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'Tenancy' or the 'lease' has its origin in contract, entered into between the landlord and the tenant for a consideration of a price paid or promised (called premium) or of money, a share of crops, service or any other thing of value (called as rent) to be rendered periodically or on specified occasions. Under the common law, tenancy is governed by the Transfer of Properties Act, 1882. Section 105 defines 'lease' as a transfer of a right to enjoy immovable property, made for a certain time, expressed or implied, or in perpetuity, in consideration of the aforementioned premium or rent. To understand the meaning of the term 'lease' properly one needs to distinguish it from the term 'license', because in both the cases, transferor permits the transferee to use his property. Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement1or an interest in the property, the right is called a license2.
Therefore, from a bare perusal of the aforesaid definitions of the term 'lease' and 'license' it is apparent that license is merely a permissive right. It is purely a personal privilege granted by the transferor to the transferee and it does not create an interest in the immovable property. For example, right to catch fish from the pond, right to pluck coconuts, mangoes, or any other fruit or vegetable for a particular period. Similarly, a hosteller stays in a Hostel as a licensee. But in the case of lease an interest in the property is created, which is apparent when
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1. "Easement" defined. _ An easement is a right which the owner or occupier of certain land possesses, as such, for the beneficial enjoyment of that land, to do and continue to do something, or to prevent and continue to prevent something being done, in or upon, or in respect of, certain other land not his own.
2. Section 52 of the Indian Easements Act, 1882
possession of the immovable property is transferred to the transferee. Therefore, this handing over of exclusive possession by the transferor to the transferee reflects the intention to create a lease and not the license, which is purely of permissive nature. However, the difficulty arises in those cases where despite exclusive possession having been handed over to the transferee interest in the property is not created. In such cases, it is very difficult to distinguish between the lease and license. Therefore, though, the distinction between the two concepts is very clear, but sometimes, the dividing line becomes very thin or even blurred.
At one time it was thought that the test of exclusive possession was infallible and if a person was given exclusive possession of a premises, it would conclusively establish that he was a lessee. But there was a change and the recent trend of judicial opinion is reflected in Errington v. Errington, (1952) 1 All ER 149, wherein Lord Denning reviewing the case law on the subject summarizes the result of his discussion as under:
"The result of all these cases is that, although a person who is let into exclusive possession is, prima facie, to be considered to be tenant, nevertheless he will not be held to be so if the circumstances negative any intention to create a tenancy."1
The Court of Appeal again in Cobb v. Lane, (1952) 1 All ER 1199, considered the legal position and laid down that the intention of the parties was the real test for ascertaining the character of a document. Somervell, L.J., stated:
"..........the solution that would seem to have been found is, as one would expect, that it must depend on the intention of the parties."2
Denning, L.J., said much to the same effect:
"The question in all these cases is one of intention: Did the circumstances and the conduct of the parties show that all that was intended was that the occupier should have a personal privilege with no interest in the land?"3
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
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1. p. 155.
2. p. 1201.
3. p. 1202.
create a lease." Associated Hotels of India Ltd. v. R.N. Kapoor, AIR 1959 SC 1262.1
1.
Question of law decided: The test of exclusive possession is not the conclusive test in order to find out whether a person is a tenant or licensee. To ascertain whether the document creates a license or lease, the substance of the document must be preferred to the form. The real test is the intention of the parties - whether they intended to create a lease or license.
Facts of the case: The Respondent secured possession of two rooms under a deed executed between him and the appellant on a monthly payment of Rs. 800 per month, which was later on reduced to Rs. 700 per month. Respondents made the application to the Rent Controller, Delhi under the Delhi and Ajmer-Merwara Rent Control Act, 1947 (the erstwhile the Rent Control Act, applicable at that time - to be referred hereinafter in short as 'Act') for fixation of the standard rent alleging that the rent demanded was excessive. This application was opposed by the appellant on the ground, amongst others, that the Rent Controller had no jurisdiction since, the Respondent was not a tenant but only a licensee. The Rent Controller held that the exemption under section 2 of the Act related only to residential rooms in a hotel and therefore the Act applied to the premises in question. On appeal, the District Judge, Delhi, took a contrary view on the ground that rooms in question were rooms in a hotel within the meaning of section 2 of the Act. Further, on a construction of the impugned document, it was held that the transaction between the parties was not a lease but a license. In revision, the High Court held that the premises were not rooms in a hotel within the meaning of section 2 of the Act and that the document executed between the parties created a lease not a license. An appeal was filed to the Supreme Court.
Findings of the Court: Minority judgment was delivered in the matter by K. Subarao, J., who considered the following terms and conditions between the parties as per the agreement:-
"1.In pursuance of the said agreement, the Licensor hereby grants to the Licensee, Leave and License to use and occupy the said premises to carry on their business of Hair Dressers from 1st May, 1949 to 30th April, 1950.
2.That the charges of such use and occupation shall be Rs. 9,600 a year payable in four quarterly instalments i.e., 1st immediately on signing the contract, 2nd on the 1st of August, 1949, 3rd on the 1st November, 1949 and the 4th on the 1st February, 1959, whether the Licensee occupy the premises and carry on the business or not.
3.That in the first instance the Licensor shall allow to the Licensee leave and license to use and occupy the said premises for a period of one year only.
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1. Minority view by K. Subba Rao, J.
4.That the licensee shall have the opportunity of further extension of the period of license after the expiry of one year at the option of the licensor on the same terms and conditions but in any case the licensee shall intimate their desire for an extension at least three months prior to the expiry of one year from the date of the execution of this DEED.
5.The licensee shall use the premises as at present fitted and keep the same in good condition. The licensor shall not supply any fitting or fixture more than what exists in the premises for the present. The licensee will have their power and light meters and will pay for electric charges.
6.That the licensee shall not make any alterations in the premises without the prior consent in writing from the licensor.
