IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA. RSA No. 450 of 2007 Judgment reserved on: 17.3.2008 Date of Decision : April 23, 2008 Simmi Karol …Appellant Versus: R. K. Madan & another …Respondents. Coram: The Hon’ble Mr.Justice Sanjay Karol, Judge. Whether approved for reporting?1 Yes For the appellant: Mr. Ajay Kumar, Advocate. For the respondents. Mr. Satyen Vaidya, Advocate. Sanjay Karol, J. The present appeal arises out of the concurrent findings of facts recorded by the Courts below with a direction to the appellant to hand over possession of 400 sq. feet of Shop No.59, on ‘The Mall Road, Shimla, given on license but also pay damages at the contractual rate of Rs.40,000/- per month w.e.f. July, 2003 onwards, which admittedly have not been paid till date. 1 Whether reporters of Local Papers may be allowed to see the judgment? 2 At the threshold, it is pointed out that all attempts made by the Court to amicably resolve the dispute, did not bear any result. Shri R. K. Madan and Smt. Rita Madan, as plaintiffs (respondents herein), filed Civil Suit No. 61-1/2003 titled as R. K. Madan & another v. Simmi Karol seeking a relief of mandatory injunction and mesne profits against Smt. Simi Karol, defendant (appellant herein), which was decreed by the Civil Judge (Jr. Division), Court, No.5, Shimla, H.P. in terms of the judgment and decree dated 6.7.2007. Aggrieved by the same, the defendant filed Civil Appeal No. 35-S/13 of 2007 titled as Simi Karol v. R. K. Madan and another which was also dismissed on merits by way of judgment and decree dated 17.9.2007 passed by the Addl. District Judge, Fast Track Court, Shimla. Thus, the defendant has filed the present appeal assailing the concurrent findings of facts recorded by the Courts below. Plaintiffs’ Shop No. 59, The Mall, Shimla (hereinafter referred to as ‘the premises’) was given on license to the defendant for a period of one year commencing from 1.7.2002 till 30.6.2003 in terms of the License Deed Ext.PW-1/A dated 30.6.2003. The terms required the defendant to hand over the possession, with the expiry of the license period. For the license period, the defendant was to pay license fee @Rs.40,000/- per 3 month (Rs.15,000/- in the name of first plaintiff and Rs.25,000/- in the name of second plaintiff). As agreed, three months license fee was paid in advance by the defendant vide Cheques dated 30.3.2002 (Ext.PW-8/A & Ext. PW-8/B) for Rs.43,000/- and Rs.27,000/- and Rs.50,000/- paid vide receipt Ext.D-1 was adjusted towards the same. After the commencement of the license period, license fee for the month of November, 2002 was sent by the defendant vide cheques dated 6.11.2002 (Ext.P-1 & Ext.P-2) with the following note written thereupon :- “Rent for Shop No. 59, The Mall, Shimla for the November month.” The plaintiffs, promptly, in terms of their letter dated 9.11.2002 (Ext.P-3) returned the cheques with the following note:- “As per agreement the shop is given to you on license & not on rent. So it is for your information to use the word license henceforth. You are not required to write anything on the cheque, as you have written (Rent A/c of shop --------). Please issue the fresh cheques & send us at the earliest.” Accordingly, the defendant issued fresh cheques dated 11.11.2002 (Ext.PW-8/E & Ext.PW-8/F) towards the license fee without protest. With the license period coming to an end in terms of letter dated 19.5.2003 (Ext.PW-1/C), plaintiff No.2 requested 4 the defendant to hand over the possession of the premises in the following terms:- “I want to bring it to your kind notice that according to clause No. 3 of License agreement, the license period will terminate on 30.6.2003. You are supposed to hand over vacant possession of my shop 59, The Mall, Shimla on 30.6.2003. I, myself need the shop for self occupation. Sd/- Rita Madan” Since the defendant did not comply with the terms of the License Deed and failed to hand over the possession, the plaintiffs also got issued a legal notice dated 15.6.2003 (Ext.PW- 1/D) requesting the defendant to hand over the possession as the premises were required by them for their personal use. The defendant, however, did not respond to the requests and consequently, the plaintiffs were constrained to file the suit. While admitting the plaintiffs to be the owners of the suit premises, the defendant, in the written statement, resisted the suit on the following grounds:- (i) Plaintiffs actually created a tenancy in terms of receipt dated 19.6.2002 (Ext.D-1); (2) The possession of the premises was also handed over by the plaintiffs to her on 19.6.2002; (3) On