1959

ftJay I9•

368 SUPREME COURT REPORTS [1960(1)]

ASSOCIATED HOTELS OF INDIA LTD.

v.

R. N. KAPOOR

(S. K. DAs, A. K. SARKAR and K. SuBBA RAo, JJ.)

Rent Control-Application for standardisation of rent-' Room

in a hotel', Meaning of-Delhi and Ajmer-Merwara Rent Control

Act, I947 (I9 of r947), ss. 2(b) and 7(r).

Section z(b) of the Delhi and Ajmer-Merwara Rent Control

Act 1947, provided as follows:-

" S. 2. In this Act, unless there is anything repugnant in

in the subject or

context,-

(a) ......................................................................

; .. ,,

(b) 'premises' means any building or part of a building

which is, or is intended to be, let separately for

use as a residence

or for commercial

use or for any other purpose ............ but does

not include a room in a dharamshala, hotel or lodging

house."

The respondent occupied two rooms in the appellant's hotel,

described as the Ladies' and Gents' Cloak Rooms, where he used

to carry on his business as a hair-dresser. The document execut­

ed hy the parties purported to be one as between a licensor

and licensee and provided, inter a!ia, that the respondent was

to pay an annual

rent of Rs.

9,600 in four quarterly instalments,

which was later reduced to Rs. 8,400 by mutual agreement. The

respondent made an application for standardisation of rent

under s. 7(1) of the Delhi and Ajmer-Merwara Rent Control Act,

1947• and the Rent Controller of Delhi fixed the rent at Rs. 94

per month. On appeal by the appellant, the District Judge

reversed

the order of the Rent

Controller and dismissed the

application holding

that the Act did not apply. The High

Court

in revision set aside the order of the District Judge and restored

that of the Rent Controller, holding that the agreement created

a lease and not a license and

that s.

;2 of the Act did not exempt

the two rooms from

the operation of the Act. The two questions

for determination in this appeal were,

(1) whether the agreement

created a lease or a licence and,

(2) whether the said rooms were

rooms in a hotel within the meaning of s. z(b)

of the Act.

Held,

(Per S. K. Das and Sarkar, JJ., Subba Rao, J. dissent­

ing), that the rooms let out by the appellant to the respondent

were rooms in a hotel within

the meaning of s. z(b) of the

Ajmer­

Merwara Rent Control Act, 1947, and were as such excluded

from

the purview of the Act and the respondent was not entitled

to claim standardisation

of rent under its provisions.

Per S. K. Das, ].-In order that a room may be 'a room

in a hotel' within the meaning

of the Act, it must fulfil

two conditions,

(1) it must be part of the hotel in the physical

sense and,

(2) its user must be connected with the general purpose

ol the hotel of which

it is a part.

J

S.C.R. SUPREME COURT REPORTS 369

A hair-dresser's business provided one of the amenities of a z959

modern hotel and as such it was connected with the business of

the note!. Associated Hotels of

There could be no doubt from the terms of the agreement India Ltd.

executed by the parties in the instant case that it was a lease v.

and not a licence. R. N. Kapoor

Per Sarkar, J.-The words "room in a hotel" in s. 2(b) of the .

Act must be given their plain meaning and a room in a hotel must,

therefore, mean any room in a building

jn the whole of which the

business of a hotel was carried on.

·

Per Subba Rao, ].--Although the document executed by the.

parties was apparently in a language appropriate to a licence, the

agreement between them, judged by its substance and real inten­

tion, as it must be, left no manner of doubt that the document

was a lease.

It had all the characteristics that distinguished it

from a license, namely,

(1) that it created an interest in the pro­

perty in favour of the respondent, and, (2) it gave him exclusive

possession thereof, which, in the absence of any circumstances

that negatived it, must indicate a clear intention to grant a

lease.

Errington v. Errington, [1952] l All E.R.

149 and Cobb,v.

Lane, [1952] l All E.R. u99, referred to.

The words 'room in a hotel

', properly construed, must

mean a room

that was part of a hotel and partook of its

charac­

ter and did not cease to do so even after it was let out.

Consequently, where a hotel, as in the instant case, occupied

the entire building, and rooms were let out for carrying on a

business different from

that of a hotel, such rooms could not fall

within purview of s. 2 of the Act.

There could

be no reasonable nexus in this case between a

hair-dresser's business

and that of a hotel as there was nothing

in the document in question to prevent the tenant from carrying

on any other business. or to bind him to give any preferential

treatment to the lodgers, who could take their chance only as

general customers, the tenant's only liability being to

pay the

stipulated rent.

CIVIL APPELLATE JURISDICTION: Civil Appeal No.

38of1955.

Appe!!>l lily special leave from the judgment and

order dated the April 29, 1953, of the Punjab High

Court at Simla in Civil Revision No. 761 of 1951,

arising

out of the Appellate

Order dated October 6,

1951, of

the

Court of District Judge, Delhi in Misc.

Civil Appeal No. 248 of 1950, against the order of the

Rent Controller, Delhi dated the December 14, 1950.

47

370 SUPREME COURT REPORTS (1960(1))

Z959 a. K. Daphtary, Solicitor-General of India, N. a.

Associawl Hol•ls

010hatterjee, 8 N. Anclley and J. B. Daclachanji, for the

I"dia Ud. appellant.

v. The respondent did not appear.

R. N. Kapoor

1959. May 19. The following Judgments were

delivered

s. K.