7.That should the licensee fail to pay the agreed fee to the licensor from the date and in the manner as agreed, the licensor shall be at liberty to terminate this DEED without any notice and without payment of any compensation and shall be entitled to charge interest @ 12% per annum on the amount remaining unpaid.
8.That in case the licensee for reasons beyond their control are forced to close their business in Delhi, the licensor agrees that during the remaining period the license shall be transferred to any person with the consent and approval of the licensor subject to charges so obtained not exceeding the monthly charge of Rs. 800."
By looking into the abovementioned terms and conditions of the agreement as contained in the document in question the Court observed that the document no doubt uses phraseology appropriate to a licence. But it is the substance of the agreement that matters and not the form, for otherwise clever drafting can camouflage the real intention of the parties.
The Court put the question - What is the substance of this document? It was found that two rooms at the Hotel Imperial were put in possession of the respondent for the purpose, of carrying on his business as hair-dresser from May 1, 1949. The term of the document was, in the first instance, for one year, but it might be renewed. The amount payable for the use and occupation was fixed in a sum of Rs. 9,600 per annum, payable in four instalments. The respondent was to keep the premises in good condition, he should 383 pay for power and electricity. He should not make alterations in the premises without the consent of the appellants. If he did not pay the prescribed amount in the manner agreed to, he could be evicted therefrom without notice, and he would also be liable to pay compensation with interest. He could transfer his interest in the document with the consent of the appellants. The respondent agreed to pay the amount prescribed whether he carried on the business in the premises or not. Shortly stated, under the document the respondent was given possession of the two rooms for carrying on his private business on condition that he should pay the fixed amount to the appellants irrespective of the fact whether he carried on his business in the premises or not.
In this scenario with regard to the distinction between lease and a licence the Court observed as under:
"There is a marked distinction between a lease and a licence. Section 105 of the Transfer of Property Act defines a lease of immovable property as a transfer of a right to enjoy such property made for a certain time in consideration for a price paid or promised. Under section 108 of the said Act, the lessee is entitled to be put in possession of the property. A lease is therefore a transfer of an interest in land. The interest, transferred is called the leasehold interest. The lessor parts with his right to enjoy the property during the term of the lease, and it follows from it that the lessee gets that right to the exclusion of the lessor. Whereas section 52 of the Indian Easements Act defines a licence thus:
"Where one person grants to another, or to a definite number of other persons, a right to do or continue to do in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a licence."
Under the aforesaid section, if a document gives only a right to use the property in a particular way or under certain terms while it remains in possession and control of the owner thereof, it will be a licence. The legal possession, therefore, continues to be with the owner of the property, but the licensee is permitted to make use of the premises for a particular purpose. But for the permission, his occupation would be unlawful. It does not create in his favour any estate or interest in the property. There is, therefore, clear distinction between the two concepts. The dividing line is clear though sometimes it becomes very thin or even blurred. At one time it was thought that the test of exclusive possession was infalliable and if a person was given exclusive possession of a premises, it would conclusively establish that he was a lessee. But there was a change and the recent trend of judicial opinion is reflected in Errington v. Errington, (1), wherein Lord Denning reviewing the case law on the subject summarizes the result of his discussion thus at p. 155:
"The result of all these cases is that, although a person who is let into exclusive possession is prima facie, to be considered to be tenant, nevertheless he will not be held to be so if the circumstances negative any intention to create a tenancy."
The Court of Appeal again in Cobb v. Lane, (2) considered the legal position and laid down that the intention of the parties was the real test for ascertaining the character of a document. At p. 1201, Somervell, L.J., stated:
"............. the solution that would seem to have been found is, as one would expect, that it must depend on the intention of the parties."
Denning, L.J., said much to the same effect at p. 1202:
"The question in all these cases is one of intention: Did the circumstances and the conduct of the parties show that all that was intended was that the occupier should have a privilege with no interest in the land ?"
In this scenario, the following propositions were, therefore, found to 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.
After applying the above mentioned test of intention of the parties, K. Subarao, J. observed that it was not possible to hold that the document was one of license, because it conferred only a bare personal privilege on the respondent to make use of the rooms. It was observed that it put him in exclusive possession of them, untrammeled by the control and free from the directions of the appellants. It was also observed that the solitary circumstance that the rooms let out were situated in building wherein a Hotel is run, could not make any difference in the character of the holding. The intention of the parties was clearly manifest and the clever phraseology used or the ingenuity of the document writer hardly concealed the real intent. Therefore, it was held that under the document, there was transfer of a right to enjoy two rooms and therefore it created a tenancy in favour of the respondent.\
2.
Question of law decided: If an interest in immovable property entitling the transferee to enjoyment was created, it was a lease; if permission to use land without exclusive possession was alone granted a license was the legal result.
Facts of the case: The premises in question belongs to the Bombay City Weavers' Co-operative Limited. They filed ejectment proceedings against one Sugarbhai Mohammed Hussain, their tenant and obtained a decree. It is stated that the appellant was a monthly tenant on the suit premises since about February 2, 1965. On or about February 9, 1965 a fresh document of that date was executed. It is alleged that this agreement was entered into between the parties since the respondent wanted to charge more rent or mesne profits. This agreement is in writing and this was for a period of five years, i.e., from September 1, 1965 to August 31, 1970. The main contention involved in this appeal is whether the appellant was a licensee or a tenant.
Findings of the Court: The Court reproduced the observation of Krishna Iyer, J., in Qudrat Ullah v. Municipal Board, Bareilly, MANU/SC/0418/1973: (1974) 1 SCC 202 that there is no simple litmus test to distinguish a lease as defined in section 105, the Transfer of Property Act, 1882 from licence as defined in section 52 of the Easements Act, 1882 but the character of the transaction turns on the operative intent of the parties. The Court after looking into the terms and conditions of the document opined that the expression 'license' was introduced therein and clause (2) states that it was only for business purposes. The license fee was fixed. It permitted used only for 20 hours. Therefore, it was held that restriction of hours of works negates the case for a lease. Emphasis were also laid down on clause 12, which gave to the licensee the right to enter upon the premises and inspect the same at any time. In this background, it was held that the entire document represented the license and not the lease.
