Full Judgment
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE P.BHAVADASAN WEDNESDAY, THE5H DAY OF FEBRUARY201416TH MAGHA, 1935 RSA.No. 1211 of 2013 (C) ----------------------------------- [A.S. NO.25/2009 DTD. 12/04/2013 ON THE FILE OF THE SUB COURT, CHENGANNUR, O.S. NO.294/2007 DTD. 28/02/2009 ON THE FILES OF THE MUNSIFF'S COURT, CHENGANNUR] ............... APPELLANT/APPELLANT/DEFENDANT: -------------------------------------------------------- V.G.MANOJ, AGED49YEARS, BUSINESS, ROOM NOI. XIII/346, MULLASSERY COMPLEX, OPPOSITE OF K.S.R.T.C. STAND, CHENGANNUR FROM VALIYAPARAMBIL VEETTIL, THITTAMEL MURI, CHENGANNUR. BY ADVS.SRI.K.SHAJ, SRI.SAJJU.S. RESPONDENTS/RESPONDENTS/PLAINTIFFS: ----------------------------------------------------------------- 1. STEPHEN JOHN, AGED66YEARS, MULLASSERY VEETTIL, KEEZHVANMAZHY MURI, PANDANADU VILLAGE, ALAPPUZHA DISTRICT-685 901.
2. M.JACOB STEPHEN, AGED69YEARS, MULLASSERY VEETTIL, KEEZHVANMAZHY MURI, PANDANADU VILLAGE, ALAPPUZHA DISTRICT-689 501. BY SRI.ABRAHAM VAKKANAL, SENIOR ADVOCATE, ADVS. SRI.PAUL ABRAHAM VAKKANAL, SRI.DIJO SEBASTIAN. THIS REGULAR SECOND APPEAL HAVING BEEN FINALLY HEARD ON0502-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: Prv. P.BHAVADASAN, J.
- - - - - - - - - - - - - - - - - - - - - - - - R.S.A. No. 1211 of 2013 - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 05th day of February, 2014
JUDGMENT
The short question that arises for consideration in this second appeal is regarding the interpretation to be given to Ext.A1 agreement entered into between the parties. While the defendant in the suit would say that it evidences a lease agreement, the plaintiff would characterize it as a licence. Both the courts below, on construction of the document and on ascertainment of the intention of the parties, came to the conclusion that Ext.A1 is a licence.
2. At the time of admission of the second appeal, the following substantial question of law was raised: "Did the courts below go wrong in interpreting Ext.A1 as a licence agreement when the recitals in Ext.A1 would indicate that the grant was actually a lease and if so, whether the decree for mandatory injunction granted by the courts below is sustainable?" R.S.A. No. 1211/2013 -2- 3. Ext.A1, as it now stands, is an admitted document. It is nomenclatured as a licence agreement. It contains XI clauses. It allows the premises to be used for running a provision store. The licence fee is fixed as 1150/- per month and it also contains a clause that it is a revocable agreement on violation of any of the conditions stipulated.
4. The learned counsel appearing for the appellant relying on the decisions reported in Peramanand Gulabchand and Co., v. Mooligi Visanji [AIR1990 Kerala 190], Associated Hotels of India Ltd. v. R.N. Kapoor [AIR 1959 SC1262 and Mangal Amusement Park (P) Ltd. & Anr. v. State of Madhya Pradesh & Ors. [AIR 2012 SC3325, contended that it is not the nomenclature of the document that determines the issue but the real transaction that has been entered into between the parties. For this purpose, the learned counsel pointed out that even though the words 'occupation', 'licence fee' etc have been used, it can be seen that the defendant is given R.S.A. No. 1211/2013 -3- exclusive possession of the building for business purposes, it could not be said that there is no possession handed over to the defendant. Relying on clause V of the licence, wherein, it is stated that on expiry of the term of licence, the property shall be surrendered and delivered to the owner, it is contended that it is a clear indication of possession has been transferred and that belies the nomenclature of the document. Further, inspiration is drawn from clause VI wherein, it is mentioned that on revocation of the licence, the licensor can re-occupy the premises which is interpreted by the learned counsel as an indication of the fact that the licensee, till that point of time, has absolute control and possession of the premises. Clause XI was referred to as the clause which should be treated as one trying to contract out of the Rent Control Act which cannot be permitted in law. The learned counsel for the appellant pointed out that the licence for running the business has to be taken by the lecensee and for that purpose, he has to necessarily show a R.S.A. No. 1211/2013 -4- premises which can only be the premises in question. The clause that the licensee can occupy premises only during day time is meaningless in the sense that he is allowed to run a provision store in the premises. An impartial consideration of the nature of the document and also the manner in which it is put to use will clearly show that it is a lease arrangement and in order to get over the application of the Rent Control Act, it is nomenclatured as licence.
