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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loft on the  upper floor  of a building under an agreement of licence  and  the licence had been duly terminated and withdrawn.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