3.
Question of law decided: Affirmed the law laid down by the Supreme Court in Associated Hotels of India Ltd. v. R.N. Kapoor, MANU/SC/0168/1959: AIR 1959 SC 1262.
The peculiar circumstance of the case, the notice of which was taken by the court, is that the document in question is not provided by an illiterate layman or poor person in need of some premises, but is executed by two companies, where it can be presumed that it is mentioned after full understanding and to avoid any wrong inference of intention.
Facts of the case: These appeals are filed against the Judgment and Decree dated 2nd December, 1997 passed by the Division Bench of the High Court of Calcutta in Appeal from Original Decree Nos. 148 of 1992 and 165 of 1992. 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. Dewar's 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 Limited (appellant-plaintiff). By an agreement dated 18th July, 1970, they 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. 1, 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 assignees 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 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 a sub-lease. In 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 it 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."
Findings of the Court: This case again raised a question about interpretation of the document in question as to whether it created license or the lease. Shah, J., after considering all the cases namely and affirming the law already laid down in this regard crystallized the same as under:
"(1)To 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 licence 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 in, 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 the sub-tenant may 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 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 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 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 immovable 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 only what he had a right to do".
Applying these tests, the Court observed as under:
"In our view, the submission of the learned Counsel for the appellant requires to be accepted because as stated above, it is nowhere pleaded that the deed executed between the parties is a camouflage to evade the rigours of the provisions of the Rent Act nor it is stated that a sham document is execute for achieving some other purpose. In these sets of circumstances, the intention of the parties is required to be gathered from the express words of various terms provided by them in the deed. For this purpose, clause 12 of the document is to be taken into consideration and due weight is required to be given to what parties have stated. It provides as under:
"It is hereby expressly agreed upon and declared by and between the parties that these presents shall not be treated or used or dealt with or construed by the parties in any way as a tenancy or lease or as a document within the purview of the West Bengal Premises Tenancy Act or any modification or amendment thereof or to confer any relationship as landlord and tenant between the parties hereto."
The aforesaid term of the document is not provided by an illiterate layman or poor person in need of some premises for his residence or business, but is executed by two companies where it can be presumed that it is mentioned after full understanding and to avoid any wrong inference of intention. It specifically mentions that only a license was created and not a lease. The said clause is in positive as well as negative form providing that the agreement was a licence and should not be treated or used or dealt with or construed by the parties in any way as lease or to confer any relationship as landlord and tenants between the parties. When the parties which are capable of understanding their rights fully, expressly agreed and declared that document should not be construed in any manner as creating any relationship as landlord and tenant between them, it would be impermissible to conjecture or infer that their relations should be construed as that of landlord and tenant because of certain terms mentioned in the deed can have double intendment. As stated above, intention of the parties is the meaning of the words they have used and there could be no intention independent of that meaning. The learned Single Judge of the High Court rightly, therefore, held that this clause stares in his face in construing it as a lease deed.
Secondly, parties to the document were fully aware that lease or sub-lease 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-lease, 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 lease 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 at least 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 law or to defeat the rights of owner or tenant who granted the license and inducted the licensee in possession. Further, in cases where contract for license is executed by handing over exclusive possession of the premises, the distinguishing line between the lease and license is absolutely thin. In such cases, the terms of the document are to be read as they are and it would be unreasonable to draw inference that parties intended to create relationship of landlord and tenant despite express contrary terms in the deed which are binding between the parties.
Finally after looking into the document in question it was held that 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 of sub-lease was 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 premise in good repair and was required to obtain necessary insurance policies for the business. A further clause to the effect that 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 licensor's 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 grant sub-licence to 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 the sub-lease is 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, sub-lease is not granted and the amount of Rs. 2,50,000 as agreed is also not paid by anyone.
4.
Question of law decided: Affirmed the law laid down in Associated Hotels of India Ltd. v. R.N. Kapoor, MANU/SC/0168/1959: AIR 1959 SC 1262.
Facts of the case: Once again in this case the terms and conditions of the document entered into between the parties were to be interpreted to find out whether it was a lease or the license.
Findings of the Court: First of all the document executed by the appellant in favour of the respondent is styled as a deed of licence instead of the term lease deed. Vide clause (I) the license fee was fixed as Rs. 500 per mensem. The licensee was authorized to use the room as licensee for a period of one year. Clause (2) enjoined the licensee not to make any structural alterations in the room. Clause (3) permitted the licensee and his servants to use bath rooms and toilet facilities in the building and also the telephone facility subject to payment of charges. If license required any decorative electrification, it could be provided by the licensor at the cost of the licensee. Clause (4) obligated the licensee to pay the current charges of electricity consumed. Vide clause (5), the licensee at the end of one year had to hand over the possession to the licensor by removing of his goods from the premises unless by mutual agreement a fresh contract was entered into between the parties. Clause (6) entailed automatic termination of license on non-payment of license fee. Clauses 7 and 8, as relied on by the respondent are reproduced verbatim as under:
"7. It is also understood and agreed that if the Licensor desires to have the premises used as a car park or used for any purpose of his Hotel & Lodging Business it is open to the Licensor to terminate this Licence at any time after giving one month's Notice.
8. It is definitely understood that the License creates no estate or interest in the Licensee over the premises and the Licensee shall have only a permission to use the premises for his business."
