A recent ruling by the Delhi High Court highlighted how crucial it is for tenants to maintain a proper paper trail so they can defend their position in any case of disputes in the future regarding the security amount or rent. In this case, Mr Mendiratta, a tenant from Tilak Nagar, New Delhi, took a 238.38 sq. ft shop on rent for Rs 25,500 per month in 2014 from Janakpuri’s Mr and Mrs Chawla. However, the rent agreement was unregistered and had a term of 11 months.
Moreover, Mendiratta (the tenant) claimed that between November 2016 and March 2017, he gave Rs 10 lakh in cash to the Chawlas (landlords) as security deposit; however, there was no paper trail or receipt or anything to show this cash.
Mendiratta also said to the court that he signed rent agreements in 2015 at the same rent and again in 2017; all these unregistered rent agreements were prepared by the Chawlas (landlords).
However, the dispute started on August 22, 2018, when a new rent agreement, carrying an increased rent of Rs 29,000 per month, as claimed by the Chawlas, was signed. This agreement, too, was unregistered and for 11 months. Mendiratta (tenant), in court, disputed the rent increase part, even though he admitted that in 2018 a new rent agreement was executed. According to Mendiratta, the rent for 2018 was fixed at Rs 2,900, not Rs 29,000, because he paid Rs 10 lakh as a security deposit in earlier years. The Chawlas (the landlords) categorically denied this.
After the expiry of the 2018 rent agreement on July 31, 2019, the Chawlas (the landlords) asked Mendiratta (the tenant) to vacate the shop and hand over the property. But Mendiratta refused to vacate until he got back his Rs 10 lakh. This created a rift between them, which ultimately reached the Delhi High Court.
On September 28, 2026, the Delhi High Court ordered Mendiratta (the tenant) to evict and pay mesne profits to the Chawlas (the landlords) for the period of unauthorised occupation.
Why did Mr Mendiratta (the tenant) lose the case?
Saumya Brajmohan, Partner at Solomon & Co, said to ET Wealth Online: Mendiratta (tenant) ultimately lost because his own admissions substantially undermined his defence, he could not prove the central assertion that he had relied upon to advance his case i.e., he paid an amount of Rs 10 lakh towards a mortgage/security amount arrangement, and he was unable to establish that the agreed rent had been reduced to Rs 2,900 per month as a consequence of this mortgage / security amount arrangement.
Chawla family's (landlords’) case was that Mendiratta (tenant) had been inducted in 2014 at a monthly rent of Rs 25,500, with the tenancy being renewed from time to time. In his own cross-examination, Mendiratta (tenant) admitted that he had taken the premises on rent in 2014 at Rs 25,500 per month, that the arrangement contemplated an annual increase, and that fresh 11-month Rent Agreements were executed in 2015, 2017 and 2018.
Mendiratta (tenant’s) principal defence was that he had paid an amount of Rs 10 lakh in 2016–17 towards a mortgage/security amount arrangement and, in consequence, was paying a rent of only Rs 2,900 per month. However, this mortgage / security amount arrangement and/or the payment of Rs 10 lakh was never proved.
Significantly, Mendiratta (tenant) did not produce the rent agreements which he admitted had been executed, nor was he able to show that the alleged mortgage / security arrangement i.e Rs 10 lakh was recorded in any of them. Mendiratta's own mother, who appeared as a defence witness, also admitted that she had not paid any such monies contrary to what is written in her affidavit.
Brajmohan says: "In other words, Mendiratta (tenant’s) fundamental problem was evidentiary: his pleadings, his cross-examination, and the evidence he led did not establish the alternative version of the tenancy that he relied upon."
Tenants should always keep signed rent agreement for their own protection
Brajmohan from Solomon & Co. says that the most important lesson from this judgement for tenants is to ensure that the commercial and documentary record of the tenancy is complete, consistent and capable of being proved independently.
- First, tenants should retain signed copies of every Rent Agreement and its subsequent renewals. In this case, the tenant admitted that successive agreements had been executed in 2015, 2017 and 2018, but did not produce those agreements before the Court. That left him in a significantly weaker evidentiary position.
- Second, rent and any substantial deposit, premium, security or other payment should preferably be made through traceable banking channels and documented through receipts or contemporaneous written acknowledgements. A substantial part of the tenant’s defence rested on an alleged cash payment of INR 10 lakh, but he ultimately could not prove that payment.
