Holding

The agreement was held to be a lease, establishing a landlord‑tenant relationship, and the appellant is a tenant.

Summary

The respondent (landlord) sued the appellants (father and son) for mandatory injunction to vacate a shop premises, alleging that a deed of licence executed in 1981 had terminated. The trial court and first appellate court found the appellants to be tenants, but the High Court reversed, treating the deed as a licence to evade rent‑control law. The Supreme Court examined the substance of the arrangement, emphasizing the real intention of the parties, exclusive possession, and the conduct before and after the deed. It held that despite the label of "licence," the parties intended a landlord‑tenant relationship, with the landlord not retaining control over the premises. Consequently, the suit for injunction was dismissed, the appellant was confirmed as a tenant, and an enhanced rent of Rs. 2000 per month was ordered. The appeal was allowed, setting aside the High Court decree and restoring the lower courts' decisions.

Issues considered

Whether the deed of licence creates a lease or a licence.
Whether the landlord retained control or possession sufficient to characterize the arrangement as a licence.
Whether the appellant is entitled to tenancy protection under rent‑control legislation.
Whether the suit for mandatory injunction is maintainable.

Legislation cited

Subjects

leaselicenceexclusive possessionrent controltenancydeed of licencelandlord-tenant relationshipmandatory injunctionenhanced rent

Judgment

C.M. BEENA AND ANR.
,
A
v.
P.N. RAMACHANDRA RAO

MARCH 22, 2004

B [R.C. LAHOTl AND DR. AR. LAKSHMANAN, JJ.]

Rent Control and Eviction: 4-- '

lease and licence-Distinction between-Tests to determine-Held: Real
C intention of the parties as decipherable from a complete reading of the
document, if any, executed between the parties and the surrounding
circumstances as also their conduct before and after creation ofthe relationship
is ofrelevance to determine whether it is lease or licence-If the owner retained
control or possession over the property, then it was a licence-User of the
D terms like "/ease" or "licence" not by itself decisive-Indian Easements Act,
1882, s. 52.

Constitution of India, 1950:

Article l 42--Relief-Grant of-Rent paid in respect of a property lease
E was found to be very meagre-Said property located in a busy commercial
locality of a city bustling with business and commercial activity-Hence,
considering oil facts and circumstances of the case, relief of enhanced rent
granted

The respondent filed a civil suit seeking issuance of mandatory
F injunction directing the appellants to hand over vacant possession of the
suit premises to the respondent on the ground that the licence to occupy
the suit premises was terminated. The trial Court directed the suit to be
dismissed by recording a finding that one of the two appellants was a
tenant and not a mere licensee. The decree was maintained in the first
appeal. In the appeal preferred by the landlord-respondent, the High
G Court had set aside the judgments and decrees of the two Courts below
and directed a decree as prayed for being passed. Hence the appeal by
the defendant-appellant.

Allowing the appeal, the Court

H 306
'
C.M. BEEN Av. P.N. RAMACHANDRA RAO 307
HELD: I. I. Though a deed of licence may have been executed it is A
open for the parties to the documents to show that the relationship which
was agreed upon by the parties and was really intended to be brought into
existence was that of a landlord and tenant though it was outwardly styled
as a deed of licence to act as a camouflage on the Rent Control Legislation.
(311-C-D( B
1.2. Generally speaking the difference between a 'lease' and 'licence'
is to be determined by finding out the real intention of the parties as
•4 decipherable from a complete reading of the document, if any, executed
between the parties and the surrounding circumstance. Only a right to
use the property in a particular way or under certain terms given to the C
occupant while the owner retains the control or possession over the
premises results in a licence being created; for the owner retains legal
possession while all that the licensee gets is a permission to use the premises
for a particular purpose or in a particular manner and but for the
permission so given the occupation would have been unlawful. (311-E-Fl
D
Associated Hotels of India Ltd. v. R.N. Kapoor, AIR (1959) SC 1262
and Corporation o(Ca/ic111 v. K. Sreenivasan, (2002( 5 SCC 361, relied on.

