Full Judgment Text
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PETITIONER:
SOHAN LAL NARAINDAS
Vs.
RESPONDENT:
LAXMIDAS RAGHUNATH GADIT
DATE OF JUDGMENT08/01/1971
BENCH:
[J. C. SHAH, C.J., K, S. HEGDE AND A. N. GROVER, JJ.]
ACT:
Lease and licence-Difference between-Test, of exclusive
possession Language of document must be read wish
surrounding circumstances.
HEADNOTE:
The plaintiff commenced an action in the City Civil Court,
Bombay for a decree in ejectment against the defendant
alleging that the defendant was occupying loft on the upper
floor of a building under an agreement of licence and the
licence had been duly terminated and withdrawn.
The defendant contended that he was tenant of the loft, that
the tenancy had not been duly terminated as required by law;
that he was entitled to the protection of the Bombay Rents,
Hotel and Lodging Rates Contract. Act, 1947; and that the
court had no jurisdiction to try the suit. The trial court
dismissed the suit. The decree was confirmed in appeal by
the High Court of Bombay. The plaintiff applied for
certificate under Art. 133(1)(a) of the Constitution and in
the alternative under Art. 133(1)(c) thereof. The High
Court passed an order certifying the case under Art.
133(1)(c), and the plaintiff appealed.
HELD : (1) A certificate granted by the High Court must be
supported by adequate reasons. It is obligatory upon the
High Court to setout the question of public or private
importance which in their opinion-falls to be determined in
the proposed appeal. In the present case since there was no
merit in the appeal it was not necessary to vacate the:
cirtificate. [318 G]
(2)A licence confers a right to do or continue to do
something in or upon immovable property of grantor which but
for the grant of the right may be unlawful, but it create no
estate or interest in the immovable property of the grantor.
A lease on the other hand creates an interest in the
property demised. [322 G]
Intention of the parties to an instrument must be gathered
from the terms of the agreement examined in the light of
surrounding circumstances. The description given by the
parties may be evidence of the intention but is not
decisive. The crucial test in each case is whether the
instrument is intended to create or not to create an
interest in the property, the subject matter of the
agreement. If it is in fact intended to, create interest in
the property it is a lease, if it does not, it is a licence.
In determining whether the agreement creates a lease or a
licence, the test of exclusive possession though not
decisive, is of significance.
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[322 H-323 B]
Mrs. M. N. Clubwala v. Fida Hussain Saheb & Ors., [1964] 6
S.C.R. 2. relied on.
In the present case on a careful consideration of the
covenants and in the light of the relevant surrounding
circumstances it must held that the exclusive possession
given to the defendant was intended to confer an. interest
in the loft and on that account the agreement operated as a-
lease and not as a licence. [323 D]
320
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2443 of
1966.
Appeal from the judgment and order dated January 21, 25 of
the Bombay High Court in First Appeal No. 769 of 1963.
F. S. Nariman, P. C. Bhartari and J. B. Dadachanji, for
the appellant.
D. V. Patel,, Ramesh Malik and Ganpat Rai, for the
respondent.
The Judgment of the Court was delivered by
Shah, C.J. Sohan Lal Naraindas-hereinafter referred to as
’the plaintiff-commenced an action in the City Civil Court,
Bombay, for a decree in ejectment against Laxmidas Raghunath
hereinafter called ’the defendant’- alleging that the
defendant was occupying a loft 19’ x 15’ on the upper floor
of a building at Pragraj Galli, Mulji Jetha Market, Bombay
under an agreement of licence dated November 3, 1958 and
that the licence had been duly terminated and withdrawn but
the defendant had failed and neglected to vacate the loft
notwithstanding the demand. The defendant contended that he
was a tenant of the loft, that the tenancy had not be duly
terminated as required by law, that he was entitled to the
protection of the Bombay Rents Hotel & Lodging House Rates
Contract Act 1947 and that the Court had no jurisdiction to
try the suit.
The Trial Court dismissed the suit holding that the
defendant was a tenant of the plaintiff and not his
licensee. The decree was confirmed in appeal, by the High
Court of Bombay. The High Court held that on the terms of
the agreement and in the light of the surrounding
circumstances the relationship between the parties was that
of landlord and tenant. With certificate granted by the
High Court the plaintiff has appealed to this Court.
The certificate granted by the High Court is defective. The
plaintiff applied for certificate under Art. 133 (1 ) (a) of
the Constitution and in the alternative under Art. 1 3 3 (1
) (c) of the Constitution. The High Court passed an order
certifying the case under Art. 1 3 3 (1 ) (c). A
certificate granted by the High Court must be supported by
adequate reasons. It is obligatory upon the High Court to
set out the question of public or private importance which
in their opinion fall to be determined in the proposed
appeal. Since we are of the view that there is no merit in
this appeal, we have not thought it fit to vacate the
certificate.
The agreement dated November 3, 1958 was recorded formally
in writing and was duly executed. The plaintiff was the
lessee of a shop No. 11 in Pragraj Galli, Mulji Jetha
Market, and
321
the loft of that shop was the subject matter of that
agreement. The period of the agreement was one year. It
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was stated in the agreement that the loft "was given on
leave and licence basis for use and occupation" of the
defendant on the terms and conditions mentioned therein.