R.C. Lahoti, J., while relying upon the judgment delivered by K. Subarao, J., in Associated Hotels of India Ltd. v. R.N. Kapoor, MANU/SC/0168/1959: AIR 1959 SC 1262 held as under:
"The appellant has exclusive possession over the premises and the owner neither can nor does interfere therein. A full-fledged stationery shop and allied business activities have been carried on by the appellant in the premises ever since 1972. The appellant was in possession of the premises for about 20 years before the date of the deed of license and in spite of the 'deed of license' of 1981 having been executed continued to possess, use and enjoy the occupation of premises as before. Though the so-called licence expired in 1982 the respondent did not insist on the appellant putting back the respondent in possession of the premises but allowed him to remain in occupation and to continue to do so for a period of about seven years till the date of the institution of the suit. It is thus clear that the present one is not a case where the possession or control of the premises was retained by the respondent while the appellant was only permitted to make such use of the premises as would have been unlawful but for the permission given. Agreeing with the Courts below and disagreeing with the High Court we hold the relationship between the parties to be of landlord and tenant and the possession of the appellant over the premises as that of a tenant."
The appeal was allowed and the judgment and decree of the High Court was set aside, while restoring the decree of the Trial Court, as upheld by the first Appellate Court.
5.
Question of law decided: Law laid down in Associated Hotels of India Ltd.'s case was affirmed and it was held on facts - "The fact, therefore, that a stall-holder has exclusive possession of the stall is not conclusive evidence of his being a lessee. 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 constructed not as a mere licence but as a lease."
Facts of the case: In the words of the Apex Court itself the facts may be narrated as under:
The main point which arises for consideration in this appeal is whether the plaintiffs-respondents are the lessees of the appellants who were defendant 4 and 5 in the trial court or only their licensees. In order to appreciate the point certain facts need to be stated.
The appellants are the owners of a private market situate in Madras known as Zam Bazar Market. There are about 500 odd stalls in that market and meat, fish, vegetables, etc., are sold in that market. The practice of the appellants has been to farm out to contractors the right to collect dues from the users of the stalls. Defendants 1 to 3 to the suit were the contractors appointed by the appellants for collecting rent at the time of the institution of the suit. Two of these persons died and their legal representatives have not been impleaded in appeal as they have no interest in the subject-matter of litigation. The third has been transposed as Respondent No. 7 to this appeal. They were, however, alive when the special leave petition was filed and were shown as appellants 1 to 3, but two of them were struck out from the record after their death and the third transposed as Respondent No. 7. Though the building in which the market is located is owned by the appellants it cannot be used as a market for the purpose of sale of meat or any other article of human consumption without the permission of the municipal council under section 303 of the Madras City Municipal Act, 1919 (hereafter referred to as the Act). Before such a permission is granted the owner has to obtain a licence from the Municipal Commissioner and undertake to comply with the terms of the licence. The licence granted to him would by for one year at a time but he would be eligible for renewal at the expiry of the period. Section 306 of the Act confers power on the Commissioner to require the owner, occupier or framer of a private market for the sale of any animal or article of food to do a number of things, for example to keep it in a clean and proper state, to remove all filth and rubbish therefrom, etc. Breach of any condition of the licence or of any order made by the Commissioner would result, under section 307, in suspension of the licence and thereafter it would not be lawful for any such person to keep open any such market. Section 308 of the Act confers powers on the Commissioner to make regulations for markets for various purposes such as fixing the days and hours on and during which any market may be held or kept for use, requiring that in the market building separate areas be set apart for different classes of articles, requiring every market building to be kept in a clean and proper state by removing filth and rubbish therefrom and requiring the provision of proper ventilation in the market building and of passages of sufficient width between the stalls therein for the convenient use of the building. We are told that regulations have been made by the Commissioner in pursuance of the powers conferred upon him by section 308 of the Act. Thus, as a result of the Act as well as the regulations made thereunder a number of duties appear to have been placed upon the owners of private markets. It would also appear that failure to comply with any of the requirements of the statute or the regulations would bring on the consequence of suspension or even cancellation of the licence. We are mentioning all this because it will have some bearing upon the interpretation of the documents on which the plaintiffs have relied in support of the contention that the relationship between them and the appellants is that of tenants and landlord.
The suit out of which this appeal arises came to be filed because disputes arose between the plaintiffs and the defendants 1 to 3 who became the contractors for collection of rent as from February 9, 1956. These disputes were with regard to extra carcass fees and extra fees for Sunday Gutha which were claimed by the contractors. The respondents further alleged that the relationship between them and the appellants was, as already stated, that of lessees and lessors while according to the appellants, the respondents were only their licensees. The respondents further challenged the extra levies made by the contractors, i.e., the original defendants 1 to 3 who are no longer in the picture. The reliefs sought by the respondents were for an injunction against the appellants and the defendants 1 to 3 restraining them from realising the extra levies and for further restraining them from interfering with their possession over their respective stalls as long as they continued to pay their dues. The First Additional City Civil Court Judge before whom the suit had been filed found in the respondents' favour that the extra fees sought to be levied by the contractor were sanctioned neither by the provisions of the Municipal Act nor by usage but upon the finding that the respondents were bare licensees dismissed their suit.
The appellate Bench of the City Civil Court before whom the respondents had preferred an appeal affirmed the lower court's decision. The High Court reversed the decision of the Courts below and in the decree passed by it pursuant to its judgment granted a number of reliefs to the respondents. Here we are concerned only with reliefs (ii) (e), (f) and (g) since the appellants are not interested in the other reliefs. Those reliefs are:
"(ii) that the respondents defendants, in particular defendants 1 to 3 (respondents 1 to 3) be and hereby are restrained from in any manner interfering with the appellants-plaintiffs 1 to 4, 6 and 7 carrying on their trade peacefully in their respective stall at Zam Bazar Market, Royapettah, Madras and imposing any restrictions or limitations upon their absolute right to carry on business as mentioned hereunder:
(e) interfering with the possession and enjoyment of the respective stalls by the appellants plaintiffs 1 to 4, 6 and 7 so long as they pay the rents fixed for each stall;
(f) iincreasing the rents fixed for the appellants plaintiffs' 1 to 4, 6 and 7 stalls under the written agreements between the said plaintiffs and defendants 4 and 5;
(g) evicting of the appellants-plaintiffs 1 to 4, 6 and 7 or disturbing and plaintiffs and their articles in their stalls by defendants 1 to 3."
