The law has guaranteed every citizen who owns the property the right to possess their property. However, suppose such a person is deprived of the possession of the property and income generated from that property. In that case, such a person is liable for compensation as mesne profits under CPC.
Now, what is mesne profit? In this article, we will discuss what is mesne profits, the object of mesne profit, when can it be claimed, how to calculate it, interest and deductions in mesne profit, situations where mesne profit cannot be granted, the arrears of rent and mesne profit, can mesne profits be claimed in partition suits.
What are mesne profits under CPC?
Mesne profit is laid down under Section 2(12) of the Code of Civil Procedure (CPC) and Order 2, Rule 4, and Order 20, Rule 12 of CPC.
Section 2(12) of CPC defines “mesne profits” as the profit received by a person in wrongful possession of the property, including the interest accruing from such profits.
However, it does not include any profit from such a wrongful possessor after making any improvements on that property.
Therefore, mesne profits are profits that are actually received or might have been received with ordinary diligence by the wrongful possessor.
Order 2, Rule 4 of CPC – It states that a claim for mesne profit should not be separate. It has to be made along with a suit for recovery of possession of the property.
Illustrations:
A gives his house on rent to B. B sublets the house to C and receives rents on A’s house. Here, A is in wrongful possession of B’s property, and the rent he receives is called the mesne profits. Therefore, A has the right to claim for profits that B receives from wrongful possession of the property combined with the interest on such property.
X, a trespasser, captures Y’s house and collects the rent. The rent collected by X would be mesne profits. Further, X builds a few guesthouses and digs a bore-well in Y’s land. Here, Y cannot claim profits from the bore-well and newly constructed guesthouses but can claim profits for rent collected from Y’s house, as mesne profits do not include profits earned from any improvements made by the wrongful possessor.
Essential ingredients of Mesne profits
1. There should be wrongful or unauthorized possession of the property
2. The property should be immovable.
3. The owner should be deprived of his right of ownership and enjoyment of the property.
4. The unlawful owner should have earned profits from such possession.
5. The profit claimed should also include the interest on it.
6. Profit cannot be claimed on any improvements made by the wrongful possessor.
In K.C. Alexander Vs Nair Service Society Ltd., 1966, the court stated that the unauthorized possessor is not entitled to claim from the owner any expenses incurred for making any improvement to the property, as he is only a trespasser.
The object of mesne profit
The object of awarding mesne profit is to compensate the actual owner of the property for any profits received or might have received by the wrongful possessor with ordinary diligence and not for any losses suffered by the owner.
Mesne profit under the Transfer of Property Act, 1882
Section 111(g) of the Transfer of Property Act, 1882 states that the lease of immovable property determines on forfeiture of the lease, i.e.,
· if the lessee breaks any conditions which specifically allows the lessor to re-enter the premises on breach of the condition; or
· if the lessee renounces or gives up his character by transferring the title to a third party or in himself; or
· if the lessee has become insolvent.
If the lease terminates on the happening of any of the above events and the lessee refuses to vacate the premises, then the lessee would be considered as a wrongful possessor and will be liable to pay mesne profits to the owner of the property (lessor).
Mesne profit under the Limitation Act
Section 109 of the Limitation Act states that the wrongful possessor is liable to pay for all mesne profits received or might receive with ordinary diligence during 3 years before the suit for claiming mesne profits has been instituted.
Therefore, a suit for mesne profits can be made within 3 years from the date of wrongful possession.
When can mesne profits be claimed?
In Nataraja Achari Vs. Balambal Amma, AIR 1980 Mad 222, the court had put forward that the mesne profits can be claimed under the following situations:
a) When a suit for eviction and recovery of possession of any immovable property has been instituted against an unauthorized possessor who is not an owner of the property, including all claims from past and future mesne profits.
b) In a suit for partition by a tenant for claiming any past and future profits against other tenants.
c) Where a member of the Hindu Undivided Family institute a suit for partition to claim any past and future profits against the head or manager of the Hindu Undivided Family.
Against whom mesne profits are ordered?
A person becomes liable for mesne profit if they wrongfully possess and enjoy profits from the property belonging to another person. Mesne profit can be ordered against any of the following people:
- Tenants – if the tenant does not vacate the premises after a notice to vacate the property has been issued.
- Trespassers
- Mortgagor – if the mortgagor refuses to give possession of the property after a decree for foreclosure has been declared against him.
- Mortgagee – if the mortgagee is in possession of the property after a decree of redemption has been passed.
- Several people – where several people have denied the owner of his possession, then no matter whether they are in actual possession or only receiving any benefits from the property, they will be held liable for mesne profits.