Evans and Smith: "The law of landlord and Tenant" 4th Edn. and
Hill and Redman: "law of landlord and Tenant" 17th Edn., Vol. I, referred
to. E
2. A few principles are well settled. User of the terms like 'lease' or
licence', 'lessor' or 'licensor', 'rent' or 'licence fee' are not by themselves
decisive of the nature of the right created by the document. An effort
should be made to find out whether the deed confers a right to possess
exclusively coupled with transfer of a right to enjoy the property, or what F
has been parted with is merely a right to use the property while the
possession is retained by the owner. The conduct of the parties before and
after the creation of relationship is of relevance for finding out their
intention. (311-G-H; 312-A(

3. On the facts found by the two Courts below which findings have
G
not been reversed by the High Court it is clear that the nature of the
premises is of a shop and not a garage meant and designed exclusively
for parking a car. The premises are located in a busy commercial market.
The appellant has exclusive possession over the premises and the owner
neither can nor does interfere therein. A full fledged stationery shop and H
308 SUPREME COURT REPORTS [2004] 3 S.C.R.

A 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 licence and in spite of
the 'deed of licence' of 1981 having been executed continued to possess,
use and enjoy the occupation of the premises as before. Though the so
called licence expired in 1982, the respondent did not insist on the appellant
B 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
C 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 it is held that the relationship between the parties to be of
landlord and te11ant and the possession of the appellant over che premises
as that of a tenant. 1313-D-HI

D 4. The compensation which the appellant was paying to the
respondent was very meagre looking at the size of the premises and its
admitted location in a busy commercial locality of a city bustling with
business and commercial activity. Though, the suit must suffer a dismissal
and as a result the appellant shall continue in possession but considering
E all the facts and circumstances of the case, the appellant should pay
enhanced rent till he continues to remain in lawful possession of the
premises. 1314-A-CI
.. '
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1548 of 1999.

F From the Judgment and Order dated 17.6.98 of the Kerala High Court
i11 S.A. No. 846 of 1995.

E.M.S. Anam for the Appellants.

T.L. V. Iyer. Ms. Malini l'onduval and Ms. Lansinglu Rongmei for the
G Respondent.

The Jud·gment of the Court was delivered by

R.C. LAHOTI, .I. The suit property is a shop situated on the ground .~
floor of a building known as "Woodlands Building" on the M.G. Road,
H Ernakulam. The respondent filed a civil suit seeking issuance of mandatory
C.M. BEENA v. P.N. RAMACHANDRA RAO [LAHOTI . .I] 309

injunction directing the appellants to hand over vacant possession over the A
shop to the respondent on the ground that the licence to occupy the suit
premises was terminated. The trial Court directed the suit to be dismissed by
recording a finding that one of the two appellants (who are father and son)
was a tenant <}nil not a mere licensee. The son was held to be a tenant and
hereinafter he is being referred to as the appellant. The decree was maintained B
in first appeal. In the second appeal preferred by the lanc!lord the High Court
has set aside the judgments and decrees of the two Courts below and directed
a decrees as prayed for being oassed. The defendant has preferred this appeal
by special leave.

The building is a double-storey building. On the upper floor the C
respondent is conducting hotel business. On the ground floor there are several
shops. A photo of the building, produced for the perusal of the Court at the
time of hearing, shows a number of shops in continuity located on the ground
floor.

According to the respondent the premises in occupation of the appellant D
is a car parking place. As between the parties there exists a document dated
April 1, 1981 executed by the appellant in favour of the respondent which is
styled as a deed of licence. The document begins with a recital-"whereas
licencee is desirous of having the use of the premises for conducting a
stationery shop in room ..... in Woodlands building intended as car parking E
space for lodgers at the time of construction." The next para states-"And
whereas the licensor is willing to grant licence to the licencee in respect of
the aforesaid room for the purpose of carrying on business in stationery
goods as licencee of the premises".

A brief resume of the relevant out of the nine clauses of terms and p
conditions agreed upon between the parties and as contained in the deed
would suffice. Vide clause ( l ), the licence fee is appointed at Rs. 500 per
mensem. The licensee is authorized "to use the room as licensee for period
of one year from 1.4.1981". Clause (2) enjoins the licensee not to make any
structural alterations in the room. Clause (3) permits the licensee and his
servants to use the bathroom and toilet facility in the building and also the G
telephone facilities subject to payment of the telephone charges. If the licensee
requires any decorative electrification it may be provided by the licensor at
the cost of the licensee. Clause (4) obligates the licensee to pay the current
charges of electricity consumed. Vide clause (5), the licensee must, at the end
of one year, hand over possession to the licensor by removing all his goods H
310 SUPREME COURT REPORTS [2004] 3 S.CR.

A and other immovable from the premises unless by mutual agreement a fresh
contract is entered into between the parties. Clause (6) entails automatic
termination of licence on non-payment of licence fee. Clauses (7) and (8)
were much relied on by the learned counsel for the lincensor-respondent and
hence are reproduced verbatim as under:-
B "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 propose of his
Hotel and Loding 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 Licence creates no estate or
c interest in the Licencee over the premises and the Licensee shall have
only a permission to use the premises for his business."

