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TMI Blog2006 (5) TMI 567X X X X Extracts X X X X X X X X Extracts X X X X ..... nst Respondent No. 1 passed by the High Court of the Hong Kong Special Administrative Region, Court of First Instance, in Action No. 4761 of 2001 in the sum of US $ 618,331.26 with interest. Respondent No. 1 is the judgment debtor. On 26.3.2003 the above Execution Application was taken out by the Appellant for execution of the decree of a sum of Rs.3,48,98,644.84 inter-alia against a flat owned, according to the Appellant, by Respondent No. 1. According to Respondent No. 1, he is the co-owner of Flat No. 201, Silver Arch, Nepan Sea Road, Mumbai alongwith his wife. This is a dispute with which we are not concerned in this Appeal. A warrant of sale of the said flat was issued on 21.5.2004 and a proclamation of a sale thereof has also been issued. On 25.5.2005 the particulars and conditions of sale were finalised by the Sheriff of Mumbai. 3. Respondent No. 2, the Applicant to the above Chamber Summons, is the ING BANK, N.V., a banking company, incorporated under the Laws of Netherlands. Aggrieved by the fact that the particulars and conditions of sale finalised by the Sheriff of Mumbai do not mention their rights in respect of the said flat arising from the leave and license agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said the Licensee shall, until the Licensors refund the entire Security Deposit, be entitled to continue to use and occupy the Licensed Premises without payment to the Licensors of any license fee or compensation and such staying over by the Licensee in the Licensed Premises shall not constitute a default by the Licensee under the Leave and License Agreement and the Licensors shall not be entitled to invoke the Bank Guarantee referred to hereinafter. Without prejudice to the aforesaid and notwithstanding anything herein contained, the Security Deposit shall thereupon from the date of expiry or termination of the licence and from the date on which the Licensee is willing to hand over vacant charge of Licensed Premises, bear and carry interest at the rate of 2% (two per cent) per month or part thereof till repayment or realization of the Security Deposit. 6. Admittedly, the security deposit has not been repaid by Respondent No. 1 to Respondent No. 2 despite the leave and license agreement having expired on 31.7.2003. 7. The issue that arises therefore pertains to the rights of Respondent No. 2 as a result of the admitted failure on the part of Respondent No. 1 in having failed to ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any contract to the contrary. He denied the contention that the agreement created either a mortgage or a charge or a lien in favour of Respondent No. 2. 10. The case therefore falls broadly into two parts : Whether Respondent No. 2 is entitled under the leave and license agreement to continue to use and occupy the licensed premises till the security deposit and interest thereon is refunded by Respondent No. 1. And whether the leave and license agreement creates a mortgage or a charge or security in respect of the licensed premises to secure the repayment of the security deposit and the interest thereon. Whether Respondent No. 2 is entitled under the leave and license agreement to continue to use and occupy the licensed premises till the security deposit and interest thereon is refunded by Respondent No. 1. 11. The first point, which is no longer res-integra, requires a consideration of Sections 59, 60 and 64 of the Indian Easements Act which read as under : 59. Grantor's transferee not bound by license.-When the grantor of the license transfers the property affected thereby, the transferee is not as such bound by the license. 60.60.60. License when revocable when revocable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt, by virtue of a compromise decree passed in a previous litigation, the Defendant occupied a room as a licensee. Under the terms of the compromise, the licence in favour of the Defendants was irrevocable. It was contended on behalf of the Plaintiff that a licence must always be regarded as revocable at the will of the licensor except in the two cases set out under Section 60 of The Indian Easements Act, 1882. It was contended that Section 60 did not mention any third class of cases where a licence would be irrevocable, including an agreement that it shall be irrevocable. Mudholkar, J. rejecting the contention, held as under : It is no doubt true that Section 60 mentions only two classes of cases in which the licence could be regarded as irrevocable. This means that where a case falls in either of these categories the licence is made irrevocable by operation of law, that is the Easements Act. But apart from the Easements Act, there is the law of contract and if parties enter into a contract and arrive at a solemn agreement to the effect that the licence shall be irrevocable or shall be limited for a particular duration, it follows that the licensor will be bound by his engagement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the plaintiff cannot claim to itself the right of revocation at its free will and pleasure. To hold otherwise and to decree possession in such circumstances would be nothing else than putting the Seal of approval of the Court to a breach of contract. 