Defendant is liable to pay mesne profits till possession delivery: Bombay High Court Affirms Decision in BPCL Case

Bombay High Court has dismissed Bharat Petroleum Corporation Limited’s (BPCL) appeal against the Appellate Bench of the Small Causes Court’s decision regarding mesne profits. The court affirmed the decision that BPCL is to pay Rs. 2,41,691 per month in mesne profits for occupying a leased premises post-lease termination until delivery of possession. This judgment underscores the legal principle that wrongful possession warrants compensation based on potential profits from the property.

The case involves BPCL’s occupation of a fuel station located at the junction of Lamington Road and Dr. Anandrao Nair Road in Mumbai. The original lease, executed in 1960, was terminated by the plaintiffs in 2004, leading to a prolonged legal battle over the rightful possession and mesne profits for the property. The Small Causes Court initially decreed BPCL to vacate the premises and pay mesne profits from the termination date, a decision partially upheld by the Appellate Bench with modifications.

The High Court addressed BPCL’s contention that the plaintiffs, being lessees and not owners, could not claim mesne profits based on property sales value. The court found this argument irrelevant to the mesne profits inquiry, emphasizing the focus on wrongful possession post-lease termination.

The court reiterated that mesne profits are determined based on potential earnings from the property or its fair rental value. In this case, the plaintiffs' valuer calculated profits considering the commercial potential of the prime Mumbai location, which the court found reasonable given BPCL’s failure to provide accurate profit records from the fuel station operations.

BPCL challenged the quantum, arguing it was excessive and should be based on their valuer’s lower estimate. However, the court noted multiple errors in BPCL’s valuation approach, including incorrect land area and rate assumptions. The court upheld the Rs. 2,41,691 monthly rate as justified, considering the evidence and prevailing real estate values in Mumbai.

Addressing BPCL’s defense of pending obstruction proceedings by its dealer, Sardar Automobiles, the court dismissed this as an invalid argument. It emphasized BPCL’s accountability for its agent's actions, noting the continued possession and commercial exploitation of the premises under BPCL’s arrangement.

Justice Sandeep V. Marne remarked, “The Defendant is liable to pay mesne profits to the Plaintiffs till the date of handing over of possession of the suit premises.” He further stated, “The Defendant’s conduct in continuing to possess the suit premises by permitting its agent/dealer to conduct business of sale of its petroleum products is irresponsible and contrary to the decree of eviction.”

The Bombay High Court’s decision reinforces the principle of compensating rightful property claimants for wrongful possession, with significant implications for future commercial lease disputes. By upholding the Appellate Bench's findings and dismissing BPCL’s appeal, the judgment affirms the judiciary's commitment to equitable compensation based on credible valuations and evidence.

Date of Decision: 8 July 2024