Case: Konchada Ramamurthy Subudhi & Anr Vs. Gopinath Naik

Sikri, J. 1. This appeal by special leave is directed against the judgment of the High Court of Orissa allowing the appeal and setting aside the judgment of the District Judge, Ganjam-Boudh, Berhampur, who had had affirmed the order passed by the Munsif, Berhampur, dismissing M. J. C. No. 220/60 of Gopinath Naik, respondent before us, hereinafter referred to as the Judgment Debtor. 2. The facts in this case are not in dispute. One Konchada Ramamurti Subudhi, deceased, now represented by his legal representatives and appellants before us-hereinafter referred to as the decree-holder- and Bhagirathi Naiko, now represented by Gopinath Naik, Judgment debtor, filed a compromising petition under Order 23 R. 3 of the Code of Civil Procedure in the Court of subordinate Judge, Berhampur, in T. A. No. 13 of 1955. In terms of this compromise petition a decree was passed. The decreeholder filed an application for execution of the decree and the judgment-debtor filed the application (M. J. C. No. 220/60) under Section 47, C. P. C., in the Court of Munsif Berhampur, objecting to the execution of the decree. The Munsif dismissed this application of the judgment-debtor and the District Judge affirmed the order. The High Court, however, on appeal, set aside the order of the District Judge. 3. The only point raised before us is whether the compromise decree created a lease or licence. It is common ground that if a leave was created the judgment-debtor would be entitled to protection against being ejected by virtue of the provisions of Orissa House-Rent Control Act (Orissa Act 31 of 1958) - hereinfter referred to as the Act. 4. The terms of the compromise were as follows :-"I Respectable people have settled the subject matter of this appeal and the suit and so both parties agreed to compromise as follows :- (a) That the defendant-respondent should vacate the suit house on or before 1st July, 1960 (five years) failing which the appellant plaintiff will he entitled to execute this decree and recover possession of the suit house through court after the date fixed above. (b) That in respect of all arrears of rent claimed in the suit and the rent due during the pendency of the suit and of this appeal as calculated up to 30th June, 1955, the defendant has paid to the plaintiff the sum of Rs. 1,125 only (Rupees One thousand and one hundred twenty-five only). (c) That in respect of future rent i. e. with effect from 1st July, 1955 the defendant shall pay to the plaintiff at the rate of Rs. 50 a month by the end of each month until delivery, and a sum of Rs. 300 is paid to plaintiff to be kept as deposit for six months rent to be adjusted towards rent for the period of last six months ending with 1st, July, 1960. (d) In case the defendant fails to pay the rent for any three consecutive months the plaintiff will be at liberty to adjust the advance towards arrears and also to evict the defendant from the suit house without waiting till 1st July, 1960 by executing the decree and also realise the amount accrues due by then, from the defendant by executing this decree (e) That the house fell to the share of a minor son of plaintiff-appellant, namely; Konchada Koteswarao for whom the appellant plaintiff is the guardian, and the plaintiff-appellant will be responsible for the due compliance of the terms of this compromise. 2. That each party do bear its own costs in both courts. 3. That a decree may be passed in the above terms." 5. The High Court has held that the compromise decree created a lease and not a licence. 6. The learned counsel for the appellants contends that the intention of the decree holder was only to give accommodation to the judgment debtor, and as he had filed a suit to eject the judgment debtor it could not have been his intention to create a fresh tenancy. He places reliance on the decision in Ramjibhai Virpal Shah v. G. M. Bhagat ILR (1954) Bom 615 = (AIR 1954 Bom 370 ) where the Bombay High Court has elaborately considered the law bearing on the subject of the interpretation of compromise decrees and the distinction between a lease and a licence. 7. Before we approach the question of the construction of the compromise deed, we may refer to two decisions of this Court bearing on the distinction between a lease and a licence and the principles for distinguishing one from the other. This Court observed in M. N. Clubwala v. Fida Hussain Saheb, 1964-6 SCR 642 at pp. 652, 653 = (AIR 1965 SC 610 at p. 614):"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." This Court further observed that exclusive possession is not conclusive evidence of a lease."If, however, exclusive possession to which a person is entitled under an agreement with a landlord is coupled with an interest in the property, the agreement would be construed not as a mere licence but as a lease. (See Associated Hotels of India Ltd. v. R. N. Kapur, 1960-1 SCR 368 at p. 384 = (AIR 1959 SC 1262 at p. 1269). 8. In 1960-1 SCR 368 at p. 384 = (AIR 1959 SC 1262 at p. 1269) Subba Rao, J., as he then was, summarised the propositions as follows:"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 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." 9. Lord Denning, speaking for the Judicial Committee of the Privy Council in Isack v. Hotel De Paris, 1960-1 All ER 348-352 observed:"There are many cases in the books where exclusive possession has been given of premises outside the Rent Restriction Act and yet there has been held to be no tenancy. Instances are Errington v. Errington and Woods, 1952-1 All ER 149 and Cobb v. Lane 1952-1 All ER 1199 which were referred to during the argument. It is true that in those two cases there was no payment or acceptance of rent, but even payment and acceptance of rent-though of great weight-is no decisive of a tenancy where it can be otherwise explained: see Clarke v. Grant, 1949-1 All ER 768. A Lord Greene, M. R., said in Booker v. Palmer, 1942-2 All ER 674-677. "There is one golden rule which is of very general application, namely, that the law does not impute intention to enter into legal relationship where the circumstances and the conduct of the parties negative any intention of the kind."" 10. Keeping in mind the above observations, what was the intention of the parties ?. It seems to us that the fact that the decree holder had brought a suit for ejectment of the judgment debtor and that a compromise was entered into in that suit is important.It is difficult to impute to him an intention to create a fresh tenancy while the fact that he brought the suit shows that his intention was to eject the judgment debtor after having purported to terminate the tenancy. 