Holding

A person who has physical control of property and acquires an interest in it by agreement of sale is in lawful possession, even if not the legal owner, and is therefore eligible for licence renewal under the Act.

Summary

The appellant, K. Krishna Kishore Firm, had been operating a cinema under a lease that was due to expire in 1976. Before the lease ended, one co‑lessor of the landowner entered into an agreement of sale and a lease of his share with the appellant, who then sought renewal of its cinema licence under the Andhra Pradesh Cinemas (Regulation) Act, 1955. The High Court held that the appellant was neither lessee nor owner and therefore did not have lawful possession, rejecting the licence renewal. On appeal, the Supreme Court distinguished ‘lawful’ from ‘legal’, held that a person who has physical control and acquires an interest by agreement of sale enjoys lawful possession even if not the legal owner, and can therefore file for licence renewal. The Court set aside the High Court order and directed the licensing authority to treat the appellant as in lawful possession for the purpose of renewing the licence.

Issues considered

Whether possession of a lessee who acquires an interest of a co‑lessor before the lease expires is lawful or litigious for purposes of Rule 11 of the Andhra Pradesh Cinemas (Regulation) Rules, 1970.
Whether the appellant, not being a lessee or owner, can be said to have lawful possession of the cinema site.
Interpretation of the terms ‘lawful’, ‘legal’ and ‘litigious’ in the context of licence renewal.
Whether the licensing authority must consider the appellant’s possession lawful and grant renewal of the cinema licence.

Legislation cited

Andhra Pradesh Cinemas (Regulation) Acts. Rule 11 of the 1970 Rules
Specific Relief Act
Transfer of Property Acts. Section 11(l)(d)

Subjects

lawful possessionlegal vs lawfulcinema licence renewalleaseagreement of saleSpecific Relief ActTransfer of Property Actlesseeco‑lessorRule 11

Judgment

A KRISHNA KISHORE FIRM
v.
GOVT. OF. A.P. AND OTHERS

SEPTEMBER 21, 1990.
I
B
[K. JAGANNATHA SHETTY AND•R.M. SAHA!, JJ.]

A.P. Cinemas (Regulation) Act, 1955/A.P. Cinemas (Regulation)
Rules, 1970: Rule I I-Licensee applicant in physical control of cinema
site-Acquiring interest 10 hold by virtue of agreement of sale-Posses-
sion-Nature of-Whether lawful-Application for renewal of license
C -Whether maintainable.

Words and Phrases: 'Lawful', 'legal' and 'litigious'-Connotation
of.

Rule 11 of the A-P. Cinemas (Regulation) Rules, 1970 framed
D under the A.P. Cinemas (Regulation) Act, 1955, as it stood at the rele-
vant time, required a licensee either for grant or renewal of license to
· file evidence of his lawful possession of the site. ·

The appellant-firm had been running a cinema since 1950 on a
piece of land leased by the_ th~n zamindar. The said lease was to expire '. ,
E on March 31, 1976. ln the meantiine the ownership of the land changed
hands. In 1975, when the appellant sought renewal of the license the
estate partnership, consisting of father, son and grandson objected on
the ground that it did not intend to renew the lease. However, on March
24, 1976 one of the co-lessors, the father, entered into an agreement of
sale with the appellant to sell his entire share which was one-halffor a
F consideration. He also ex,ecuted lease of the remaining half the next day
in favour of the appellant as the managing partner of the estate· and
withdrew the objection fded before the licensing authority unconditionally.

A question arose about the nature of appellant's possession. The
High Court found that the co-lessor could not lease out the property on
G his behalf as the partnership deed did not invest him with such an
authority, and that the agreement of sale was ineffective to make him
the owner. Consequently, the possession of appellant was not lawfUI as
last was neither a lessee nor an owner.

Allowing the appeal, the Court,
H

8
K.K. FIRM v. GOVT. OF A.P. 9

HELD: I. When a person having physical control acquires au A
interest to hold or continue by virtue of an agreement of sale it cannot
be said that be bad no interest and his possession was forbidden by law.
In the instant case, by virtue of the transaction entered between the
co-lessor and the appellant which was not challenged by him nor any
cloud was cast over it by creating any subsequent interest tbe appellant
B
may not have become owner but could certainly claim lawful posses-
sion. In law last was entitled to file suit for specific performance if there
was any threat to its right or interest by the co-lessor. Such right or
interest could not be termed as litigious. [13A-C]