16(a). In Dominion of India v. Sohan Lal AIR 1950 P H 40, also affirmed by the Supreme Court, the Division Bench came to the conclusion that the Railway authorities had granted in favour of the Respondent a licence to sell books and other publications, and for that purpose, to erect book stalls. The agreement was for a period of five years, renewable at the option of the Appellant for a further period of five years on the same terms and conditions and was to terminate on expiry of five years without any formal notice. For the present purpose, it is not necessary to consider certain facts regarding a separate understanding in view of the impending partition of India and the consequential possible division of the North Western Railway. (b). In paragraphs 12 and 13, the Division Bench held as under : [12] ... Be that as it may, the two tests of irrevocability established by the cases and referred to above, or by the Indian Easements Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, a threatened breach of the license may be prevented by enforcing this implied negative covenant by means of an injunction-a remedy which really gives effect to the irrevocability of the license. (c). As we shall shortly indicate it is this ratio that has been affirmed by the Supreme Court in Ram Sarup Gupta (dead) v. Bishun Narain Inter College and Ors. [1987] 2 SCR 805. (d). The Division Bench then, in paragraph 13, noted the argument that if the statute applies, it having prescribed a specific remedy of damages under Section 64, no other remedy is available even if the case is of an irrevocable license. The Division Bench noted the judgments cited in this regard of the Calcutta High Court. Though the Division Bench observed that the argument was not without force, it obviously did not accept the ratio of these judgments. The same is clear not merely from paragraphs 12 and 13 which we have extracted above, but also from what follows thereafter. In paragraph 15, the Division Bench held : I would be prepared to say that there is included in that contract a contract not to revoke the license if the licensee performs all its obligations under the agreement and I would be inclined t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Narain Inter College [1987] 2 SCR 805, affirmed the above judgments in M.F. De Souza v. Children's Education Uplift Society's case and the judgment in the case of Dominion of India v. Sohan Lal. 18. It would be useful to preface a consideration of Ram Sarup Gupta's case by referring, at the cost of repetition, to three of Mr.Dada's submissions and the essential features of the judgement qua the same. (a). Mr.Dada submitted that Section 60 of the Indian Easements Act is not subject to a contract to the contrary. He further submitted that in any event in view of Section 59 of the Indian Easements Act even an irrevocable license is not binding on the transferee of the property. Thirdly, Mr.Dada invited us to overrule the judgment of this Court in M.F. De Zouaves case and urged us not to follow the Division Bench judgement in Dominion of India inter-alia on the ground that the judgements were per-incuriam having failed to consider Section 64 of the Indian Easements Act. Lastly he submitted that these judgements have not considered the effect of Section 59 of the Indian Easements Act. (b). The essential features of Ram Sarup Gupta's case with reference to these sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution. Revocation of licence may be express or implied. Section 62 enumerates circumstances on the existence of which the licence is deemed to be revoked. One of such conditions contemplates that where licence is granted for a specific purpose and the purpose is attained, or abandoned, or if it becomes impracticable, the licence shall be deemed to be revoked. Sections 63 and 64 deal with licensee's right on revocation of the licence to have a reasonable time to leave the property and remove the goods which he may have placed on the property and the licensee is further entitled to compensation if the licence was granted for consideration and the licence was terminated without any fault of his own. These provisions indicate that a licence is revocable at the will of the grantor and the revocation may be expressed or implied. Section 60 enumerates the conditions under which a licence is irrevocable. Firstly, the licence is irrevocable if it is coupled with transfer of property and such right is enforced and secondly, if the licensee acting upon the licence executes work of permanent character and incurs expenses in execution. Section 60 is not exhaustive. There may be a case where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ouza's case. It was contended before the Gujarat High Court that Section 60 of The Indian Easements Act is not the only section under which a licence can be made irrevocable. It was contended that where a licence is coupled with a condition that it shall enure for a stated period, it is irrevocable during that period. The Division Bench held that even if there was such an agreement, the licence would be revocable at the will of the licensor. Referring to Section 64 of The Indian Easements Act, the Division Bench held that the provisions of Section 64 which entitle a licensee to recover compensation from the licensor for wrongful eviction, indicate that compensation is the only remedy of the aggrieved licensee. The Division Bench held that even if there is such an agreement and the licensor evicts the licensee before the term of the agreement has expired, the only right the licensee would have, is to recover compensation from the licensor. The Division Bench held that the provisions of Section 64 established the same. 22. We are, with great respect, unable to agree with the judgment of the Gujarat High Court. The Division Bench expressly dissented from the judgment of this Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's rights. (ii) If the answer to the first question is in the affirmative, whether a transferee of the property is bound by such an agreement. 