Further we are concerned in this case only with the relationship between the meat vendors occupying and using some of the stalls in the market (as the plaintiffs-respondents belong to this category) and the appellants-landlords. What relationship subsists or subsisted between the appellants and other stall-holders vending other commodities is not a matter which can be regarded as relevant for the purpose of deciding the dispute between the appellants and the respondents.
It is common ground that under the licence granted by the Municipal Corporation, the market is to remain open between 4 A.M. and 11 P.M. and that at the end of the day the stall-holders have all to leave the place which has then to be swept and disinfected and that the gates of the market have to be locked. None of the stall-holders or their servants is allowed to stay in the market after closing time. In point of fact this market used to be opened at 5 A.M. and closed at 10 P.M. by which time all the stall-holders had to go away. It is also common ground that the stalls are open stalls and one stall is separated from the other only by a low brick wall and thus there can be no question of a stall-holder being able to lock up his stall before leaving the market at the end of the day. The stall-holders were required to remove the carcasses brought by them for sale by the time the market closed. Meat being an article liable to speedy decay the stall-holders generally used to finish their business of vending during the afternoon itself and remove the carcasses. They, however, used to leave in their stalls wooden blocks for chopping meat, weighing scales, meat choppers and other implements used by them in connection with their business. There used to be left either in boxes or almirahs kept in the stall and locked up therein.
It is also an admitted fact that some of the stall-holders have been carrying on business uninterruptedly in their stalls for as long as forty years while some of them have not been in occupation for more than five years. It is in evidence that these stall-holders have been executing fresh agreements governing their use and occupation of stalls and payment of what is styled in the agreements as rent whenever a new contractor was engaged by the appellants for collecting rents.
The next thing to be mentioned is that the agreements referred to the money or charges payable by the stall-holders to the landlords as 'rent' and not as 'fee'. It has, however, to be noted that the dues payable accrue from day-to- day. Thus, in Ex. A-1 the rent of Re. 1 is said to be payable every day by 1.00 P.M. In all these agreements there is a condition that in case there is default in payment of rent for three days the stall-holder was liable to be evicted by being given 24 hours' notice. A further condition in the agreements is that a stall-holder may be required by the landlord to vacate the stall after giving him 30 days' notice. There is a provision also regarding repairs in these agreements. The liability for the annual repairs is placed by the agreement upon the landlord and these repairs are ordinarily to be carried out in the month of June every year. Where, however, repairs became necessary on account of the carelessness of a stall-holder they were to be carried out at the expense of that stall-holder. It may be also mentioned that these agreements are obtained by the contractors from the stall-holders in favour of the landlord and bear the signatures only of the stall-holders.
It was contended before us by Mr. R. Gopalakrishnan that in order to ascertain the relationship between the appellants and the respondents we must look at the agreements alone and that it was not open to us to look into extraneous matters such as the surrounding circumstances. It is claimed on behalf of the respondents that the lease in their favour is of a permanent nature. But if that were so, the absence of a registered instrument would stand in their way and they would not be permitted to prove the existence of that leas by parol evidence. From the fact, however, that with every change in the contractor a fresh agreement was executed by the stall-holders it would be legitimate to infer that whatever the nature of the right conferred by the agreement upon the stall-holders, it could not be said to be one which entitled them to permanent occupation of the stalls. It could either be a licence as contended for by the appellant or a tenancy from month to month. In either case there would be no necessity for the execution of a written agreement signed by both the parties. Here, the agreements in question are in writing, though they have been signed by the stall-holders alone. All the same, oral evidence to prove their terms would be excluded by section 92 of the Evidence Act. To that extent Mr. Gopalakrishnan is right. Though that is so, under the 6th proviso to that section the surrounding circumstances can be taken into consideration for ascertaining the meaning of the word 'rent' used in the agreements. Indeed, the very circumstance that rent is to fall due every day and in default of payment of rent for three days the stall-holder is liable to be evicted by being given only 24 hours' notice it would not be easy to say that this 'rent' is payable in respect of a lease. On the other hand, what is called rent may well be only a fee payable under a licence. At any rate this circumstance shows that there is ambiguity in the document and on this ground also surrounding circumstances could be looked into for ascertaining the real relationship between the parties. Indeed, the City Civil Court has gone into the surrounding circumstances and it is largely on the view it took of them that it found in favour of the appellants.
The High Court, however, has based itself upon the agreements themselves. To start with it pointed out - and in our opinion rightly - that the use of the word 'rent' in Ex. A-1 did not carry the respondents' case far. The reasons given by it for coming to the conclusion that the transaction was a lease, are briefly as follows:
(1)Notice was required to be given to the stall-holder before he could be asked to vacate even on the ground of non-payment of rent;
(2)the annual repairs were to be carried out by the landlord only in the month of June;
(3)the stall-holder was liable to carry out the repairs at his own expense when they are occasioned by him carelessness;
(4)even if the landlord wanted the stalls for his own purpose he could obtain possession not immediately but only after giving 30 days' notice to the stall-holder;
(5)the possession of the stalls by the respondents had been continuous and unbroken by virtue of the terms of the agreement and that the terms of the original agreement were not shown to have been substituted by fresh agreements executed by the respondents.
