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PETITIONER: KONCHADA RAMAMURTHY SUBUDHI & ANR.

       Vs.

RESPONDENT: GOPINATH NAIK

DATE OF JUDGMENT: 07/12/1967

BENCH: SIKRI, S.M. BENCH: SIKRI, S.M. SHELAT, J.M. HEGDE, K.S.

CITATION:  1968 AIR  919            1968 SCR  (2) 559  CITATOR INFO :  APL        1978 SC  22  (7)  C          1980 SC 299  (4,6)  R          1982 SC 813  (8)  E&D        1987 SC 248  (6)

ACT: Lease or Licence-Test for determining.

HEADNOTE: The  appellant filed a suit for eviction of  the  respondent from  the appellant’s house.  The suit was dismissed by  the trial  court.   In  appeal, a compromise  was  entered  into between the parties and a decree was passed in terms of  the compromise.   The compromise provided for  the  respondent’s continuation of possession of the house for five years,  but it  enabled the appellant to execute the decree by  evicting the respondent if the respondent failed to pay rent for  any three  consecutive  months.  When the  appellant  sought  to evict  the  respondent, the latter claimed  protection  from eviction  as  a tenant under the Orissa  House-Rent  Control Act, 1958. On  the  question whether the compromise  decree  created  a lease or a licence, HELD  :  The facts that the appellant had filed a  suit  for eviction of the respondent and the compromise decree enabled him to execute the decree by evicting the respondent,  show, that  the  intention of the parties, which is  the  decisive test,  was not to enter into the relationship of a  landlord and tenant, in spite of the fact the word ’rent’ was used in the compromise.  Therefore, the respondent was not  entitled to any protection against eviction. [562 C; 563 A-C] Associated  Hotels of India v. R. N. Kapur, [1960] 1  S.C.R. 368, State of Punjab v. British India Corporation, [1964]  2 S.C.R. 114 and M.   N.  Clubwala  v.  Fida  Hussain   Saheb, [1964] 6 S.C.R. 642, followed. Issac v. Hotel De Parts, [1960] 1 All E.R. 348, applied. Sumatibai  Waman Kirlikar v. A. B. Shirgaonkar, A.I.R.  1949 Bon. 402, approved.

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JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeal No. 372 of 1965. Appeal  by special leave from the judgment and  order  dated September 23, 1963 of the Orissa High Court in Miscellaneous Appeal No. 59 of 1961. B.Parthasarathy  and  M.  S. K. Sastri  for  M/s.  J.  B. Dadachanji and Co., for the appellants. K. R. Chaudhuri for respondent No. 1. The Judgment of the Court was delivered by Sikri,  J. This appeal by special leave is directed  against the judgment of the High Court of Orissa allowing the appeal and 560 setting  aside  the judgment of the District  Judge  Ganjam- Boudh,  Berhampur, who had affirmed the order passed by  the Munsif, Berhampur, dismissing M.J.C. No. 220/60 of  Gopinath Naik,  respondent before us, hereinafter referred to as  the Judgment Debtor. The  facts  in this case are not in  dispute.  One  Konchada Ramamurti  Subudhi, deceased, now represented by  his  legal representatives   and   appellants   before   us-hereinafter referred  to as the Decree Holder-and Bhagirathi Naiko,  now represented  by  Gopinath  Naik, Judgment  Debtor,  filed  a compromise  petition  under O. XXIII, r. 3 of  the  Code  of Civil   Procedure  in  the  Court  of   Subordinate   Judge, Berhampur,  in  T.A.  No.  13 of 1955.   In  terms  of  this compromise  petition a decree was passed, The Decree  Holder filed  an  application for execution of the decree  and  the Judgment  Debtor filed the application (M.J.C. No. 220/  60) under  s.  47, C.P.C., in the Court  of  Munsif,  Berhampur, objecting  to  the  execution of  the  decree.   The  Munsif dismissed  this application of the Judgment Debtor  and  the District.   Judge  affirmed  the  order.   The  High  Court, however,  on  appeal, set aside the order  of  the  District Judge. The  only point raised before us is whether  the  compromise decree  created a lease or a licence.  It is  common  ground that  if  a lease was created the Judgment Debtor  would  be entitled  to protection against being ejected by  virtue  of the provisions of Orissa House-Rent Control Act (Orissa  Act XXXI of 1958)-hereinafter referred to as the Act. The terms of the compromise were as follows               "1.   Respectable  people  have  settled   the               subject matter of this appeal and the suit and               so  both  parties  agreed  to  compromise   as               follows :-               (a)That  the  defendant-respondent   should               vacate  the  suit house on  or  before  1-7-60               (five  years)  failing  which  the  appellant-               plaintiff  will  be entitled to  execute this               decree  and  recover possession  of  the  suit               house  through  court  after  the  date  fixed               above.               (b)That  in respect of all arrears of  rent               claimed  in the suit and the rent  due  during               the  pendency of the suit and of this  appeal,               as calculated up to 30-6-55, the defendant has               paid  to  the plaintiff the sum of  Rs.  1,125               only  (Rupees  One thousand  and  one  hundred               twentyfive only).               (c)That  in respect of future  rent,  i.e.,               with  effect from 1-7-55 the  defendant  shall               pay to the plaintiff at               561

