PETITIONER:
KONCHADA RAMAMURTHY SUBUDHI & ANR.
Vs.
RESPONDENT:
GOPINATH NAIK
DATE OF JUDGMENT:
07/12/1967
BENCH:
SIKRI, S.M.
SHELAT, J.M.
HEGDE, K.S.
CITATION:
1968 AIR 919 1968 SCR (2) 559
ACT
Lease or Licence-Test for determining.
HEADNOTE
The appellant filed a suit for eviction of the respondent from the appellant’s house. The suit was dismissed by the trial court. In appeal, a compromise was entered into between the parties and a decree was passed in terms of the compromise. The compromise provided for the respondent’s continuation of possession of the house for five years, but it enabled the appellant to execute the decree by evicting the respondent if the respondent failed to pay rent for any three consecutive months. When the appellant sought to evict the respondent, the latter claimed protection from eviction as a tenant under the Orissa House-Rent Control Act, 1958. On the question whether the compromise decree created a lease or a licence, HELD : The facts that the appellant had filed a suit for eviction of the respondent and the compromise decree enabled him to execute the decree by evicting the respondent, show, that the intention of the parties, which is the decisive test, was not to enter into the relationship of a landlord and tenant, in spite of the fact the word ’rent’ was used in the compromise. Therefore, the respondent was not entitled to any protection against eviction. [562 C; 563 A-C] Associated Hotels of India v. R. N. Kapur, [1960] 1 S.C.R. 368, State of Punjab v. British India Corporation, [1964] 2 S.C.R. 114 and M. N. Clubwala v. Fida Hussain Saheb, [1964] 6 S.C.R. 642, followed. Issac v. Hotel De Parts, [1960] 1 All E.R. 348, applied. Sumatibai Waman Kirlikar v. A. B. Shirgaonkar, A.I.R. 1949 Bon. 402, approved.
JUDGMENT
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 372 of 1965. Appeal by special leave from the judgment and order dated September 23, 1963 of the Orissa High Court in Miscellaneous Appeal No. 59 of 1961. B.Parthasarathy and M. S. K. Sastri for M/s. J. B. Dadachanji and Co., for the appellants. K. R. Chaudhuri for respondent No. 1. The Judgment of the Court was delivered by Sikri, J. This appeal by special leave is directed against the judgment of the High Court of Orissa allowing the appeal and 560 setting aside the judgment of the District Judge Ganjam- Boudh, Berhampur, who had affirmed the order passed by the Munsif, Berhampur, dismissing M.J.C. No. 220/60 of Gopinath Naik, respondent before us, hereinafter referred to as the Judgment Debtor. The facts in this case are not in dispute. One Konchada Ramamurti Subudhi, deceased, now represented by his legal representatives and appellants before us-hereinafter referred to as the Decree Holder-and Bhagirathi Naiko, now represented by Gopinath Naik, Judgment Debtor, filed a compromise petition under O. XXIII, r. 3 of the Code of Civil Procedure in the Court of Subordinate Judge, Berhampur, in T.A. No. 13 of 1955. In terms of this compromise petition a decree was passed, The Decree Holder filed an application for execution of the decree and the Judgment Debtor filed the application (M.J.C. No. 220/ 60) under s. 47, C.P.C., in the Court of Munsif, Berhampur, objecting to the execution of the decree. The Munsif dismissed this application of the Judgment Debtor and the District. Judge affirmed the order. The High Court, however, on appeal, set aside the order of the District Judge. The only point raised before us is whether the compromise decree created a lease or a licence. It is common ground that if a lease was created the Judgment Debtor would be entitled to protection against being ejected by virtue of the provisions of Orissa House-Rent Control Act (Orissa Act XXXI of 1958)-hereinafter referred to as the Act. The terms of the compromise were as follows
"1. Respectable people have settled the
subject matter of this appeal and the suit and
so both parties agreed to compromise as
follows :-
(a)That the defendant-respondent should
vacate the suit house on or before 1-7-60
(five years) failing which the appellant-
plaintiff will be entitled to execute this
decree and recover possession of the suit
house through court after the date fixed
above.
(b)That in respect of all arrears of rent
claimed in the suit and the rent due during
the pendency of the suit and of this appeal,
as calculated up to 30-6-55, the defendant has
paid to the plaintiff the sum of Rs. 1,125
only (Rupees One thousand and one hundred
twentyfive only).
(c)That in respect of future rent, i.e.,
with effect from 1-7-55 the defendant shall
pay to the plaintiff at
561
the rate of Rs. 50 a month by the end of each
month until delivery, and a sum of Rs. 300 is
paid to plaintiff’ to be kept as deposit for
six months rent to be adjusted towards rent
for the period of last six months ending with
1.-7-1960.
(d)In case the defendant fails to pay the
rent for any three consecutive months the
plaintiff will be at liberty to adjust the
advance towards arrears and also to evict the
defendant from the suit house without waiting
till 1-7-1960 by executing the decree and also
realise the amount accrued due by then, from
the defendant by executing this decree.
(e)That the house fell to the share of a
minor son of plaintiff-appellant, namely,
Konchada Koteswarrao for whom the appellant-
plaintiff is the guardian, and the plaintiff-
appellant will be responsible for the due com-
pliance of the terms of this compromise.
2.That each party do bear its own costs in
both courts.
3. That a decree may be passed in the above
terms."