Das J. S. K. DAS J.-I have had the advantage and

privilege of reading ,the judgments prepared by my

learned brethren, Sarkar, J., and Subba Rao, J. I

agree with

my learned brother Subba Rao, J., that the

deed of May 1, 1949, is

a lease and not a licence. I

have nothing useful to add to what he has said on this

part of the case of the appellant.

On the question of the true scope and effect of s. 2(b)

of the Delhi and Ajmer-Merwara Rent Control Act,

(19

of 1947) hereinafter called the Rent

Control Act, I

have reached

the same conclusion as has been reached

by my learned brother Sarkar, J., namely, that the

rooms or spaces let out by the appellant to the

res­

pondent in the Imperial Hotel, New Delhi, were rooms

in a hotel within the meaning of s. 2(b) of the Rent

Control Act; therefore that Act did not apply and the

respondent was not entitled ~o ask for the determination

of fair rent under its provisions. Th@ reasons for which

I ha.ve reached

that conclusion are somewha.t different

from those

of my learned brother, Sarkar J., and it is,

therefore, necessa.rythat I should state the reasons in

my own words.

I

read first s. 2(b) of the Rent

Control Act so far as

it is relevant for our purpose:

"S. 2. In this Act, unless there is anything

repugnant in the subject or context,-

(a) ............................................................. .

(b) ' premises ' means any building Q.l' part of a

building which is, or is intended to be, let separately

for use as a residence or for commercial use or for .

any other purpose ......... but does not include a room

in a dha.ra.mshala, hotel or lodging house."

The question before us is-what is the meaning of

the expression 'a room in a hotel '? Does it merely

i

S.C.R. SUPREME COURT REPORTS 371

mean a room which in a physical sense is within a x959

building or part of a building used as a hotel ; or does A ·a1 ~ H

1 1

•

1 't th' th . th 't If . t ssoe1 e,. o es o

l mean some mg more, at lS e room l se ls. no India Ltd.

only within a hotel in a physical sense but is let out to v.

serve what a.re known as 'hotel purposes~? If a strictly R. N. Kopoor

literal construction is adopted, then a room in a hotel

or dharamshala or lodging house means merely that s. K. Das J.

the room is within, and part of, the building which is

used

as a hotel, dharamshala or lodging house.

There

may be a. case where the entire building is not used as

a hotel, dharamshala or lodging house, but only a pa.rt

of it so used. In that event, the hotel, lodging house

or dharamshala will be that part of the building only

whtch is used as such, and any room therein will be a

room in a hotel, dharamshala or lodging house. Rooms

outside

that part but in the same building will not be

rooms

in a hotel, dharamshala or lodging house. Take,

however,

a case where the room in question is within

that part of the building which is used as a hotel,.

dharamshala or lodging house, but the room is let out

for a purpose totally unconnected with that of the

hotel, lodging house or dharamshala as the case may

be. Will the room still be a room in a. hotel, lodging

house

or dharamshala ? That I take it, is the question

which we

have to answer.

·

The word ' hotel ' is not defined in the Rent Control

Act. It is defined in a cognate Act called the Bombay

Rents, Hotel and Lodging House Rates Control Act,

1947 (Born. 57

of 47). The definition there says that a hotel or lodging house means a building or a part of

a. building where lodging with or without board or

other service is provided for a monetary consideration.

I

do not pause here to decide whether that definition

should be adopted for the purpose of interpreting

s. 2(b} of the rent

Control Act. It is sufficient to state

that in its ordinary connotation the word 'hotel' means

a house for entertaining strangers or travellers: a

place where lodging is furnished

to transient guests as

well as one where both lodging and food or other

amenities are furnished. It is worthy of note that in

s. 2(b) of the Rent

Control Act three different words

are used ' hotel ', dha.ramshala ' or ' lodging house '.

372 SUPREME COURT REPORTS [1960(1)]

Obviously, the three words do not mean the same

'9

59

establishment. In the cognate Act, the Bombay Rents

Associated Hotels of Hotel and Lodging House Rates Control Act, 1947,

India Ltd. however, the definition clause gives the same meaning

v. to the words 'hotel' and 'lodging house'. In my view

R. N. Kapoor s. 2(b) of the Hent Control Act by using two different

s. K. Das f. words distinguishes a hotel from a lodging house in

some respects and indicates that the former is an

establishment where not merely lodging but some other

amenities are provided. It was, however, never ques­

tioned that the Imperial Hotel, New Delhi, is a hotel·

within the meaning of that word as it is commonly

understood, or even

as it is defined in the cognate Act.

Passing now from definitions which

are apt

not to

be uniform, the question is whether the partitioned

spaces in the two cloak rooms let out to the respondent

were rooms in that hotel. In a physical sense they

were undoubtedly rooms in that hotel. I am prepared,

however, to say that a strictly literal construction may

not be justified and the word 'room ' in the composite

expression

'room in a hotel' must take colour from the

context or the collocation of words in which it has

been used; in other words, its meaning should be

deter­

mined noscitur a. sociis. The reason why I think so

may be explained by an illustration. Suppose there

. is a big room inside a hotel; in a physical sense it is a

room

in a hotel, but let us suppose that it is let out, to

1

_

take an extreme example, as a timber godown. Will

it still be a room in a hotel, though in a physical sense

it is a room of the building which is used as a hotel?

