Appeal No 4233 of 1984
From the Judgment and Order dated 2531983 of the Bombay High Court in WP No 25 of 1982
SB Bhasme and AS Bhasme for the Appellant
Umesh Bhagwat and VB Joshi for the Respondent
The Judgment of the Court was delivered by RM SAHAI J
Can a statutory tenant create a licence If the answer is in affirmative then can such licensee claim immunity from eviction in execution proceedings in view of Section 15A of this Bombay Rent Hotel and Loging House Rates Control Act 57 of 1947 hereinafter referred to as the Act  These are questions which arise for consideration in this appeal directed against the judgment and order of the Bombay High Court
462 What happened was that the landlord determined the tenancy of the contractual tenant in October 1966 and filed a suit for his eviction in 1967 which was decreed ex parte on 5th October 1973
In execution of the decree the licensee obstructed and claimed to be protected licensee under Section 15A of the Act
The objection was rejected by the executing and the appellate court
The appellate court found that even though the first licence was created in 1966 before determination of the tenancy for a period of six years but the second licence having been created in 1972 it was not necessary to examine the validity of the first as second was created when contractual tenant had become statutory tenant therefore he was incapable of transferring any right or interest in favour of the licensee
The High Court did not disturb the finding that the licence was created in 1972 but it held that creation of licence by a statutory tenant was valid
Consequently the licensee was in occupation of the premises as licensee on the date the Bombay Rent Act was amended and was entitled to the benefit of Section 15A of the Act
For this reliance was placed on certain observations made by a Division Bench of that Court in Vasant Tatoba Hargude and Others vs Dikkava Mutta Pujari to the following effect On this point of initial presumption as to the subsisting incidence of the tenancy we shall have to follow the ratio of Damadilal s case  in preference to the decision in Anand Nivas case and shall have to proceed on the assumption that statutory tenant does ordinarily possess transferable interest in his tenancy
 Who is a statutory tenant what right or interest he can assign or transfer have been dealt by this Court in more that one decisions
In Anand Nivas Private Lid vs Anandji Kalyanji s Pedhi  others AIR 1965 SC 414 a decision rendered under Bombay Rent Act the majority held A person remaining in occupation of the premises let to him after the determination of or expiry of the period of the tenancy is commonly though in law not accurately called a statutory tenant 
Such a person is not a tenant at all he has no estate or interest in the premises occupied by him
He has merely the protection of the statute in that he cannot be turned out so long as he pays the standard rent and permitted increases if any and performs the other conditions of the tenancy
His right to remain in possession after the determination of the contractual tenancy is personal it is not capable of being transferred or assigned and devolves on his death 463 only in the manner provided by the statute
The right of a lessee from a landlord on the other hand is an estate or interest in the premises and in the absence of a contrant to the contrary is transferable and the premisses may be sublet by him
But with the determination of the lease unless the tenant acquires the right of a tenant holding over by acceptance of rent or by assent to his continuing in possession by the landlord the terms and conditions of the lease are extinguished and the rights of such a person remaining in possession are governed by the statute alone
Section 12 1 of the Act merely recognises his right to remain in possession so long as he pays or is ready and willing to pay the standard rent and permitted increases and performs the other conditions of the tenancy but not the right to enforce the terms and conditions of the original tenancy after it is determined
 In Jai Singh Morarji and others vs Ms Sovani P Ltd  yet another decision from Bombay the ratio in Anand Nivas was reiterated and It was held that tenant in Section 15 of the Bombay Rent Actmeant the contractual tenant and not the statutory tenant
Then came another decision Damadilal and others vs Parashram and others  on MP Accommodation Control Act
It in the Court traced the genesis of the concept of statutory tenant derived from the English Rent Act but carved out an exception where the sanctity of the contract  was touched by legislation
It was held that where the statute itself provided continuance in possession of the tenant after determination of the tenancy in some right the tenant was at par with contractual tenant
Reason was the definition of tenant  under Section 2 i of the Act
It read as under a person by whom or on whose account or behalf for the rent of any accommodation is or but for a contract express or implied would be payable for any accommodation and includes any person occupying the accommodation as a sub tenant and also any person continuing in possession after the termination of his tenancy whether before or after the commencement of this Act but shall not include any person against whom any order or decree for eviction has been made