2. A lessee may before expiry of lease acquire entire lessor's
interest resulting in drowning or sinking of inferior right into superior c
right. That is right of one merges into another. It has been statutorily
recognised by s. lll(d) of the Transfer of Property Act. Similarly, a
tenant after expiry of period of lease may be holding over and the lessor
may acquiesce in his continuance expressly or impliedly. That is from
conduct of lessor the tenant's possession may stand converted into law-
ful. But where the lessor does not agree to renew the lease nor he D
acquiesce in his continuance a lessee cannot claim any right or interest.
His possession is neither legal nor lawful. In the instant case, the appel-
lant had acquired some interest in part of the undivided property by
virtue of the agreement. It may not be a lessee, but its possession was
not without any excuse or forbidden by law. [12D-G]
E
3. The High Court erred in equating lawful with legal. What is
legal is lawful .. But what is lawful may be so without being formally
legal. That which is not stricto legato may yet be lawful. It should not be
forbidden by law. Although provision in Specific Relief Act empower-
ing a person or tenant to recover possession if he has been evicted
forcibly by the landlord, may be juridical and not lawful or a tenant F
holding over is not in lawful possession unless landlord agrees or
acquiesces expressly or impliedly but that does not alter the legal posi-
tion about possession of a person not legal yet not without'interest. The
provision in Specific Relief Act is founded more on public policy than on
jurisprudence. [llG; 12A-C]
G
4. The licensing authority is directed to consider renewal of
license in accordance with law treating licensee to be in lawful pos-
session. [13F]

M. C. Chockalingam v. M. Manichavasagam, [1974] 2 SCR 143
H
distinguished.
JO SUPREME COURT REPORTS [ 1990] Supp. 2 S.C.R.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2674
A
of 1977.

. From the Judgliient and Order dated 19.8.1977 of the Andhra
Pradesh High Court inWrit Appeal No. 527 of I976.
t
B Dr. K. Parasaran, Mr. A.D.N. Rao and A. Subba Rao for the
Appellants.

C. Sitaramiat1, T.S. Krishnamurthy Iyer, G. Prabhakar,
A.T.M. Sampath and P.N. Ramalingam for the Respondents.

The Judgment of the Court was delivered by
c
R.M. SAIIAI, J. Whether possession of a lessee who acquires
interest of one of the co-lessors, before expiration of period of lease, is
litigious or lawful?

D Litigious and lawful possession are concepts of varying legal
shades deriving their colour from the setting in which they emerge.
Epithet used itself indicates the field in which they operate. The one
pertains to dispute in which possession may be conterminous with
physical or de facto control, only, whereas the domain of other is
control with some legal basis. The former may be uncertain in char-
E acter and may even be without any basis or interest but the latter is
founded on some rule, sanction or excuse. Dictionarily 'litigious'
means "disputed" Concise Oxford Dictionary or "disputable" Concise
Oxford Dictionary" or "marked by intention to quarrel" Webster
Third New International Dictionary, "inviting controversy" Webster
Third New International. Dictionary, "relating to or marked by litiga-
F tion" Webster Third New International Dictionary, "that which is the
subject of laiw suit". Black's Law Dictionary. Lawful on the other hand
is defined as, "legal, warranted or authorised by the law." Black's Law
Dictionary. Jurisprudentially a person in physcial co11trol or ile facto
possession may have an interest but no right to continue whereas a
person in possession, de jure, actually or constructively has the right to
G use, enjoy, destroy or alienate property. "Rights are interest protected
or recognised by law. But every interest may not be so. Its violation
may not be wrong. Many interest exist de facto and not de jure; they
receive no recognition or protection from any rule or right". Salmond
on Jurisprudence.

H With this brief preface it may now be determined if possession of
~,.,
K.K. FIRM v.. GOVT. OF A.P. [SAHA!, J.l 11

appellant who had entered into an agreement of sale with one of
A
co-lessors of his interest, and has been found by High Court to have
entered into his shoes, was lawful for purposes of rule 11 framed under
Andhra Pradesh Cinemas (Regulation) Act 1955 which required a
licensee either for grant or renewal of license to file all necessary
record or certified copies with the application, "relating to his lawful
possession thereof", if he was not the owner. That the appellant has B
been running cinema not as owner but after obtaining lease in 1950 of
2038 2/3 sq. yds. out of7000 sq. yds. from the then Zamindar is not in
dispute. Nor it is in dispute that ownership· of land changed twice since
then and the last purchaser in July 1974 were one V. Venkatarathnam
(in brief V.V. since deceased) his son and grandson who formed a
~ private partnership V.V. Estates in September 1975 and objected to
renewal of appellant's license in December 1975 as the Estate did not c
intend to renew the lease in favour of appellant which was to expire on
~
31st March 1976. But problem arose when on 24th March V.V.
entered into an agreement of sale with appellant to sell his entire share
which was one-half for consideration of Rs.14,000 cash and partner·
ship of I/8th in appellants' cinema business. He further executed lease D
of remaining half on next day in favour of appellant as managing
partner of the Estate and withdrew the objection, filed before licens-
ing authority for renewal of appellant's license, unconditionally.
Dispute however arose as V. V .'s son on his behalf and on behalf of his
nephew refuted authority of his father to grant lease as he had already
withdrawn his authority to act on their behalf on 22nd March. There- E
fore the question arose about nature of appellant's possession. The
High Court found that even though it was not open to the son to
remove his father from position of managing partner yet V.V. could
not lease out the property on his behalf as the partnership deed did not
invest him with such authority. And so far the agreement of sale was
concerned it was ineffective to make him owner. Consequently the F
possession of appellant was not lawful as he was neither lessee nor
owner.

