not get interest. Interest is a part of mesne profits.”

What are the deductions on Mesne Profits:-

The Court must allow the following deductions from the gross profit of the defendant in possession of the property:-

1. The charge for collecting rent, etc.

2. The costs of cultivating and reaping the crops, and

3. Public charges made from the preservation of the property, e.g., government revenue.

Mesne Profits- against whom means profits can be ordered?

Generally, the Court can award Mesne Profits against the following persons under the purview of section 2 sub section12 of the Code of Civil Procedure,1908.

1. Tenants in a suit for recovery of possession. (Anderson wright Vs. Amar Nath Roy, AIR 2005 SC 2457)

2. Persons against whom a decree for possession of immovable property was passed. ( Gopal Krishna Pillai Vs. Meenakshi Ayal, AIR 1967 SC 155)

3. Trespass (Sita Ram Lakshmanji Vs. Dipnarain Mandal, AIR 1977 SC 1870)

4. Mortgagors in possession of mortgaged property against whom a decree for foreclosure was passed. (Shiv Kumar Sharma Vs. Santhosh Kumari, AIR 2008 SC 171)

5. Mortgagors in possession of property after a decree for redemption was passed. (Prabhakaran Vs M. Azhagiri Pillai, AIR 2006 SC 1567).

The Hon’ble Madras High Court in Nataraja Achari v. Balambal Ammal6 pointed out that there are three different types of cases in which question of rights of profits arise:

1. Suit for ejectment or recovery of possession of immovable property from a person in possession without title, together with a claim for past or past and future mesne profits.

2. A suit for partition by one or more tenants in common against others with a claim for account of past or past and future profits.

3. Suits for partition by a member of joint Hindu family with a claim for an account from the manager.

The Hon’ble Madras High Court further delineated that , “In the first case, the possession of the defendant not being lawful, the plaintiff is entitled to recover mesne profits such profits being really in the nature of damages. In second case the possession and receipt of profits by the defendant not being wrongful the plaintiffs remedy is to have an account of such profits making all jus allowance in the favour of the collecting tenant in common. In the third case the plaintiff must take the joint family property as it exists at the date of the demand for partition and is not entitled to open up past account or claim relief on the ground of past inequality of enjoyment of the profit, except where the manager has been guilty of fraudulent conduct or misappropriation. The plaintiff would however, be in the position of the tenant in common from the date of severance in status and his right would have to be worked out on that basis.

What principles are to be applied to award mesne profits?

The Court must apply the following settled principles to award mesne profits:-

1. the profit to be taken into account is that made by a person in wrongful possession;

2. the aim should be restoration of status before dispossession of the Decree-holder;

3. the use to which the decree-holder may have put the property if he himself was in possession is relevant only as evidence of what the defendant might with reasonable diligence have received.

Conclusion:-

In 178th Report of the Law Commission, in the list of the Sections in various statutes in regard to which amendments are proposed is given, proposed to amend Order XX Rule 12 and Order XX Rule 18: Making it mandatory that evidence as to mesne profits, rents up to the date of commencement of trial should be adduced at the trial. As to under Order XX, Rule 12 of CPC, as was pointed out by the Law Commission, in practice, in most courts, a decree is passed for possession and so far as past or future rents or mesne profits are concerned, an inquiry is directed. Usually, this inquiry hangs on for years in as much the court appoints advocate commissioners, they give reports after recording evidence, the objections are heard by the courts and a final decree is later passed after several years. Experience shows that once a decree for possession is passed and a preliminary decree for the rents/ mesne profits is passed, the matter is not given importance and final decrees usually take 5 years or more to be passed after the preliminary decree. The suit might have been pending for years earlier and if profits or rents are ascertained long after the preliminary decree, the delay leads to serious injustice.

In my view, there must a uniform practice for courts in all the States to record evidence of rents or mesne profits, at the trial, and give findings thereon, irrespective of whether a decree for possession is passed or not.

Similarly in a partition suit, at the stage of preliminary decree the quantum of share and the items of property which are portable, are ascertained initially and under Order 20 Rule 18(2) a preliminary decree is passed together with a direction for accounts to be taken. In fact, in some courts in some States, it is the practice to ascertain rents/profits up to the date of the preliminary decree straightaway when the preliminary decree is passed. It saves not only time but also renders speedy justice to the parties.

Further, it is needless to stress that, in case of mesne profits, the burden of proof rests on the plaintiff and that mesne profits being in the form of compensation, before claiming mesne profits the plaintiff have to establish before the court that he was lawful owner of the property and he was deprived of it by the wrongful possession of the defendant.

Foot notes:

1. AIR 1959 AP 64

2. 5th Edn., Vol. I Page 528

3. AIR 2004 SC 1383

4. AIR 1999 SC 882

5. 2004 (10) SCALE 345

6. AIR1980 Madras page 222