Holding

The agreement is a lease creating exclusive possession, making the appellant a tenant protected by the rent‑control Act.

Summary

The respondent landlord and the appellant entered into a written agreement that was labeled as a leave and licence, but its terms required payment of monthly rent, prohibited sub‑letting, and provided for renewal, indicating an interest in the premises. After the agreement expired, the landlord sued for eviction, claiming the appellant was a licensee and the suit was not barred by the Goa, Daman and Diu Buildings (Lease, Rent and Eviction) Control Act, 1968. The trial court and the district judge decreed eviction, and the High Court upheld those decisions on the basis of concurrent findings of fact. The Supreme Court held that the lower courts' findings were not binding under CPC s.100 and that the document must be interpreted by its substance, not its label, establishing that it created a lease and exclusive possession for the appellant. Consequently, the appellant was a month‑to‑month tenant protected by the rent‑control Act, rendering the eviction suit untenable. The appeal was allowed, the decree set aside, and the suit dismissed.

Issues considered

The nature of the agreement: whether it creates a lease or a licence.
Whether exclusive possession is a decisive test for distinguishing lease from licence.
Whether the findings of fact by lower courts bind the Supreme Court under CPC s.100.
Whether the suit is barred under section 56 of the Goa, Daman and Diu Buildings (Lease, Rent and Eviction) Control Act, 1968.

Legislation cited

Subjects

leaselicenceexclusive possessionrent controlevictioninterpretation of agreementtenant protectionGoa Daman Diu Buildings Act

Judgment

CAPT. B.V.D' SOUZA
A v.
ANTONIO FAUSTO FERNANDES

AUGUST l, 1989

[LAUT MOHAN SHARMA AND J.S. VERMA, JJ.J
B
Goa, Daman and Diu Buildings, (Lease, Rent and Eviction)
Control Act, 1968: Section 5{r-Bar.of Court's Jurisdiction.

Rent Control-Deed-Lease or Licence-Determination of-
Jntention of parties-The real test-Test of exclusive possession-
C Whether relevant. ~

Civil Procedure Code, /908:Section JOO IJocument-Whether
lease or licence-Concurrent findings by Trial Court and First Appel-
late Court-Binding effect of in second appeal before High Court.
D The respondent-landlord inducted the appellant into the suit
premises pursuant to an agreement. The agreement was described as
agreement of leave and licence, the parties as licensor and licensee and
the rent as compensation for use and occupation, and it was provided
that the appellant (i) shall pay monthly rent regularly on or before the
Sth day of each consecutive month; (ii) shall not sub-let, under-let or
E part with possession nor shall keep the premises vacant for more than
three months without the consent of the licensor; (iii) that on the expiry
of the deed, it shall berenewable at the will of the licensee.

Several years after the expiry of the above agreement the respon- -
dent instituted a civil suit for a decree of eviction of the appellant on tbe
F ground that the appellant was in occupation as a licensee and bas illeg-
ally refused to vacate. Rejecting the plea of the appellant that he was a~
month to month tenant protected by the provisions oi the Goa, Daman -r ·
and Diu Buildings (Lease, Rent and Eviction) Control Act, 1968 and
that the suit was barred by section 56 the Trial Court passed a decree
for eviction which was conf"ll1Ded in appeal by the District Judge.
G
The second appeal filed by the appellant was also dismissed by the
High Court holding that It was concluded by concorrent findings of
fact. Hence this appeal.

Allowing the appeal, and setting aside the decree of the Courts
H below,
626
BY D'SOUZA v. A.F. FERNANDES 627

HELD: l. The rmdings of the Courts below were not those of fact A
so as to be binding on the High Court under section 100 or the Civil
Procedure Code. The case has to be decided on the nature of poSses.ion
of the appeUant which is dependent on a correct interpretation or the
document. I628G]

2. It is well settled that the main purpose or enacting the Rent B
statutes is to protect the tenant from the exploitation of the landlord,
who being in the dominating position is capable of dictating his terms at
the inception of the tenancy; and, the Rent Acts must receive that
interpretation which may advance the object and suppress the mischief.
By adopting a different approach the Rent laws are likely to be defeated
altogether. [630H, 63IA]
c
+ 3. For ascertaining wh~tber a document creates a licence or lease,
the substaoce or the document must be preferred to the form. The real
test is the intention or the parties-whether they intended to create a
lease or licence. If an interest in the property is created by the deed ii is
a lease but if the document only permits another person to make use of D
the property or which the legal possession continues with the owner, it is
a licence. The test or exclusive possession is not irrelevant but at the
same time it is not conclusive. If the party in whose favour the docu-
ment is executed gets exclusive possession or the property, prima facie
be must be considered to be a tenant; although this factor hy itself will
not be decisive. [629A-B-C, 630B-C] E

- Associated Hotels of India Ltd. v. R.N. Kapoor, [1960] I S.C.R.
368; Sohanlal Naraindas v. Laxmidas Raghunath, [1971] 3
S.C.R. 319; applied.