The High Court, therefore, held that from the general tenor of the documents it is fairly clear that as between the appellants and the respondents the terms created only a tenancy in respect of the stalls and not a mere licence or permissive occupation. After saying that if the occupation of the stall-holders was only permissive the condition as to payment of rent, eviction for default in payment of rent for more than 3 days, the provision for annual repairs being carried out by the landlord, the further provision that repairs that might be occasioned by the carelessness of the respondents should be carried out at their expense and the adequate provision for 30 days' notice for vacating the stalls if they were required by the landlord would all seem to be inconsistent and irrelevant, it observed:
"As a matter of fact, there is no evidence whatsoever to show that any of these plaintiffs were at any time turned out of their possession of their stalls at the will of the landlords or for default of any of the terms and conditions stipulated in the agreements. The specific provision for 30 days' notice for vacating and delivering possession seems to be conclusive of the fact that the plaintiffs were to occupy the stalls as permanent tenants and not as mere licensees. The terms of the agreements further disclose that the plaintiffs were to be in exclusive possession of these stalls for the purpose of their trade as long as they comply with the terms and until there was a notice of termination of their tenancy in respect of the shops held by them. The very tenor of the agreements, the intention behind the terms contained in the agreements and the measure of control established by the terms of the agreements, all point only to the fact that the plaintiffs were to be in undisturbed and exclusive possession of the stalls as long as they paid the rent and until there was a valid termination of their right to hold the stalls as such tenants."
Hence the present appeal.
Findings of the Court: It was observed by the Court, in the facts and circumstances of the case, as under:
"While it 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 a licence. In England it has been held that a contractual licence may be revocable or irrevocable according to the express or implied terms of the contract between the parties. If has further been held that if the licensee under a revocable licence has brought 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. (See Halsbury's Laws of England, 3rd Edn., Vol. 23, p. 431). 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 or non-performance of 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 Court's 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 (Ibid p. 427). Here the terms of the document evidencing the agreement between the parties are not clear and so the surrounding circumstances and the conduct of the parties have also to be borne in mind for ascertaining the real relationship between the parties. Again, as already stated, the documents relied upon being merely agreements executed unilaterally by the stall-holders in favour of the landlords they cannot be said to be formal agreements between the parties. We must, therefore, look at the surrounding circumstances. One of those circumstances is whether actual possession of the stalls can be said to have continued with the landlords or whether it had passed on to the stall-holders. Even if it had passed to a person, his right to executive possession would not be conclusive evidence of the existence of a tenancy though that would be a consideration of first importance. That is what was held in Errington v. Errington and Woods, (1957) 1 KB 290; Cobb v. Lane, (1952) 1 All ER 1190. These decisions reiterate the view which was taken in two earlier decisions: Clore v. Theatrical Properties Ltd. and Westby & Co. Ltd., (1936) 3 All ER 483; Smith & Son v. The Assessment Committee for the Parish of Lambeth, (1882) 10 QBD 327. Mr. S.T. Desai appearing for the appellants also relied on the decision of the High Court of Andhra Pradesh in Vurum Subba Rao v. The Eluru Municipal Council, ILR (1956) AP 515, as laying down the same proposition. That was a case in which the High Court held that stall-holders in the municipal market who were liable to pay what was called rent to the municipality were not lessees but merely licensees. The fact, therefore, that a stall-holder has exclusive possession of the stall is not conclusive evidence of his being a lessee. 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 constructed not as a mere licence but as a lease. (See Associated Hotels of India Ltd. v. R.N. Kapoor, (1960) 1 SCR 368. In the case before us, however, while it is true that each stall-holder is entitled to the exclusive use of his stall from day-to-day it is clear that he has no right to use it as and when he chooses to do so or to sleep in the stall during the night after closure of the market or enter the stall during the night after 11-00 P.M. at his pleasure. He can use it only during a stated period every day and subject to several conditions. These circumstances, coupled with the fact that the responsibility for cleaning the stalls, disinfecting them and of closing the market in which the stalls are situate is placed by the Act, the regulations made thereunder and the licence issued to the landlords, is on the landlords, would indicate that the legal possession of the stalls must also be deemed to have been with the landlords and not with the stall-holders. The right which the stall-holders had was to the exclusive use of the stalls during stated hours and nothing more. Looking at the matter in a slightly different way it would seem that it could never have been the intention of the parties to grant anything more than a licence to the stall-holders. The duties cast on the landlord by the Act, are onerous and for performing those duties they were entitled to free and easy access to the stalls. They are also required to see to it that the market functioned only within the stated hours and not beyond them and also that the premises were used for no purpose other than of vending comestibles. A further duty which lay upon the landlords was to guard the entrance to the market. These duties could not be effectively carried out by the landlord by parting with possession in favour of the stall-holders by reason of which the performance by the landlords of their duties and obligations could easily be rendered impossible if the stall-holders adopted an unreasonable attitude. If the landlords failed to perform their obligations they would be exposed to penalties under the Act and also stood in danger of having their licences revoked. Could, in such circumstances, the landlords have ever intended to part with possession in favour of the stall-holders and thus place themselves at the mercy of these people ? We are, therefore, of the opinion that the intention of the parties was to bring into existence merely a licence and not a lease and the word 'rent' was used loosely for 'fee'."
Upon this view the appeal was allowed, while setting aside the decree of the High Court and dismissing the suit of the respondents insofar as it related to reliefs (ii) (e), (f) and (g) granted by the High Court against the appellants. So far as the remaining reliefs granted by the High Court were concerned, its decree was confirmed, without any cost.
Lease of immovable property is governed by Chapter V of the Transfer of Property Act, 1882, which contains provisions from 117. These provisions are essential to understand the concept of lease under the said Act, which for the sake of convenience, in our country, is referred to as "Contractual Tenancy", vis-…-vis the tenancy under the special piece of legislation in respective States (for example Delhi Rent Control Act, 1958 in Delhi), which is referred to as "Statutory Tenancy". These provisions are reproduced as under:
105. Lease defined.-
A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.
Lessor, lessee, premium and rent defined: The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent.
106. Duration of certain leases in absence of written contract or local usage.-
In the absence of a contract or local law or usage to the contrary, a lease of immovable property for agricultural or manufacturing purposes shall be deemed to be a lease from year to year, terminable, on the part of either lessor or lessee, by six months' notice expiring with the end of a year of the tenancy; and a lease of immovable property for any other purpose shall be deemed to be a lease from month to month, terminable, on the part of either lessor or lessee, by fifteen days' notice expiring with the end of a month of the tenancy.
