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by sayum
27 May 2026 2:25 PM
“The obligation to yield possession under the lease deed and Section 108(q) of the Transfer of Property Act is a continuing obligation, which remained unfulfilled until 20.06.2022”— Madras High Court awarding ₹33.61 crores in damages to the plaintiff for BPCL’s prolonged unlawful occupation of the plaintiff’s property on Anna Salai, Chennai, for more than 24 years after expiry of the lease in 1997. The Court rejected limitation defences and held the breach as a continuing one, thereby preserving the plaintiff's right to sue well beyond the initial three-year limitation period.
Lease Ended in 1997, Possession Delivered Only in 2022: Court Calls It “Statutory and Contractual Breach of Continuing Nature”
The Court, exercising its Original Side jurisdiction, held that BPCL’s failure to vacate the premises after expiry of lease on 31.12.1997 amounted to a continuing breach of legal obligation, both contractual and statutory, under Clause 3(iii) of the 1958 lease deed and Section 108(q) of the Transfer of Property Act, 1882.
Justice Senthilkumar Ramamoorthy observed: "The breach of clause 3(iii) starts from 01.01.1998 and ends only on 20.06.2022 when we handed over possession to the plaintiff." (DW1's cross-examination)
The Court cited Section 22 of the Limitation Act, noting that in cases of continuing breaches, a fresh limitation period begins to run each day the breach continues.
Rejecting the defendants' argument that the claim was time-barred, the Court held: “Because the defendants handed over possession only on 20.06.2022, the obligation continued until then and, therefore, the period of the claim for damages was co-extensive.”
Accordingly, it was held that the suit filed in January 2020 was within limitation, despite the lease expiring in 1997.
Damages Claim Not Barred by Earlier Ejectment Suit: Different Cause of Action
BPCL had contended that the present damages suit was based on the same cause of action as the earlier ejectment suit (O.S. No.711/2006) decreed in 2010. The Court rejected this, affirming the legal distinction between suits for possession and suits for damages for continued occupation.
Justice Ramamoorthy recorded: “The Hon’ble Supreme Court has already clarified that the cause of action for this suit is not the same as the cause of action for the ejectment suit.”
Hence, the earlier litigation had no bearing on the maintainability of the present action for damages.
Plaintiff's ₹128.90 Crore “Liquidated Damages” Claim Reclassified as Unliquidated Claim Under Contract Law
Although the plaintiff sought ₹128.90 crores as “liquidated damages”, the Court noted that the lease deed contained no predetermined rent or damages formula, and therefore reclassified the claim as one for unliquidated damages under Section 73 of the Indian Contract Act, 1872.
“A claim for liquidated damages lies only when parties have agreed on the amount payable or the formula… The expression ‘liquidated’ is a misnomer in this context.”
Despite the misdescription, the Court made it clear that mere nomenclature would not defeat the substantive claim.
Court Adopts Market-Based Rental Method, Rejects Auditor’s Report
The Court undertook a detailed valuation analysis using guideline values of the Registration Department, affirmed by evidence of Civil Engineer (PW1). The Auditor’s Report (Ex.P5) was rejected due to internal inconsistencies, absence of objective basis, and failure to account for property-specific factors.
BPCL’s own calculation (Ex.P20) adopting 12% yield on market value was relied upon to affirm the plaintiff's valuation method. The Court found that BPCL's occupation denied the plaintiff the opportunity to exploit the commercial potential of its property, leading to quantifiable loss of rental income.
The Court observed: “The plaintiff was not in a position to either self-occupy, let out, sell or take any other measures in relation to such property. The only reasonable conclusion is that the plaintiff was put to loss.”
Detailed Rental Loss Computation for 1998–2022 Totals ₹36.57 Crores
Using the Registration Department’s data, the Court arrived at a comprehensive calculation of market value and potential rental income for each sub-period between 01.01.1998 and 20.06.2022, applying the 12% rental yield method.
“The aggregate loss on account of rent would, therefore, be Rs.36,57,79,840.45.”
After deducting payments made by BPCL during litigation—₹2 crores towards arrears and ₹96 lakhs as monthly rent for 16 months—the Court fixed the net liability at ₹33,61,79,840.45, rounded off to ₹33.61 crores.
No Compound Interest, But Simple Interest at 9% Allowed From Month to Month
Rejecting the plaintiff’s claim for compound interest, the Court held that no such term existed in the lease agreement. Relying on Section 34 CPC, the Court awarded simple interest at 9% per annum on monthly damages from the 6th day of each subsequent month, noting:
“In the absence of contractual stipulation, compound interest cannot be charged by the plaintiff… principles formulated in public law actions cannot be applied in a private lease dispute.”
Plaintiff Also Awarded ₹1.10 Crores in Costs Towards Court Fees and Legal Expenses
Recognising the substantial court fee of over ₹1.29 crores paid by the plaintiff, the Court awarded ₹1 crore as reimbursement, along with ₹10 lakhs towards lawyer’s fees and expenses.
“As the substantially successful party, the plaintiff is also entitled to costs.”
The Court, thus, decreed the suit with the following reliefs:
This ruling is a significant precedent in leasehold disputes, especially where government undertakings or statutory corporations continue in possession post-expiry of leases. By treating non-vacation as a continuing wrong, the Court ensured that limitation law cannot be misused as a shield against continuing statutory and contractual obligations. The ruling also provides a structured method for assessing rental losses based on public guideline values, making it relevant for future commercial lease litigations.
Date of Decision: 19 September 2025