It is the respondent's own case, as pleaded in the plaint, that the appellant
is running a stationery shop and allied business activities in the premises.
D Though the period of licence expired w.e.f. 13.3.1982, the appellant has
continued to remain in occupation of the premises. The suit was filed on
22.9.1989. The written statement obviously denied all the material plaint
averments and pleaded a case of tenancy and the deed of licence being a
camouflage for evading the applicability of Rent Control legislation.

E In its judgment dated 17.1.1992, the trial Court arrived at certain finding
which are of relevance and significance. The trial Court found that initially
the appellant was inducted as tenant in the premises in the month of April
1972 on a monthly rent of Rs. 300 and has continued to remain in occupation
of the premises ever since then. The rent was increased from Rs. 300 to Rs.
360 and then to Rs. 500. The business carried on by the appellant in the suit
F premises is not in any manner connected with the hotel business of the
respondent. The nature of the premises is not such as can be said to be
necessarily an adjunct of the premises in possession of the resp0ndent for his
own use. Though a part of the same building, the shop in possession of the
appellant is a separate entity or a separate unit of premises. The appellant is
G in exclusive possession of the premises. The business conducted by the
appellant in the premises is not only different from the one carried on by the
respondent, the respondent has no supervisory power or any other connection
with the business run by the appellant. The compensation paid by the appellant
to the respondent for user of the premises is paid month by month. The
appellant entered in the witness box but the respondent did not adduce any
H evidence relevant for the purpose of determining the nature of the appellant's
C.M. BEEN Av. P N RAMACHANDRA RAO [LAHOTI . .I.] 311

occupation Of the suit premises or the appellant's status- whether a tenant or A
a licensee. The trial Court also concluded that the appellant has been in
possession of the suit premises for a long time and the respondent being in
a dominating position he had prevailed over the appellant for executing the
deed of licence. On these findings, the trial Court concluded that the appellant
was a tenant and the tenancy was not terminated. All these findings have B
been upheld by the first appel !ant Court.

A perusal of the judgment of the High Court shows a failure on the part
• ~ of the High Court in giving any serious thought to the findings concurrently
arrived at by the two Courts below. The High Court bas been much impressed
by the apparent tenor of the· document dated April I, 1981 and held the C
relationship between the respondent and the appellant to be that of the licensor
and licensee.

The crucial issue for determination is as to whether there is a lease or
licence existing between the parties. Though a deed of licence may have been
executed it is open for the parties to the document to show that the relationship D
which was agreed upon by the parties and was really intended to be brought
into existence was that of a landlord and tenant though it was outwardly
styled as a deed of licence to act as a camouflage on the Rent Control
Legislation. 'Lease' is defined in Section I05 of the Transfer of Property Act
1882 while 'licence' is defined in Section 52 of the Indian Easements Act
l882. Generally speaking the difference between a 'lease' and 'licence' is to
E
be determined by finding out the real intention of the parties as decipherable
from a complete reading of the document, if any, executed between the
parties and the surrounding circumstances. Only a right to use the .property
ltHI particular way or under certain terms given to the occupant while the
·owner retains the control or possession over the premises results in a licence F
being c:-eated; for the owner retains legal possession while all that the lice;; see
gets is a pennission to use the premisee for a .particular purpose or in a
particular manner and but fru: the permission so given the occupation would
have been unlawful (See Associated Hotels of India Ltd. v. R.N. Kapoor, AIR
(1959) SC 1262). The decided cases on the point are ligion. For our purpose G
it would suffice to refer to a recent decision of this court in Corporation of
Cafic1il -v: K.. .Sreenivasan, [2002] 5 SCC 36).

A few principles· are· well- .settled. User. of the terms like 'lease or
'licence', 'lessor', 'rent' or 'licence fee' are not-.b.)l themselves decisive of the
nature of the right created by the document. An effort shou1d·be.made to find H
312 SUPREME COURT REPORTS [2004] 3 S.C.R.

A out whether the deed confers a right to possess exclusively coupled with
transfer of a right to enjoy the property or what has been parted with is
merely a right to use the property while the possession is retained by the
owner. The conduct of the parties before and after the creation of relationship
is of relevance for finding out their intention.

