A

B

CAPT. B.V.D' SOUZA

v.

ANTONIO FAUSTO FERNANDES

AUGUST l, 1989

[LAUT MOHAN SHARMA AND J.S. VERMA, JJ.J

Goa, Daman and Diu Buildings, (Lease, Rent and Eviction)

Control Act,

1968: Section

5{r-Bar.of Court's Jurisdiction.

Rent

Control-Deed-Lease or Licence-Determination of­

Jntention of parties-The real test-Test of exclusive possession-

C Whether relevant. ~

D

Civil Procedure Code, /908:Section JOO IJocument-Whether

lease

or licence-Concurrent findings by Trial Court and First Appel-

late

Court-Binding effect of in second appeal before High Court.

The respondent-landlord inducted the appellant into the suit

premises

pursuant to

an agreement. The agreement was described as

agreement of leave and licence, the parties as licensor and licensee and

the rent as compensation for use and occupation, and it was provided

that the appellant (i) shall pay monthly rent regularly on or before the

Sth day of each consecutive month; (ii) shall not sub-let, under-let or

E part with possession nor shall keep the premises vacant for more than

three months without the consent of the licensor; (iii) that on the expiry

of the deed, it shall berenewable at the will of the licensee.

Several years after the expiry of the above agreement the respon- -

dent instituted a civil suit for a decree of eviction of the appellant on tbe

F ground that the appellant was in occupation as a licensee and bas illeg­

ally refused to vacate. Rejecting the plea of the appellant that he was a~

month to month tenant protected by the provisions oi the Goa, Daman -r ·

and Diu Buildings (Lease, Rent and Eviction) Control Act, 1968 and

that the suit was barred by section 56 the Trial Court passed a decree

G

for eviction which was conf"ll1Ded in appeal by the District Judge.

The second appeal filed by the appellant was also dismissed by the

High Court holding that It was concluded by concorrent findings of

fact. Hence this appeal.

Allowing the appeal, and setting aside the decree of the Courts

H below,

626

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BY D'SOUZA v. A.F. FERNANDES 627

HELD: l. The rmdings of the Courts below were not those of fact

so as to be binding on the High Court under section 100 or the Civil

Procedure Code. The case has to be decided on the nature of poSses.ion

of the appeUant which is dependent on a correct interpretation or the

document. I 628G]

2.

It is

well settled that the main purpose or enacting the Rent

statutes is to protect the tenant from the exploitation of the landlord,

who being in the dominating position is capable of dictating his terms at

the inception of the tenancy; and, the Rent Acts must receive that

interpretation which may advance the object and suppress the mischief.

By adopting a different approach the Rent laws are likely to be

defeated

altogether. [630H, 63IA]

3. For ascertaining wh~tber a document creates a licence or lease,

the substaoce or the document must be preferred to the form. The real

test is the intention or the

parties-whether they

intended to create a

lease

or licence.

If an interest in the property is created by the deed ii is

A

B

c

a lease but if the document only permits another person to make use of D

the property or which the legal possession continues with the owner, it is

a licence. The test or exclusive possession is not irrelevant but at the

same time it

is not conclusive. If the party in

whose favour the docu­

ment is executed gets exclusive possession or the property, prima facie

be must be considered to be a tenant; although this factor

hy

itself will

not be decisive. [629A-B-C, 630B-C] E

Associated Hotels

of India Ltd. v. R.N. Kapoor,

[1960] I S.C.R.

368; Sohanlal Naraindas v. Laxmidas Raghunath, [1971] 3

S.C.R. 319; applied.

Shell-Mex and

BP Ltd. v. Manchester Garages Ltd., [1971] I

All F

E.R. 841; explained.

4.

In the instant case, the terms of the deed are not consistent

with the respondent's case

or licence, and indicate that an interest in

the

property was created in favour of the appellant in pursuance or which

he was

put in possession with a right of renewal.

The surrounding G

circumstaoces

are

also consistent with the deed being one of lease. The

notice to vacate the premises was served on the appellant after several

years

or expiry or

the agreement. There was no relationship or friend·

ship bt:_tween the parties, which would have induced the respondent lo

allow· the appellant to occupy the building. Realisation of rent was the

sole consideration. The description of the parties as licensor and H

A

B

c

D

E

F

G

H

628

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

licensee or the rent as compensation does not carry too much weight.

The agreement was in reality a document of lease, and the appellant has

~een enjoying the exclusive possession in the capacity of month to

month tenant. The suit filed by the respondent was, therefore. not

maintainable. (629F, 6318-C, D-E]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6184

of 1983.

From the Judgment and Order dated 28. 7. 1983 of the Bombay

High Court in S.C.A. No. 5/B/1982.

S.K. Mehta, Dhruv Mehta, Aman Vachher and Atul Nanda for

the Appellant.

'

S.K. Dholakia and Praveen Kumar for the Respondent.s.

The Judgment of .the Court was delivered by

SHARMA, J. The only point involved in this appeal is whether

the document (Ext. 20) executed by the parties at the time the appel-

lant was inducted in the disputed premises is an agreement of leave

and licence or a deed of lease. The building belongs to the respondent,

and the appellant claims to be in its QCl:Upation as a month to month

tenant. The respondent instituted the suit in the civil court, out of

which this appeal by special leave arises, for a decree for eviction of

the appellant alleging that he has been in occupation of the building as

a licensee

and .has illegally refused to vacate in spite of' service of

notice. The appellant's defence is that he is a tenant protected by the

provisions

of the Goa, Daman and Din

Buildings (Lease, Rent and

Eviction) Control Act, 1968, and in view of s. 56 thereof the suit in the

civil court is not maintainable. Agreeing with the plaintiff-respondent,

the trial court passed a decree which was confirmed on appeal by the

District Judge. The High Court dismissed the second appeal filed by

the appellant observing that it was concluded.by concurrent findings of

fact.

