Research › Browse › Judgment

Kerala High Court · body

1988 DIGILAW 508 (KER)

K. M. Abdulrahiman v. Ayyappali Muhamed Haji

1988-10-27

VARGHESE KALLIATH

body1988
JUDGMENT Varghese Kalliath, J. 1. This appeal presents a recurring facet of an oft familiar controversy whether the first appellant herein is a lessee or a tenant. 2. The respondent filed a suit for a preventive and mandatory injunction. He wanted the court to decree that the appellants should remove the articles stored in a shop room which according to the respondent is occupied by the appellants as licensees. The appellants contended that their occupation of the shop room is on the basis of a lease and so, the suit is not maintainable. 3. The trial court assessed the evidence and circumstances emerged in the case construed the document evidencing the transaction and found that the contention raised by the appellants is valid and so, dismissed the suit. The plaintiff appealed. The appellate court did not agree with the trial court. It reversed the judgment and decree of the trial court and allowed the appeal. It decreed the suit, Now, the defendants appeal. 4. On the evidence, facts and circumstances effused in the case the final question posed, is are the defendants - tenants or only licensees. This question has to be answered primarily and fundamentally on the terms of the agreement between the parties Ext. A1. 5. Before considering the terms of Ext. A1 I may mention what the Supreme Court has said as the norm of construction of a document. In the decision reported in Chunchun Jha v. Ebadat Ali ( AIR 1954 SC 345 ) the Supreme Court observed thus: "If the words are express and clear, effect must be given to them and any extraneous enquiry into what was thought or intended is ruled out, The real question in such a case is not what the parties intended or meant but what is the legal effect of the words which they used. If, however, there is ambiguity in the language employed, then it is permissible to look to the surrounding circumstances to determine what was intended". In construing an agreement alleged to be a lease or licence in M. N. Clubwala v. Fida Hussain Saheb (AIR 1965 S. C 610) the Supreme Court said : "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. In construing an agreement alleged to be a lease or licence in M. N. Clubwala v. Fida Hussain Saheb (AIR 1965 S. C 610) the Supreme Court said : "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 ascertained on a consideration of all the relevant provisions in the agreement". (emphasis added). Ext. Al is the agreement in question. All the terms of this agreement are relevant for deciding the question whether the relationship, that exists between the appellants and respondent is that of landlord and tenant or merely that of licensor and licensee. Certainly, the decisive consideration is the intention of the parties and the intention of the parties has to be determined from the terms of the agreement itself. 6. No doubt that the agreement Ext. A1 has been executed after fully knowing the contents of it and the legal effect of the words used in it. The agreement certainly calls it a licence. It has to be remembered that the parties knew the difference between lease and licence particularly in view of the security of tenure given to lessees under the Kerala (Buildings Lease and Rent Control) Act. 7. Ext. A1 agreement proceeds on the basis that a licence would be granted in respect of the plaint schedule property. The first clause stipulated that the licence has been granted for a period upto 31-8-1983. The first appellant herein who is the party to the agreement, it is specifically stated, has no right to enter the premises on termination of the licence and that the respondent herein who is the A party had the right to enter the premises and to resist the appellant from further using the building. This seems to be the core of the agreement or the substance of the agreement. Further, in the agreement it is provided that the licence is not coupled with any interest and that licensee is not permitted to effect fittings of permanent nature and that the licensee should not claim any right as that of a lessee. The stipulation that the first appellant cannot claim any right as that of a lessee is a specific indication of the intention of the parties. The stipulation that the first appellant cannot claim any right as that of a lessee is a specific indication of the intention of the parties. This stipulation makes it clear that the parties knowingly wanted to avoid the creation of a lease and also wanted to avoid a controversy as to the nature of the transaction which they have entered into. They wanted to create a licence only. Nevertheless, a controversy has arisen and the court is asked to decide the question. 