Case: Konchada Ramamurthy Subudhi &amp; Anr Vs. Gopinath Naik

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 (1 = appeal accepted, 0 = rejected): 1

Explanation:
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