03 February 1964
Supreme Court


Case number: Appeal (civil) 151 of 1963






DATE OF JUDGMENT: 03/02/1964


CITATION:  1965 AIR  610            1964 SCR  (6) 642  CITATOR INFO :  R          1968 SC 919  (7)  R          1974 SC 396  (8)  RF         1976 SC1860  (12)  F          1988 SC1845  (13)

ACT: Licence  or  Lease-Provision requiring notice  to  vacate-If inconsistent   with  licence-Intention  of   parties-To   be ascertained from Agreement-Inference from circumstances  and conduct,  if formal document absent-Exclusive possession  if conclusive evidence of lease.

HEADNOTE: in  disputes regarding extra fees in respect of  meet-stalls in   a   private  market  owned  by  the   appellants,   the respondents--stall-holders  filed a suit alleging  that  the relationship  between  them and the appellants was  that  of lessees and lessors; while according to the appellants,  the respondents                             643 were  only  their licensees.  The  stall-holders  have  been executing agreements, signed by the stall-holders alone,  in which the payment is styled as rent.  Though the building in which  the market is located is owned by the  appellants  it could  not  be  used as a market for the  sale  of  meat  or comestibles without the permission of the municipal council, and  a  number of duties have been imposed upon  the  owners including  that  of  closing  the  market  and  that  market functioned  only  within ’he stated hours.  The  City  Civil Court Judge finding that the respondents were bare licensees dismissed their suit.  His decision was affirmed in  appeal. On a further appeal the High Court reversed the findings  of the Courts below holding that from the general tenor of  the document the terms created only a tenancy in respect of  the stalls  and  not  a mere licence  or  permissive  occupation saying that if the occupation of the stall-holders was  only permissive the condition as to the payment of rent, eviction for  default  in payment of rent for more than 3  days,  the provision  for  annual  repairs being  carried  out  by  the landlord,  the further provision that repairs that might  be occasioned by the carelessness of the respondents should  be carried out at their expense and the adequate provision  for



30 days notice for vacating the stalls if they were required by  the  landlord  would all seem  to  be  inconsistent  and irrelevant.  On appeal by special leave: Held: (i) While it is true that the essence of a licence  is that  it  is  revocable  at the  will  of  the  grantor  the provision in the licence that the licensee would be entitled to  a  notice  before  being  required  to  vacate  is   not inconsistent  with  a  licence, and the  mere  necessity  of giving such a notice would not indicate that the transaction was a lease. 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, which has to be ascertained on  a consideration   of  all  the  relevant  provisions  in   the agreement.   In the absence, however, of a  formal  document the  intention  of  the parties must be  inferred  from  the circumstances and conduct of the parties. (ii)The fact that a person has exclusive possession is  not conclusive evidenceof  his  being a lessee.   If,  however, exclusive possession to which a personis 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. Associated  Hotels  of India Ltd. v. R. N. Kapur,  [1960]  1 S.C.R. 368, Errington v. Errington and Woods, [1952] 1 K. B. 290,  Cobb.  v.  Lane, [1952] 1 All.  E.R.  1199,  Clove  v. Theatrical  Proprietors Ltd. and Westby & Co. Ltd. [1936]  3 All.  E.R. 483.  Smith & Son v. The Assessment Committee for the  Parish of Lambeth, [1882-831 10 Q.B.D. 327  and  vutrum Subba Rao v. The Eluru Municipal Council, I.L.R. [1956] A.P. 515, referred to. (iii)  In view of the duties cast upon the landlord and  the circumstances  of  the  present case the  intention  of  the parties was to bring into existence merely a licence and not a lease and the word ’rent’ was used loosely for ’fee’. 644