5. Sri. Abraham Vakkanal, the learned senior counsel appearing for the respondents contended that it comes little grace from the appellant now contend that the agreement is a lease arrangement. Having entered into an agreement with open eyes and having understood the terms of the agreement as a licence, he cannot now be heard to say that it is a lease agreement. He has no case that there was any misrepresentation. He executed the documents fully knowing its contents and consequences. Even assuming, according to the learned counsel, that for argument sake, R.S.A. No. 1211/2013 -5- possession is with the licensee for a limited purpose of running the business that cannot ipso facto convert the arrangement to one of lease. The learned senior counsel pointed out that the court has to look at the document as a whole and to ascertain the intention of the parties at the time of entering into the agreement. Even though a licence arrangement may have the effect or impact of overriding or getting out of the Rent Control Act, that is not illegal. Such a transaction is recognized in law. At any rate, it could not be said that going by the terms of the document that the defendant was under any misapprehension as per the nature of the document and transaction. He was fully conscious of his rights and liabilities and nature of possession or occupation as the case may be which he had over the premises. The learned senior counsel went on to point out that at any rate, the two courts which are fact finding courts, have on interpretation of the document and on consideration of various aspects, come to the conclusion that the R.S.A. No. 1211/2013 -6- arrangement is a licence arrangement and exercising the jurisdiction under Section 100 of C.P.C., since it is not shown that the findings are either perverse or contrary to the terms of the agreement, interference by this Court is uncalled for.
6. The distinction between a licence and a lease is well settled. While in a lease arrangement, there is a transfer of interest in the immovable property to enjoy it, in a licence, there is no transfer of interest in the immovable property at all and there is only a permissive occupation.
7. Quite often, such documents come up for consideration with conflict, one claims it to be a licence agreement whereas others claim it to be a lease agreement. Various aspects regarding the licence and lease had come up for consideration before courts. For a while, it was thought that if exclusive possession was given, that is a clear indication of the arrangement of lease. But as time passed by, that view got diluted and the courts held that merely because exclusive possession is given or is enjoyed R.S.A. No. 1211/2013 -7- by the licensee or lessee as is considered that by itself is not a criterion to determine whether the transaction is a lease.
8. It is true that in the decisions reported in Peramanand Gulabchand and Co., v. Mooligi Visanji [AIR1990 Kerala 190], a Division Bench of this Court had construed whether the agreement is licence or lease. Referring to the decisions reported in A.G. Securities v. Vaughan [(1988) 3 AII ER1058 and Street v. Mount Ford [(1985) 1 AII ER289, it was held as follows: "Parties to an agreement cannot contract out of the Rent Acts; if they were able to do so the Acts would be a dead letter because in a state of housing shortage a person seeking residential accommodation may agree to anything to obtain shelter. The Rent Acts protect a tenant but they do not protect a licensee. Since parties to an agreement cannot contract out of the Rent Acts, a document which expresses the intention, genuine or bogus, of both parties or of one party to create a licence will nevertheless create tenancy if the rights and obligations enjoyed and imposed satisfy the legal requirements of a tenancy. R.S.A. No. 1211/2013 -8- xxx xxx xxx In considering one or more documents for the purpose of deciding whether a tenancy has been created, the court must consider the surrounding circumstances, including any relationship between the prospective occupiers, the course of negotiations and the nature and extent of the accommodation and the intended and actual mode of occupation of the accommodation.
10. Before taking up the question of construction of Ext.1 agreement we may dispose of one of the arguments of the learned counsel for the respondent based upon the decision reported in Khalil Ahmed v. Tufelhussein Samasbhai, AIR 1988 SC184 The argument is that the recitals in the document considered in the said case is identical with the recitals in Ext.A1 and as such following the reasoning and conclusion contained in the Supreme Court decision, Ext.A1 agreement should also be construed as a licence. On a careful examination of the provisions in the document considered in the said case, we find that the recitals therein are neither identical nor substantially similar to the recitals in Ext.A1 and as such the said decision is clearly distinguishable on facts and cannot be applied R.S.A. No. 1211/2013 -9- to the facts of this case." 9. The decision reported in Associated Hotels of India Ltd. v. R.N. Kapoor [AIR 1959 SC1262 was also referred to in support of the contention that it was not the nomenclature of the document that determines the issue. Considerable help is sought to be drawn from the decision reported in Peramanand Gulabchand's case (cited supra).
10. It is contended on behalf of the appellant that a document of similar nature has been construed by the Apex Court and a document which permitted exclusive possession to the occupant can only be treated as lease and cannot be treated as licence.