I think it would be doing violence to the context if

the expression ' room in a hotel ' is interpreted in a

strictly literal sense. On the view which I take a room

in a hotel must fulfil two conditions: (1) it must

be part a hotel in the physical sense and (2) its user

must be connected with the general purpose of the

hotel of which it is a part. In the case under our con­

sideration the spaces were let out for carrying on the

business of a hair dresser. Such a business I consider

to be one of the amenities which a modern hotel pro-

vides.

The circumstance that people not resident in

the hotel might also be served by the hair dresser does

S.C.R SUPREME COURT REPORTS 373

not alter the position ; it is still an amenity for the x959

residents in the hotel to have a hair dressing saloon A . . --:-H

11

,,

"th" th h t 1 "t lf A d h t l "d '"

0

"ate..

0 1 5

OJ w1 m e o e . i se . mo ern o e prov1 es many

1

,.

4

;,.

Lid.

facilities to its residents; some hotels have billiard v.

rooms let out to a private person where residents of R. N. Kapoor

the hotel as also non-residents can play billiards on

payment of a small fee; other hotels provide post-s. K. Das J.

office and banking facilities by letting out rooms in the

hotel for that purpose. All these amenties are connect-

ed with the hotel business and a barber's shop within

the hotel premises is no exception.

These

are my reasons for holding that the rooms in

question were rooms in a hotel within

the meaning of

s. 2(b) of the Rent

Control Act, 1947, and the respon­

dent was not entitled to ask for fixation of fair or

standard rent for the same. I, therefore,' agree with

my learned brother Sarkar, J., that the appeal should

be allowed,

but in the circumstances of the case there

should be no order for costs.

SARKAR J.-The appellant is the proprietor of an Sarkar J.

hotel called the Imperial Hotel which is housed in a

building on Queenswa.y, New Delhi. R. N. Kapoor,

the

respondent named above who is now dead, was the

proprietor of a business carried on under the name of

Madam Janes.

Under an agreement with the appellant,

he came

to occupy certain spaces in the Ladies' and

Gents' cloak rooms of the Imperial Hotel paying there-

for initially

at the rate of Rs.

800 and subsequently

Rs. 700, per month.

On SeRtember 26, 1950, R. N. Kapoor made an

application under s. 7 (1) of the Delhi and Ajmere­

Merwara Rent Control Act, 1947 (19 of 1947), to the

Rent Controller, New Delhi, alleging that he was a

tenant of the spaces in the cloak rooms under the

appellant and asking that standard rent might be fixed

in respect of them. The appellant opposed the applic~­

tion, contending for reasons to be mentioned later, that

the Act did not apply and no standard rent could be

fixed. The

Rent Controller however rejected the

appellant's contention and allowed the application fixing the standard rent at Rs. 94 per month. ~

374 SUPREME COURT REPORTS [1960(1)]

'959 appeal by the appellant, the District Judge of Delhi

Associated Hotels

01 seht

aside

1

. th~ orderRofNthe

17

Rent Controller and dismissed

India Ltd. t e app icat10n. . £ • >capoor then moved the High

v. Court in revision. The High Court set aside the order

R. N. Kapol>r of the District Judge and restored that of the Rent

Sarkar].

Controller. Hence this appeal. We are informed that

R. N. Kapoor died pending the present appeal and his

legal representatives have been duly

brought on the

record. No one has however appeared to oppose the

appeal and we have not had the advantage of the

other side of the case placed before us.

As earlier stated,

the appellant contends that the Act

does not apply to the present case and the Rent

Controller had no jurisdiction to fix a standard rent.

This contention was founded on two grounds which I

Rhall presently state, but before doing that I wish to

wfer to a few of the provisions of the Act as that

would help to appreciate the appellant's contention.

For the purpose of the present case it may be stated

that the object of the Act is to control rents and

evictions. Section 3 says that no tenant shall be liable

to pay for occupation of any premises any sum in

excess of the standard rent of these premises. Section

2(d) defines a

tenant as a person who takes on rent any

premises. Section 2(b) defines what is a premises within

the meaning of the Act and this definition will have to

be set out later because this case largely turns on that

definition. Section 2( c) provides how standard rent in

relation to any premises is to be determined. Section

7 (I) states

that if any dispute arises regarding the

standard rent payable for any premises, then it shall

be determined

by the

Court. It is under this section

that the application out of which this appeal arises

was made,

the

Court presumably being the Rent

Controller. It is clear from these provisions of the Act

that standard rent can be fixed only in relation to

premises as defined in the Act and only a tenant, that

is, the person to whoi:µ the premises have been let out,

can ask for the fixing of the standard rent.

I now

set out the definition of

"premises " given in

the Act so far as is material for our purposes:

S.C.R. SUPREME COURT REPORTS 375

" "premises " means any building or part of a z959

building which is or is intended to be let separately A .

1

dHo1 l

1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

but does not include a room in a dharamsala, hotel

or lodgirg house."

It is clear from this definition that the Act did not

intend to control the rents payable by and evictions of,

persons who

take on rent rooms in a dharamsala, hotel

or lodging house.

The appellant contends that the spaces are not

premises within the Act as they are rooms in

a hotel

and so no standard rent could be fixed in respect of

them. Thus the first question that arises in this appeal

is

are the spaces rooms in an hotel within the defini­

tion

? If they are rooms in an hotel, clearly no

standard rent could be fixed by the Rent Controller in

respect of them.