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 151 of 1963. Appeal  by special leave from the judgment and decree  dated February 17, 1959 of the Madras High Court in Second  Appeal No. 252 of 1957. S.   T. Desai and R. Ganapathy Iyer, for the appellants. R.   Gopalakrishnan, for the respondents Nos. 1-6. February  3, 1964.  The Judgment of the Court was  delivered by MUDHOLKAR  J.-This  is an appeal by special leave  from  the judgment of the High Court of Madras reversing the decisions of the courts below and granting a number of reliefs to  the plaintiffs-respondents. The  main  point  which arises for   consideration  in  this appeal is whether the plaintiffs-respondents are the lessees of  the appellants who were defendants 4 and 5 in the  trial court  or only their licensees.  In order to appreciate  the point certain facts need to be stated. The appellants are the owners of a private market situate in Madras  known as Zam Bazar Market.  There are about 500  odd stalls in that market and meat, fish, vegetables, etc.,  are sold  in  that market.  The practice of the  appellants  has been  to farm out to contractors the right to  collect  dues from the users of the stalls.  Defendants 1 to 3 to the suit were  the  contractors  appointed  by  the  appellants   for



collecting rent at the time of the institution of the  suit. Two  of these persons died and their  legal  representatives have  not been impleaded in appeal as they have no  interest in  the  subject-matter of litigation.  The third  has  been transposed  as respondent No. 7 to this appeal.  They  were, however, alive when the special leave petition was filed and were shown as appellants 1 to 3, but two of them were struck out  from the record after their death and the third  trans- posed as Respondent No. 7. Though the building in which  the market is located is owned by the appellants it cannot                             645 be  used as a market for the purpose of sale of meat or  any other article of human consumption without the permission of the  municipal  council  under s. 303  of  the  Madras  City Municipal  Act,  1919 (hereafter referred to  as  the  Act). Before such a permission is granted the owner has to  obtain a  licence from the Municipal Commissioner and undertake  to comply  with the terms of the licence.  The licence  granted to  him  would  be for one year at a time but  he  would  be eligible  for renewal at the expiry of the period.   Section 306 of the Act confers power on the Commissioner to  require the owner, occupier or farmer of a private market for the We of  any animal or article of food to do a number of  things, for  example  to  keep it in a clean and  proper  state,  to remove all filth and rubbish therefrom, etc.  Breach of  any condition  of  the  licence  or of any  order  made  by  the Commissioner  would result, under s. 307, in  suspension  of the  licence and thereafter it would not be lawful  for  any such  person to keep open any such market.  Section  308  of the  Act  confers  powers  on  the  Commissioner  to   make. regulations for markets for various purposes such as  fixing the  days  and hours on and during which any market  may  be held or kept for use, requiring that in the market  building separate  areas  be  set  apart  for  different  classes  of articles.  requiring every market building to be kept  in  a clean  and  proper  state  by  removing  filth  and  rubbish therefrom and requiring the provision of proper  ventilation in  the market building and of passages of sufficient  width between  the  stalls therein for the convenient use  of  the building.   We are told that regulations have been  made  by the  Commissioner in pursuance of the powers conferred  upon him  by S. 308 of the Act.  Thus as a result of the  Act  as well  as the regulations made thereunder a number of  duties appear  to  have  been placed upon  the  owners  of  private markets.   It would also appear that failure to comply  with any  of the requirements of the statute or  the  regulations would  bring  on  the  consequence  of  suspension  or  even cancellation  of  the licence.  We are mentioning  all  this because it will have some bearing upon the interpretation of the documents on which the plaintiffs have relied in support of the contention that the relationship between them and the appellants is that of tenants and landlord. 646 The  suit out of which this appeal arises came to  be  filed because  disputes  arose  between  the  plaintiffs  and  the defendants 1 to 3 who became the contractors for  collection of rent as from February 9, 1956.  These disputes were  with regard to extra carcass fees and extra fees for Sunday Gutha which  were  claimed by the  contractors.   The  respondents further  alleged that the relationship between them and  the appellants  was,  as  already stated, that  of  lessees  and lessors  while according to the appellants, the  respondents were   only  their  licensees.   The   respondents   further challenged  the extra levies made by the contractors,  i.e., the  original  defendants 1 to 3 who are no  longer  in  the