11. It is true that it is so stated in the above decision. But the facts show that DW1, when examined, had categorically asserted that the defendant was in exclusive possession of the premises and without his permission, the plaintiff could not enter into the premises. R.S.A. No. 1211/2013 -10- 12. The question as to whether the term 'exclusive possession' or the fact that the exclusive possession is with the licensee can be treated as the criterion to come to the conclusion that transaction is a lease and it was considerd in the decision reported in Ayurvedic Oushada Nirmana Vyavasaya Co-Op. Ltd. v. P.V. Abraham [1987 KLJ892 it was held as follows: "In the interpretation of a document to ascertain whether it creates the relationship of landlord and tenant or that of licensor and licensee, the decisive consideration is the intention of the parties, to be gathered on a true construction of the agreement and not merely from the description given by the parties. This is a matter of substance and not merely of words. The description given is a good indication of the intention of the parties. The parties can certainly be presumed to have reduced to writing what they had in their mind, in other words their intention. It is open to the parties to enter into a transaction of licence or to create a relationship of lessor and lessee. The parties are well aware nowadays of the distinction between lease and licence and the consequences that follow the R.S.A. No. 1211/2013 -11- creation of a licence in contra distinction to a lease, especially after the advent of the Rent Control Legislation. When therefore it is the express term of the grant that the grantee was only permitted to use the property as licensee for a specific purpose and that only that limited right was being granted to him, it requires cogent and convincing material to the contra by way of circumstances of the case or conduct of parties to hold that the transaction was nevertheless a lease. Even in cases where transfer of possession is exclusive, it need not necessarily be an indication of the creation of a lease for even in a licence there should become transfer of possession. Possession is necessary even for a licensee to do such acts in the land as he is permitted to do. Exclusive possession is by no means decisive of lease. A man may be a licensee, even though he has exclusive possession. It is the substance of the agreement that governs the matter. The court must look at the agreement as a whole and see whether tenancy really was intended." 13. The issue again came up for consideration before this Court in the decision reported in Ulahannan v. George [1988 (1) KLT335 wherein, it was observed as follows: R.S.A. No. 1211/2013 -12- "The question whether a document evidences a lease or a licence is essentially a question of intention. The courts have to gather the intention firstly from the recitals in the document. Of course, the recitals in the document have to be understood in the setting and cicumstances under which the document has been executed. When a question comes up before the court whether a document is a lease and a licence, naturally, the court is bound to keep in mind the cardinal distinction between a lease and a licence. The distinction is that in a lease, there is a transfer of interest in the immovable property to enjoy it, whereas in a licence, there is no transfer of interest in the immovable property at all. The primary and important character of the lessee's right is his right to possession and enjoyment of the demised land to the exclusion of the lessor. It is always better to remember that the right of exclusive possession was at one time considered as the sigil and signet to rule out a licence. But, modern view as seen taken from the decisions show a different trend and say that exclusive possession is not concusive though it may be an important circumstance to hold that the transaction is a lease. This is so, because, exclusive possession of the property R.S.A. No. 1211/2013 -13- is not to be considered inconsistent with the occupier being a licensee and not a tenant. In a case where circumstances negative an intention to create tenancy, but the occupier has got exclusive possession of the property, nevertheless, the transaction can be considered not as a lease, but only as a licence." 14. Thus it could be seen that, earlier it was thought that exclusive possession is the sole criterion to determine whether the transaction is a lease or licence agreement. As time passed by, that view became unacceptable and the mere use of the word 'possession' by itself was not considered to be decisive. The current trend seems to be to ascertain the intention of the parties at the time of entering into a document. One has to remember that a licence agreement is not a prohibited transaction.
15. Here, the parties have entered into a transaction which is termed as a licence agreement and the defendant is permitted to occupy the premises. Of course, there are words like 'surrender', 're-occupy' etc. But those words are R.S.A. No. 1211/2013 -14- to be construed as a part of the recitals in the document which show that no exclusive right or interest is transferred in favour of the defendant as regards the premises in question is concerned.
16. It cannot be said that the nomenclature of the document is totally irrelevant. It gives an insight into what the parties intended and the transaction which was in the mind of a person at the time of entering into the transaction. To more precise, it cannot be said to be irrelevant. In the case on hand, the defendant entered into an agreement with open eyes and he knew the consequences of the various terms in the agreement. He voluntarily executed that document. There is no plea of any vitiating aspect regarding the agreement. Having thus entered into an agreement with open eyes, especially, with a clauses like clause XI in the agreement, the defendant cannot now be heard to say that notwithstanding the recitals in Ext.A1 agreement, the licence should be treated as a R.S.A. No. 1211/2013 -15- lease agreement. As rightly pointed out by the learned counsel for the respondents in this appeal that both the courts below have considered the issues in considerable detail and have referred to the law on the point and have come to the conclusion that document evidences a licence agreement. It cannot be said that the view taken by the lower courts is either perverse or contrary to the terms of the agreement. This appeal is without any merits and is accordingly dismissed. P.BHAVADASAN JUDGE ds