~
I
Shell-Mex and BP Ltd. v. Manchester Garages Ltd., [1971] I All F
E.R. 841; explained.

4. In the instant case, the terms of the deed are not consistent
with the respondent's case or licence, and indicate that an interest in the
property was created in favour of the appellant in pursuance or which
he was put in possession with a right of renewal. The surrounding G
circumstaoces are also consistent with the deed being one of lease. The
.·~. notice to vacate the premises was served on the appellant after several
years or expiry or the agreement. There was no relationship or friend·
ship bt:_tween the parties, which would have induced the respondent lo
allow· the appellant to occupy the building. Realisation of rent was the
sole consideration. The description of the parties as licensor and H

\
628 SUPREME COURT REPORTS (1989] 3 S.C.R

A
licensee or
the rent as compensation does not carry too much weight.
The agreement was in reality a document of lease, and the appellant has
~een enjoying the exclusive possession in the capacity of month to
month tenant. The suit filed by the respondent was, therefore. not
maintainable. (629F, 6318-C, D-E]

B CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6184 ':/
of 1983.

From the Judgment and Order dated 28. 7. 1983 of the Bombay
High Court in S.C.A. No. 5/B/1982.
~
S.K. Mehta, Dhruv Mehta, Aman Vachher and Atul Nanda for
c the Appellant.
4-
'
S.K. Dholakia and Praveen Kumar for the Respondent.s.

The Judgment of .the Court was delivered by
D
SHARMA, J. The only point involved in this appeal is whether
the document (Ext. 20) executed by the parties at the time the appel-
lant was inducted in the disputed premises is an agreement of leave
and licence or a deed of lease. The building belongs to the respondent, c
J...,
and the appellant claims to be in its QCl:Upation as a month to month
E tenant. The respondent instituted the suit in the civil court, out of

-
which this appeal by special leave arises, for a decree for eviction of
the appellant alleging that he has been in occupation of the building as
a licensee and .has illegally refused to vacate in spite of' service of
notice. The appellant's defence is that he is a tenant protected by the

F
provisions of the Goa, Daman and Din Buildings (Lease, Rent and
Eviction) Control Act, 1968, and in view of s. 56 thereof the suit in the
civil court is not maintainable. Agreeing with the plaintiff-respondent,
.+
the trial court passed a decree which was confirmed on appeal by the
District Judge. The High Court dismissed the second appeal filed by
the appellant observing that it was concluded.by concurrent findings of
fact.
G
2. We do not agree with the High Court that the findings of the
courts below were those of fact so as to be bindin_g on the High Court ·;i
under s. 100 of the Code of Civil Procedure. The case has to be
decided on the nature of possession of appellant which is dependent on ·
a correct interpretation of the document Ext. 20.
H
3. The document Ext. 20 has been described as an agreement of
/

B.V. D"SOUZA ,.. A.F. FERNANDES [SHARMA. J.] 629

leave and licence and the parties as the Licensor and the Licensee. But A
it is significant to note that in the very first sentence of the document
the respondent is described as "Landlord hereinafter called the
Licensor". However, this cannot answer the disputed issue as it is
firmly established that for ascertaining whether a document creates a
licence or lease, the substance of the document must be preferred to
the form. As was observed by this Court in Associated Hotels of India B
Ltd. v. R.N. Kapoor, [1960] 1 SCR 368, the real test is the intention of
the parties-whether they intended to create a lease or licence. If an
interest in the. property is created by the .deed it is a lease but if the
document only permits another person to make use of the property "of
which the legal possession continues with the owner", it is a licence. If
the party in whose favour the document is executed gets exclusive
possession of the property, prima facie he must be considered to be a C
tenant; although this factor by itslef will not be decisive. Judged in this
light, there does not appear to be any scope for interpreting Ext. 20 as
an agreement of leave and licence.