picture.  The reliefs sought by the respondents were for  an injunction against the appellants and the defendants 1 to  3 restraining  them  from realising the extra levies  and  for further   restraining  them  from  interfering  with   their possession  over  their respective stalls as  long  as  they continued  to  pay their dues.  The  First  Additional  City Civil Court Judge before whom the suit had been filed  found in the respondents’ favour that the extra fees sought to  be levied  by  the contractor were sanctioned  neither  by  the provisions  of the Municipal Act nor by usage but  upon  the finding  that the respondents were bare licensees  dismissed their suit. The appellate bench of the City Civil Court before whom  the respondents  had  preferred  an appeal  affirmed  the  lower court’s  decision.  The High Court reversed the decision  of the courts below and in the decree passed by it pursuant  to its judgment granted a number of reliefs to the respondents. Here  we are concerned only with reliefs (ii) (e),  (f)  and (g)  since  the appellants are not interested in  the  other reliefs.  Those reliefs are :               "(ii)  that  the  respondents  defendants,  in               particular defendants 1 to 3 (respondents 1 to               3)  be and hereby are restrained from  in  any               manner   interfering  with   the   appellants-               plaintiffs  1 to 4, 6 and 7 carrying on  their               trade peacefully in their respective stalls at               Zam  Bazar  Market,  Rovapettah,  Madras   and               imposing any restrictions or limitations  upon               their  absolute right to carry on business  as               mentioned hereunder                                    647               (e)   Interfering  with  the  possession   and               enjoyment  of  the respective  stalls  by  the               appellants plaintiffs 1 to 4, 6 and 7 so  long               as they pay the rents fixed for each stall;               (f)   increasing  the  rents  fixed  for   the               appellants-plaintiffs’ 1 to 4, 6 and 7  stalls               under the written agreements between the  said               plaintiffs and defendants 4 and 5;               (g)   evicting of the appellants-plaintiffs  1               to 4, 6 and 7 or disturbing the plaintiffs and               their articles in their stalls by defendants 1               to 3." Further  we  are  concerned  in  this  case  only  with  the relationship  between the meat vendors occupying  and  using some  of  the  stalls  in the  market  (as  the  plaintiffs- respondents  belong  to this category) and  the  appellants- landlords.  What relationship subsists or subsisted  between the   appellants  and  other  stall-holders  vending   other commodities  is  not  a  matter which  can  be  regarded  as relevant for the purpose of deciding the dispute between the appellants and the respondents. It  is common ground that under the licence granted  by  the Municipal Corporation, the market is to remain open  between 4 A.m. and II P.m. and that at the end of the day the stall- holders  have  all to leave the place which has then  to  be swept and disinfected and that the gates of the market  have to  be locked.  None of the stall-holders or their  servants is  allowed  to stay in the market after closing  time.   In point  of fact this market used to be opened at 5  A.M.  and closed,  at 10 P.m. by which time all the stall-holders  had to  go away.  It is also common ground that the  stalls  are open  stalls and one stall is separated from the other  only by  a low brick wall and thus there can be no question of  a stall-holder being able to lock up his stall before  leaving



