For a gratuitous licensee disputing title, stay compensation may commence from the eviction decree, not suit filing.

The Respondent, the younger brother of Petitioner No. 1, instituted L.E. Suit No. 150/188 of 2011 seeking eviction and mesne profits in respect of Flat No. 2D, Pallonji Mansion, Cuffe Parade, Mumbai, contending that the Petitioners occupied the premises as gratuitous licensees from 1982–1983 and that the licence had been terminated by notice dated 10 August 2011.

The Petitioners disputed the Respondent’s title and asserted that Petitioner No. 1 had paid the consideration for the flat, which had been purchased in the Respondent’s name for reasons relating to restrictions on owning multiple flats in the society.

The Trial Court held that the Petitioners were gratuitous licensees, decreed eviction, and directed payment of mesne profits at Rs. 500 per sq. ft. per month, subject to subsequent quantification.

During the pending appeal, the Appellate Bench granted a stay of execution under Order XLI Rule 5 of the Code of Civil Procedure, 1908 (“CPC”), subject to the Petitioners depositing interim compensation of Rs. 3,00,000 per month from October 2011 to April 2026 and thereafter continuing monthly deposits at the same rate.

A separate suit concerning declaration of ownership of the premises was pending before the Civil Court.

Whether the conditions imposed while staying execution of the eviction decree under Order XLI Rule 5 CPC were excessive or onerous in the circumstances of the case.

Whether interim compensation could properly be directed from the date of the suit, or should instead commence from the date of the Trial Court’s eviction decree, particularly when the occupants claimed ownership and a title suit was pending.

Whether the Appellate Court could impose monetary conditions and require an undertaking to secure the Respondent’s interests during the pendency of the appeal.

Order XLI Rule 5 CPC provides that an appeal does not automatically stay execution; a stay may be granted for sufficient cause where substantial loss may result, the application is made without unreasonable delay, and security is furnished for due performance of the decree.

In Atma Ram Properties (P) Ltd. v. Federal Motors (P) Ltd., (2005) 1 SCC 705, the Supreme Court held that an appellate court may require an evicted occupant seeking stay to pay reasonable compensation, potentially reflecting market rent, while doing equity.

State of Maharashtra v. Super Max International Pvt. Ltd., AIR 2010 SC 722, reiterates that such conditions must not be excessive, fanciful, or punitive.

The Court distinguished these cases insofar as they concerned tenants or contractual licensees, holding that the present family dispute involved a gratuitous licensee and a pending claim to title; therefore, the compensation terms had to be calibrated to the particular circumstances.

The High Court held that the Petitioners’ continued possession after the eviction decree justified imposing conditions for stay, since the Respondent would otherwise be deprived of possession and the fruits of the decree during the appeal.

However, the Court found that directing payment from the date of the suit, October 2011, was unduly onerous in the particular circumstances: the Petitioners were family members, the occupation was alleged to be gratuitous, and the Petitioners’ claim that Petitioner No. 1 was the real purchaser and owner remained pending in a separate title proceeding.

Although the Respondent had produced a valuation report estimating market rent at Rs. 6,65,200 per month from November 2024, the Appellate Court had fixed compensation at Rs. 3,00,000 per month, which the High Court considered reasonable and non-punitive.

The Court therefore retained the monthly amount but shifted its operative commencement date to the date of the eviction decree, while securing the Respondent’s claim for the earlier period through an undertaking.

The Petitioners were directed to deposit Rs. 3,00,000 per month as interim compensation from 26 November 2024, the date of the Trial Court’s eviction decree, within two months, and to continue depositing the same amount by the tenth day of each succeeding month until disposal of the appeal.

The Respondent could withdraw the deposited amounts upon furnishing an undertaking and was restrained from creating any third-party interest in the suit premises.

The Petitioners were required to undertake that, if unsuccessful in the appeal, they would deposit compensation at Rs. 3,00,000 per month for the period from the date of the suit until 26 November 2024, within eight weeks before the Appellate Bench.

The Court clarified that its observations were prima facie and would not affect the pending title proceedings or other proceedings between the parties.