Case: Delta International Ltd Vs. Shyam Sunder Ganeriwalla

Undisputed facts of the matter are that original owner of the premises was Abhiram Mullick (since deceased) who created tenancy of the premises, namely, No. 4D, Council House Street, Calcutta in favour of Mallika Investment Company Private Limited. Dewars Garage India Private Limited was inducted into the premises as the monthly tenant under Mallika Investment Company Private Limited. Dewars Garage (India) Private Ltd. (in short `Dewar) was maintaining and running a petrol service station for sale of motor spares and components at the tenanted premises. Dewar had erected and built certain structures on the said premises. Dewar was subsequently amalgamated into Delta International Limitedp.m. from 1st May, 1985, that is, the date of termination of leave and license as claimed in the plaint and for decree for possession of the said premises and other reliefs. The learned Single Judge passed the decree in favour of the plaintiff by holding that the agreement in question was only a license agreement and it was not aIn appeal, the said Judgment was reversed by holding that the agreement in question constitutes a lease mainly on the basis of exclusive possession and the Division Bench observed that "to put is pithily, if an interest in immovable property entitling the transferees to enjoyment is created, it is a lease, if permission to use land without right to exclusive possession is alone granted, a licence is the legal result."

Court's reasoning:
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 operates as a licence. 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 theof 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 licence. In determining whether the agreement creates a lease or a licence the test of exclusive possession, though not decisive, is of significance." (Emphasis added).13. From the aforesaid discussion what emerges isTo find out whether the document creates lease or license real test is to find out `the intention of the parties, keeping in mind that in cases where exclusive possession is given, the line between lease and license is very thin.(2) The intention of the parties is to be gathered from the document itself. Mainly, intention is to be gathered from the meaning and the words used in the document except where it is alleged and proved that document is a camouflage. If the terms of the document evidencing the agreement between the parties are not clear, the surrounding circumstances and the conduct of the parties have also to be borne in mind for ascertaining the real relationship between the parties.(3) In the absence of a written document and when somebody is in exclusive possession with no special evidence how he got it, the intention is to be gathered from the other evidence which may be available on record, and in such cases exclusive possession of the property would be most relevant circumstance to arrive at the conclusion that the intention of the parties was to create a lease.(4) If the dispute arises between the very parties to the written instrument, the intention is to be gathered from the document read as a whole. But in cases where the landlord alleges that the tenant has sublet the premises and where the tenant in support of his own defence sets up the plea of a mere licensee and relies upon a deed entered into, inter se, between himself and the alleged licensee, the landlord who is not a party to the deed is not bound by what emanates from the construction of the deed; the tenant and themay jointly set up the plea of a license against the landlord which is a camouflage. In such cases, the mask is to be removed or veil is to be lifted and the true intention behind a facade of aconveniently drafted instrument is to be gathered from all the relevant circumstances. Same would be the position where the owner of the premises and the person in need of the premises executes a deed labelling it as a licence deed to avoid to operation of rent legislation.(5) Prima facie, in absence of a sufficient title or interest to carve out or to create a similar tenancy by the sitting tenant, in favour of a third person, the person in possession to whom the possession is handed over cannot claim that thewas created in his favour; because a person having no right cannot confer any title of tenancy orA tenant protected under statutory provisions with regard to occupation of the premises having no right to sublet or transfer the premises, cannot confer any better title. But, thus question is not required to be finally determined in this matter.(6) Further lease or licence is a matter of contract between the parties. Section 107 of the Transfer of Property Act inter alia provides that leases of immoveable property may be made either by registered instrument or by oral agreement accompanied by delivery of possession; if it is a registered instrument, it shall be executed by both the lessee and the lessor. This contract between the parties is to be interpreted or construed on the well laid principles for construction of contractual terms, viz. for the purpose of construction of contracts, the intention of the parties is the meaning of the words they have used and there can be no intention independent of that meaning; when the terms of the contract are vague or having double intendment one which is lawful should be preferred; and the construction may be put on the instrument perfectly consistent with his doing what he had a right to do.For this proposition there cannot be any