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             the rate of Rs. 50 a month by the end of  each               month until delivery, and a sum of Rs. 300  is               paid  to plaintiff’ to be kept as deposit  for               six  months rent to be adjusted  towards  rent               for the period of last six months ending  with               1.-7-1960.               (d)In  case the defendant fails to pay  the               rent  for  any three  consecutive  months  the               plaintiff  will  be at liberty to  adjust  the               advance towards arrears and also to evict  the               defendant from the suit house without  waiting               till 1-7-1960 by executing the decree and also               realise  the amount accrued due by then,  from               the defendant by executing this decree.               (e)That  the house fell to the share  of  a               minor  son  of  plaintiff-appellant,   namely,               Konchada  Koteswarrao for whom the  appellant-               plaintiff is the guardian, and the  plaintiff-               appellant will be responsible for the due com-               pliance of the terms of this compromise.               2.That each party do bear its own costs in               both courts.               3.  That a decree may be passed in  the  above               terms."               The  High Court has held that  the  compromise               decree created a lease and not a licence.  The learnedcounsel for the appellants contends that the intention of thedecree   bolder   was   only   to   give accommodation to the judgment debtor, and as he had filed  a suit to eject the judgment debtorit  could not  have  been his intention to create a fresh tenancy. He       places reliance on the decision in Ramjibhai Virpal Shah v.G. M. Bhagat(1)  where  the  Bombay  High  Court  has  elaborately considered   the   law  bearing  on  the  subject   of   the interpretation of the compromise decrees and the distinction between a lease and a licence. Before  we approach the question of the construction of  the compromise deed, we may refer to two decisions of this Court bearing on the distinction between a lease and a licence and the principles for distinguishing one -from the other.  This Court observed in M. N. Clubwala v. Fida Hussain Saheb(2) :               "Whether  an  agreement  creates  between  the               parties  the  relationship  of  landlord   and               tenant or merely that of licensor and licensee               the decisive consideration is the intention of               the parties.  This intention has to be  ascer-               tained on a consideration of all the  relevant               provisions               in the agreement."               1) A.I.R. [1954] Bom. 370.               L2SupCI/68-5                                    561               (2).[1964] 6 S.C.R 642-652, 653.               562               This  Court  further observed  that  exclusive               possession  is  not conclusive evidence  of  a               lease.  "If, however, exclusive possession  to               which a person is entitled under an  agreement               with a landlord is coupled with an interest in               the property, the agreement would be construed               not  as  a mere licence but as a  lease.  (See               Associated  Hotels  of India Ltd.  v.  R.  IV.               Kapur)"(1).               In  Associated Hotels of India Ltd. v.  R.  N.               Kapur(1)  Subba  Rao,  J.,  as  he  then  was,