4. The document has been placed before us by the learned D
counsel for the appellant. Although as stated earlier, it has been
described as an agreement of leave and licence and the parties as the
"Licensor" and the "Lecensee", its provisions unmistakably indicate
that the appellant was being let in as a tenant on the monthly rental of
Rs.350 (besides water and electricity charges) to be paid regularly on
or before the 5th day of each consecutive month. By clause 5, it was E
/
agreed that the appellant "shall not sub-let, under-let or·part posses-
sion of the premises to any stranger nor shall h<;.keep the premises
vacant for more than 3 months without the consent of the Licensor",
that is, the respondent. The question of executing a sub-lease or sub-
letting can arise only by a tenant. If a licensee inducts any person in the
property as his tenant, it cannot be described as sub-letting. In clause F
)
15 it is stated that on the expiry of the period, the deed "shall be
renewable thereafter at the will of the licensee"; and in the event of
the licensee not desiring to renew, "shall give one month's notice in
writing". These terms are not consistent with the respondent's case of
licence, and indicate that an interest in the property was created in
favour of the appellant in pursuance of which he was put in possession G
with a right of renewal. When compared with the terms of the docu-
ments set out in the judgments in Associated Hotels of India Ltd. v.
R.N. Kapoor, [1960] 1SCR368 and Sohan Lal Naraindas v. Laxmidas
Raghunath Gadit, (1971] 3 SCR 319, relied upon by the learned
counsel for the appellant, which were construed by this Court as creat-
ing lease inspite of their description as licence deeds, the appellant's H
630 SUPREME COURT REPORTS [ 1989[ 3 S.C.R.

A case stands out as stronger. If the approach adopted by the courts
below in interpreting the document is accepted, it shall defeat the
object of the Rent Acts, by permitting the parties to camouflage the
real nature of the transaction by resorting to skilful drafting.

5. Mr. Dholakia, learned counsel for the respondent, strene- '.,
-'
B ously, contended that the test of exclusive possession is an outdated
one which should not now be taken into account for the purpose of
deciding the nature of possession. Reliance was placed on the observa-
tions of Lord Denning MR in Shell-Mex and BP Ltd. v. Manchester I
Garages Ltd., [1971] I All E.R. 841. We do not agree that exclusive ·--.,;..
possession of a party is irrelevant as is suggested; but at the same time
c as has been observed in the earlier cases of this Court, referred to .+
above, it is not conclusive. The other tests, namely, intention of the
parties and whether the document creates any interest in the property
or not, are important considerations. The observations in the English
case, relied upon by the learned counsel for the respondent cannot be
understood to suggest that the test of exclusive possession has been
D n,ow rendered irrelevant and redundant as· they are immediately fol-
lowed by the statement;

"As I have said manytimes, exclusive possession is no
longer decisive."

E The position stands further clarified by the following statement in the
concurring judgment of Buckley, LJ,;

"The only clause which points one way or the other, l
think, is cl. 19 in Sch. I which Lord Denning MR has
already read, which clearly recognises that notwithstanding
F the bargain between the parties, the plaintiffs retained
rights of possession and control over the property in ques-
tion. That seems to me to be consistent only with the fact
that this transaction was in truth a licence transaction and
not a tenancy under which the defendants would obtain an
exclusive right to possession of the property during the
G term of the tenancy, subject, of course, to any rights
reserved by the plaintiffs."

We are also not in a position to agree with Mr. Dholakia when he says
that if the parties themselves have chosen to describe the transaction
as a licence, we cannot make out a different case for them. It is well
H settled that the main purpose of enacting the Rent statutes is to protect
/

B.V. o·soUZA '- A.F. FERNANDES [SHARMA. J.J 631

,.,, the tenant from the exploitation of the landlord, who being in the A
dominating position is capable of dictating his terms at the inception of
the tenancy; and, the Rent Acts must receive that interpretation which
may advance the object and suppress the mischief. By adopting a
\'. different approach the Rent laws are likely to be defeated altogether.

6. The surrounding circumstances are also consistent with the 8
deed being one of lease. The notice to vacate the premises was served
on the appellant after several years of expiry of the term of the agree-
.:.:ment. It is not suggested on behalf of the respondent that there is any
· relationship between the parties or that they were friends which
+- induced him to allow the appellant to occupy the building. Realisation
of rent which has been described in the document (Ext. 20) as "com- c
pensation reserved for use and occupation" was the sole consideration
of the transaction. In this background the description of the parties as

I lessor and lessee or the rent as compensation does not carry much
weight.

7. For the reasons mentioned above, we hold that Ext. 20 was in D
reality a document of lease and the appellant has been enjoying the
) exclusive possession thereof in the capacity of month to month tenant.
As a result the suit was, in view of the provisions of the Goa, Daman
and Diu Buildings (Lease, Rent and Eviction) Control Act, not main-
tainable. The appeal is accordingly allowed but without costs, the

- decree passed by the courts below is set aside and the suit is dismissed.

T.N.A. Appeal allowed.
E