dispute. The contract is to be construed on the basis of the terms of the document disregarding the legal consequences. However, when terms of the document are ambiguous and are holding double intendment then the meaning which is lawful is to be preferred. As stated above, in the license deed, the parties have specifically made it clear that they were not executing lease deed, but only a license deed and it should not be construed as a lease deed or a deed creating relationship of landlord and tenant between them. It was known to them that without prior consent, creation ofwould be illegal. Hence, it would not be correct to arrive a conclusion which is contrary to the law and the express terms of the agreement. Learned counsel for the respondents further submitted that in the present case, exclusive possession of the property was handed over to the defendant coupled with the fact that in clause 18, the parties have used the phrase `demised premises which means that the intention of the parties was to create relationship of landlord and tenant. In our view, this submission of the learned counsel cannot be accepted. Exclusive possession as discussed above is not the sole inditia (indicia ?) to establish the relationship of landlord and tenant between parties. It is true that the word `demise indicates either lease or conveyance depending upon the terms of the document. But, at the same time said word is to be construed by finding out what is sought to be conveyed or transferred in the context of all the terms of the document. If privilege of occupying the premises exclusively is granted on certain terms and conditions specifically as a licensee or what is agreed to be granted is exclusive possession of the premises on certain terms and conditions as a licensee, then there is no question of holding to the contrary. This would be clear from various meanings which could be assigned to the word `demise. In Strouds `Judicial Dictionary of Words and Phrases, the word `demise is given different meaning and it is stated that it is to be interpreted in context of other terms. This would be clear from the following meanings given to the said word :"On the demise of a brewery, with the exclusive privilege of supplying ale, it would seem that no covenant can be implied with respect to such a privilege from the word `demise." (Hind v. Gray 9 L.J.C.P. 253).An instrument is not a demise or lease, although it contains the usual words of demise, if its contents show that such was not the intention of the parties (Taylor v. Caldwell, 32 L.J.Q.B. 164); and, on the other hand, an agreement only may sometimes be a lease.Hence for determining whether the phrase `demised premises should be construed as a lease or a license as expressly stated in the agreement, the phrase or the word is to be construed in context in which it is used. In the present case the said phrase is used in clause 18 three times along with the term `license fee which was to be paid by the licensee and the manner of its payment. It provides that `license fee for the demised premises was Rs. 3950/per month and the license fee was payable for the said demised premises as provided therein, that is to say, Rs. 23,700/for six months in advance and that the said license fee is to be adjusted in respect of the demised premises per month. The phrase `demised premises is used for recovering the license fee. If the intention of the parties was to create lease, then the word `rent would have been easily used at all the places. `Demised premises, in the present case, includes not only the premises, but fittings, fixtures and the petrol service station also. License was granted specifically to run the petrol service station on the terms and conditions specified therein. There are number of other terms and conditions in the document which indicate that it was a license deed. Firstly, the license was for the purpose of running the petrol service station which was set up by the licensor. The possible grant ofwas reserved for the future in the event of Delta obtaining consent from its landlord Mallika Investments Company. The licensee was not obliged to pay any part of the outgoings in respect of the premises which indicate that the charges attendant upon occupation of the premises were to be paid and borne by the licensor. He was also required to keep the plant and machinery at the said premises in good repair and was required to obtain necessary insurance policies for the business. A further clause to the effect that the licensee was permitted to carry on business in the name of the licensor indicates that the premises were not let out otherwise there was no question of permitting the use of the licensors name. It is true that there are certain other clauses which may indicate a different intention if they are construed in isolation such as a term to the effect that licensee was entitled to grantto operate the petrol station or that they were entitled to instal other machinery. But, at the same time, these clauses are to be read in the context of the fact that the licensor had decided not to run the business of petrol service station and that by the impugned deed, right to run the said business along with the premises was given to the licensee. Further, clause 9 specifically provides that licensor shall be at liberty to withdraw and or revoke the leave and licence in case there is any default of the terms mentioned in the document. Clause 16 provides that if theis granted then licensee was required to purchase the