Every notice under this section must be in writing, signed by or on behalf of the person giving it, and either be sent by post to the party who is intended to be bound by it or be tendered or delivered personally to such party, or to one of his family or servants at his residence, or (if such tender or delivery is not practicable) affixed to a conspicuous part of the property.
107. Leases how made.-
A lease of immovable property from year to year, or for any term exceeding one year or reserving a yearly rent, can be made only by a registered instrument.
All other leases of immovable property may be made either by a registered instrument or by oral agreement accompanied by delivery of possession.
Where a lease of immovable property is made by a registered instrument, such instrument or, where there are more instruments than one, each such instrument shall be executed by both the lessor and the lessee:
Provided that the State Government from time-to-time, by notification in the Official Gazette, direct that leases of immovable property, other than leases from year to year, or for any term exceeding one year, or reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral agreement without delivery of possession.
108. Rights and liabilities of lessor and lessee.-
In the absence of a contract or local usage to the contrary, the lessor and the lessee of immovable property, as against one another, respectively, possess the rights and are subject to the liabilities mentioned in the rules next following, or such of them as are applicable to the property leased:-
(A)Rights and liabilities of the lessor
(a)The lessor is bound to disclose to the lessee any material defect in the property, with reference to its intended use, of which the former is and the latter is not aware, and which the latter could not with ordinary care discover;
(b)the lessor is bound on the lessee's request to put him in possession of the property;
(c)the lessor shall be deemed to contract with the lessee that, if the latter pays the rent reserved by the lease and performs the contracts binding on the lessee, he may hold the property during the time limited by the lease without interruption.
The benefit of such contract shall be annexed to and go with the lessee's interest as such, and may be enforced by every person in whom that interest is for the whole or any part thereof from time to time vested.
(B)Rights and liabilities of the lessee
(d)If during the continuance of the lease any accession is made to the property, such accession (subject to the law relating to alluvion for the time being in force) shall be deemed to be comprised in the lease;
(e)if by fire, tempest or flood, or violence of an army or of a mob, or other irresistible force, any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let, the lease shall, at the option of the lessee, be void:
Provided that, if the inquiry be occasioned by the wrongful act or default of the lessee, he shall be entitled to avail himself of the benefit of this provision;
(f)if the lessor neglects to make, within a reasonable time after notice, any repairs which he is bound to make to the property, the lessee may make the same himself, and deduct the expense of such repairs with interest from the rent, or otherwise recover it from the lessor;
(g)if the lessor neglects to make any payment which he is bound to make, and which, if not made by him, is recoverable from the lessee or against the property, the lessee may make such payment himself, and deduct it with interest from the rent, or otherwise recover it from the lessor;
(h)the lessee may even after the determination of the lease remove, at any time whilst he is in possession of the property leased but not afterwards all things which he has attached to the earth; provided he leaves the property in the State in which he received it;
(i)when a lease of uncertain duration determines by any means except the fault of the lessee, he or his legal representative is entitled to all the crops planted or sown by the lessee and growing upon the property when the lease determines, and to free ingress and egress to gather and carry them;
(j)the lessee may transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the property, and any transferee of such interest or part may again transfer it. The lessee shall not, by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease;
nothing in this clause shall be deemed to authorise a tenant having an untransferable right of occupancy, the farmer of an estate in respect of which default has been made in paying revenue, or the lessee of an estate under the management of a Court of Wards, to assign his interest as such tenant, farmer or lessee;
(k)the lessee is bound to disclose to the lessor any fact as to the nature or extent of the interest which the lessee is about to take of which the lessee is, and the lessor is not aware, and which materially increases the value of such interest;
(l)the lessee is bound to pay or tender, at the proper time and place, the premium or rent to the lessor or his agent in this behalf;
(m)the lessee is bound to keep, and on the termination of the lease to restore, the property in as good condition as it was in at the time when he was put in possession, subject only to the changes caused by reasonable wear and tear or irresistible force, and to allow the lessor and his agents, at all reasonable times during the term, to enter upon the property and inspect the condition thereof and give or leave notice of any defect in such condition; and, when such defect has been caused by any act or default on the part of the lessee, his servants or agents, he is bound to make it good within three months after such notice has been given or left;
(n)if the lessee becomes aware of any proceeding to recover the property or any part thereof, or of any encroachment made upon, or any interference with, the lessor's rights concerning such property, he is bound to give, with reasonable diligence, notice thereof to the lessor;
(o)the lessee may use the property and its products (if any) as a person of ordinary prudence would use them if they were his own; but he must not use, or permit another to use, the property for a purpose other than that for which it was leased, or fell or sell timber, pull down or damage buildings belonging to the lessor, or work mines or quarries not open when the lease was granted, or commit any other act which is destructive or permanently injurious thereto;
(p)he must not, without the lessor's consent, erect on the property any permanent structure, except for agricultural purposes;
(q)on the determination of the lease, the lessee is bound to put the lessor into possession of the property.
109. Rights of lessor's transferee.-
If the lessor transfers the property leased, or any part thereof, or any part of his interest therein, the transferee, in the absence of a contract to the contrary, shall possess all the rights, and, if the lessee so elects, be subject to all the liabilities of the lessor as to the property or part transferred so long as he is the owner of it; but the lessor shall not, by reason only of such transfer cease to be subject to any of the liabilities imposed upon him by the lease, unless the lessee elects to treat the transferee as the person liable to him:
Provided that the transferee is not entitled to arrears of rent due before the transfer, and that, if the lessee, not having reason to believe that such transfer has been made, pays rent to the lessor, the lessee shall not be liable to pay such rent over again to the transferee.
The lessor, the transferee and the lessee may determine what proportion of the premium or rent reserved by the lease is payable in respect of the part so transferred, and, in case they disagree, such determination may be made by any court having jurisdiction to entertain a suit for the possession of the property leased.