The High Court has held that the compromise
decree created a lease and not a licence. The learnedcounsel for the appellants contends that the intention of thedecree bolder was only to give accommodation to the judgment debtor, and as he had filed a suit to eject the judgment debtorit could not have been his intention to create a fresh tenancy. He places reliance on the decision in Ramjibhai Virpal Shah v.G. M. Bhagat(1) where the Bombay High Court has elaborately considered the law bearing on the subject of the interpretation of the compromise decrees and the distinction between a lease and a licence. Before we approach the question of the construction of the compromise deed, we may refer to two decisions of this Court bearing on the distinction between a lease and a licence and the principles for distinguishing one -from the other. This Court observed in M. N. Clubwala v. Fida Hussain Saheb(2) :
"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 ascer-
tained on a consideration of all the relevant
provisions
in the agreement."
1) A.I.R. [1954] Bom. 370.
L2SupCI/68-5
561
(2).[1964] 6 S.C.R 642-652, 653.
562
This Court further observed that exclusive
possession is not conclusive evidence of a
lease. "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 construed
not as a mere licence but as a lease. (See
Associated Hotels of India Ltd. v. R. IV.
Kapur)"(1).
In Associated Hotels of India Ltd. v. R. N.
Kapur(1) Subba Rao, J., as he then was,
summarised the propositions as follows
"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) +,he 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."
Lord Denning, speaking for the Judicial
Committee of the P.-ivy Council in Issac v.
Hotel De Paris(2) observed :
"There are many cases in the books where
exclusive possession has been given of
premises outside the Rent Restriction Acts and
yet there has been held to be no tenancy.
Instances are Errington v. Errington &
Woods(3) and Cobb v. Lane(4), which were
referred to during the argument. It is true
that in those two cases there was no payment
or acceptance of rent, but even payment and
acceptance of rent-though of great weight-is
not decisive of a tenancy where it can be
otherwise explained : see Clarke v. Grant(1).
As Lord Greene., M.R., said in Booker v.
Palmer(6) :
’There is one golden rule which is of very
general application, namely, that the law does
not impute intention to enter into legal
relationships where the circumstances and the
conduct of the parties negative any intention
of the kind."’
(1) [1960] 1 S.C.R. 368-384.
(3) [1952] 1 All E.R. 149.
(5) [1949] 1 All E.R. 768.
(2) [1960] 1 All E.R. 348-352.
(4) [1952] 1 All E.R. 1199.
(6) [1942] 2 All E.R. 674-677.
563
Keeping in mind the above observations, what
was the intention of the parties ? It seems to
us that the fact that the decree holder had
brought a suit for ejectment of the judgment
debtor and that a compromise was entered into
in that suit is important. It is difficult to
impute to him an intention to create a fresh
tenancy while the fact that he brought the
suit shows that his intention was to eject the
judgment debtor after having purported to
terminate the tenancy.
Coming to the terms of the compromise, it is
true, as stressed by the learned counsel for
the respondent, that the word "rent" has been
used, but the word "rent" is not conclusive,
for as observed by this Court in State of
Punjab v. British India Corporation Ltd.,(’,)
"in its wider sense rent means any payment
made for the use of land or buildings and thus
includes the payment by a licensee in respect
of the use and occupation of any land or
building. In its narrower sense it means
payment made by tenant to landlord for
property demised to him."
The learned counsel further stresses the point
that Rs. 300 were paid as deposit for six
months’ rent "to be adjusted towards rent for
the period of last six months ending with 1-7-
1960", but it seems to us that that amount was
really paid as a security for the amounts due
under the compromise deed, as it was only to
be adjusted against the rent for the last six
months. But what is very significant is cl.
(d) which enables the decree holder to execute
the decree if the judgment debtor fails to pay
rent for any three consecutive months. This,
it seems to us, shows that the intention of
the parties was not to enter into the
relationship, of a landlord and tenant. We,
may mention that the importance of this fact
was adverted to in Sumatibai Waman Kirlikar v.
A. B. Shirgaonkar ( 2 ) where Chagla, C.J.,
observed:
"On the failure of the defendant to pay any
of the amount which is fixed as rent on its
due date, the only right the decree gave to
the judgment-creditor was to have it executed
for the amount which remained due; it did not
entitle the judgment-creditor to take posses-
sion of the land on default of payment of
rent." The High Court stressed the fact that a long period of five years was granted to the judgment debtor for continuation of the possession. In our view, the length of the period, in the circumstances, does not militate against the construction that the compromise only created a licence, for the decree holder apparently had lost in the trial court and it was only in the court of appeal that this compromise was arrived at. (1) [1964] 2 S.C.R. 114-123. (2) A.I.R. 1949 Bom. 4 2-44. 564 For the aforesaid reasons we hold that the compromise deed did not create a lease. Therefore, the judgment debtor is not a tenant within S. 2(5) of the Act which defines "tenant" to mean "any person by whom or on whose behalf rent is payable for -any house and includes every person who, from time to time, derives title under a tenant, or a person continuing in possession after ’the termination of his tenancy otherwise than under the provisions of this Act, and shall include any person against whom a suit for ejectment is pending in a Court of competent jurisdiction but not a person against whom a decree or order for eviction has been made by such a Court." In the result the appeal is allowed, the judgment of the High ,Court set aside and that of the District Judge restored. The appellants will have their costs incurred in this Court. V.P.S. Appeal allowed. 565