the  market at the end of the day.  The  stall-holders  were required to remove the carcasses brought by them for sale by the time the market closed.  Meat being an article liable to speedy  decay  the stall-holders generally  used  to  finish their 648 business  of vending during the afternoon itself and  remove the carcasses.  They, however, used to leave in their stalls wooden  blocks  for  chopping meat,  weighing  scales,  meat choppers  and  other implements used by them  in  connection with their business.  These used to be left either in  boxes or almirahs kept in the stall and locked up therein. It  is also an admitted fact that some of the  stall-holders have  been  carrying on business  uninterruptedly  in  their stalls  for as long as forty years while some of  them  have not  been in occupation for more than five years.  It is  in evidence that these stall-holders have been executing  fresh agreements governing their use and occupation of stalls  and payment of what is styled in the agreements as rent whenever a   new  contractor  was  engaged  by  the  appellants   for collecting rents. The  next  thing  to be mentioned  is  that  the  agreements referred  to  the  money or charges payable  by  the  stall- holders to the landlords as ’rent’ and not as ’fee.  It has, however,  to be noted that the dues payable accrue from  day to day.  Thus in Ex.A- 1 the rent of Re. 1 /- is stid to  be payable every day by 1.00 P.m. In all these agreements there is  a condition that in case there is default in payment  of rent  for  three  days the stall-holder  was  liable  to  be evicted  by  being  given  24  hours’  notice.   A   further condition  in the agreements is that a stall-holder  may  be required  by the landlord to vacate the stall  after  giving him  30 days’ notice.  There is a provision  also  regarding repairs  in these agreements.  The liability for the  annual repairs  is  placed by the agreement upon the  landlord  and these repairs are ordinarily to be carried out in the  month of   June  every  year.   Where,  however,  repairs   became necessary  on account of the carelessness of a  stall-holder they  were to be carried out at the expense of  that  stall- holder.  It may be also mentioned that these agreements  are obtained by the contractors from the stall-holders in favour of  the landlord and bear the signatures only of the  stall- holder,.;. It was contended before us by Mr. R. Gopalakrishnan that  in order  to ascertain the relationship between the  appellants and the respondents we must look at the agree-                             649 ments  alone  and that it was not open to us  to  look  into extraneous  matters such as the  surrounding  circumstances. It is claimed on behalf of the respondents that the lease in their favour is of a permanent nature.  But if that were so, the absence of a registered instrument would stand in  their way  and they would not be permitted to prove the  existence of  that lease by parol evidence.  From the  fact,  however, that  with every change in the contractor a fresh  agreement was executed by the stall-holders it would be legitimate  to infer that whatever the nature of the right conferred by the agreement upon the stall-holders, it could not be said to be one  which  entitled  them to permanent  occupation  of  the stalls.   It could either be a licence as contended  for  by the  appellant or a tenancy from month to month.  In  either case  there  would be no necessity for the  execution  of  a written  agreement  signed by both the parties.   Here,  the agreements in question are in writing, though they have been signed  by  the  stall-holders alone.  All  the  same,  oral



evidence to prove their terms would be excluded by s. 92  of the  Evidence  Act.  To that extent  Mr.  Gopalakrishnan  is right.   Though  that is so, under the 6th proviso  to  that section  the  surrounding circumstances can  be  taken  into consideration  for  ascertaining  the meaning  of  the  word ’rent’   used   in  the  agreements.    Indeed,   the   very circumstance  that  rent  is to fall due every  day  and  in default  of payment of rent for three days the  stall-holder is liable to be evicted by being given only 24 hours’ notice it  would not be easy to say that this ’rent’ is payable  in respect of a lease.  On the other hand, what is called  rent may well be only a fee payable under a licence.  At any rate this  circumstance  shows  that there is  ambiguity  in  the document  and on this ground also surrounding  circumstances could be looked into for ascertaining the real  relationship between the parties.  Indeed, the City Civil Court has  gone into the surrounding circumstances and it is largely on  the view  it  took  of  them that it  found  in  favour  of  the appellants. The   High  Court,  however,  has  based  itself  upon   the agreements themselves.  To start with it pointed out-and, in our opinion rightly-that the use of the word ’rent’ in,  Ex. A-1 did not carry the respondents’ case far.  The reasons. 650 given   by  it  for  coming  to  the  conclusion  that   the transaction was a lease, are briefly as follows :               (1)   Notice  was required to be given to  the               stallholder before he could be asked to vacate               even on the ground of non-payment of rent;               (2)   the  annual repairs were to  be  carried               out by the landlord only in the month of June;               (3)   the stall-holder was liable to carry out               the  repairs at his own expense when they  are               occasioned by his carelessness;               (4)   even  if the landlord wanted the  stalls               for his own purpose he could obtain possession               not immediately but only after giving 30 days’               notice to the stall-holder;               (5)   the  possession  of the  stalls  by  the               respondents  had been continuous and  unbroken               by  virtue of the terms of the  agreement  and               that the terms of the original agreement  were               not  shown to have been substituted  by  fresh               agreements executed by the respondents. The High Court, therefore, held that from the general  tenor ,of  the  documents it is fairly clear that as  between  the appellants  and  the respondents the terms  created  only  a tenancy  in respect of the stalls and not a mere licence  or permissive occupation.  After saying that if the  occupation of the stall-holders was only permissive the condition as to payment of rent, eviction for default in payment of rent for more  than  3 days, the provision for annual  repairs  being carried  out  by the landlord, the  further  provision  that repairs that might be occasioned by the carelessness of  the respondents  should be carried out at their expense and  the adequate  provision  for 30 days’ notice  for  vacating  the stalls if they were required by the landlord would all  seem to be inconsistent and irrelevant, it observed :               "As  a  matter of fact, there is  no  evidence               whatsoever   to   show  that  any   of   these               plaintiffs  were  at any time  turned  out  of               their possession of their               651               stalls  at  the will of the landlords  or  for               default  of  any of the terms  and  conditions