the asking of the plaintiffs, the defendant had signed certain blank documents with the understanding that the lease agreement was to be executed; (4) As such, the License Deed Ext.PW-1/A is an outcome of fraud as 5 the parties had never intended to create a license; (5) The agreed rent of the premises was Rs.5,000/- per month; (6) As agreed for a period of 18 months the defendant was to pay @Rs.40,000/- per month which was to be adjusted @Rs.5000/- per month towards the rent and no rent was to be paid till such time the advance amount of Rs.7,20,000/- (Rs.40,000/- x 18 months)}, to be paid by her was adjusted in totality. The plaintiffs filed the replication refuting the stand taken by the defendant and explaining the circumstances under which receipt dated 19.6.2002 (Ext.D-1) was issued. Ext.D-1 reads as under:- “Received a sum of Rs. Fifty thousand (50,000/-) from Simi Karol w/o Abhinav Karol as advance for rent of Shop No. 59, The Mall, Shimla on 19/6/2002. Sd/- Dr. Amita Madan Shimla.” Based on the pleadings of the parties, the trial Court framed the following issues:- “1. Whether the plaintiff is entitled for a decree of mandatory injunction, as prayed? OPP 2. Whether the plaintiff is entitled for mesne profits, as prayed? OPP 3. Whether the present suit is not maintainable? OPD 4. Whether the plaintiff has not approached this Court with clean hands? OPD 5. Whether there is no enforceable cause of action? OPD 6 6. Whether the plaintiff is estopped to file the present suit on account of his own acts, deeds and conducts? OPD 7. Whether this Court has got no jurisdiction to entertain the present suit? OPD 8. Whether the suit has not been properly valued for the purpose of Court fees and jurisdiction? OPD 9. Relief.” In support of their claim, the plaintiffs examined eleven witnesses and the defendant examined three witnesses. Based on the material on record, the trial Court held that the parties had been negotiating the deal for about 1½ months prior to the date of signing of the License Deed. In absence of the plaintiffs, on 19.6.2002, Smt. Amita Madan wife of plaintiff No.1 executed receipt Ext.D-1 in good faith and at the insistence of the defendant. Based on the sworn testimonies of S/Shri Padam Singh (PW-2), J. S.Rana (PW-3), D. R. Kashyap (PW-8), Manmohan Sharma (PW-9), Jagdish Chand (RW-1) & Rakesh Sharma (RW-3), the Court found the agreed license fee of the premises to be Rs.40,000/- per month and not Rs.50,000/- as alleged by the defendant. While arriving at its conclusion, the Court took into account the defendant’s statement dated 30.8.2003 recorded before the Income Tax Officer, to the effect that the monthly cheques for the premises were Rs.40,000/-. On 7 the basis of the material on record, the Court also determined the mesne profits to be Rs.40,000/- per month. The Court repelled the defendant’s contention that License Deed Ext.PW-1/A was an act of fraud or that the receipt Ext.D-1 governed the relationship between the parties. The first Appellate Court having examined the record and appreciated the evidence upheld the findings of facts recorded by the Court below and also found the relationship between the parties being governed by License Deed Ext.PW- 1/A. The present appeal, with the consent of the parties, was taken-up for hearing for consideration of the following substantial questions of law:- “1. Whether the findings of the ld. First Appellate Court and the ld. Trial Court are result of complete misreading of pleadings, evidence and the law as applicable to the facts of the case and particularly documents exhibit PW-1/A and exhibit D1 vis a vis categorical admissions made by the respondents in their statements regarding exclusive control and possession of the appellant with respect to the shop in question and as such palpably erroneous and illegal, and if so to what effect? 2. Whether in the facts and circumstances of the case and in the face of material on record, the document exhibit PW-1/A only creates a license or confers a right to possess exclusively coupled with transfer of a right to enjoy the property in question? 