You rent out your property and the rent agreement expires, and the tenant does not vacate it, but continues to pay you higher rent. Are you entitled to claim mesne profits, which is a compensation that is payable by a person who has wrongfully possessed someone else’s property for the profits or benefits they actually received, or could reasonably have received, from that possession.A tenant may be asked to pay mesne profits when they remain in possession of a property after the tenancy agreement has expired and the landlord has issued an eviction notice.The Delhi High Court recently this very principle of mesne profits in a case involving a bank, directing the tenant to pay out, along with 6% annual interest, to the landlady for continuing to occupy the premises beyond the agreed tenancy period.
What the case is about:
A Delhi-based landlady, had rented out a property in Defence Colony Market in 2002. The building consisted of two floors and a terrace, although only the first and second floors were leased to the tenant.The monthly rent was fixed at Rs 62,000. According to the submissions made before the court, the first floor measured 1,600 sq. ft., while the second floor had an area of 1,200 sq. ft.The registered rent agreement began on January 1, 2002, and was valid until December 31, 2004, making the original tenancy period three years. The agreement also contained a provision for a 20% increase in rent if the tenancy was renewed after December 31, 2004, according to an ET report.The agreement, however, was not renewed when the three-year period ended. The tenant neither entered into a fresh agreement nor vacated the premises on January 1, 2005.Instead, it continued occupying the property and paying the increased rent. With the original agreement having expired, the tenancy from that point operated on a month-to-month basis.The tenant eventually remained in possession for several more years and vacated the premises only on December 31, 2017.Before that, in May 2008, the landlady issued a legal notice to the tenant demanding that it vacate the property. She also sought mesne profits of Rs 4 lakh per month from June 2008, until the premises were actually vacated. Despite receiving the notice, the tenant continued to occupy the property.The landlady subsequently approached the court, challenging the tenant’s continued occupation of the premises. On July 9, 2026, the Delhi High Court delivered its judgment in the case and directed the tenant to pay the specified mesne profits to the landlady.
The Rs 25 lakh loan angle
Asha Kiran Sharma, Partner, King Stubb and Kasiva, told ET that the original rent agreement came to an end on December 31, 2004. Although the agreement contained a renewal provision, the tenant was required to submit a written request for renewal before the existing agreement expired.No such written request was made by the tenant within the stipulated period. As a result, there was no formal renewal of the rent agreement.At the same time, the landlady continued to communicate with the tenant in 2005 and 2007, increasing the rent by 20%, while the tenant continued making payments at the higher rate.Sharma says that the courts interpreted this conduct as an “extension” of the tenancy rather than the creation of a fresh lease meaning the tenant continued as a lawful month-to-month tenant, not a trespasser, even without a registered document.”The case took a significant turn in 2007, when the landlady borrowed Rs 25 lakh from the tenant, with her husband acting as the guarantor. As a condition attached to the loan, the landlady signed a notarised undertaking in which she agreed to continue the tenancy until the entire loan had been repaid.The arrangement also provided that the loan EMIs would be adjusted against the rent payable to her. The loan was eventually repaid in May 2012.Despite this commitment, the landlady issued a legal notice in May 2008 seeking to end the tenancy.The court, however, held that the 2008 notice could not supersede the binding undertaking that the landlady had already given, under which she had agreed to allow the tenant to remain in the premises until the loan was cleared. In other words, she could not subsequently withdraw from that commitment.Sharma says that this was the reason the court did not grant mesne profits for the period between 2008 and 2012. During these years, the tenant’s occupation continued to be considered authorised under the tenancy arrangement and was therefore not treated as unauthorised possession. The tenant was consequently liable only to pay the agreed rent and not damages.
Why did the landlady win the case?
The repayment of the loan in May 2012 became the key event in determining when the tenancy could effectively come to an end. Once the loan had been cleared, the court treated that point as the trigger for termination.The tenant’s continued occupation thereafter was considered unauthorised, making it liable for mesne profits calculated at market rates until it eventually vacated the premises in December 2017.This formed the basis of the landlady’s successful mesne profits claim in the Delhi High Court’s July 9, 2026 judgment.Under the July 2026 order, the tenant was directed to pay mesne profits at Rs 163 per sq. ft. per month for the period from May 2012 to December 2015. From January 2016 until December 31, 2017, the amount was to be calculated with a 15% increase in rent. The order also imposed 6% annual interest. The order will attain finality unless it is challenged before a higher court.Based on ET’s estimated calculations using the Delhi High Court’s July 2026 order, the total mesne profits work out to Rs 3,26,78,240, or approximately Rs 3.27 crore. This amount is in addition to the 6% annual interest directed by the court.The landlady subsequently approached the court seeking a review on limited technical grounds. Her review petition was dismissed in September 2026, with the court observing that the attempt was essentially to reopen findings that had already been decided. Such an exercise falls outside the scope of a review petition.