27. Mr.Dada then submitted that in any event, upon the right of the licensor as the owner of the property, coming to an end, the new owner will not be bound by the provisions of the licence. Mr.Dada, relied upon the judgment of a learned Single Judge of this Court in HSBC's case. The judgment does support Mr.Dada. Unfortunately, as we have already observed, the attention of the learned Judge was not invited to the judgments in M.F. De Souza v. Children's Education Uplift Society AIR 1959 Bom 533 and Ram Sarup Gupta (dead) v. Bishun Narain Inter College and Ors. [1987] 2 SCR 805. It is in these circumstances, that the judgment was delivered. 28. We were invited to overrule the judgement in M. F. De Souza's case and not to follow the judgement in Dominion of India. It was also suggested that as the judgement of the Supreme Court in Ram Sarup Gupta's case did not consider the provisions of Section 59 of the Indian Easements Act, we are not bound by it on this point. We are unable to agree on both points. 29. In HSBC's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the registration under Section 17(1)(b) of the Registration Act was required and in the absence of such a document being registered, the Applicants were not entitled to claim a right to retain the possession under the alleged lien. 11. The reasoning given by this Court earlier hereinabove is also supported by the provisions of Section 52 read with Section 59 of the Indian Easement Act, 1882. Under Section 52 of the Indian Easement Act, it is provided that where one person grants to Anr. right to do or continue to do in or upon the immovable property of the grant or something which would, in the absence of such right, be unlawful, and such right does not amount an easement or interest in the property then the right is called a licence. In this case if one goes through the Leave and Licence Agreement, it is clear that the Applicants have intended that the Agreement will be construed only as licence and that the said Agreement, will not constitute tenancy, sub-tenancy, easement or any right, title or interest in the property. Under Section 59 of the Indian Easement Act, it is further provided that when the grantor of the licence transfers property, the transferee shall not be bound ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est in the property to Anr., after accepting the entire consideration paid for the purpose of making the licence irrevocable. 34. Mr.Dada submitted that a view contrary to his would render the provision of Section 59 otiose. He submitted that the words as such in Section 59 indicate that a transferee is not bound by the terms of the license between the original owner as licensor and the licensee. 35. This submission too is not well founded. We are supported in this view by a series of judgements of which we shall refer to only four. 36. In Ras Behari Lal v. Akhai Kunwar and Ors. AIR 1915 All 56, the Division Bench held as under at page 57 : The plaintiff admits that on the facts found the case is clearly covered by Section 60 of the Act, but he maintains that Section 59 lays down an independent rule, which entitles a transferee of property to revoke a license even if the licensee acting upon the license has executed a work of a permanent character and incurred expenses in the execution, that is to say, even if the license could not have been revoked by the original grantor. It seems to us that the words as such in Section 59 are extremely significant and would not have appeared in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icence is for some reasons irrevocable by the grantor himself this section does not authorise the transferee to revoke it and the provisions of this section are in this respect subject to the provisions of Section 60. 39. In Manoolal Balchand v. Kaluram Gulabchand AIR 1958 MP 343, the learned Single Judge held as under : (17). All the relevant cases have been cited by the author in foot-note 6. The reasoning in those cases has been that if the grantor of a license could not himself revoke a license, how could his transferee revoke it ? In other words, the reason given is that the transferee does not get any better rights than those possessed by the transferor. It was on this footing that the late Justice Kaushalendra Rao held in Rahim Bax v. Samsu 1950 Nag LJ 460 : AIR 1951 Nag 215 (Q), that a licensor cannot put an end to an irrevocable license by a transfer of property affected by the license and that a transfer does not ipso facto extinguish a license. I respectfully concur in this opinion. (18). In my opinion, in the instant case, Section 59 (and not Section 56) will be applicable, as the question of revocation of the license arises after the transfer of the absolute occupancy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire security deposit in the first sentence includes within its ambit, interest thereon, referred to in the next sentence of Clause 28. The term security deposit is not defined in the agreement. It is important however to read Clause 26 alongwith Clause 28. Clause 26 provides that the security deposit during the original license period shall not carry any interest . The second sentence in Clause 28 provides that upon default in repayment of the security deposit, the security deposit shall bare and carry interest at the rate of 2% per month. It is important to note that the clause does not merely state that interest shall be payable on the security deposit. This is an important distinction. According to us, the expression bare and carry used in relation to the security deposit indicates that the security deposit would comprise of the principal sum of Rs.3,25,00,000/-together with interest thereon and not merely that interest shall be payable on the security deposit. 