8 4. Whether in the facts and circumstances of the case and in the face of the pleadings of the plaintiffs and the evidence led by the parties the present suit was not maintainable and the Civil Courts had no jurisdiction to try the same in view of the provisions of the Himachal Pradesh Urban Rent Control Act, 1987?” Learned counsel for the appellant has confined his submission only to the said questions of law and has fairly not disputed the execution and the contents of Ext.PW-1/A which governs the relationship between the parties. However, it has been argued that Ext.PW-1/A read with Ext.D-1 coupled with the sworn testimony of the plaintiffs would prove that a tenancy was created with an interest in the property which is evident from the plaintiffs’ own admission that the defendant is in exclusive possession of the premises; Ext.PW-1/A is actually a tenancy in the disguise of License Deed; The premises being governed by the provisions of H.P. Urban Rent Control Act, 1981, the jurisdiction of the Civil Court to entertain the suit was thus barred. Per contra, learned counsel for the respondent has supported the judgment for the reason set out therein. Learned counsel for the parties jointly submit that the jurisdiction of the Civil Court to entertain the suit would be barred only and only if it is held that the parties had agreed to create a tenancy and not a license. 9 I have heard the learned counsel for the parties and also perused the record. The crucial issue for determination is as to whether the parties had intended to create a lease or a license and whether it conferred an exclusive right to possess, coupled with an interest in the property. And whether the agreement was a tenancy in the disguise of license. Plaintiffs PW-1 & PW-7 have admitted that the defendant herself opens and closes the shop and they have no interference and the possession of the shop is with the defendant. In this view of the matter, it is argued by the learned counsel for the appellant, that the plaintiffs having admitted the defendant to be in exclusive possession of the shop without any interference is indicative of the fact that the relationship between the parties is that of landlord and tenant and not licensor and licensee. In Khalil Ahmed v. Tufelhussein Samasbhai (AIR 1988 SC 184) while dealing with the same and similar situation, the Apex Court held as under:- “This Court referred to the well known decision in the case of Errington v. Errington. (1952) 1 All ER 149, where Lord Denning reviewing the case law on the subject summarized the position as follows:- “The result of all these case is that, although a person who is let into exclusive possession is, prima facie, to be considered to be tenant, nevertheless he 10 will not be held to be so if the circumstances negative any intention to create a tenancy.” The Court of Appeal in England again in Cobb. v. Lane, (1952) 1 All ER 1199 considered the legal position and laid down that the intention of the parties was the real test for ascertaining the character of a document. Somervell L.J., had observed : “………………..The solution that would seem to have been found is, as one would expect, that it must depend on the intention of the parties.” Denning, L.J. also reiterated the same decision. Reviewing thee decisions Denning, L.J. had observed at page 384 of the report (1) that to ascertain whether a document created a license or lease, the substance of the document must be preferred to the form; (2) the real test was the intention of the parties – whether they intended to create a lease or a license; (3) if the document created an interest in the property, it is a lease, but if it only permitted another to make use of the property, of which the legal possession continued with the owner, it was a license; and (4) if under the document a party got exclusive possession of the property, prima facie, he was considered to be a tenant; but circumstances might be established which negative the intention to create a lease.” Qudrat Ullah v. Municipal Board, Bareilly (1974) 2 SCR 530 where at page 533 : (AIR 1974 SC 396 at p. 397) of the report Krishna Iyer J. observed that there is no simple litmus test to distinguish a lease as defined in S.105, Transfer of Property Act from license as defined in S. 52 of the Easements Act, but the character of the transaction turns on the 11 operative intent of the parties. To put precisely if an interest in immovable property entitling the transferee to enjoyment was created, it was a lease; if permission to use land without exclusive possession was alone granted, a license was the legal result. We are of the opinion that this was a license and not a lease as we discover the intent. For this purpose reference may be made to the language used and the restrictions put upon the use of the premises in question by the appellant.” In Union Bank of India v. Chandrakant Gordhandas Shah (1994(6) SCC 271), the Apex Court also held as under:- “9. On perusal of the judgment of the trial Court we find that, to ascertain whether the agreement was one of lease or license the Court first quoted the following passage from the judgment of this Court in Sohan Lal Naraindas v. Laxmidas Raghunath Gadit (1971 (1) SCC 276) wherein the tests for such ascertainment were laid down; (SCC p.279, para 9) “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 use of the words appropriate to the creation of a lease will not preclude the agreement operating as a license. 