- Third, any side arrangement which changes the essential terms of the tenancy; particularly the rent, security deposit or the nature of the parties’ arrangement should be recorded in writing. Since relying on informal or undocumented understanding when it comes to money aspects is very risky since the other party can in the future deny it.
- Fourth, where a tenant genuinely disputes the execution or signature of a document like rent agreement the tenant should know better than to just put a bare challenge and allege forgery. If the tenant is alleging forgery of rent agreement and his signature on it the tenant should back this forgery claim with cogent evidence and pursue it specifically rather than being limited to a bare denial. In Mendiratta's case also he made this same mistake.
Brajmohan also says that tenants should act promptly when a tenancy expires or a termination notice is received (unless it has cogent documentary evidence to challenge termination). Once the right to occupy has come to an end, continued possession can expose a tenant not only to a decree for possession but also to liability for mesne profits or user and occupation charges until possession is actually handed over.
In Mendiratta's case, the court ordered mesne profit charges at the contractual rent of Rs 25,500, with a 15% increase after every three years of unauthorised occupation.
Why do tenants need to pay mesne profits?
Brajmohan says that mesne profits are, broadly speaking, compensation payable for wrongful possession of property. In the context of a tenant and landlord's rent agreement, the distinction is between rent and mesne profits is this: Rent is payable while the tenancy subsists in accordance with the contractual arrangement. Once the tenancy (rent agreement) has expired or has been validly terminated but the tenant continues to remain in possession, the occupation may become unauthorised, and the landlord may seek mesne profits for that period.
In Mendiratta's case, the Hon’ble Delhi High Court explained that mesne profits are ordinarily assessed by considering what the premises could have fetched if they had been let out during the period of unauthorised occupation. Evidence of rents fetched by comparable premises in the locality is one way of establishing the rate of mesne profits.
Where such evidence is not led, the Court may in appropriate cases take judicial notice of a general increase in rents and apply a reasonable enhancement to the last contractual rent. Further, in the present case, the Court upheld an award of mesne profits/user and occupation charges at Rs 25,500 per month, with a 15% increase after every three years of continued unauthorised occupation.
Delhi High Court discussion
Tenancy started in 2014
The Delhi High Court said that the tenant argued he gave Rs 10 lakh (as a security deposit) to the landlords between November 2016 and 2017 in lieu of the shop, and thus he was paying Rs 2,900 as monthly rent regularly. However, the landlady asserted that the rent was Rs 29,000 and not Rs 2,900 as claimed by the tenant.
When the landlady was deposed by the District Court, she said that she clarified that the rent was Rs 25,500 under the first rent agreement (2014) and Rs 29,000 from 2018. She also mentioned that this information was reflected in her income tax return (ITR). Later, in the Delhi High Court, she, however, changed her statement and said that the tenant wanted to avoid payment of GST/income tax, so rent was taken in cash, and no receipt was issued. The landlady also told the high court that she had not disclosed this rental income to the tax authorities.
The tenant’s own testimony confirmed the 2018 rent agreement
The Chawlas (landlords) submitted the 2018 rent agreement as evidence, which was initially denied by Mendiratta (the tenant) on the grounds that his signature on the said 2018 rent agreement is forged and fabricated. However, later, in the Delhi High Court, he admitted the 2018 rent agreement, so this directly contradicts his earlier comments.
Tenant’s mother denied giving any money for security amount
When Mendiratta’s mother was examined by the court, she said that the shop was taken on rent in 2014 at Rs 25,500 per month. She also denied executing any receipt or paying Rs 4.5 lakh (out of Rs 10 lakh) as claimed in her affidavit.
This testimony made the Delhi High Court doubt the authenticity of Mendiratta’s Rs 10 lakh security amount claim, as his own mother denied her affidavit’s admission about paying Rs 4.5 lakh.
The Delhi High Court also observed that Mendiratta while executing the rent agreement in 2016, 2017 and then again in 2018 did not indicate any attempts to include this Rs 10 lakh amount in any of the rent agreements since none of these rent agreements were presented as evidence.
Thus, Mendiratta’s Rs 10 lakh claim failed in court and his occupation of the shop was found to be unauthorised. So, the Delhi High Court ordered him to pay mesne profits for the unauthorised period occupation.
Calculations: (our calculations, not the court’s): The total amount payable, as per our estimate, if the shop is vacated in September 2026 is Rs 24.29 lakh (this is an estimate, not an accurate calculation).