Example: If A owns a farmhouse and W, X, Y, and Z have wrongfully taken possession of the said farmhouse. W was the only person actually living on the farmhouse. All of them enjoyed whatever benefits were made. Here, A was deprived of his right to possess and enjoy the benefits accruing from the said farmhouse. Therefore, A can claim mesne profits from W, X, Y, and Z.
How to calculate mesne profit?
There is no specific provision mentioned in the CPC to calculate the mesne profits. It says that the mesne profits should include the interest on the profits. It does not include any profits made due to improvements. The law of equity states that the mesne profits should be in net profits (i.e., actual profits earned after deducting all the expenses made for earning such profits).
Mesne profits are granted as compensation to the owner of the property; therefore, a rigid rule for calculating the mesne profits cannot be made.
Hence, mesne profits are decided at the discretion of the court based on the following criteria:
a) Nature, location, condition, and value of the property;
b) Actual profit made by the wrongful possessor or
c) Any reasonable profits which a person with ordinary diligence would have received from the said property.
d) It does not include any loss made by the owner due to deprivation of possession.
Interest and deductions in mesne profits
Interest: The definition under Section 2(12) of CPC states that the mesne profits include the interest on such profits. But there is no fixed rate of interest specified. Hence, the court can decide the rate of interest considering all the necessary conditions. However, the rate of interest cannot exceed 6% per annum.
In Sri Ramnik Vallbhdas Madhvani Vs. Taraben Pravinlal Madhvani, 2004, the Supreme Court held that the interest on mesne profits should be calculated yearly, not on the whole amount falling due on mesne profits.
Deductions: Mesne profits should be net profits. Therefore, while calculating the mesne profits, the following deductions should be made from the gross profits made by the wrongful possessor:
· Cost of cultivating, seasonal fluctuation, and reaping the crops
· Government revenue, cess
· Any charges for collecting rent, maintenance of the property, etc.
What are the scenarios under which mesne profits cannot be granted?
There are instances when mesne profits cannot be granted by the court. Let us now look into it.
Joint owner: The property in issue is the joint family property, and the plaintiff and defendant are the joint owners of the property. Then, the plaintiff cannot claim mesne profits as the defendant is also the property owner and cannot be considered a wrongful possessor (Smt. Subashini Vs. S. Sankaramma, 2018).
Lack of evidence: if the claimant cannot prove that he is the property owner and has been deprived of his possession, the court would not grant mesne profits.
Order by the civil court: If there was no order or decree passed by the civil court to affect the mesne profits, then the Income Tax Appellate Tribunal refused to grant mesne profits to the appellant (Krishna N Bhojwani Vs. Assessee, 2021).
Section 144 of CPC for restoration of possession of the disputed property and rewarding mesne profit: The court will not grant mesne profits, if there is no decree or order passed by the trial court to handover the possession to the owner or any order that states that the plaintiff is the owner of the property then the provisions of Section 144 of CPC will not be applicable (Murti Bhawani Mata Mandir REP. Through Pujari Ganeshi Lal (D) Through L.R. Vs Rajesh & ORS., 2019).
Burden of Proof
In a suit for mesne profits, the burden of proof lies on the plaintiff to prove that he is the actual owner of the property and he has been deprived of his rights by the wrongful possessor (defendant). The plaintiff also needs to prove the profits he might have received from the property with ordinary diligence.
Power of the court in a suit relating mesne profits
Order 20 Rule 12 of CPC states that in a suit for recovery of possession, the court has the discretion of passing the following decree:
a) Decree for possession of the immovable property
b) Directing an inquiry or decree for collection of mesne profits or
c) Preliminary decree for inquiring the mesne profits made before instituting the suit; or
d) Directing an inquiry of mesne profits incurred till the possession is relinquished or returned plus profits made 3 years before the decree.
Can mesne profits be claimed in partition suits?
Yes, mesne profits can be claimed in a suit for partition under Order 20 Rule 18 of CPC.
Arrears of rent and mesne profit
In Union of India and Ors Vs. Banwari Lal and Sons, 2004, the court had held that if the possession of the property was not wrongful initially, but later in the future, it became wrongful. The property owner cannot claim mesne profits instead, only arrears of rent will be granted to the owner.
Conclusion
Mesne profits mean profits received or might have been received by the wrongful possessor with ordinary diligence, including the interest on the profits made. There are no criteria for calculating the mesne profits. A suit for mesne profits can be claimed within 3 years from the date of wrongful possession. Such a suit is combined with the suit for recovery of possession of the property. Mesne profits are net profits. The burden of proving the wrongful possession is on the person claiming the suit for mesne profits.