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 12 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 license. In determining whether the agreement creates a lease or a license the test of exclusive possession, though not decisive, is of significance.” While laying down the ratio the Court noticed the decisions reported in Associated Hotels of India Ltd., v. R. N. Kapoor (AIR 1959 SC 1262), Errington v. Errington (1952(I) ALL ER 149), M. N. Clubwala v. Fida Hussain Saheb (AIR 1965 SC 610), Sohan Lal Naraiandas v. Laxmidas Raghunath Gadit (1971 (3) SCR 319), Qudrat Ullah v. Municipal Board, Bareilli (1974 (2) SCR 530), Khalil Ahmed Bashir Ahmed v. Tufelhussein Samasbhai Sarangpurawala (AIR 1988 SC 184) & Sohan Lal Naraiandas v. Laxmidas Raghunath Gadit (1971(I) SC 276). In order to ascertain the intention of the parties, the material placed on record by the parties needs to be examined. It has come on record, through the statements of Shri R. K. Madan (PW-1), Smt. Rita Madan (PW-7), Amita Madan (PW-6), and Simi Karol (DW-1) that prior to the date of execution of Ext.PW-1/A, the parties have been negotiating the terms for some time. From the sworn testimonies of PW-1, PW-6 & PW-7, it is clear that at the time of execution of the receipt Ext.D-1, the plaintiffs were not present. The defendant’s (DW-1) sworn testimony is replete with falsehood and her defence has been found to be false by the 13 Courts below. As per her sworn testimony, the tenancy was created at the time when the possession of the premises was handed over on 19.6.2002 and the agreed rent was Rs.5000/-; the plaintiffs had got the signatures on blank papers and Ext.PW- 1/A is an outcome of fraud; cheques Ext.P-1 & P-2 were not issued by her towards license fee for the month of November, 2002; denied having made any statement before the Income Tax Officer. Her pleaded defence and her sworn testimony (deposition) has been found to be false and contrary to record. She however admitted having paid only Rs.4,80,000/- to the plaintiffs. This amount is equivalent to one year license fee. Ext.D-1 admittedly is signed by Dr. Amita Madan (PW-6) wife of plaintiff No.1 on 19.6.2002. Even though defendant Simmi Karol (DW-1) deposed that the same was acknowledged in the presence of the plaintiffs which fact is disputed by the plaintiffs but however, it is a matter of proved and now an undisputed fact that the agreement Ext.PW-1/A was executed on 30.6.2002 and the contractual period was to commence from 1.7.2002. Prior to the execution of the same, the parties had been negotiating and as per the sworn testimony of Dr. Amita Madan (PW-6), on 19.6.2002 the defendant came to her clinic and informed her that the deal had been finalized and in good faith, at the instance of the defendant she signed the receipt without complete knowledge and talks going on between the parties. She had executed the receipt as 14 none of the plaintiffs was present in her Clinic nor her husband was available on phone at that time. Had the plaintiffs been present at the time of signing of Ext.D-1 then the same would have been signed by the plaintiffs and not PW-6. In normal course the defendant would have insisted for their signatures. The plaintiffs are educated persons and the defendant was negotiating with them. It is not the case of the defendant that PW-6 was authorized to deal or issue receipts. The terms governing the relationship between the parties were finally reduced into writing vide License Deed Ext.PW-1/A. It is a common case of the parties that the said amount of Rs.50,000/- paid vide receipt Ext.D-1 was adjusted towards three months advance license fee agreed to be paid at the time of the execution of License Deed Ext.PW-1/A. The relationship between the parties, therefore, cannot be held to be governed by this receipt. The intention and the relationship governing the parties was eventually reduced into writing and reflected in Ext.PW-1/A. Ext.D-1 was issued without authority and express knowledge of the agreed terms between the parties and that too while the parties were still at the stage of negotiation. That the parties had intended not to create the tenancy is also evident from letter Ext.P-3, when the