IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE M.SASIDHARAN NAMBIAR WEDNESDAY, THE 3RD FEBRUARY 2010 / 14TH MAGHA 1931 SA.No. 821 of 1995(F) --------------------- AS.106/1991 of ADDL.DISTRICT COURT, KOZHIKODE OS.1000/1987 OF MUNSIFF'S COURT, KOZHIKODE-II --------------- APPELLANT(S): APPELLANT/PLAINTIFF ------------------------------------------ E.V.N. RAVEENDRANATH, S/O.E.V.R.NARAYANAN, MURALI MEDICALS, CALICUT-8. BY ADV. SRI.M.C.SEN, SENIOR ADVOCATE SRI.A.PARVATHI MENON RESPONDENT(S): RESPONDENT/DEFENDANT -------------------------------------------------- THE CALICUT CORPORATION, REPRESENTED BY ITS COMMISSIONER. ADV. SRI.KPG.MENON THIS SECOND APPEAL HAVING BEEN FINALLY HEARD ON 03/02/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: M.SASIDHARAN NAMBIAR,J. =========================== S.A.No.821 OF 1995 =========================== Dated this the 3rd day of February,2010 JUDGMENT Appellant is in possession of one of the rooms in Medical College Rest House owned by the respondent Corporation of Kozhikode under Ext.A1 agreement. Appellant instituted the suit for a declaration that the resolution of the Corporation No.40 dated 16.2.1987 and No.3 dated 18.6.1987 intimated to the appellant under Ext.A1 demanding enhanced rent is void illegal and unenforceable and to restrain the respondent Corporation by a permanent prohibitory injunction from enforcing the decision or realising the enhanced amount. Appellant contended that he has been in possession of the property from 1981 on a monthly rent of Rs.2050/- and the room was taken for the purpose of running a medical shop S.A.821/1995 2 and since then he is continuing in the building as a tenant and the relationship between the appellant and the respondent is that of a tenant and landlord and the agreement is not a licence and as per the decision of the Government which is binding on the Corporation, enhanced rent cannot be claimed as demanded in Ext.A1 and therefore he is entitled to get the declaration and injunction. 2. Respondent resisted the suit contending that tender was invited for granting a licence and petitioner submitted the tender agreeing to be a licensee and Ext.B1 was executed as a license agreement and the relation created thereunder is that of a licensor and licensee and not a lessor and lessee and therefore appellant is not entitled to the decree sought for. 3. Learned Munsiff on the evidence of Exts.A1 and A2, B1 and B2 and PW1 dismissed the suit holding that the right created under Ext.B1 is not that of a lessor and lessee and it is a licence arrangement and therefore appellant is not entitled S.A.821/1995 3 to contend that he is a tenant. Though reliance was placed on Ext.A2 Government circular prescribing guidelines which are to be followed by the statutory bodies like the Corporation, learned Munsiff found that by Ext.B2, the directions in Ext.A2 were dropped and therefore the said guidelines are not binding on the Corporation. In such circumstances, the suit was dismissed. Appellant challenged the judgment before the District Court, Kozhikode in A.S.No.106/1991. Learned District Judge on reappreciation of the evidence found that the question whether Ext.B1 creates a lease or licence is to be decided based on the conditions incorporated therein as well as the intention of the parties and the condition in Ext.B1 and the intention of the parties establish, that the right created under Ext.B1 is not that of a lessee but only a licensee. Learned District Judge relying on Ext.B2 found that the binding nature of Ext.A2 circular was dropped by Ext.B2, the subsequent circular and therefore based on the S.A.821/1995 4 circular A2 also appellant is not entitled to the decree sought for. The appeal was dismissed. Second Appeal was filed challenging the concurrent decree and judgment. 4. Second Appeal was admitted formulating the following substantial questions of law. 1. Whether Ext.B1 is not a lease, considering the terms of document and following the decisions of the Supreme Court. 2. Whether the fact that plaintiff has exclusive possession of the shop room is not an indication that the transaction is only a lease. 3. Whether the findings of the court below that Ext.B1 is a licence is sustainable. 4. Whether the respondent Corporation can enhance the rent unilaterally and whether Corporation is bound by the S.A.821/1995 5 Circular issued by Government permitting the local authorities to enhance the rent.” 5. Learned senior counsel appearing for the appellant was heard. 6. Learned senior counsel argued that under Ext.B1, exclusive possession of the building was given to the appellant and he is entitled to do any business therein and in such circumstances interest in the property has been created and based on the nomenclature in Ext.B1, it cannot be said that Ext.B1 creates only a licence and not a lease. Learned senior counsel pointed out that the other covenants in Ext.B1 would be there even in a lease agreement and in such circumstances, it can only be found that Ext.B1 is a lease arrangement and will not to create a licence. Learned senior counsel relied on the decision of the Apex Court in Associated Hotels of India Ltd v. R.N.Kapoor (AIR 1959 SC 1262), M.N.Clubwala v. Fida Hussain Saheb (AIR 1965 SC 610), Ramamurty Subudhi v. Gopinath S.A.821/1995 6 Naik (AIR 1968 SC 919),Qudrat Ullah v. Bareilly Municipality (AIR 1974 SC 396), and the decision of High Court of Allahabad Ram Niwas v. Municipal Board Nawabganj (AIR 1976 Allahabad 241), and High Court of Punjab and Haryana in Kidar Nath v. Swami Parshad (AIR 1978 Punjab and Haryana 204) and argued that if Ext.B1 is appreciated in the background of the guidelines settled by decisions, it is to be found that it is a lease and not a licence. Relying on Ext.A2 circular issued by the Government and that too pursuant to a decision of this court and also relying on the decision of a learned single Judge of this Court in Vareed Poulose v. State of Kerala (1994(2) KLT 21) it was argued that the circular is binding on the Corporation and therefore the enhancement could only be subject to the conditions provided in Ext.A2 and therefore respondent is not entitled to demand the amount as claimed in Ext.A2 and the courts below should have granted the decree. 