The relevant conditions were
"1. The owner (the plaintiff) has agreed to
grant the leave the licence for use and
occupation of the said loft (Medo) of the said
shop for a period one year commencing from Aso
Vad 13 S. Y. 2014 to Aso Vad 12 S. Y. 2,015.
2. The Licensee (the defendant) shall pay
to the Owner monthly compensation or Licensee
fee at the rate of Rs. 250/- per month, and
the Licensee has paid Rs. 3000/- (Rupee three
thousand) only to the Owner as compensation or
licence fee for the said period in advance on
or before the execution of this agreement.
3 The Licensee shall have no right as a
tenant or sub-tenant in respect of the said
loft (Medo) of the said shop. The Licensee
shall not sub-let, allow to use, transfer or
assign in any way the said loft (Medo) of the
shop to any one else.
4. The Owner shall bear and pay the rent of
the said shop.
5. The Licensee shall use and occupy the
said loft (Medo) of the said shop as a cloth
merchants only and shall not be entitled to
carry on any other business.
6. The parties hereto shall give one
month’s clear notice of their intention to
terminate this agreements in writing.
7...................................................
....
8. If the Licensee commits breach of any of
the terms of this agreement in that case the
Owner shall be entitled to terminate and
recoke the leave and licence hereby granted
without giving notice to the Licensee."
The defendant was put in exclusive possession of the loft.
The plaintiff did not reserve possession of any part of the
loft or a right of entry therein. The loft had a separate
entrance. The customers of the defendant used the separate
entrance to the loft during the business hours and his stock
of cloth remained in the loft after business hours. The
plaintiff and defendant were both cloth merchants, and the
only consideration for granting the licence was the payment
of Rs. 250/- per month. There is no
L7Sup./71
322
evidence that the loft was given to the defendant out of
sympathy or because of friendship, or relationship, or any
similar motive. It was stipulated that the plaintiff may
terminate the agreement by giving one month’s clear notice,
the agreement could not be terminated by notice of a shorter
duration.
An attempt was deliberately made to camouflage the true
nature of the agreement, by reciting in several clauses that
the agreement was for leave and licence, and to emphasise
the presence it was also recited that the defendant was not
to have any right as tenant or sub-tenant in respect of the
loft.
At the trial the elder brother of the defendant was examined
as a witness. He stated that the agreement dated November
3, 1958 was intended to be an agreement of lease, but the
plaintiff insisted that the agreement be drafted with the
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conditions set out therein.
Section 52 of the Easements Act defines a
"Licence"
"Where one person grants to another, or to a
definite number of other persons, a right to
do, or continue to do, in or upon the
immovable property of the grantor, something
which would, in the absence of such right be
unlawful, and such right does not amount to an
easement or an interest in the property, the
right is called a licence "
Section 105 of the Transfer of Property Act
defines "lease"
"A lease of immovable property is a transfer
of a right to enjoy such property, made for a
certain time, express or implied, or in
perpetuity, in consideration of a price paid
or promised, or of money, a share of crops,
service or any other thing of value, to be
rendered periodically or on specified
occasions to the transfer or by the
transferee, who accepts the transfer on such
terms.
A licence confers a right to do or continue to do something
in or upon immovable property of grantor which but for the
grant of the right may be unlawful, but it creates no estate
or interest in the immovable property of the grantor. A
lease on the other hand creates an interest in the property
demised.
Intention of the parties to an instrument must be gathered
from the terms of the agreement examined in the light of the
surrounding circumstances. The description given by the
parties may be evidence of the intention but is not
decisive. Mere
323
use of the words appropriate to the creation of a lease will
not preclude the agreement operating as a licence. A
recital that the agreement does not create a tenancy is also
not decisive. The crucial test in each case is whether the
instrument is intended to create or not to create an
interest in the property the subject matter of the
agreement. If it is in fact intended to create an interest
in the property it is a lease, if it does not, it is a
licence. In determining whether the agreement creates a
lease or a licence the test of exclusive epossession, though
not decisive, is of significance. Mrs. M. N. Clubwala v.
Fida Hussain Saheb and Ors(1).
The Trial Court regarded exclusive possession of the
premises, given to the defendant as conclusive of the
question whether the loft was in the occupation of the
defendant as a tenant. The Court observed that on a
consideration of the clauses of the agreement it was unable
to reach a conclusion whether the agreement was intended to
operate as a lease or as a licence but since exclusive
possession was given it must be regarded a lease. The High
Court considered all the covenants and the attendant cir--
cumstances and reached the conclusion that having regard to
the exclusive possession given to the defendant it was
intended to confer an interest in the loft and on that
account the agreement operated as a lease and not as a
licence.
We have carefully considered the covenants in the light of
the relevant surrounding circumstances. We are unable to
disagree with the view taken by the High Court that by the
terms of the agreement an interest was created in the loft
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in favour of the defendant.
The appeal fails and is dismissed with costs.
G.C. Appeal dismissed-
(1) [1964]6 S.C,R. 642.
324