The Act does not define an hotel. That word has

therefore

to be understood in its ordinary sense. It is

clear

to me that the Imperial Hotel is an hotel however

the word may be understood. It was never contended

in these proceedings that the Imperial Hotel was not

an

"hotel" within the Act. Indeed, the Imperial Hotel

is one

of the best known hotels of New Delhi. It also

seems

to me plain that the spaces are

"rooms", for,

this again has not been disputed in the Courts below

and I have not found any reason to think that they

are not rooms.

The language used in the· Act is " room in a ........ .

hotel ". The word " hotel " here must refer to a

building for a room in an hotel must be a room in a.

building. That building no doubt must be an hotel,

that is to say, a building in which the business of an

hotel is carried on. The language used in the Act

would include

any room in the hotel building. That is

its plain meaning. Unless there is good reason to do

otherwise,

that meaning cannot be departed from.

This is the view that the learned District Judge took.

Is there then any reason why the words of the

statute should be given a meaning other than their

ordinary meaning ? The Rent Controller and the High

ssocsa

1 1 so

India Lid •

v.

R.N. Kapow

Sarkar J.

376 SUPREME COURT REPORTS (1960(1))

z959 Court found several such reasons and these I will now

.A.sso&iated Hotels of consider•

India Ltd. The learned Rent Controller took the view that a

v. room in an hotel would be a room normally used for

R. N. Kapoor purposes of lodging and not any room in an hotel. He

Sarkar].

took this view because he thought that if, for example,

there was a three storeyed building,

the ground floor of

which was used for shops and the two upper floors for

an hotel, it could not have been intended to exclude the

entire building from the operation of the Act, and so

the rooms on the ground floor would not have been

rooms

in an hotel. I am unable to appreciate how this

illustration leads to the conclusion that a room in an

hotel contemplated is a room normally used for

lodg­

ing. The learned Rent Controller's reasoning is clearly

fallacious. Because in a

part of a building there is a

hotel,

the entire building does not become a hotel.

Under the definition, a part of a building may be a

premises

and there is nothing

"to prevent a part only

of a building being a hotel and the rest of it not being

one.

In the illustration imagined the ground floor is

not a part of the hotel. The shoprooms in the ground

floor cannot for this reason be rooms in a hotel

at all.

No question

of these rooms being rooms in an hotel

normally used for lodging, arises. We see no reason

why a room

in an hotel within the Act must be a room

normally used for lodging.

The Act does not say so.

It would be difficult to say which is a room normally

used for lodging for the hotel owner

may use a room

in an hotel for any purpose of the hotel he likes.

Again,

it would be an unusual hotel which

lets out its

lodging rooms; the usual thing is to give licences to

boarders to live in these rooms.

I now pass on

to the judgment of the High

Court.

Khosla, J., who delivered the judgment, thought that

a room in an hotel would be within the definition if it

was let out to a person to whom board or other ser­

vice was also given. It would seem that according to

the learned Judge a room in an hotel within the Act

is a room let

out to a guest in an hotel, for only a

guest bargains for lodging

and food and services in

an hotel. But the section does not contain words

S.C.R. SUPREME COUR.T REPORTS 377

indicating that this is the meaning contemplated. z959

In defining a room in an hotel it does not circumscribe -

1

h t f h 1 tt

. If h' th . t t' Associated Hates of

t e erms o t e e mg. t is was e m en 10n, India Ltd.

the tenant would be entirely unprotected. Ex hypo- v.

thesi he would be outside the protection of the Act. R. N. Kapoor

Though he would be for all practical purposes a boar-

der

in an hotel, he would also be outside the protec-

Sarkar J.

tion of the cognate Act, The Bombay Rents, Hotels

and Lodging House, Rates Control Act, 194 7 (Born.

57 of 1947), which has been made applicable to Delhi,

for

that Act deals with lodging rates in an hotel which

are entirely different from rents payable when hotel

rooms are let out. A lodger

in an hotel is a mere

licensee

and not a tenant for

"there is involved in the

term "lodger" that the man must lodge in the house

of another "; see Foa on Landlord and Tenant (8th

Ed.) p.

9. It could

h~rdly have been intended to

leave a person who is practically a boarder in an hotel

in

that situation. As I have earlier said, it would be

a most unusual hotel which lets

out its rooms to

a.

guest, and the Act could not have been contemplating

such a thing.

Khosla,

J., also said that the room in a hotel need

not necessarily be a bed room but it must be so

inti­

mately connected with the hotel as to be a part and

parcel of it, that it must be a room which is an essen­

tial amenity provided by an hotel e.g., the dining

room in

an hotel. I am unable to agree. I do not

appreciate why any room in an hotel is not intimately

connected with it,

by which apparently "is meant, the

business of the hotel. The business of the hotel is

carried on in

the whole building and therefore in

every

part of it. It would be difficult to say that one

part of the building is more

intimately connected with

the hotel business than another. Nor do I see any

reason why the Act should exempt from its protection

a

part which is intimately connected as it is said, and

which I confess I do not understand, and not a part

not so intimately connected. I also do not understand

what is meant by' saying

that a part of an hotel

supplies essential amenities.

The idea of essentiality

of an amenity is so vague as to be unworkable. This

378 SUPREME COURT REPORTS [1960(1))

z959 test would introduce great uncertainty in the working

, .

1

d H

1 1

, of the Act which could not have been intended. Nor

.iissocia e o e s OJ

India Ltd. do I see any reason why the Act should have left out

v. of its protection a room which is an essential amenity

R. N. Kapoor of the hotel and not other rooms in it.

Sarkar j.