8. The question whether a document creates a licence or lease is a question on which all the High Courts in India and the Supreme Court had occasion to consider and deliver classic judgments on the subject. The law on the subject has been developed greatly by precedents; I am tempted to say that the law has been revolutionised. The English law on the subject also has made a radical change since the oft quoted decision reported in Errington v. Errington (1952 (1) All ER 149). Similarly the Indian law has also showed different facets after the decision in Associated Hotels of India v. R. N. Kapoor (A I. R.1959 SC 1262). In the decision reported in Merchant v. Charters (AIR 1977 (3) All ER 918) Lord Denning MR referred to the growth of precedents on the subject and said that "the law on this subject has been developed greatly in the last 25 years. I might almost say revolutionised. In 1952 I collected several of the cases in Errington v. Errington and since that time there have been many more. The difference is very important under the Rent Acts (including 1974 Act) because a tenant is given complete security of tenure, but a licensee is not". The test laid down is this: "Gathering the cases together, what does it come to? What is the test to see whether the occupier of one room in a house is a tenant or a licensee? It does not depend on whether he or she has exclusive possession or not. It does not depend on whether the room is furnished or not. It does not depend on whether the occupation is permanent or temporary. It does not depend on the label which the parties put on it. All these are factors which may influence the decision but none of them is conclusive. All the circumstances have to be worked out. It does not depend on whether the room is furnished or not. It does not depend on whether the occupation is permanent or temporary. It does not depend on the label which the parties put on it. All these are factors which may influence the decision but none of them is conclusive. All the circumstances have to be worked out. Eventually the answer depends on the nature and quality of the occupancy. Was it intended that the occupier should have a stake in the room or did he have only permission for himself personally to occupy the room, whether under a contract or not, in which case he is a licensee"? In the case of Associated Hotels of India, the Supreme Court said that 'there is a marked distinction between a lease and a licence. S.105 of the Transfer of Property Act defines a lease of immovable property as transfer of a right to enjoy such property made for a certain time in consideration for a price paid or promised. Under S.108 of the said Act, the lessee is entitled to be put in possession of the property. A lease is therefore a transfer of an interest in land. The interest transferred is called the leasehold interest. The lessor parts with his right to enjoy the property during the term of the lease, and it follows from it that the lessee gets that right to the exclusion of the lessor". The Supreme Court had occasion of consider the same question in the following important cases: B M. Lali v. Dunlop Rubber Co., ( AIR 1968 SC 175 ) Qudrat Ullah v. Bareilly Municipality ( AIR 1974 SC 396 ). Revenue Board v. A. M. Ansari ( AIR 1976 SC 1813 ). Dipak Banerjee v. Lilabati Chakrabony ( AIR 1987 SC 2055 ), Khalil Whined v. Tufelhussein Samasbhai ( AIR 1988 SC 184 ) and Rajbir Kaur v. M/s. S. Chokosiri and Co., ( AIR 1988 SC 184 5). In the decision reported in AIR 1968 SC 175 , the Supreme Court had occasion to observe thus : "The transaction is a lease, if it grants an interest in the land, it is a license if it gives a personal privilege with no interest in the land. In the decision reported in AIR 1968 SC 175 , the Supreme Court had occasion to observe thus : "The transaction is a lease, if it grants an interest in the land, it is a license if it gives a personal privilege with no interest in the land. The question is not of words but of substance and the label which the parties choose to put upon the transaction, though relevant, is not decisive. The test of exclusive possession is not conclusive, though it is a very important indication in favour of tenancy". In the above quote, it has to be noted that the Supreme Court had definitely opined that exclusive possession is not conclusive, though it is a very important indication in favour of tenancy. The same idea has been reiterated in AIR 1988 SC 184 5, Venkatachaliah. J., observed thus: "These two rights, viz. easements and lease in their very nature, are appurtenant to the property. On the other hand, the grant only of the right to use the premises without being entitled to the exclusive possession thereof operates merely as a licence. But the converse implications of this proposition need not necessarily and always be true, wherever there is exclusive possession, the idea of a licence is not necessarily ruled out". Lord Denning has also pointed out in the decision cited earlier, that the question does not depend on whether he or she has exclusive possession or not. English Law contemplates what are called 'Possessory Licences' which confer aright of exclusive possession. These licences are a distinct category from the usual type of licences which normally permit acts which would otherwise be trespasses A very active thinking has emerged in English Law on the problem of licences in land law. The remedies advocated have differed widely, from the fanciful suggestion that the law should move forward to recognise a new concept of "quasi property" to a claim that the difficulties can be resolved by a return to basic principles. Stephen Moriority in his article "Licences and Land Law: Legal Principles and Public Policies" in 1984 Law Quarterly Review Vol. 100 said that "what all have in common, however, is a failure to dispel the confusion with which this area of the law is surrounded". The author has said that "Contractual licences, it is said, are fundamentally different from estoppel licences. 