equipments, fittings and fixtures as mentioned in the Second Schedule at a price of Rs. 2,50,000/within a period of one year from the date thereof. Admittedly,is not granted and the amount of Rs. 2,50,000/as agreed is also not paid by anyone.24. Hence, even though it is not necessary to discuss, however, we would briefly refer to other decisions upon which learned Counsel for the parties relied upon. Learned Counsel for the respondent relied upon the decision in the case of Capt. B.V. DSouza v. Antonio Fausto Fernandes, 1989(3) S.C.C. 574 and submitted that the main purpose of enacting the rent statutes is to protect the tenant from the exploitation of the landlord, who being in dominating position is capable of dictating his terms at the inception of the tenancy and the Rent Acts must receive that interpretation which may advance the object and suppress the mischief. He, therefore, submitted that using of the words leave and licence or some other terms in the document should be construed in a way so as to advance the object of the Rent Act. In our view, in the present case, there is no question of such exploitation by the landlord. `Dewar itself was inducted by a tenant in the premises and at the time of executing the leave and licence document; parties were under the impression that they would obtain the consent of the landlord for grantingThe contemplation was not achieved. Hence, the said judgment has no bearing in interpreting the terms of the document which is executed between two Companies knowing full well their rights and the legal implications of the terms provided in the document. He also referred to the decision in the case of Tulsi v. Paro (dead) 1997(2) SCC 706 wherein this Court after considering the revenue records for the period from72 mentioning that appellant was not in a possession as the "tenant at will", held that the theory of licence was untenable and in that context observed that a licensee has no right in property and not to speak of any right to exclusive possession of the property and animus of possession always remains with the licensor and the licensee gets the possession only with the consent of licensor and is liable to vacate when so asked. In the said case, there was no written document between the parties and considering the facts of the case particularly exclusive possession for a period of 20 years and the revenue records, the Court held that it was unthinkable to conclude that appellant of that case was licensee. As stated above, exclusive possession is one of the most relevant factors for deciding whether it is a lease or licence. But, at the same time, when the terms of the document are clear leaving no doubt that parties never intended to execute lease deed, in that set of circumstances, exclusive possession would lose its importance. Dealing with the similar question in the case of M.N. Clubwala v. Fida Hussain Saheb, 1964(6) S.C.R. 642, this Court observed as underit is true that the essence of a licence is that it is revocable at the will of the grantor the provision in the licence that the licensee would be entitled to a notice before being required to vacate is not inconsistent with the licence. In England it has been held that a contractual licence may be revocable or irrevocable according to the express of implied terms of the contract between the parties. It has further been held that if the licensee under a revocable licence has brought the property on to the land, he is entitled to notice of revocation and to a reasonable time for removing his property, and in which to make arrangements to carry on his business elsewhere. Thus the mere necessity of giving a notice to a licensee requiring him to vacate the licensed premises would not indicate that the transaction was a lease. Indeed, section 62(c) of the Indian Easements Act, 1882 itself provides that a licence is deemed to be revoked where it has been either granted for a limited period, or acquired on condition that it shall become void on the performance orof a specified act, and the period expires, or the condition is fulfilled. In the agreements in question the requirement of a notice is a condition and if that condition is fulfilled the licence will be deemed to be revoked under section 62. It would seem that it is this particular requirement in the agreements which has gone a long way to influence the High Courts finding that the transaction was a lease. 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. In the absence, however, of a formal document the intention of the parties must be inferred from the circumstances and conduct of the parties."25. Lastly, it is to be noted that if the document is a camouflage as stated earlier, the mask or veil is required to be removed for determining the true intent and purpose of the document. In the present case, there is no pleading by the defendants that the document was a camouflage so as to defeat the rights of a tenant who had inducted the appellant or that of the owner of the premises. As stated earlier, the document contemplates three types of agreements, one, that of a leave and licence; secondly, in case a consent is obtained from the tenant, for execution ofwhich would create interest in the property asand thirdly, in case offor purchase of equipment, fittings and fixtures at a price of Rs. 2,50,000. Second and third part of the Agreement never came into operation. Hence, for the reasons discussed above, we hold that the agreement dated 18th July, 1970 is a deed of `leave and licence and not a `lease.