11. Coming to the terms of the compromise, it is true, as stressed by the learned counsel for the respondent that the word "rent" has been used, but the word "rent" is not conclusive, for as observed by this Court in State of Punjab v. British India Corporation Ltd., 1964-2 SCR 114 at p. 123 = (AIR 1963 SC 1459 at p. 1463),"in its wider sense rent means any payment made for the use of land or buildings and thus includes the payment by a licensee in respect of the use and occupation of any land or building. In its narrower sense it means payment made by tenant to landlord for property demised to him." 12. The learned counsel further stresses the point that Rs. 300 were paid as deposit for six months rent "to be adjusted towards rent for the period of last six months ending with 1st July 1960",but it seems to us that that amount was really paid as a security for the amounts due under the compromise deed as it was only to be adjusted against the rent for the last six months. But what is very significant is Clause (d) which enables the decree holder to execute the decree if the judgment debtor fails to pay rent for any three consecutive months. This it seems to us shows that the intention of the parties was not to enter into the relationship of a landlord and tenant.We may mention that the importance of this fact was adverted to in Sumatibai Waman Kirlikar v. A. B. Shirgaonkar, AIR 1949 Bom 402-404 where Chagla, C. J., observed:"On the failure of the defendant to pay any of the amount which is fixed as rent on its due date, the only right the decree gave to the judgment-creditor was to have it executed for the amount which remained due it did not entitle the judgment-creditor to take possession of the land on default of payment of rent." 13. The High Court stressed the fact that a long period of five years was granted to the judgment debtor for continuation of the possession. In our view, the length of the period, in the circumstances, does not militate against the construction that the compromise only created a licence for the decree holder apparently had lost in the trial court and it was only in the court of appeal that this compromise was arrived at. 14. For the aforesaid reasons we hold that the compromise deed did not create a lease. Therefore the judgment-debtor is not a tenant within Section 2 (5) of the Act which defines "tenant" to mean "any person by whom or on whose behalf rent is payable for any house and includes every person who, from time to time, derives title under a tenant, or a person continuing in possession after the termination of his tenancy otherwise than under the provisions of this Act, and shall include any person against whom a suit for ejectment is pending in a Court of competent jurisdiction but not a person against whom a decree or order for eviction has been made by such a Court."

Decision reasoning: 1[ds]11. Coming to the terms of the compromise, it is true, as stressed by the learned counsel for the respondent that the word "rent" has been used, but the word "rent" is not conclusivefor as observed by this Court in State of Punjab v. British India Corporation Ltd., 1964-2 SCR 114   at p. 123 = (AIR 1963 SC 1459   at p.n its wider sense rent means any payment made for the use of land or buildings and thus includes the payment by a licensee in respect of the use and occupation of any land or building. In its narrower sense it means payment made by tenant to landlord for property demised to him."it seems to us that that amount was really paid as a security for the amounts due under the compromise deed as it was only to be adjusted against the rent for the last six months. But what is very significant is Clause (d) which enables the decree holder to execute the decree if the judgment debtor fails to pay rent for any three consecutive months. This it seems to us shows that the intention of the parties was not to enter into the relationship of a landlord and tenant13. The High Court stressed the fact that a long period of five years was granted to the judgment debtor for continuation of the possession. In our view, the length of the period, in the circumstances, does not militate against the construction that the compromise only created a licence for the decree holder apparently had lost in the trial court and it was only in the court of appeal that this compromise was arrived at14. For the aforesaid reasons we hold that the compromise deed did not create a lease. Therefore the judgment-debtor is not a tenant within Section 2 (5) of the Act which defines "tenant" to mean "any person by whom or on whose behalf rent is payable for any house and includes every person who, from time to time, derives title under a tenant, or a person continuing in possession after the termination of his tenancy otherwise than under the provisions of this Act, and shall include any person against whom a suit for ejectment is pending in a Court of competent jurisdiction but not a person against whom a decree or order for eviction has been made by such a Court."10. Keeping in mind the above observations, what was the intention of the parties ?It seems to us that the fact that the decree holder had brought a suit for ejectment of the judgment debtor and that a compromise was entered into in that suit is important.It is difficult to impute to him an intention to create a fresh tenancy while the fact that he brought the suit shows that his intention was to eject the judgment debtor after having purported to terminate the tenancy11. Coming to the terms of the compromise, it is true, as stressed by the learned counsel for the respondent that the word "rent" has been used, but the word "rent" is notfor as observed by this Court in State of Punjab v. British India Corporation Ltd.,2 SCR 114   at p. 123 = (AIR 1963 SC 1459   at p.n its wider sense rent means any payment made for the use of land or buildings and thus includes the payment by a licensee in respect of the use and occupation of any land or building. In its narrower sense it means payment made by tenant to landlord for property demised to him."12. The learned counsel further stresses the point that Rs. 300 were paid as deposit for six months rent "to be adjusted towards rent for the period of last six months ending with 1st Julyit seems to us that that amount was really paid as a security for the amounts due under the compromise deed as it was only to be adjusted against the rent for the last six months. But what is very significant is Clause (d) which enables the decree holder to execute the decree if the judgment debtor fails to pay rent for any three consecutive months. This it seems to us shows that the intention of the parties was not to enter into the relationship of a landlord ande may mention that the importance of this fact was adverted to in Sumatibai Waman Kirlikar v. A. B. Shirgaonkar, AIR 1949 Bom