B Given the facts and circumstances of a case, particularly when there is
a written document executed between the parties, question arises as to what
are the tests which would enable pronouncing upon the nature of relationship
between the parties. Evans and Smith state in The Law of Landlord and
Tenant (Fourth Edition)- "A lease, because it confers an estate in land, is
C much more than a mere personal or contractual agreement for the occupation
of a freeholder's land by a tenant. A lease, whether fixed-term or periodic,
confers a right in prope11y, enabling the tenant to exclude all third parties,
including the landlord, from possession, for the duration of the lease, in
return for which a rent or periodical payment is reserved out of the land. A
contractual licence confers no more than a permission on the occupier to do
D some acf on the owner's land which would otherwise constitute a trespass. If
exclusive possession is not conferred by an agreement, it is a licence." "..... the
fundamental difference between a tenant and a licensee is that a tenant, who
has exclusive possession, has an estate in land, as opposed to a personal
permission to occupy. If, however, the owner of land proves that he never
E intended to accept the occupier as tenant, then the fact that the occupier pays
regular sums for his occupation does not make the occupier a tenant. "(at
page 33).

In Hill and Redman's Law ofland/ord and Tenant (Seventeenth Edition,
Vol.I) a more detailed discussion also laying down the determinative tests,
F is to be found stated as followed: "It is essential to the creation of a tenancy
of a corporeal hereditament th2: the tenant should be granted the right to the
exclusive possession of the premises. A grant under which the grantee takes
only the right to use the premises without being entitled to exclusive possession
must operate as a licence and not as a lease. It was probably correct law at
G one time to say that the right of exclusive possession necessarily characterized
the grant as that of a lease; but it is now possible for a licensee to have the
right to exclusive possession. However. the fact that exclusive possession is
grnnted. though by no means decisive against the view that there is a mere
licence, as distinct from a tenancy, is at all events a consideration of the first
importance. Further, a grant of exclusive possession may be only a licence
H and not a lease where the grantor has no power to grant a lease. In deciding
C.M. BEENA v. P.N. RAMACHANORA RAO [LAHOTI, .I.] 313

•.1 whether a grant amounts to a lease, or is only a licence, regard must be had A
to the substance rather that the form of the agreement, for the relationsltip
between the parties is determined by the law and not by the table which they
choose to put on it. It has been said that the law will not impute an intention
to enter into the legal relation of landlord and tenant where circumstances
and conduct negative that ignition; but the fact that the agreement contains
a clause that no tenant is to be created will not, of itself, preclude the instrument B
from being a lease. If the effect of the instrument is to give the holder the
exclusive right of occupation of the land, though subject to certain
1
-,,#. reservations, or to a restriction of the purposes for which it may be used, it
is primafacie a lease; if the contract is merely for the use of the property in
a certain way and on certain terms, while it remains in the possession and C
under the control of the owner, it is a licence. To give exclusive possession
there need not be express words to that effect; it is sufficient if the nature of
the acts to be done by the guarantee require that he should have exclusive
possession. On the other hand, the employment of words appropriate to a
lease such as 'rent' or 'rental' will not prevent the grant from being a mere
licence if from the whole document it appears that the possession of the D
property is to be retained by the grantor." (at pages 14-15).

On the facts found by the two Courts below which findings have not
been reversed by the High Court it is clear that the nature of the premises is
of a shop and not a garage meant and designed exclusively for parking a car. E
The premises are located in a busy commercial market. 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 licence and in spite of the 'deed of licence' of 1981 having F
been executed continued to possess, use and enjoy the occupation of premises
as before. Though the so-called licence expired in l 982 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 G
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 permissipn 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 H
314 SUPREME COURT REPORTS (2004] 3 S.C.R.

A that of a tenant.
The suit for mandatory injunction filed by the respondent must suffer
the inevitable dismissal. However, during the course of hearing we indicated
to the learned counsel for the appellant that the compensation which he was
paying to the respondent was very meager looking at the size of the premises
B and its admitted location in a busy commercial locality of a city bustling with
business and commercial activity. Though, the suit must suffer a dismissal
and as a result the appellant shall continue in possession but considering all
the facts and circumstances of the case the appellant should pay Rs. 2000 per ~ ,
month by way of rent of the suit premises from I" April, 2004 till he continues
C to remain in lawful possession of the premises.

The appeal is allowed. The judgment and decree of the High Court is
set aside. Instead, the decree of the trial Court as upheld by the first appellate
Court is restored. The appellant shall remain liable to clear the previous
arrears, if any, at the rate agreed upon between the pa11ies and pav rent
D calculated at the rate Rs. 2000 per month for future w.e.f. I" April 2004.
Costs as incurred throughout.

Y.S.S. Appeal allowed.

.c