             stipulated  in the agreements.   The  specific               provision for 30 days’ notice for vacating and               delivering  possession seems to be  conclusive               of the fact that the plaintiffs were to occupy               the  stalls  as permanent tenants and  not  as               mere  licensees.  The terms of the  agreements               further  disclose that the plaintiffs were  to               be in exclusive possession of these stalls for               the  purpose  of their trade as long  as  they               comply  with the terms and until there  was  a               notice  of  termination of  their  tenancy  in               respect  of the shops held by them.  The  very               tenor of the agreements, the intention  behind               the terms contained in the agreements and  the               measure of control established by the terms of               the  agreements,  all point only to  the  fact               that the plaintiffs were to be in  undisturbed               and exclusive possession of the stalls as long               as  they paid the rent and until there  was  a               valid  termination of their right to hold  the               stalls as such tenants." While it is true that the essence of a licence is that it is revocable  at the will of the grantor the provision  in  the licence  that  the licensee would be entitled  to  a  notice before  being required to vacate is not inconsistent with  a licence.   In  England it has been held that  a  contractual licence  may  be revocable or irrevocable according  to  the express  or  implied  terms  of  the  contract  between  the parties.   It  has further been held that  if  the  licensee under  a  revocable licence has brought property on  to  the land,  he  is  entitled to notice of  revocation  and  to  a reasonable  time for removing his property, and in which  to make  arrangements to carry on his business elsewhere.  (See Halsbury’s Laws of England 3rd edn. vol. 23, p. 431).   Thus the  mere  necessity  of  giving  a  notice  to  a  licensee requiring  him  to vacate the licensed  premises  would  not indicate that the transaction was a lease.  Indeed, s. 62(c) of  the  Indian Easements Act. 1882 itself provides  that  a licence  is  deemed to be revoked where it has  been  either granted for a limited period, or 652 acquired  on  condition  that it shall become  void  on  the performance  or non-performance of a specified act, and  the period  expires,  or  the condition is  fulfilled.   In  the agreements  in  question the requirement of a  notice  is  a condition  and  if that condition is fulfilled  the  licence will  be  deemed to be revoked under s. 62.  It  would  seem that  it  is this particular requirement in  the  agreements which  has  gone a long way to influence  the  High  Court’s finding  that  the  transaction was  a  lease.   Whether  an agreement  creates between the parties the  relationship  of landlord and tenant or merely that of licenser and  licensee the decisive consideration is the intention of the  parties. This  intention has to be ascertained on a consideration  of all  the  relevant  provisions in  the  agreement.   In  the absence, however, of a formal document the intention of  the parties must be inferred from the circumstances and  conduct of  the  parties.  (lbid p. 427).  Here  the  terms  of  the document  evidencing the agreement between the  parties  are not  clear  and  so the surrounding  circumstances  and  the conduct  of  the parties have also to be borne in  mind  for ascertaining  the  real relationship  between  the  parties. Again,  as already stated, the documents relied  upon  being merely agreements executed unilaterally by the stall-holders in favour of the landlords they cannot be said to be  formal