 This section was construed thus The definition makes a person continuing in possession after the determination of his tenancy a tenant unless a decree or order for eviction has been made against him 464 thus putting him on par with a person whose contractual tenancy still subsists
The incidents of such tenancy and a contractual tenancy must therefore be the same unless any provision of the Act conveyed a contrary intention
That under this Act such a tenant retains an interest in the premises not merely a personal right of occupation will also appear from Section 14 which contains provisions restricting the tenant s power of subletting
Section 148 is in these terms  
No such provision existed in the Bombay Rent Act
The ratio in Damadilal s case therefore could not apply to right or interest created by a statutory tenant under the Bombay Act
The decisions in Damadilal s case did not in any way deviate from the decisions given earlier by this Court in Anand Nivas case
All these cases however were of sub tenants
In 1981 this Court had an occasion to deal with the case of a licensee under the Bombay Rent Act and his rights under Section 15A of the Act
The Bench was of the opinion that the licensee was not entitled to obstruct the eviction proceedings which had become final against the tenant as a statutory tenant could not assign or create any interest after termination of his tenancy
It was observed in Ludhichem Agencies vs Ahmed R vs Peer Mohamed and Anr
1 An agreement for licence can subsist and continue to take effect only so long as the licensor continues to enjoy a right title or interest in the premises
On the termination of his right title or interest in the premises the agreement for licence comes to an end
If the licensor is a tenant the agreement for licence terminates with the tenancy
No tenant is ordinarily competent to grant a licence enduring beyond his tenancy
On the termination of the licensor s tenancy the licensee ceases to be a licensee
 On facts however since the statutory tenancy too cam to an end before Section 15A was amended due to passing of the decree by the trial court the High Court distinguished this decision ignoring the material difference between the two enactments
What was lost sight of was that the observation made by this Court in Damadilas s case at page 2234 to the following effect We find it difficult to appreciate how in this country we can proceed on the basis that a tenant whose contractual tenancy has determined but who is protected against eviction by the statute has no right of property but only a personal right to remain in occupation without ascertaining what his rights 465 are under the statute  
It is not possible to claim that the sanctity of contract cannot be touched by legislation
Were on the language of the Section as it stood under that Act
Therefore in absence of any legislation touching the contract it appears to be settled that contractual tenant is left with no transferable right after determination of his tenancy
In our opinion the learned judge in drawing an inference from Ludhichem Agencies supra that a licence by a statutory tenant would continue to subsist lawfully till it was terminated and therefore if on the facts of that case the decree of ejectment against Saraswatibai had been made after 121973 then the licence in favour of the petitioners could have been considered to the subsisting on 121973
committed an error of law
Section 15A reads as under 15A 1Notwithstanding anything contained elsewhere in this Act or anything contrary in any other law for the time being in force or in any con tract where any person is on the lst day of February 1973 in occupation of any premises or any part thereof which is not less that a room as a licensee thereof he shall on that date he deemed to have become for the purposes of this Act the tenant of the landlord in respect of the premises or part thereof in his occupation
2The provisions of sub section 1 shall not affect in any manner the operation of sub section 1 of Section 15 after the date aforesaid
 The section brought into force with effect from 1st February 1973 undoubtedly protected a licensee form eviction
But it could operate in his favour only if he was in occupation of the premises on the date the Act came into force as a licensee
It is thus not mere occupation but occupation as licensee which has been statutorily protected
In other words the law would operate in favour of a person who held the premises under valid licence
A valid licence could be created as explained earlier by a contractual tenant or by a statutory tenant if he continued at par with contractual tenant by operation of legislation
In absence of any such provision in the Bombay Rent Act the licence created in favour of licensee by the statutory tenant could riot render the respondent a licensee within the meaning of Section 15A of the Act
466 Even a valid licence stands revoked in circumstances mentioned in Section 62 of the Indian Easements Act
Its clause a reads as under 62