100 said that "what all have in common, however, is a failure to dispel the confusion with which this area of the law is surrounded". The author has said that "Contractual licences, it is said, are fundamentally different from estoppel licences. Certainly, runs the conventional wisdom, contractual licences can sometimes be irrevocable as between the parties to the contract; but, for two very important kinds of reason, we are driven to conclude that they can affect no one else. First, it is said, there is authority. There may be the odd heretical case like Errington v. Errington which says that contractual licences can bind third parties; but this is low grade stuff compared with the high octane authorities of the House of Lords and the Court of Appeal which say they cannot." 9. In AIR 1974 SC 396 the Supreme Court observed that if an interest in immovable property 'entitling the transferor to enjoyment is created it is a lease, if permission to use and without right to exclusive possession is alone granted it is a licence In the decision reported in AIR 1987 SC 2055 Sabyasachi Mukharji, J., observed thus: "In order to prove tenancy or sub tenancy two ingredients had to be established, firstly the tenant must have exclusive right of possession or interest in the premises or part of the premises in question and secondly that right must be in lieu of payment of some compensation or rent". An almost similar case to the case now I am considering, has been considered in the decision reported in AIR 1988 SC 184 . I think that it is apposite to quote the factual basis of the case so as to justify my observant on that the case is almost similar Para.10, 11 and 14 summarise the terms of the document construed in that case. The summary reads thus: "In the instant case the agreement was described as an agreement of 'leave and licence'. The parties had been described as the 'licensor' and the 'licensee'. The summary reads thus: "In the instant case the agreement was described as an agreement of 'leave and licence'. The parties had been described as the 'licensor' and the 'licensee'. The recitals therein recite that the licensor was seized and possessed of and was otherwise well entitled as the monthly tenant of the workshop premises situated being the permises in dispute, and whereas the licensee had approached the licensor to allow him to occupy and use the said permises for the purpose of carrying out his business of workshop for a period of five years and whereas the licensor had agreed to allow the licensee to use the permises under the said leave and licence of the licensor for a period of five years. It was stated that the licensor gave and granted his 'leave and licence' to the licensee to use and occupy the said premises for the period of five years. Clause.2 of the said agreement recites that the licensee had agreed to use the premises as above and merely for the purpose of workshop business. It further goes on to state that the "licensee shall not under any circumstances be allowed to use the premises for the residential purposes or any other purpose save and except specified therein". The period of leave and licence was to commence from 1st September, 1965 to 31st August. 1970 and it was further stated that the licensee and the licensor shall not terminate the said agreement earlier save and except on the ground of breach of any of the terms and conditions written therein. The licensor was entitled to terminate the agreement earlier notwithstanding the fact that the period of the agreement might not have expired. It further stipulated that the licensee should deposit a sum of Rs. 2,500/- for the due performance of the terms and conditions of the agreement. The said deposit was to be kept free of interest and the same was to be refunded to the licensee on the licensee surrendering possession of the said premises by removing himself and his belongings on the expiry of the period of the agreement or sooner termination or determination thereof after deducting all the dues if any for payment of compensation. It further stipulated that the licensee shall pay to the licensor a monthly compensation of Rs. 225/- per month. It further stipulated that the licensee shall pay to the licensor a monthly compensation of Rs. 225/- per month. It was stipulated that the licensee would be entitled to keep the keys of the said premises with him and shall be at liberty to work in the said premises for twenty hours subject to restriction of rules and regulations imposed by the Municipal or any other local authority or authorities. It was further provided that the licensee shall be alone responsible and liable for any breach or contravention of any rule or regulation of the said authorities and he shall indemnify the licensor thereof. The document further stipulated that the licensee shall be at liberty to construct loft and electric fittings and apparatus and tools and shall be entitled to the ownership thereof and