Exorbitant Damages Without Proof Are Unsustainable: Madhya Pradesh High Court Strikes Down ₹3.84 Lakh Monthly Damage Order Against Industrial Occupant

“The Estate Officer had no authority to grant damages more than 100 times the agreed licence fee in absence of any cogent evidence” – Madhya Pradesh High Court, in a significant judgment impacting eviction and recovery proceedings under the Public Premises (Eviction of Unauthorised Occupants) Act, 1971, partly allowed two connected petitions filed by an industrial occupant against Bharat Heavy Electricals Ltd. (BHEL). The Division Bench comprising Chief Justice Sanjeev Sachdeva and Justice Vinay Saraf upheld the eviction of the petitioner under Section 5(1) of the 1971 Act but struck down the punitive monthly damages of ₹3,84,820 imposed under BHEL’s Shop Policy, 2014.

Ruling in Jyotinder Singh Saluja v. Bharat Heavy Electrical Ltd. (Misc. Petitions No. 5575/2024 & 6415/2024), the Court observed that while the continued occupation after expiry of licence constituted unauthorised occupation, the levy of exorbitant damages without any evidence of prevailing market rent or comparable properties was legally untenable.

"Mere Acceptance of Licence Fee Does Not Amount to Renewal": Court Clarifies Scope of Unauthorised Occupation under Section 2(g)

The case concerned an industrial plot in BHEL’s ancillary area in Bhopal originally allotted to the petitioner’s father in 1979 and later transferred to the petitioner. Although the last formal licence expired on 31.03.2011, the petitioner continued occupation, and BHEL continued accepting monthly licence fees until 2018. A new Shop Policy was introduced in 2014, and demands were raised thereafter for increased licence fees at rates more than 100 times the original.

The Court held that continued occupation beyond the expiry of licence, in absence of formal renewal, rendered the petitioner an “unauthorised occupant” under Section 2(g) of the Public Premises Act. It relied on the Supreme Court’s ruling in Shanti Prasad Devi v. Shankar Mahto [(2005) 5 SCC 543], which held that “mere acceptance of rent does not result in implied renewal.” The Bench observed:

“Though the respondent accepted the licence fee till 2018, the same could not be treated as implied renewal of licence.”

From Industrial Licence to Eviction and Sealing

The petitioner was allotted an industrial plot for running a sawmill and stone unit. The licence expired in 2011. Despite repeated applications by the petitioner for renewal, no fresh deed was executed. Meanwhile, BHEL introduced its Shop Policy in 2014 and began raising demands from 2018, culminating in a massive claim of ₹2.38 crore by 2022.

BHEL initiated proceedings under Sections 5 and 7 of the Public Premises Act. The Estate Officer passed an eviction order on 15.06.2023 and directed recovery of arrears and damages. The appellate authority under Section 9 upheld the eviction, leading to sealing of the premises on 22.09.2024. The petitioner challenged these orders under Article 227 of the Constitution.

Eviction Upheld: Due Process Followed, No Violation of Natural Justice

The Court carefully examined procedural compliance and found no infirmity in the eviction process. Notices under Section 4 were issued, parties were heard, and evidence was led. The Court noted:

“The petitioner was given due notice and opportunity to defend his case… There was no breach of procedure or violation of principles of natural justice.”

The Estate Officer had validly exercised power under Section 5(1) upon being satisfied that unauthorised occupation existed. Accordingly, the Court declined to interfere with the eviction order, observing that once the licence expired and no renewal was granted, the occupation became unlawful.

“Damages Must Be Based on Cogent Evidence, Not Internal Policies” – Court Rejects ₹3.84 Lakh/Month Claim Based on Shop Policy

However, the most crucial part of the judgment dealt with the legality of damages assessed by the Estate Officer. BHEL claimed damages based on its internal Shop Policy, 2014, seeking ₹3.84 lakh/month as against the previously agreed ₹3,718/month.

The Court termed the increase as arbitrary and held: “In the absence of any cogent evidence, only on the basis of provision of Policy, 2014 the Estate Officer erred in granting the damages… The rate of damages awarded is highly exorbitant and cannot be given seal of approval.”

It emphasized that under Section 7(2) of the Act, assessment of damages must be based on “principles of assessment” and supported by evidence of prevailing market rental value.

The Bench observed: “No evidence was produced to assess the market rental value. The damages should be proved before the authority and until and unless the damages are not proved by the reliable evidence, no amount can be awarded under the head of damages.”

The Court highlighted that an enhancement of over 100 times the original rate was grossly disproportionate and beyond jurisdiction:

“The Estate Officer had no authority to grant the damages more than 100 times [the licence fee]… the order for payment of damages is hereby set aside.”

Recovery of Arrears of Licence Fee Upheld

While quashing the damages, the High Court upheld the order requiring the petitioner to pay arrears of licence fee at the last agreed rate, with 5% annual increment, up to the date the premises were sealed (22.09.2024). This, it said, flowed directly from the terms of the original licence and did not require any separate proof.

Right to Remove Belongings Subject to Payment of Arrears

In terms of enforcement under Section 6 of the Act, the Court permitted the petitioner to remove temporary structures and articles within one month, but clarified that this right was conditional upon payment of the arrears. It warned that failure to pay arrears would entitle BHEL to auction the property to recover dues.

Judicial Endorsement of Limited Scope Under Article 227, Balanced with Procedural Safeguards

The High Court reiterated that supervisory jurisdiction under Article 227 can be invoked only in cases of jurisdictional error, perversity, or violation of law. It found none in the eviction or arrears orders but found a clear overreach in the assessment of damages.

Ultimately, the judgment affirms the principle that unauthorised occupation of public premises attracts legal consequences, but such consequences—particularly financial liabilities—must be grounded in law and evidence, not internal policies or arbitrary figures.

Date of Decision: 19 December 2025