A license is deemed to be revoked awhen from a cause preceding the grant of it the grantor ceases to have any interest in the property affected by the license The licence was granted by the contractual tenant in 1972
But his tenancy had been determined by the landlord in 1966
He thus had become statutory tenant
He did not in law had any assignable interest on the date he created the licence
The grantor therefore from a cause preceding the grant had ceased to have any interest and was incapable of creating any valid licence unless he could be deemed to be at par with the contractual tenant by any provision in the statute
In absence of any such provision in the Bombay Rent Act the licence was invalid and stood revoked
The occupation of the respondent thus was not as licensee within the meaning of Section 15A of the Act
In the result this appeal succeeds and is allowed
The order passed by the High Court in the Writ Petition is set aside and it shall stand dismissed
In the circumstances of the case however there shall be no order as to costs
VM Pretition dismissed


Summary:
The question for determination in these two appeals was whether the appellant firms were entitled to registration under section 26A of the Indian Income tax Act and the common point of law involved was the interpretation of the words  constituted under an instrument of partnership  occurring in that section
In Appeal No 85 the assessee firm was said to have been constituted by a verbal agreement in April 1948 and the deed of partnership was drawn up in September 1949
The application for registration under section 26A of the Act for the assessment year 1949 1950 was made thereafter to the Income tax Officer
In Appeal NO 389 the assessee firm was verbally constituted in 81 642 June 1944 and a memorandum of partnership was executed in June 1948
The application for registration under section 26A for the assessment years 1945 46 and 1946 47 was made on August 24 1949
The applications were rejected by the Income tax Officer and the appeals preferred by the assessees were also dismissed by the Income tax Appellate Tribunal
The High Court took the view that section 26A of the Indian Income tax Act contemplated a firm created or brought into existence by an instrument of partnership and answered the questions against the assessees
It was contended on their behalf that solong as the assessment was not made they were entitled to registration irrespective of the year in which the instrument of partnership came into existence
This was controverted on behalf of the Revenue and their case was that a firm seeking registration under section 26A of the Act should be created by an instrument of partnership or at any rate such instrument should be in existence during the relevant accounting year i e the year previous to the year of assessment in respect of which the application for registration was made
Held that the words  Constituted under an instrument of partnership occurring in section 26A of the Indian Income tax Act included not only firms that were created by instruments of partnership but also those that were subsequent to their creation clothed in legal form by reducing the terms and conditions of the partnership in writing
Dwarkadas Khetan  Co vs Commissioner of Income tax Bombay City Bombay  approved
Kalsi Mechanical Woyks Nandpur vs Commissioner of Income tax Simla  Padam Parshad Rattan Chand vs Commissioner of Income tax Delhi  Bery Engineering Co Delhi vs Commissioner of Income tax Delhi  Income tax Commissioner Delhi vs Messrs Birdhi Chand Girdhari Lal and Khimji Walji  Co vs Commissioner of Income tax Bihar and Orissa  dissented from
Section 26A read with SS 26 28 and Rules 2 to 6B laid down the following essential conditions that a firm must fulfil before it could claim registration under section 26A of the Act 1 that it must be constituted under an Instrument of Partnership specifying the individual shares of the partners 2 that an application on behalf of and signed by all the partners containing all the particulars as set out in the Rules must be made 3 that the application must be made before the assessment of the income of the firm was made under section 23 Of the Act for that particular year 4 that the profits or loss if any of the business relating 643 to the previous year i e the relevant accounting year must be divided or credited as the case may be in accordance with the terms of the Instrument  and lastly 5 that the partnership must be genuine and in actual existence in conformity with the terms and conditions of the Instrument
Where therefore as in the instant cases the partnership did not admittedly function in terms of an instrument of partnership which was operative during the accounting year it could not be registered during the following assessment year
Commissioner of Income tax Bombay North vs Shantilal Vrajlal  Chandulal Dayalal  CO  dis approved
Per M HIDAYATULLAH J While it was clearly not possible to read  constituted by  for the words  constituted under  occurring in section 26A of the Act it was doubtful whether the instrument of partnership sought to be registered must be in existence in the accounting year in order to entitle it to registration
Dwarkadas Khetan  Co vs Commissioner of Income tax Bombay City Bombay  referred to