Though it is not clear, it may be that Khosla J., was

thinking that in order that a room in an hotel may be

within the definition it must be let out for the purposes

of the hotel. By this it is apparently meant that the

room must be let out to supply board or give other

services to the guests, to do which are the purposes of

an hotel. Again, I find no justification for the view.

There is nothing in the definition about the purposes

of the letting out. Nor am I aware that hotel pro­

prietors are in the habit of letting out portions of the

hotel premises to others for supplying board and

services to the guests in the hotels. It may be that

an hotel proprietor grants licences to contractors to

to

use parts of his premises to provide board and

services to the guests in the hotel. This however is a

different

matter and with such licences we are not

concerned. Again, a proprietor of a different kind of

business who lets out a portion of his business

premi­

ses for the purposes of his business does not get an

exemption from the operation of the Act. I am unable

to see why the proprietor of an hotel business should

have special consideration. The Act no doubt exempts

a room

in an hotel but it says nothing about the

pur­

poses for which the room must be let out to get the

the

exemption.

Further, not only a room in an hotel

is exempted

by the definition but at the same time

also a room in a dharamsala. If a room in an hotel

within the Act is a room let out for the purposes of the

hotel so must therefore be a room in a dharamsala,

It would however be difficult to see how a room in

a dharamsala can be let out for the purposes of the

dharamsala for a dharamsala does not as a rule

supply food or give any services, properly so called.

Having given the matter my best

conside~ation I

have not been able to find any reason why the words

used

in the definition should not have their plain

meaning given to

them. I therefore come to the

S.C.R. SUPREME COURT REPOR.TS 379

conclusion

that a room in an hotel within the defini-

r959

tibn is any room in a building in the whole of which -

th b

' f h 1 ' S d d th Associated Hotels of

e usmess o an ote is run. o un erstoo , e

1

d' Lt.

definition would include the spaces in the cloak rooms n ·~. a.

of the Imperiol Hotel with which we are concerned. R. N. Kapoor

These spaces are, in my view, rooms in an hotel and

excluded from the operation of the Act. The Rent Sarkar /.

Controller had no power to fix any standard rent in

respect of them.

The appellant also contended that Kapoor was not

a tenant of the spaces but only a licensee and so again

the Act did not apply. The question so raised depends

on the construction of the written agreement under

which Kapoor came to occupy the spaces and the cir­

cumstances of the case. I do not consider it necessary

to express any opinion on this question for this appeal

· must in my view be allowed as the spaces are

outside the Act being rooms in an hotel.

In the result I would allow the appeal and dismiss

the application for fixing standard rent. I do not

propose to make any order for costs.

SuBBA RAO J.-I have had the advantage ofperus-SubbaRaoJ.

ing the judgment of my learned brother, Sarkar,· J.,

and I regret my inability to agree with him.

The facts material to the question raised are in a

narrow compass. The appellants, the Associated

Hotels of India Ltd., are the proprietors of Hotel

Imperia~, New Delhi. The respondent,. R. N. Kapur,

since deceased, was in occupation of two rooms des­

cribed as ladies' and gentlemen's cloak rooms, and

carried on his business as a hair-dresser. He secured

possession

of the said

rooms under a deed dated May I,

1949, executed by him and the appellants. He got

into possession of the said rooms, agreeing to pay a

sum of Rs. 9,600 a year, i.e., Rs. 800 per month, but

later on, by mutual consent, the annual p[tyment was

· reduced to Rs. 8,400, i.e., Rs. 700 per month. On Sep­

tember 26, 1950, the respondent made an applicn.tion

to the Rent Controller, Delhi, alleging that the rent

demanded was excessive and therefore a fair rent

might be fixed under the Delhi and Ajmer-Merwara

380 SUPREME COURT REPORTS [1960(1)]

I959 Rent Control Act, 1947 (19 of 1947), hereinafter called

Associated Hotels of the Act. The appellants appeared before the R:ent

India Ltd. Controller and contended that the Act had no apphca-

v. tion to the premises in question as they were premises

R. N. Kapoor in a hotel exempted under s. 2 of the Act from its

operation,

and also on the ground that under the Subba Rao J. aforesaid document the respondent was not a tenant

but only a licensee. By order dated October 24, 1950,

the Rent Controller held that the exemption under

s. 2 of the Act related only to residential rooms in a

hotel

and therefore the Act applied to the premises

in question.

On appeal the District Judge, Delhi,

came to a contrary conclusion ; he was

of the view

that the rooms in question were rooms in a hotel

within

the meaning of s. 2 of the Act and therefore

the Act had no application to the present case.

Further on a construction of the said document, he

held

that the appellants only permitted the respondent

to use the said two rooms in the hotel, and, therefore,

the transaction between the parties was not

a. lease but

a licence. On the basis of the aforesaid two findings,

he came to

the conclusion that the Rent

Controller

had no jurisdiction to fix a fair rent for the premises.

The respondent preferred a revision against

the said

order

of the District Judge to the High

Court of

Punjab at Simla, and Khosla, J., held that the said pre­

mises were not rooms in a hotel within the meaning of

s. 2 of the Act and that the documenti-executed bet­

ween the parties created a lease and not a licence. On

those findings, he set aside the decree of the learned

District Judge

and restored the order of the Rent

Controller. The present appeal was filed in this Court by special leave granted to the appellants on

January 18, 1954.