46. We therefore hold that Respondent No. 2 is entitled to continue to use and occupy the said premises under Clause 28 till the amount of Rs.3,25,00,000/-together with interest thereon as provided therein, is repaid. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Applicant/Respondent No. 2 to remain in the possession of the flat till the repayment of the security deposit. The learned Judge however stated that he expressed no opinion with regard to the claim of Respondent No. 2 in respect of interest. Finally, the learned Judge permitted the sale of the flat on the basis of the amended proclamation and terms and conditions of sale in terms of the order unaffected by the adjudication proceedings under the Stamp Act in relation to the leave and licence agreement dated 8.10.2001. 51. The submissions omit to take into consideration the most crucial aspect. It is true that the nature of the document and the true interpretation thereof will not necessarily depend upon the label given by the parties to the agreement. In order however to create a mortgage or a charge, it is essential that the parties ought to have intended that the property would constitute a security for repayment of the debt. In M.C. Chacko v. State Bank of Travancore [1970] 1 SCR 658, the Supreme Court held at page 346 : For creating a charge on immovable property no particular form of words is needed: by adequate words intention may be expressed to make property or a fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. Further the flat and the parking spaces throughout the agreement are referred to as the Licensed Premises . Almost every clauses in the agreement refers to the agreement as being one of leave and license . A Division Bench of this Court in Kalabhai Bapuji Chudasama and Ors. v. The Secretary of State for India in Council ILR (1905) (Bom) 19 observed at page 28 as follows : It is true that, generally speaking, the name given by parties to a document is not conclusive as to its nature, but the designation given by the parties themselves to it cannot be lost sight of where the document is ambiguous and is susceptible of more than one construction as to its nature and scope. The ratio of this judgement applies with greater force in the present case in view of the further factors mentioned hereafter. 55. There are several clauses which expressly stipulate that the agreement is one of leave and license and that it does not create any other right, title and/or interest in favour of Respondent No. 2 in the licensed premises. 7. The Licensed Premises will be occupied only by an officer of the Licensee and the family members, bona fide guests and servants of such officer and by no other p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 8 and 19 and 28 would have been entirely different. Firstly according to us if such was the intention, the agreement would have specifically spelt out an agreement to create a mortgage or charge. 59. The doubt, if any, is further set at rest by Clause 10 which reads as under : 10. The Licensee agrees that this Agreement is an agreement of leave and licence in respect of the Licensed Premises as contemplated by Section 24 of the Maharashtra Rent Control Act, 1999 and the provisions of the said Section 24 shall apply to the licence created under this Agreement. Clause 10 is not restricted to any particular clause or part of the agreement. It pertains to the entire agreement. Section 24 of the Maharashtra Rent Control Act, 1999 deals exclusively with licenses and licensees and nothing else. Section 24 reads as under : Section 24. Landlord entitled to recover possession of premises given on licence on expire. - (1) Notwithstanding anything contained in this Act, a licensee in possession or occupation of premises given to him on licence for residence shall deliver possession of such premises to the landlord on expiry of the period of licence; and on the failure of the licensee to so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 55 of the Maharashtra Rent Control Act, 1999. The stamp duty was also paid on the basis of the agreement being a leave and license agreement. It is not the case of Respondent No. 2 that the document was executed in the present form and that Respondent No. 2 thereafter proceeded to take steps in respect thereof such as in respect of registration and computing and paying the stamp duty under a mistaken belief. 62. There is thus nothing in the leave and license agreement which even remotely supports the case of a mortgage or charge. Indeed the agreement almost conclusively establishes the contrary. Are there any other circumstances which establish the case of Respondent No. 2 in this regard ? We think not. In fact the surrounding circumstances also suggest the contrary. As we shall further demonstrate this was not even the case of Respondent No. 2 at any stage and even in he affidavit in support of the above Chamber Summons. 63. Not once during all these years did Respondent No. 2 ever contend either orally or in writing that the parties had intended to create a mortgage, charge or any other security. There is no explanation for this either. 64. There is not a whisper in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Licensors. The mere fact that Clause 23 entitles the licensee to occupy the premises without let or hindrance upon the licensee regularly paying the license fee would not detract from the fact that the agreement is one of leave and license only. Indeed as we have held above the licensee is entitled to continue to use the licensed premises during the subsistence of the license period. That the licensee is entitled to do so without let or hindrance would not convert the license into a mortgage or a charge or any other form of a security over the licensed premises. 