http://JUDIS.NIC.IN
SUPREME COURT OF INDIA
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licence had been duly terminated and withdrawn.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.
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
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
Page 3 of 5
http://JUDIS.NIC.IN
SUPREME COURT OF INDIA
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
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
Page 4 of 5
http://JUDIS.NIC.IN
SUPREME COURT OF INDIA
in favour of the defendant.
The appeal fails and is dismissed with costs.
G.C.
Appeal dismissed(1) [1964]6 S.C,R. 642.
Page 5 of 5