The learned Solicitor-General and Mr. Chatterjee,

who followed him, contended

that the Rent Controller

had no jurisdiction to fix a

fair rent under the Act in

regard to

the said premises for the following reasons :

(1) The document dated May 1, 1949, created

a rela­

tionship of licensor and licensee between the parties

and not that of lessor and lessee as held by the High

Court ; and (2) the said rooms were rooms in a hotel

S.C.R. SUPREME COURT REPORTS 381

within the meaning of s. 2 of the Act, and, therefore, x959

they were exempted from the operation of the Act. A .

1

dH

11

,,

. ssocia e o e s OJ

Unfortunately, the legal representative of the respon-India Ltd.

dent was ex parte and we did not have the advantage v.

of the opposite view being presented to us. But we R. N. Kapoor

have before us the considered judgment of the High

Court, which has brought out all the salient points in Subba Rao J.

favour of the respondent.

The first question

turns upon the true construction

of the document dated

May, 1, 1949, whereunder the

respondent was put in possession of the said rooms. As

the argument turns upon the terms of the said docu-

. ment,

it will be convenient to read

the relevant

portions thereof. The document is described as a deed

of licence and the parties are described as licensor and

licensee. The preamble to the document runs thus :

"Whereas the Licensee approached the Licensor

through their constituted Attorney to permit the

Licensee to allow the use and occupation of space

allotted in

the Ladies and Gents

Cloak Rooms, at the

Hotel Imperial, New Delhi, for the consideration and

on terms and conditions as follows :-"

The following are its terms. and conditions :

" 1. In pursuance of the said agreement, ~he

Licensor hereby grants to the Licensee, Leave and

License to use and occupy the said premises to carry

on their business of Hair Dressers from 1st May,

1949

to

30th April, 1950.

2. That the charges of such use and occupation shall

be Rs. 9,600 a year payable in four quarterly instal­

ments i.e., 1st immediately on signing the contract,

2nd on the 1st

of August, 1949, 3rd on the 1st

November, 1949

and the 4th on the 1st February,

1950, whether the Licensee occupy the premises and

carry on the business or not.

3. That in the first instance the Licensor shall allow

to the Licensee leave and license to use and occupy

the said premises for a period of one year only.

4. 'l'hat the licensee shall have the opportunity of

further extension of the period of license after the

expiry of one year at the option of the licensor on

I959

Associated Hotels of

India Ltd,

v.

R. N. Kapoor

Subba Rao l•

382 SUPREME COURT REPORTS (1960(1)]

the same terms and conditions but in any case the

licensee shall intimate their desire for an extension

at least three months prior to the expiry of one year

from the date of the execution of this DEED.

5. The licensee shall use the premises as at present

fitted

and keep the same in good condition. The

licensor shall not

sRpply any fitting or fixture more

then what exists in the premi8es for the present. 'fhe

licensee will have their power and light meters and

will pay for electric charges.

6. That the licensee shall not make any alterations

in

the premises without the prior consent in writing

from

the licensor.

7. That should the licensee fail to pay the agreed

f!Je to the licensor from the date and in the manner

as agreed, the licensor shall be at liberty to termi­

nate this DEED without any notice and without

payment of any compensation and shall be entitled

to charge interest at 12% per annum on the amount

remaining unpaid.

8. That in case the licensee for reasons beyond their

control are forced to close their business in Delhi,

the licensor agrees that during the remaining period

the license shall be transferred to any person with

the consent and approval of the licensor subject to

charges so obtained not exceeding the monthly

charge of Rs. 800."

The document no doubt uses phraseology appropriate

to a licence. But it is the substance of the agreement

that matters and not the form, for otherwise clever

drafting can camouflage

the real intention of the

parties.

What is the substance of this document ? Two rooms

at the Hotel Imperial were put in possession of the

respondent for the purpose of carrying on his business

as hair-dresser from May 1, 1949. The term of the

document was, in the first

in"tance, for one year, but it

might be renewed. The amount payable for the use

and occupation was fixed in a sum of Rs. 9,600 per

annum, payable in four instalments. The respondent

was

to keep the premises in good condition. He should

S.C.R. SUPREME COURT REPORTS 383

pay for power and electricity. He should not make z959

alterations in the premises without the consent of the Associated Hotels of

appellants. If he did not pay the prescribed amount India Ltd.

in the manner agreed to, he could be evicted therefrom v.

without notice, and he would also be liable to pay R. N. Kapoor

compensation with interest. He could transfer his in-Subba Rao J.

terest in the document with the consent of the appel-.

lants.

The respondent agreed to pay the amount

prescribed whether he carried on the business in the

premises or not. Shortly stated, under the document

the respondent was given possession of the two rooms

for carrying on his

private business on condition that

he should pay the fixed amount

to the appellants

irrespective

of the fact whether he carried on his busi-

ness in

the premises or not.

There is a marked distinction between a lease

and a

licence. Section

105 of the Transfer of Property Act

defines a lease

of immoveable property as a transfer of

a right to enjoy such property made for a certain

time in consideration for

a price paid or promised.