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             summarised the propositions as follows               "The following propositions may, therefore, be               taken  as well-established : (1) To  ascertain               whether a document creates a licence or lease,               the   substance  of  the  document   must   be               preferred to. the form; (2) +,he real test  is               the  intention  of  the  parties-whether  they               intended  to create a lease or a licence;  (3)               if  the  document creates an interest  in  the               property,  it  is  a lease; but,  if  it  only               permits; another to make use of the  property,               of  which the legal possession continues  with               the  owner, it is a licence; and (4) if  under               the document a party gets exclusive possession               of the property, prima facie, he is considered               to  be  a  tenant; but  circumstances  may  be               established  which negative the  intention  to               create a lease."               Lord   Denning,  speaking  for  the   Judicial               Committee  of the P.-ivy Council in  Issac  v.               Hotel De Paris(2) observed :               "There  are  many  cases in  the  books  where               exclusive   possession  has  been   given   of               premises outside the Rent Restriction Acts and               yet  there  has been held to  be  no  tenancy.               Instances   are  Errington  v.   Errington   &               Woods(3)  and  Cobb  v.  Lane(4),  which  were               referred  to during the argument.  It is  true               that  in those two cases there was no  payment               or  acceptance of rent, but even  payment  and               acceptance  of rent-though of great  weight-is               not  decisive  of a tenancy where  it  can  be                             otherwise  explained : see Clarke v. Grant(1).               As  Lord  Greene.,  M.R., said  in  Booker  v.               Palmer(6) :               ’There  is  one golden rule which is  of  very               general application, namely, that the law does               not  impute  intention  to  enter  into  legal               relationships where the circumstances and  the               conduct of the parties negative any  intention               of the kind."’                (1)  [1960] 1 S.C.R. 368-384.                (3) [1952] 1   All E.R. 149.                (5) [1949] 1   All E.R. 768.                (2)  [1960] 1 All E.R. 348-352.                (4)  [1952] 1 All E.R. 1199.                (6)  [1942] 2 All E.R. 674-677.               563               Keeping  in mind the above observations,  what               was the intention of the parties ? It seems to               us  that the fact that the decree  holder  had               brought  a suit for ejectment of the  judgment               debtor and that a compromise was entered  into               in that suit is important.  It is difficult to               impute  to him an intention to create a  fresh               tenancy  while  the fact that he  brought  the               suit shows that his intention was to eject the               judgment  debtor  after  having  purported  to               terminate the tenancy.               Coming  to the terms of the compromise, it  is               true,  as stressed by the learned counsel  for               the respondent, that the word "rent" has  been               used,  but the word "rent" is not  conclusive,               for  as  observed by this Court  in  State  of

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             Punjab v. British India Corporation  Ltd.,(’,)               "in  its  wider sense rent means  any  payment               made for the use of land or buildings and thus               includes the payment by a licensee in  respect               of  the  use  and occupation of  any  land  or               building.   In  its narrower  sense  it  means               payment   made  by  tenant  to  landlord   for               property demised to him."               The learned counsel further stresses the point               that  Rs.  300 were paid as  deposit  for  six               months’ rent "to be adjusted towards rent  for               the period of last six months ending with 1-7-               1960", but it seems to us that that amount was               really paid as a security for the amounts  due               under  the compromise deed, as it was only  to               be adjusted against the rent for the last  six               months.   But what is very significant is  cl.               (d) which enables the decree holder to execute               the decree if the judgment debtor fails to pay               rent for any three consecutive months.   This,               it  seems to us, shows that the  intention  of               the   parties  was  not  to  enter  into   the               relationship,  of a landlord and tenant.   We,               may  mention that the importance of this  fact               was adverted to in Sumatibai Waman Kirlikar v.               A.  B. Shirgaonkar ( 2 ) where  Chagla,  C.J.,               observed:                "On  the failure of the defendant to pay  any               of  the amount which is fixed as rent  on  its               due  date, the only right the decree  gave  to               the judgment-creditor was to have it  executed               for the amount which remained due; it did  not               entitle the judgment-creditor to take  posses-               sion  of  the land on default  of  payment  of               rent." The High Court stressed the fact that a long period of  five years was granted to the judgment debtor for continuation of the  possession.  In our view, the length of the period,  in the   circumstances,   does   not   militate   against   the construction that the compromise only created a licence, for the decree holder apparently had lost in the trial court and it was only in the court of appeal that this compromise  was arrived at. (1) [1964] 2 S.C.R. 114-123.   (2) A.I.R. 1949 Bom. 4 2-44. 564 For  the aforesaid reasons we hold that the compromise  deed did  not create a lease.  Therefore, the judgment debtor  is not  a  tenant  within  S. 2(5) of  the  Act  which  defines "tenant" to mean "any person by whom or on whose behalf rent is  payable  for -any house and includes every  person  who, from time to time, derives title under a tenant, or a person continuing  in  possession  after ’the  termination  of  his tenancy otherwise than under the provisions of this Act, and shall  include any person against whom a suit for  ejectment is  pending in a Court of competent jurisdiction but  not  a person against whom a decree or order for eviction has  been made by such a Court." In  the  result the appeal is allowed, the judgment  of  the High  ,Court  set  aside  and that  of  the  District  Judge restored.  The appellants will have their costs incurred  in this Court. V.P.S.                   Appeal allowed. 565

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