7. When appellant contended that Ext.B1 S.A.821/1995 7 creates a lease and not a licence, respondent contended that it creates only a licence and not a lease. The trial court and the first appellate court appreciating the terms and conditions of Ext.B1 as well as the intention of the parties found that it is not a lease but a licence. The question whether Ext.B1 creates a lease or licence has to be settled on the terms and conditions provided therein with the attending circumstances and the intention of the parties. There is a marked distinction between a lease and licence. As defined under section 105 of Transfer of Property Act, a lease of immoveable property is a transfer of a right to enjoy such property made for a certain time on consideration of a price paid or promised. As provided under section 108 of of Transfer of Property Act, the lessee is entitled to be in possession of the property and therefore a lease is a transfer of an interest in land. The interest so transferred is the leasehold interest. Under section 52 of Indian Easement Act “license” S.A.821/1995 8 is defined as 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 immoveable 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 license. Therefore when a licence as provided under section 52 of Indian Easement Act does not create an interest in the property and instead gives only a right to use the property in a particular way or under certain terms while it remains in the possession and control of the owner, in the case of a lessee an interest is transferred in his favour. Hence the dividing line to distinguish a lease and licence is essentially whether there is a transfer of interest in the property. If a there is a transfer of interest in the property, it is a lease and if not it is a license. Though at one time it was thought that the test of exclusive possession was infallible and if a person was given S.A.821/1995 9 exclusive possession of the premises, it would conclusively establish that he was a lessee, there is a marked change in the new and the subsequent decisions show that it is not a conclusive test. The law was summarised by Lord Denning in Errington v. Errington (1952-1 All ER 149 as follows:- “The result of all these cases is that, although a person who is let into exclusive possession is, 'prima facie' to be considered to be tenant, nevertheless he will not be held to be so if the circumstances negative any intention to create a tenancy.” 8. The Supreme Court in Associated Hotels of India's case (supra) laid down the following propositions as well established principles to S.A.821/1995 10 determine whether it is a lease or licence. “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) the 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 S.A.821/1995 11 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.” The subsequent decisions only reiterate the said principle. 9. The question is whether by execution of Ext.B1, interest in that property was transferred and whether intention of the parties was to create a lease or a license. The nomenclature of the document shows that what was created thereunder is a licence and not a lease. The respondent is shown as a licensor and the appellant the licensee, Condition No.25 specifically provides that the said agreement does not create any interest or title over the property in favour of the licensee. Condition No.25 reads:- “25. The licence hereby S.A.821/1995 12 granted shall not create any interest or title over the property in favour of the licensee except for the beneficial enjoyment of the same during the period of licence.” Similarly Ext.B1 provides that under condition No.6 the licensee shall permit the Commissioner or other Corporation Officers with or without workmen at all times to enter upon the said premises to view the conditions thereof and if any loss or damages are found it shall be lawful to the Commissioner to make good the loss in the manner prescribed in clause 4(ii) & (iii). Under clause 20, the Commissioner shall have the authority to add any fresh condition or alter, amend, modify or delete any of the existing conditions to the advantage of the Corporation or to issue such orders or directions as may be required. The period of S.A.821/1995 13 license is three years. Under clause (10) the license so granted to the licensee would expire on the date specified in the agreement and the licensee shall have no authority to continue in possession of the premises thereafter and shall surrender vacant possession of the premises to the Corporation on the expiry of the license. The proviso only enables the licensor, to renew the licence and not no option is given to the licensee. When all these conditions are properly appreciated, it can only be found that what was created under Ext.B1 is not a lease but only a license as rightly found by the trial court and the first appellate court. Added to this, if the intention of the parties was to create a lease, when the period fixed therein is three years, it would have been compulsorily registered. Hence intention could only be to create a licence and not lease. Under all these circumstances, I find no reason to interfere with the findings of the courts below that Ext.B1 create only a licence and not a lease. S.A.821/1995 14 10. Though reliance was placed on Ext.A2 guidelines contending that it was binding on the Corporation and therefore an enhancement of license fee at 10% as stated in Ext.A1 notice is legal, as rightly found by the courts below Ext.B2 circular issued subsequently establishes that the binding nature of Ext.A2 was taken away. When Ext.A2 provides that the guidelines provided therein will be strictly followed by the “Local Bodies,” Ext.B2 shows that the said sentence in Ext.A2 was dropped. Therefore Ext.A2 is not binding on the Corporation. Moreover, under clause (3) of Ext.A2 enhancement could be upto 10%. In such circumstances based on Ext.A2 also, appellants are not entitled to the decree sought for. There is no merit in the Second Appeal. It is dismissed. M.SASIDHARAN NAMBIAR JUDGE tpl/- M.SASIDHARAN NAMBIAR, J. --------------------- W.P.(C).NO. /06 --------------------- JUDGMENT SEPTEMBER,2006