Under s. 108 of the said Act, the lessee is entitled to

be put in possession of the property. A lease is there­

fore a transfer of an interest in land. The interest

transferred is called

the leasehold interest. The lessor

parts with his right to enjoy the property during the

term of the lease, and it follows from it that the lessee

gets

that right to the exclusion of the lessor. Whereas

s. 52 of the Indian Easements Act defines a licence

thus:

"Where one person grants to another, or to a

definite number of other persons, a right

to do or

con­

tinue to do in or upon the immoveable property of

the grantor, something which would, in the absence

of such right, be unlawful, and such right does not

amount to an easement or an interest in the pro­

perty, the right is called a licence."

Under the aforesaid section, if a document gives only

a

right to use the property in a particular way or

under certain terms while

it remains in possession and

control of the owner thereof, it will be a licence. 'fhe

legal possession, therefore, continues to be with the

owner of the property, but the licensee is permitted to

384 SUPREME OOURT REPORTS [1960(1)]

r959 make use of the premises for a particular purpose. But

A

. -

for the permission, his occupation would be

unlawful.

ssoeialed Hotels of It d . h" .c. •

India Ltd. oes not create m 1s 1a vour any estate or mterest

v. in the property. There is, therefore, clear distinction

B. N. Kapoor between the two concepts. The dividing line is clear

though sometimes it becomes very thin or even blur-

Subba Ran J. red. At one time it was thought that the test of exclu­

sive possession was infalliable and if a person was

given .exclusive possession

of a premises, it would

con­

clusively establish that he was a lessee. But there was

a change and the recent trend of judicial opinion is

reflected

in Errington v. Errington('), wherein Lord

Denning reviewing the

case law on the subject summa- ,I

rizes the result of his discussion thus at p. 155 :

"The result of all these oases is that, although a ~

person who is let into exclusive possession is, prima

facie, to be considered to be tenant, nevertheless he

will not be held to be so if the circumstances nega-

tive any intention to create a tenancy."

The Court of Appeal again in Cobb v. Lane(') consider­

ed the legal position and laid down that the intention

of the parties was the real test for ascertaining the

character of a document. At p. 1201, Somervell, L. J.,

stated:

" ............... the solution that would seem to have

been found is, as one would expect, that it must

depend on the intention of the parties."

Denning, L. J., said much to the same effect at p. 1202 :

"The question in all these cases is one of inten­

tion: Did the circumstances and the conduct of the

parties show that all that was intended was thll>t the

occupier should have a personal privilege with no

interest in the land ?"

The following propositions may, therefore, be taken

as well-established: (1) To a8certain whether a docu­

ment creates a licence or lease, the substance of the

document must be preferred to the form ; (2) the real

test is the intention of the parties-whether they

intended to create a lease or a licence; (3) if the docu­

ment creates an interest in the property, it is a lease;

(1) [1952] 1 All E.R. 149. (2) [1952] I All E.B,, 1199·

S.C.R. SUPREME COURT REPORTS 385

but, if it only permits another to make use of the pro. z959

Perty, of which the legal possession continues with the A .

1

dH

11

. . l' d (

4

) 'f d h d t ssocia e o e s

owner, it is a icence ; an 1 un er t e ocumen a of India Ltd.

party gets exclusive possession of the property, prima v.

facie, he is considered to be a tenant; but circumstances R. N. Kapoor

may be established which negative the intention to

create a lease. Judged by the said tests, it is not Subba Rao f.

possible to hold that the document is one of licence.

Certainly

it does not confer only a bare personal

privilege on

the respondent to make use of the rooms.

It puts him in exclusive possession of them, untram.

melled by

the control and free from the directions of

the appellants. The covenants are those that are

usually found or expected to be included in a lease deed.

The right

of the respondent to transfer his interest

under

the document, although with the consent of the

appellants, is destructive of any theory of licence. The

solitary circumstance

that the rooms let out in the

present case are situated in

a building wherein a hotel

is

run cannot

make any difference in the character of

the holding. The intention of the parties is clearly

manifest,

and the clever phraseology used or the

ingenuity of the document-writer hardly conceals the real .intent. I, therefore, hold that under the docu-

ment there was tranRfer of a right to enjoy the two

rooms, and, therefore,

it created a tenancy in

fa. vour

of the respondent.

The next ground turns upon

the construction of the

provisions

of s. 2 of the Act.

Section 2(b) defines the

term " premises " and the material portion of it is as

follows: ·

" " Premises " nieans any building or part of .a

building which is, or is intended to be, let separately .

........................................................................ , ...

············································································

but does not include a room in a dharmashala, hotel

or lodging house."

What is the construction of the words " a room in a

hotel " ? The object of the Act as disclosed in the

preamble is "to provide for the control of rents and

evictions, and for the lease to Government of premises

upon their becoming vacant, in certain areas in the

49

386 SUPREME COURT REPORTS [1960(1)]

'959 Provinces of Delhi and Ajmer-Merwara ". The Act

- was, therefore, passed

to control exorbitant rents of

Associated Holels b "Id" 'l'

· th 'd S B

of India Lid. u1 mgs preva1. mg m e sa1 tates. . ut s. 2

v. exempts a room m a hotel from the operat10n of the

R. N. Kapoor Act. The reason for the exemption may be to encour­

age running of hotels in the cities, or it may be for

Subba Rao J. other reasons. Whatever may be.the object of the Act,

the scope of the exemption cannot be enlarged so as to

limit the operation of the Act. The exemption from

the Act is only in respect of a room in a· hotel. The

collocation of the words brings out the characteristics

of the exempted room. The room is part of a hotel.