110. Exclusion of day on which term commences.-
Where the time limited by a lease of immovable property is expressed as commencing from a particular day, in computing that time such day shall be excluded. Where no day of commencement is named, the time so limited begins from the making of the lease.
Duration of lease for a year: Where the time so limited is a year or a number of years, in the absence of an express agreement to the contrary, the lease shall last during the whole anniversary of the day from which such time commences.
Option to determine lease: Where the time so limited is expressed to be terminable before its expiration, and the lease omits to mention at whose option it is so terminable, the lessee, and not the lessor, shall have such option.
111. Determination of lease.-A lease of immovable property determines-
(a)by efflux of the time limited thereby,
(b)where such time is limited conditionally on the happening of some event-by the happening of such event,
(c)where the interest of the lessor in the property terminates on, or his power to dispose of the same extends only to, the happening of any event-by the happening of such event,
(d)in case the interests of the lessee and the lessor in the whole of the property become vested at the same time in one person in the same right,
(e)by express surrender, that is to say, in case the lessee yields up his interest under the lease to the lessor, by mutual agreement between them,
(f)by implied surrender,
(g)by forfeiture; that is to say, (1) in case the lessee breaks an express condition which provides that, on breach thereof, the lessor may re-enter; or (2) in case the lessee renounces his character as such by setting up a title in a third person or by claiming title in himself; or (3) the lessee is adjudicated an insolvent and the lease provides that the lessor may re-enter on the happening of such event; and in any of these cases the lessor or his transferee gives notice in writing to the lessee of his intention to determine the lease,
(h)on the expiration of a notice to determine the lease, or to quit, or of intention to quit, the property leased, duly given by one party to the other.
Illustration to clause (f)
A lessee accepts from his lessor a new lease of the property leased, to take effect during the continuance of the existing lease. This is an implied surrender of the former lease, and such lease determines thereupon.
112. Waiver of forfeiture.-
A forfeiture under section 111, clause (g) is waived by acceptance of rent which has become due since the forfeiture, or by distress for such rent, or by any other act on the part of the lessor showing an intention to treat the lease as subsisting:
Provided that the lessor is aware that the forfeiture has been incurred:
Provided further that, where rent is accepted after the institution of a suit to eject the lessee on the ground of forfeiture, such acceptance is not a waiver.
113. Waiver of notice to quit.-
A notice given under section 111, clause (h), is waived, with the express or implied consent of the person to whom it is given, by any act on the part of the person giving it showing an intention to treat the lease as subsisting.
Illustrations
(a)A, the lessor, gives B, the lessee, notice to quit the property leased. The notice expires. B tenders and A accepts, rent which has become due in respect of the property since the expiration of the notice. The notice is waived.
(b)A, the lessor, gives B, the lessee, notice to quit the property leased. The notice expires, and B remains in possession. A gives to B as lessee a second notice to quit. The first notice is waived.
114. Relief against forfeiture for non-payment of rent.-
Where a lease of immovable property has been determined by forfeiture for non-payment of rent, and the lessor sues to eject the lessee, if, at the hearing of the suit, the lessee pays or tenders to the lessor the rent in arrear, together with interest thereon and his full costs of the suit, or gives such security as the Court thinks sufficient for making such payment within fifteen days, the Court may, in lieu of making a decree for ejectment, pass an order relieving the lessee against the forfeiture; and thereupon the lessee shall hold the property leased as if the forfeiture had not occurred.
114A. Relief against forfeiture in certain other cases.-
Where a lease of immovable property has been determined by forfeiture for a breach of an express condition which provides that on breach thereof the lessor may re-enter, no suit for ejectment shall lie unless and until the lessor has served on the lessee a notice in writing-
(a)specifying the particular breach complained of; and
(b)if the breach is capable of remedy, requiring the lessee to remedy the breach, and the lessee fails, within a reasonable time from the date of the service of the notice, to remedy the breach, if it is capable of remedy.
Nothing in this section shall apply to an express condition against the assigning, under-letting, parting with the possession, or disposing, of the property leased, or to an express condition relating to forfeiture in case of non-payment of rent.
115. Effect of surrender and forfeiture on underleases.-
The surrender, express or implied, of a lease of immovable property does not prejudice an under lease of the property or any part thereof previously granted by the lessee, on terms and conditions substantially the same (except as regards the amount of rent) as those of the original lease; but, unless the surrender is made for the purpose of obtaining a new lease, the rent payable by, and the contracts binding on, the underlessee shall be respectively payable to and enforceable by the lessor.
The forfeiture of such a lease annuls all such underleases, except where such forfeiture has been procured by the lessor in fraud of the underlessees, or relief against the forfeiture is granted under section 114.
116. Effect of holding over.-
If a lessee or underlessee of property remains in possession thereof after the determination of the lease granted to the lessee, and the lessor or his legal representative accepts rent from the lessee or underlessee, or otherwise assents to his continuing in possession, the lease is, in the absence of an agreement to the contrary, renewed from year to year, or from month to month, according to the purpose for which the property is leased, as specified in section 106.
Illustrations
(a)A lets a house to B for five years. B underlets the house to C at a monthly rent of Rs. 100. The five years expire, but C continues in possession of the house and pays the rent to A. C's lease is renewed from month to month.
(b)A lets a farm to B for the life of C. C dies, but B continues in possession with A's assent. B's lease is renewed from year to year.
117. Exemption of leases for agricultural purposes.-
None of the provisions of this Chapter apply to leases for agricultural purposes, except insofar as the State Government may, by notification published in the Official Gazette, declare all or any of such provisions to be so applicable in the case of all or any of such leases, together with, or subject to, those of the local law, if any, for the time being in force.
Such notification shall not take effect until the expiry of six months from the date of its publication.Law related to these provisions in different cases has been discussed in subsequent chapters at appropriate places.
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