agreements between the parties.  We must, therefore, look at the  surrounding circumstances.  One of those  circumstances is  whether actual possession of the stalls can be  said  to have  continued with the landlords or whether it had  passed on to the stall-holders.  Even if it had passed to a person, his  right to exclusive possession would not  be  conclusive evidence of the existence of a tenancy though that would  be a consideration of first importance.  That is what was  held in Errington v. Errington and Woods(1) and Cobb v.  Lane(1). These  decisions reiterate the view which was taken  in  two earlier  decisions: Close v.Theatrical Properties  Ltd.  and Westby  &  Co. Ltd.,(1) and Smith & Son  v.  The  Assessment Committee  for  the Parish of Lambeth(1).  Mr. S.  T.  Desai appearing for the appellants also relied on the decision  of the High Court of (1) [1957] 1 K.B. 290.       (2) [1952] 1 All.  E.R. 1190. (3) [1936] 3 All.  E.R.483. (4) (1882-83) 10 Q.B.D. 327 at 330.                             653 Andhra  Pradesh  in Vurum Subba Rao v. The  Eluru  Municipal Council (1) as laying down the same proposition.  That was a case in which the High Court held that stall-holders in  the municipal market who were liable to pay what was called rent to  the municipality were not lessees but merely  licensees. The  fact,  therefore, that a  stall-holder  has  ,exclusive possession  of the stall is not conclusive evidence  of  his being a lessee.  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. N. Kapoor(2).  In the  case  before us, however, while it is  true  that  each stall-holder  is entitled to the exclusive use of his  stall from  day to day it is clear that he has no right to use  it as  and  when he chooses to do so or to sleep in  the  stall during  the night after closure of the market or  enter  the stall during the night after 11-00 P.m. at his pleasure.  He can use it only during a stated period every day and subject to  several conditions.  These circumstances,  coupled  with the  fact that the responsibility for cleaning  the  stalls, disinfecting  them  and of closing the Market in  which  the stalls  are  situate is placed by the Act,  the  regulations made thereunder and the licence issued to the landlords,  is on  the landlords, would indicate that the legal  possession of  the  stalls must also be deemed to have  been  with  the landlords  and not with the stall-holders.  The right  which the stall-holders had was to the exclusive use of the stalls during stated hours and nothing more.  Looking at the matter in  a  slightly different way it would seem  that  it  could never  have  been  the intention of  the  parties  to  grant anything  more  than a licence to  the  stall-holders.   The duties  cast on the landlord by the Act are onerous and  for performing those duties they were entitled to free and  easy access  to the stalls.  They are also required to see to  it that the market functioned only within the stated hours  and not beyond them and also that the premises were used for  no purpose  other than of vending comestibles.  A further  duty which  lay upon the landlords was to guard the  entrance  to the market.  These duties (1)  I.L.R. [1956] A.P. 515 at pp. 520-4. (2)  [1960] 1 S.C.R. 368. 654 could  not  be effectively carried out by  the  landlord  by parting  with possession in favour of the  stall-holders  by reason  of which the performance by the landlords  of  their



duties  and obligations could easily be rendered  impossible if the stall-holders adopted an unreasonable attitude,.   If the landlords failed to perform their obligations they would be  exposed  to penalties under the Act and  also  stood  in danger  of  having their licences revoked.  Could,  in  such circumstances, the landlords have ever intended to part with possession  in  favour of the stall-holders and  thus  place themselves at the mercy of these people?  We are, therefore, of  the  opinion that the intention of the  parties  was  to bring  into existence merely a licence and not a  lease  and the word rent’ was used loosely for ’fee. Upon  this  view  we must allow the appeal,  set  aside  the decree  of  the  High  Court and dismiss  the  suit  of  the respondents inso far as it relates to reliefs (ii) (e), (f) and (g) grantedby the High Court against the appellants are  concerned. So far as the remaining reliefs  granted  by the High Court are concerned, its decree will stand.  In the result we allow the appeal to the extent indicated above but in  the particular circumstances of the case we order  costs throughout will be borne, by the parties as incurred. Appeal partly allowed.