It partakes its character and does not cease to be one

after it is let out. It is, therefore, necessary to ascer­

tain the meaning of the word "hotel". The word

"hotel " is not defined in the Act. A hotel in com­

mon parlance means a place where a proprietor makes

it his business to furnish food or lodging or both to

travellers or other persons. A building cannot be run

as a hotel unless services necessary for the comfortable

stay of lodgers and 'boarders are maintained. Services

so

maintained vary with the standard of the hotel and

the class of persons to which it caters; but the amenities

must have relation to the hotel business. Provisions

for

heating or lighting, supply of hot water, sanitary

arrangements, sleeping facilities, and such others are

some of the amenities a hotel offers to its constituents.

But every amenity however remote and unconnected

with the business of a hotel cannot be described as

service in a hotel. The idea of a hotel can be better

clarified by illustration than by definition and by

giving examples of what is a room in a hotel and also

what is not a room in a hotel: (1) A owns a building

in a part whereof he runs a hotel but leases out a room

to B in the part of the building not used as hotel ;

(2) A runs a hotel in the entire building but lets out a

room

to B for a purpose unconnected with the hotel

business;

\3) A runs a hotel in the entire building and

lets out a room to B for carrying on his business

different from

that of a hotel, though incidentally the

inmates of the hotel take advantage of it because of

its proximity; (4) A lets out a room in such a building

•

S.C.R. SUPREME COURT REPORTS 387

to another with an express condition that he should z959

cater only to the needs of the inmates of ,the hotel; Associ;;; Hotels

and (5) A lets out a room in a hotel to a lodger, who of India Ltd.

can command all the services and amenities of a hotel. v.

In the first illustration, the room has never been a part R. N. Kapoor

of a hotel though it is part of a building where a hotel

is run.

In the second, though a room was once part Subba Rao f.

of a hotel, it ceased to be one, for it has been let out

for a non-hotel purpose. In the fifth, it is let out as

part

9f a hotel, and, therefore, it is definitely a room

in a note,. In the fourth, the room may still continue

as part of the hotel as it is let out to provide an

amenity or service connected with the hotel. But to

extend the scope of the words to the third illustration

is

to obliterate the distinction between a room in a

hotel

and a room in any other building. If, a room in

a building, which is

not a hotel but situated near a

hotel, is let

out to a tenant to carry on his business of

a hair-dresser,

it is not exempted from the operation of

the Act. But if the argument of the appellants be

accepted,

if a similar room in a building, wherein a

hotel is situated is let out for a similar purpose,

it

would be exempted. In either case, the tenant is put

in exclusive possession of the room and he is entitled

to carry on his business without any reference to the

activities of the hotel.

Can it be said that there is

any reasonable nexus between the business of the

tenant and that of the hotel. The only thing that can

be said is

that a lodger in a hotel building can step

into

the saloon to have a shave or haircut. So too, he

can do so in

the case of a saloon in the neighbouring

house. The

tenant is not bound by the contract to

give any preferential treatment to the lodger. He may

take his turn along with others, and when he is served,

he is served

not in his capacity as a lodger but as one

of the general customers. What is more, under the

document the tenant is not even bound to carry on

the business of a -hair-dresser. His only liability is to

pay the stipulated amount to the landlord. The room,

therefore, for

the .purpose of the Act, ceases to be a

part of the hotel and becomes a place of business of the

respondent. As the rooms in question were not let

'959

Associated Hotels

of ltidia Ltd.

v.

R. N. Kapoor

Subba Rao].

l959

May z9.

388 SUPREME COURT REPORTS [1960(1)]

out as part of a hotel or for hotel purposes, I must

hold that they are not rooms in a hotel within the

meaning of s. 2 of the Act.

In this view, the appellants are not exempted from

the operation

of the Act. The judgment of the High Court is correct. The appeal fails and is dismissed.

ORDER

In accordance with the opinion of the majority, the

appeal is allowed. No order as to costs.

DHRANGADHRA CHEMICAL WORKS LTD.

v.

THE DHRANGADHRA MUNICIPALITY

(and connected petition)

(B.

P.

SINHA, JAFER IMAM, J. L. K.APUR,

P. B. G.AJENDRAGADKAR and K. N. W ANCHOo, JJ.)

Municipality-Regulation of discharge of ejjl.uent-Issue of

notice-Objection to such notice and requisition specified therein­

Scope of enquiry by Special Officer-Existence of nuisance, if can be

gone into-Bombay District Municipal Act, I9DI, as adapted and

applied

to the State of Saurashtra and as amended by Act XI of

I955·

s. Ij3A(3).

The respondent Municipality issued a notice under sub-s. (1)

of s. l53A of the Bombay District Municipal Act, 1901, as adapted

and applied to the State of Saurashtra

and as amended by Act

XI of 1955, calling upon the appellant to show cause why it

should not be directed to discharge the effluent of it's chemical

works in the manner specified in the notice.

On the :ippellant

objecting to the notice and the requisition contained therein, a

Special Officer was appointed by the Government under sub-s. (3)

of that section to hold an enquiry in the matter. The Special

Officer treated some of the issues raised, as preliminary issues of

law and held .that the question whether the discharge of the

effluent polluted the water and adversely affected the fertility of

the soil was a matter for the subjective satisfaction of the

Municipality and binding on him and was as such beyond the

scope of his enquiry. The question for determinatiOn in this

appeal was whether

the Special

Officer was right in the view he

took

of s. l53A(3) of the Act and in restricting

·the scope of the

enquiry in the way he did.