The Delhi High Court has clarified that the dispute over rent or mesne profits for an immovable property leased for commercial purposes is a “commercial dispute” under Section 2(1)(c)(vii) of the Commercial Courts Act, 2015. Accordingly, the Court ruled that the bar on civil court jurisdiction under Section 14 of SAFEMA does not apply to claims for mesne profits arising after the foundational forfeiture proceedings under SAFEMA have been quashed for lack of jurisdiction.
The Court explained that ‘good faith’ protection under Section 23 of SAFEMA is not available to the government servant if its conduct, such as occupying a property for years without paying rent after forfeiture proceedings are nullified, lacks bona fides. Further, the Court said that the right to recover mesne profits for unauthorized occupation is a recurring cause of action, and the law of limitation cannot be applied so rigidly as to penalize a litigant who was bona fide pursuing remedies before another court.
The Court also asserted that the time spent prosecuting a writ petition under Article 226 can be excluded under Section 14 of the Limitation Act when calculating the limitation period for a subsequent civil suit, if the writ court was unable to grant the relief due to disputed facts or other similar causes.
Accordingly, the Court modified the decree to the limited extent that the Plaintiff are entitled to mesne profits only for the period from 23.09.2016 to 02.07.2020. After recalculating the amount for this period based on the evidence on record and setting off the rent already paid, the Court held that the Plaintiffs are entitled to a sum of Rs. 67.13 Lakh, along with interest at the rate of 6% per annum for the specified period.
The Division Bench comprising Justice Anil Kshetarpal and Justice Amit Mahajan observed that Section 14 of SAFEMA bars a civil court’s jurisdiction only in respect of matters that the SAFEMA authorities are empowered to determine. As the present suit did not challenge the Forfeiture Order but sought a money decree for unauthorized possession, a claim that arose after the SAFEMA proceedings were quashed.
On the issue as to whether the suit was procedurally maintainable in light of the death of one of the Plaintiffs, the Bench held this contention to be devoid of merit. The Bench found that the suit property was jointly owned by the Plaintiffs, and the legal representative of the deceased Plaintiff (Ms. Radhika Sarin), her mother Mrs. Veera Sarin, was already on record and entitled to prosecute the suit. Therefore, the plea of abatement was deemed technical and did not vitiate the suit’s maintainability.
Briefly, the dispute originates from Flat No. 1108, Ansal Bhawan, New Delhi (suit property), owned by the Respondent Nos. 1, 2, & 3 (Plaintiff). The property was leased to the Appellant (Defendant No. 1, a government authority), and possession was handed over on 01.09.1976, after which, the rent was paid regularly until April 1999. In the interim, proceedings under the Customs Act, 1962, and a preventive detention order under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA) were initiated against the Respondent’s father, the late H.K. Sarin. Subsequently, on 05.08.1998, an order under Section 7 of the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA) was passed, forfeiting the suit property. Consequently, the Appellant stopped paying rent from 01.05.1999, despite retaining possession.
The Respondent’s challenge to the Forfeiture Order was initially rejected by the Appellate Authority under SAFEMA. However, in a writ petition, the Division Bench of the High Court quashed the SAFEMA proceedings for lack of jurisdiction. Following this, the SAFEMA proceedings were formally closed on 28.03.2016.
When the Appellant failed to hand over possession, the Respondent filed another petition, where the Court recorded that possession had been handed over. On 28.07.2020, the Court directed the Appellant to pay arrears of rent from 01.05.1999 to 02.07.2020 at Rs. 20,500/- per month and granted the Respondent liberty to pursue claims for market rent/mesne profits and interest in separate proceedings. The Respondent then filed a commercial suit seeking recovery of mesne profits for the period of unauthorized possession (01.05.1999 to 02.07.2020), and the Single Judge decreed the suit for Rs. 1.76 Crores, with 6% interest.
Appearances:
CGSC Syed Abdul Haseeb and Advocate Nasreen Khatoon, for the Appellant
Advocates Sidhant Kumar, Shagun Chopra, Vinayak Thakur, and Om Batra, for the Respondent
