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TMI Blog1999 (4) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... Dewar was subsequently amalgamated into Delta International Limited (appellant-plaintiff). By an agreement dated 18th July, 1970, they were executed leave and. license agreement in Favour of ESSO Standard Eastern Inc. (in short ESSO). The; ESSO in. turn permitted Shyam Sunder Ganeriwalla, respondent no. I, to run a petrol service station. By an Order passed in Company Petition No. 331 /91, Dewar was amalgamated with plaintiff (Delta International Limited). Further, the business undertakings and the estates of ESSO also had been taken over by the Act of Parliament and has been transferred and assigned by the Central Government in favour of M/s. Hindustan Petroleum Corporation Limited. In 1985, Delta International Limited filed Civil Suit No. 491/85 in the High Court of Calcutta for a perpetual injunction restraining the Defendants and/or their servants, agents and assigns from using any of the fixtures, fittings and assessories lying at suit premises; for damages, for wrongful use and occupation of the premises at the rate of Rs, 20,000 p.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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the premise; thus even the charges attendant upon occupation of the premises were to be paid by the appellant, [clauses 3 and 4] 7. The respondent was obliged to keep the plant and machinery at the said premises in good repair, [clause 5] 8. The respondent was obliged to take out necessary insurance policies for the business, [clause 8] 9. The appellant was entitled to revoke the license in the event of any breach or default on the part of the responderit. [clause 9] 10. Clause 11 specifically permits the respondent to carry out business in the name of the appellant which normally would not be permitted if it is not a license to run the business. 11. Clause 12 manifests the intention of the parties that the document was executed only for the purpose of creating license and not lease, 12. Clauses 13 to 17 specifically make provision for the possible future grant of sub-lease by the appellant to the respondent in the event that the appellant obtains a consent from the tenant. These clauses also contemplate various temis which would be provided in the prospective sublease. 13. Clause 18 provides for the payment of advance license fees by the respondent and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act to sublet the premises without the prior written consent of the landlord. It is nobody's case that the prior written consent of the landlord was in fact obtained in the present case. It is, therefore, not possible to contend that any sub-lease was granted and any such purported disposition would be unenforceable arid void, (Decided in the case of Woman Shriniwas Kini v. Ratilal Bhagwandas Co. (1959) Suppl. 2 SCR 217 at 221. (f) Where the dominant intention is to use the premises with fittings and fixtures for the purpose of running a business, the same does not tantamount to a lease of immoveable property as decided in the case of Uttam Chand v.S.N. Lalwani, AIR (1965) SC 716, paras II and 12. As against this, Mr. D.P. Gupta, learned senior counsel for the respondent no, 1 submitted that for resolving the dispute that the document is a lease or a license, the legal principles have been laid down in a long line of decisions which inter alia are as under ; - (a) The Court looks at the substance of the transaction and not the label which the parties may have agreed to put on the transaction. The Court is entitled to decide whether or not the agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to ESSO for at least a period of 10 years with three renewal options; [clause 15 (a)] From the aforesaid submissions it is apparent that the common contention of the learned counsel for both the parties is that the Court has to gather and find out the true `intention of the parties' as to whether the document creates a lease or license; the dominant intention of the parties is to be gathered from the terms of the document irrespective of the labels that the parties may put upon it. It is to be stated that even though it is the common contention of the learned counsel for the parties that dominant intention of the parties is to be gathered from the document, yet all throughout the question had remained a vexed one, having no easy solution and precise mathematical tests. Because ultimately `intention of the parties' is to be inferred. For this purpose, we would first refer to the tests laid down by this Court in the case of Associated Hotels of India Ltd. v. R.N. Kapoor, [1960] 1 SCR 368 which are relied upon in subsequent decisions. In minority judgment rendered by Subba Rao, J, the Court held that there is a clear distinction between lease and license: the dividing line i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges in their judgments given separately :- Somervell, L,J, observed ; Certainly under the old cases (and I doubt if this has been affected by the modem authorities), if all one finds is that somebody has been in occupation for an indefinite period with no special evidence of how he got there or of any arrangement being made when he went into occupation, it may be that the court will find a tenancy at will. I am assuming that there is no document, or clear evidence as to terms. The modern cases establish that, ft there is evidence of the circumstances in which the person claiming to be a tenant at will went into occupation those circumstances must be considered in deciding what the intention of the parties was. The learned judge further observed : No doubt, in former days, except for the question of the statute, the distinction between a tenancy, whether at will or for a period, and a licence was not so important as it has become since the Rent Restrictions Acts came into operation. In many cases under those Acts it has a special importance. That fact has led to an examination of the distinction, and the solution that -would seem to have been found is, as one -wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that, further, the grant be for consideration. While the definition of `lease' in Section 105 of the Transfer of Property Act, 1882, envisages the transfer of a right to enjoy the property, on the other