True the appellant was neither owner nor lessee. Yet was his
possession forbidden in law? Was there no excuse for his possession?
The error committed by High Court was to equate lawful with legal. G
Legal and lawful, normally, convey same sense and are, usually
interchangeable. What is legal i< lawful. But what is lawful may be so
without being formally legal. "The principle distinction between the
•'( terms 'lawful' and 'legal' is that former contemplates the substance of
law, the latter the form of law. To say of an act that it is lawful implies
that it is authorised, sanctioned or at any rate not forbidden by law". H'
12 SUPREME COURT REPORTS [ 1990] Supp. 2 S.C.R.

A Black's Law Dictionary. Same thought about lawful has been brought
out by Pollock and Wright by explaining that "Lawful Possession"
means a legal possession which is also rightful or at least excusable.
Pollock and Wright Possession in the Common Law. Thus that which
is not stricto legalo may yet be lawful. It should not be forbidden by
law. In fact legal is associated with provisions in the Act, rules etc.
B whereas lawful visualises all that is not illegal against law or even
permissible. Lawful is wider in connotation than legal. Although provi-
sion in specific Relief Act empowering a person or tenant to recover
possession if he has been evicted forcibly by the Landlord, may be
juridical and not lawful or a tenant holding over is not in lawful posses-
sion unless landlord agrees or acquiesces expressly or impliedly but (
1
that does not alter the legal position about possession of a person not
C legal yet not without interest. The provision in specific Relief Act is
founded more on public policy than on jurisprudence. But concept of
lawful as opposed or in contradistinction to litigious assumes different
dimension. M.C. Chockalingam v. M. Manichavasagam, (1974] 2 SCR
143 is of no help as it was concerned with possession which could not
D be said to be warranted or authorised by law. Distinction between
nature of possession of a lessee after expiry of period of lease can
better be explained by resorting to few illustrations. For instance a
lessee may before expiry of lease acquire entire lessor's interest result-
ing in "drowning" or "sinking" of inferior right into superior right. That
is right of one merges into another. It has been statutorily recognised
E by Section 11 l(d) of Transfer of Property Act. Similarly a tenant after
expiry of period of lease may be holding over and the lessor may
acquiesce in his continuance expressly or impliedly. That is from con-
duct of lessor the tenant's possession may stand converted into lawful.
The other may be where lessor may not agree to renew the lease nor he
may acquiesce in his continuance. Such a lessee cannot claim any right
F or interest. His pnssession is neither legal nor lawful. Such was the
Chockalingam's c~se (supra). The Court held that continuance of
lessee's possession after expiry of period of lease was not lawful for
purposes of renewal of licence under Madras Cinema Regulation Act
1955 obviously because lessee was left with no interest which could
furnish any excuse or give it even colour of being legal.
G
Yet another illustration may be, not very common where, lessee
acquires some interest in part of the undivided property as in present
case. Can it be said in such a case on ratio of Chockalingam's authority
that possession of such lessee or to be more specific of appellant was
unwarranted or contrary to law: Share of V.V. in 7,000 sq. yds. was
H half. He had agreed to sell his half interest. V. V. was joint owner with
his son and grandson. He had "both single possession and a single
K.K. FIRM v. GOVT. OF A.P. ISAHAI, J.l 13

joint right to possess" Pollock and Wright. Whether such joint owner
A
could transfer his share even when he was not in exclusive possession
and what would be effect of such transfer need not be gone into as title
suit is pending between parties but when a person having physical
control acquires an interest to hold or contin.ue by virtue of an agree-
ment of sale it cannot be said that he had no interest and his possession
was forbidden by law. The High Court lost sight of the fact that by B
virtue of the transaction entered between V. V. and appellant which
was not challenged by him nor any cloud was cast over it by creating
any subsequent interest the appellant may not have become owner but
he could certainly claim that he was in lawful possession. In law he was
entitled to file suit for specific performance if there was any threat to
his right or interest by V.V. Such right or interest could not be termed
as litigious. It was at least not without any excuse or forbidden by law. c
In words and Phrases Permanent Edition Vol. 25A, 2nd reprint 1976 a
somewhat similar situation was described as not lj,tigious:
"Where client conveyed undivided half-interest in land to
attorney in consideration of attorney's rendering services
and paying court costs, giving irrevocable power of at- D
torney to sue, settle, or compromise, attorney received
good title as third person purchasing upon faith of public
records, precluding reformation as against attorney, on the
strength of an instrument recorded after deed to attorney
and client claimed title, as against contention that attorney
acquired a "litigious right"." E

For reasons stated above this appeal succeeds and is allowed.
The order of High Court and the licensing authority are set aside. The
licensing authority is further directed to consider renewal of license of
the cinema in accordance with law treating licensee to be in lawful
possession. F
Since suit has been filed between parties in respect of title it is
clarified that any observatiOJl made above shall not be treated as bind-
ing or deciding right of parties except to the limited extent that appel-
lant shall be treated to be in lawful possession for renewal of license
subject to final adjudication in suit, which shall now proceed as, prob-
ably, the proceedings had been stayed. It shall be disposed of G
expeditiously.

The appellant shall be entitled to irs costs in this Court and High
Court.

P.S.S. Appeal allowed.