shall be free to carry away such articles and the licensor agreed and undertook that he shall not obstruct the removing of such articles at the time of the delivery of the possession of the said workshop. It was further mentioned in the said agreement that it was agreed by the licensee that if he commits any default of any terms and conditions or fails to pay the compensation for two months or if the licensee at any time puts up false or adverse claim of tenancy or sub tenancy the licensor shall be entitled to terminate the agreement and cancel and revoke and withdraw the leave and license granted earlier and shall be entitled to take possession forthwith of the said premises. It was further stipulated that the licensee shall pay the electric charges in respect of consumption of electricity and the rent of the said premises should be paid by the licensor only. The agreement recited that the licensee shall not allow any other person to use and occupy the said premises and shall not do any unlawful or illegal business therein. The agreement further recited that the licensor shall hive the full right to enter upon the premises and inspect the same anytime". The Supreme Court held that the intention of the parties revealed from the said document on the facts and circumstances of the case would point out that the agreement was a licence and not a lease. The agreement further recited that the licensor shall hive the full right to enter upon the premises and inspect the same anytime". The Supreme Court held that the intention of the parties revealed from the said document on the facts and circumstances of the case would point out that the agreement was a licence and not a lease. An ultimate analysis of the cases would indicate one fact clear that the "exclusive possession itself is not decisive in favour of a lease and against a mere licence, for, even the grant of exclusive possession might turn out to be a licence and not a lease where the grantor himself has no power rant the lease In the last analysis the question whether a transaction lease or licence "turns on the operative intention of the parties and there is no single, simple litmus test to distinguish one from the other" (vide AIR 1988 SC 184 5). 10. In this case, the appellate court has found that the document in question created a licence. There is clear statement in the document itself that no contention should be raised on the ground that the document is not a licence. Further the only point that can be canvassed against the document is that considering the nature of the business that is being conducted, the appellants have obtained exclusive possession of the shop room. As I said earlier, exclusive possession is not a decisive factor though it is important. As stated by Lord Denning M. R. "eventually the answer depends on the nature and quality of the occupancy. Was it intended that the occupier should have a stake in the room or did he have only permission for himself personally to occupy the room, whether under a contract or not, in which case he is a licensee" Looking at the position in this case in the light of the document, in my opinion, the first appellant was not a tenant of the shop room in question. He was only a licensee. A contractual licensee no doubt, is still only a licensee. So he does not have security of tenure under the Rent Acts. He is not protected against eviction. 11. The learned counsel for the appellants argued that even if the appellants are licensees, they are entitled to protection under the Kerala I (Buildings (Lease and Rent Control) Act. A contractual licensee no doubt, is still only a licensee. So he does not have security of tenure under the Rent Acts. He is not protected against eviction. 11. The learned counsel for the appellants argued that even if the appellants are licensees, they are entitled to protection under the Kerala I (Buildings (Lease and Rent Control) Act. since they are paying rent for the shop room. Referring to the definition of the tenant under the Kerala Buildings (Lease and Rent Control) Act, the learned counsel argued that the licensee is also a tenant since he is paying rent. I cannot agree. The whole question was considered with respect to a sub tenant in the decision reported in AIR 1988 SC 184 5. Further, it is not possible to accept that the first appellant is paying rent. He is only paying what is provided in the document in question, namely, licence fee. 12. In the result, I see no merit in the contentions raised by the appellants. The appeal is only to be dismissed. I do so. 13. Counsel for the appellants submitted that it is very difficult to find an alternate accommodation for them and that this court should grant a little time to the appellants to remove the articles now stored in the shop rooms and to surrender the building. In these circumstances, I feel that I should order that the decree should not be executed for two months on condition that the appellants file an undertaking in the form of an affidavit that they will remove the articles from the building within two months from today. The undertaking has to be filed in the form of an affidavit before the trial court within 15 days from today. If no undertaking is filed, the landlord can execute the decree as such.