hand the definition of a `licence' under section 52 of the Indian Easements Act, 1882, consistently with the above, excludes from its pale any transaction which otherwise, amounts of an easement or involves a transfer of an interest in the property, which is usually involved in the case of a transfer of right to enjoy it. These two rights viz. Easements and lease in their very nature, are appurtenant to the property. Oh the other hand, the grant only for the right to use the premises without being entitled to the exclusive possession thereof operates merely as a licence. But the converse implications of this proposition need not necessarily and always be true. Wherever there is exclusive possession, the idea of a licence is not necessarily ruled out. English law contemplates what are called `Possessory Licences' which confer a right of exclusive possession, marking them off from the more usual type of licences which serve to authorise acts which would otherwise be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessarily depend upon all the other circumstances of the erase; The tenant arid the subtenant, who jointly set up a plea of licence against the landlord may choose to camouflage the truth and substance of the transaction behind a facade of a self-serving and conveniently drafted instrument. Learned Counsel for the respondent had also relied upon the decision of this Court in the case of Sohan Lal Naraindas v: Laxmidas Raghunath Gadit, [1971] 1 SCC 276, (paras 6 . 9) wherein the Court has observed as under : 6. An attempt was deliberately made to camouflage the true nature of the agreement, by reciting in several clauses that the agreement was for lease and licence and it emphasise the pretence, it was also recited that the defendant was not to have any right as tenant or sub-tenant in respect of the loft. 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 recita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of a self-serving conveniently 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 the operation of rent legislation. (5) Prima facie, in absence of a sufficient title or interest to carve out or to create a sim i lar 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 the sub-tenancy was created in his favour; because a person having no right cannot confer any title of tenancy or sub-tenancy. A 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, this 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; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, the question of construction should hot be approached with a leaning in one direction or another. Thus although the law frowns upon covenants in restraint of trade, nevertheless such a covenant should not be approached on the basis that it is prima facie illegal. You are to construe the contract, and then see whether it is legal. Illustrations 1. A bond was conditioned to assign all offices. It was held that it should be construed as limited to those offices which it was lawful to assign, Harrington v, Kloprogge, (1785) 2B B 678 n.(a). 2. A contract for the assignment of a lease provided that if licence to assign was delayed beyond a certain date, the purchaser would pay the purchase price to the vendor and the vendor would thereupon allow the purchaser to enter into occupation pending completion and the purchaser would pay the rent and other outgoings. It was held that allow, menat, lawfully , and consequently did not cover entry into occupation in breach of covenant. Cantor Art Services Ltd v, Kenneth Bieber Photography Ltd., (1969) 1 W.L-.R. 1226, C.A. In our view, the submission of the learned counsel for the appellant requires to be accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease could not be granted and therefore, specific provision is made in the deed that if the consent of the tenant is obtained for Creation of sub-tease, deed for the same would be executed on the terms and conditions which were set out in the document; detailed provisions are made in various clauses of the deed for obtaining permission and execution of leaso deed. Parties were conscious that a lawful lease deed could be executed only after obtaining consent of the landlord and the document if treated as sub-lease, would be illegal: Paragraphs 4, 5 and 6 of the deed specifically provide that after obtaining the consent of the landlord, licensor would grant a sub-lease in respect of the said premises for a period of atleast ten years and the licensor would endeavour to obtain a lease on the terms which would not be inconsistent with the standard terms on which a sub-lease is obtained by the licensee for the purpose of selling his products through the Petrol Service Station and a copy of the standard form of the lease was also attached with the deed. Thirdly, no contention was raised by the defendants to the effect that license deed is a camouflage to circumvent the provisions of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 licencee, 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 Stroud's Judicial Dictionary of Words and Phrase', 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 meaning given to the said word: On the demise of a brewery, with the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; for the demised premises was ₹ 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 giant of sub-lease was reserved for the future in the event of Delta obtain ing 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the Rent Act. [n 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 granting sub-lease. That 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 where in this Court after considering the revenue records for the period from 1951-52 to 1971-72 mentioning the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee 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 much be inferred from the circumstances and conduct of the parties. 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 of sublease which would create interest in the property as sub-tenant and thirdly, in. case of sub- lease, for purchase of equipment, fitting and fixtures at a price of ₹ 2,50,000. Second and third part of the Agreement never came into operation. Hence, for the reasons discussed above, we hold that the agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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