68. Intention is a matter of fact. In a case such as this where the document does not contain even a whisper to this effect it was all the more incumbent upon Respondent No. 2 to have adduced evidence to establish its case regarding the creation of a mortgage, charge or any other security. There was not even an application before the learned single Judge to lead oral evidence. 69. We may conclude this discussion by referring to the following observations of a Full Bench comprising of four Hon'ble Judges of this Court in Tukaram Mairal v. Ramchand Malukchand ILR (1902) Bom 26 : The learned District Judge has observed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of a lien. The Supreme Court referring to Halsbury's Laws of England, (4th Edition, Volume 28) observed that a lien is a right to retain the possession of a property belonging to Anr. until the claims are satisfied. The Supreme Court also referred to the Stroud's Judicial Dictionary which says that : Lien. (1) A lien -(without effecting a transference of the property in a thing). -is the right to retain possession of a thing until a claim be satisfied ; and it is either particular or general.So, as regards Scotland, lien is defined as including the right of retention (Factors (Scotland) Act, 1890 (Clause 40), Section 1); See hereon Great Eastern Railway v. Lords Trustees (1909) AC 109. Thus a mere lien permits a party to retain possession until the claim is satisfied. But without anything more that by itself does not create a security over that property for repayment of a debt by sale or otherwise thereof. In fact during the course of the arguments before us, Mr.Samdani never contended to the contrary but we find a statement to that effect in paragraph 2 of the Updated Brief Note on Submissions submitted by him. Mr.Samdani however later clarified before us that this was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulam Mohiuddin AIR 1990 PC 121 ; Kanna Kurup v. Sankara Varma Rajah ILR (1920) 344 and Hathika v. Puthiyapurayil Padmanabhan AIR 1994 Ker 141.) We proceed on the basis that if in the present case it can be gathered that the licensors/owners of the flat intended to create a security over the said flat for repayment of the security deposit it must be held that the agreement created an anomalous mortgage. 76(a). Mr.Samdani relied upon a Full Bench judgment of the Rajasthan High Court in Ramdayal v. Bhawarlal, in support of the contention that the rights given under Section 67 of the T.P. Act may be curtailed by an agreement between the parties but these rights will have effect in absence of a contract to the contrary. In other words according to Mr.Samdani merely because the agreement does not specifically entitle Respondent No. 2 to sell the said flat it would not bar Respondent No. 2 from obtaining a decree for the sale of the same and to appropriate the sale proceeds towards the payment of its dues. (b). It is important to note however that the Full Bench first came to the conclusion that an anomalous mortgage had been created to secure the repayment of both the principal and inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e construed on its own terms. 79. To sum up, for the purpose of this judgment we proceed on the basis that the right to use, occupy and enjoy property is a species of property and that it is one of the component elements in the bundle of full ownership rights and is capable of being mortgaged as such. We further proceed on the presumption that if the alienation by the judgment debtor/owners of the flat was with the intention of creating a security in respect thereof for payment of the security deposit, the said agreement constituted, a charge and/or an anomalous mortgage. Lastly we also proceed on the basis that in that event Respondent No. 2 is not precluded from exercising rights under Section 67 of the T.P. Act merely because there is no specific term in the agreement entitling Respondent No. 2 to sell the property and to appropriate the sale proceeds towards its dues i.e. the security deposit together with interest. 80. Mr.Dada's submission reiterated by Mr.Sekseria, the learned Counsel appearing on behalf of the Appellants, that there is nothing to indicate that the parties to the suit intended creating a mortgaged or charge is well founded. We also find well founded their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to continue to use and occupy the said licensed premises for the reason of not refund of the security deposit in view of the provisions of the Indian Easements Act. Apart from the fact that we have already rejected this contention, it must be noted that before the learned single Judge, Respondent No. 1 conceded and expressly recognized the right of Respondent No. 2 to remain in possession of the premises till the said amount was paid. The same has been noted inter-alia in paragraph 7 of the impugned judgement. 84. In the circumstances, the following order is passed : i). The Appeal is dismissed. ii). The Chamber Summons is made absolute in terms of prayer (c) which reads as under : in the alternative to prayer (b) above, this Hon'ble Court be pleased to amend the terms and conditions of sale and recognize the right of the Applicants to be in possession of the Flat till the amount of the Security Deposit of Rs.3,25,00,000/- along with the accrued interest thereon is refunded to the Applicants as per the terms and conditions of the License Agreement; iii). As the agreement dated 8.10.2001 is only a leave and licence agreement under Section 24 of the Maharashtra Rent Control Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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