plaintiffs expressly informed the defendant not to mention the word ‘rent’ on the cheques as their relationship was of licensor and licensee. The defendant received back all the cheques and issued fresh 15 cheques Ext.PW-8/C, Ext.PW-8/E & Ext.PW-8/F as license fee for the month of November, 2002. This was unconditional and without any demure or protest. Thus, from the beginning the plaintiffs were clear and categorical in their assertion of plea of license and not tenancy. Admittedly, there was no response to the plaintiffs’ request Ext. PW-1/C dated 19.5.2003, legal notice dated 15.6.2003 Ext.PW-1/D and telegram Ext.P-4 asking the defendant to hand over the possession on the expiry of the license period. The plaintiffs thus have been asserting their right and relationship which was never refuted prior to the filing of the written statement in the Court. The defendant’s contention that the possession of the shop was handed over to her on 19.6.2002 has been disbelieved by the Courts below on the ground that prior to the execution of the License Deed in terms of agreement Ext.PW- 1/A the premises were under tenancy of M/s. Bharti Airtel at a monthly rental of Rs.30,000/- for a period of 5 years commencing from 1.5.1998 up to 30.4.2002. As per the sworn testimony of Shri Manmohan Sharma (PW-9), Credit Officer, Bharti Airtel, Shimla, the possession of the premises remained with them till 29th June, 2002. The defendant’s defence and sworn testimony was rightly disbelieved by the Courts below as the possession could not have been handed over to her on 19.6.2002 at the time of execution of the receipt Ext.D-1. 16 Further the plaintiffs’ intention is quite evident from the fact that immediately with the commencement of the license period the Municipal Authority was also informed of the same which is clear from the sworn testimony of Shri Padam Singh (PW-2), Tax Inspector, Municipal Corporation, The Mall, Shimla, according to whom, on 28.8.2002, plaintiff No.2 had informed the Municipal Authority in writing that the premises had been given to the defendant at a license fee of Rs.40,000/- per month. Apart from Ext.D-1, there is no other document from which it can be inferred that the parties had intended to create a tenancy and the terms of Ext.PW-1/A amply depict the intention of the parties that they had agreed not to create a tenancy. As per the agreed terms, the duration of the license was only one year and the licensee had the option of reducing the terms by giving two months advance notice. Similarly, the licensor also had a right of reducing the said period by paying an amount equal to two months license fee to the licensee. Further, any defect in the title of the licensor causing loss of business entitled the licensee to a refund of the entire amount of license fee paid by the licensee along with interest @24% per annum. The right of the licensee to carry out the necessary repairs was restrictive in nature. The terms thus did not create any interest in the property. 17 The premises had already been given on rent for a period of 5 years (1988 to 2002) to M/s. Bharti Airtel Ltd., on a monthly rental of Rs.30,000/-. The shop being vacated was given to the defendant only for a limited period. It is important to notice that the premises are situated on the Mall Road in a busy market place where the rentals are increasing day by day. Short duration of the agreement coupled with a further right to shorten the period is only indicative of the plaintiffs’ intention that the premises were actually required by them for their own personal use and therefore were given on license. No deposit whatsoever was given by the defendant to the plaintiffs. During the subsistence of the agreement and immediately thereafter the plaintiffs had reiterated their relationship and on the expiry thereof, had expressed their intention of taking back the premises. In the absence of any response the plaintiffs promptly filed the suit. All this is manifest of the plaintiffs’ intention of only creating a license. This is fortified by the defendant’s conspicuous silence. The license fee was fixed and the purpose of license i.e. carrying out business was also agreed by the parties. For all the aforesaid reasons the defendant’s exclusive possession by itself would not change the relationship between the parties. Thus, having considered the matter in its entirety, I am of the view that simply because the plaintiffs have admitted that the premises are in exclusive possession of the appellant 18 that fact alone would not be sufficient enough to declare that the relationship between