2.

We do not agree with the High Court that the findings of the

courts

below were those of fact so as to be bindin_g on the High Court

under s. 100 of the Code of Civil Procedure. The case has to be

decided on the nature of possession of appellant which is dependent on ·

a correct interpretation of the document Ext. 20.

3. The document Ext. 20 has been described as an agreement of

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c

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

leave and licence and the parties as the Licensor and the Licensee. But A

it

is

significant to note that in the very first sentence of the document

the respondent

is described as

"Landlord hereinafter called the

Licensor". However, this cannot answer the disputed issue as it is

firmly established that for ascertaining whether a document creates a

licence

or lease, the substance of the document must be preferred to

the form. As was observed

by this Court in Associated

Hotels of India B

Ltd. v. R.N. Kapoor, [1960] 1 SCR 368, the real test is the intention of

the parties-whether they intended to create a lease or licence. If an

interest in the. property

is created by the .deed it is a lease but if the

document only permits another person to make use

of the property

"of

which the legal possession continues with the owner", it is a licence. If

the party in whose favour the document is executed gets exclusive

possession

of the property, prima facie he must be considered to be a

C

tenant; although this factor by itslef will not be decisive. Judged in this

light, there does not appear to be any scope for interpreting Ext. 20 as

an agreement of leave and licence.

4. The document has been placed before us by the learned D

counsel for the appellant. Although

as stated earlier, it has been

described as an agreement

of leave and licence and the parties as the

"Licensor" and the "Lecensee", its provisions unmistakably indicate

that the appellant was being let in as a tenant on the monthly rental of

Rs.350 (besides water and electricity charges) to be paid regularly on

or before the 5th day of each consecutive month. By clause 5, it was E

/

agreed that the appellant "shall not sub-let, under-let or·part posses-

sion

of the premises to any stranger nor shall

h<;.keep the premises

vacant for more than 3 months without the consent

of the

Licensor",

that is, the respondent. The question of executing a sub-lease or sub­

letting can arise only by a tenant. If a licensee inducts any person in the

property as his tenant, it cannot be described as sub-letting. In clause F

15 it is stated that on the expiry of the period, the deed "shall be

renewable thereafter at the will

of the

licensee"; and in the event of

the licensee not desiring to renew, "shall give one month's notice in

writing". These terms are not consistent with the respondent's case of

licence, and indicate that an interest in the property was created in

favour

of the appellant in pursuance of which he was put in possession G

with a right

of renewal. When compared with the terms of the docu­

ments set out in the judgments

in Associated

Hotels of India Ltd. v.

R.N. Kapoor, [1960] 1SCR368 and Sohan Lal Naraindas v. Laxmidas

Raghunath Gadit,

(1971] 3

SCR 319, relied upon by the learned

counsel for the appellant, which were construed by this Court as creat-

ing lease inspite of their description as licence deeds, the appellant's H

630 SUPREME COURT REPORTS [ 1989[ 3 S.C.R.

A case stands out as stronger. If the approach adopted by the courts

below in interpreting the document

is accepted, it shall defeat the

object of the Rent Acts, by permitting the parties to camouflage the

real nature of the transaction by resorting to skilful drafting.

'.,

5. Mr. Dholakia, learned counsel for the respondent, strene--'

B ously, contended that the test of exclusive possession is an outdated

one which should not now be taken into account for the purpose of

deciding the nature of possession. Reliance

was placed on the observa­

tions of Lord Denning MR

in Shell-Mex and

BP Ltd. v. Manchester I

Garages Ltd., [1971] I All E.R. 841. We do not agree that exclusive ·--.,;..

possession of a party is irrelevant as is suggested; but at the same time

c as has been observed in the earlier cases of this Court, referred to .+

above, it is not conclusive. The other tests, namely, intention of the

parties and whether the document creates any interest

in the property

or not, are important considerations. The observations in the English

case, relied upon

by the learned counsel for the respondent cannot be

understood to suggest that the test of exclusive possession has been

D

n,ow rendered irrelevant and redundant

as· they are immediately fol­

lowed by the statement;

"As I have said manytimes, exclusive possession is no

longer decisive."

E The position stands further clarified by the following statement in the

concurring judgment

of Buckley, LJ,;

F

G

"The only clause which points one way or the other, l

think,

is cl. 19 in

Sch. I which Lord Denning MR has

already read, which clearly recognises that notwithstanding

the bargain between the parties, the plaintiffs retained

rights of possession and control over the property

in ques­

tion. That seems to me to be consistent only with the fact

that this transaction was

in truth a licence transaction and

not a tenancy under which the defendants would obtain an

exclusive right to possession of the property during the

term

of the tenancy, subject, of course, to any rights

reserved

by the

plaintiffs."

We are also not in a position to agree with Mr. Dholakia when he says

that if the parties themselves have chosen to describe the transaction

as a licence,

we cannot make out a different case for them. It is well

H settled that the main purpose of enacting the Rent statutes

is to protect

/

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

,.,, the tenant from the exploitation of the landlord, who being in the A

dominating position

is capable of dictating his terms at the inception of

the tenancy; and, the Rent Acts must receive that interpretation which

may advance the object and suppress the mischief.

By adopting a

I

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\'. different approach the Rent laws are likely to be defeated altogether.

6. The surrounding circumstances are also consistent with the

8

deed being one of lease. The notice to vacate the premises

was served

on the appellant after several years of expiry of the term of the agree­.:.:ment. It is not suggested on behalf of the respondent that there is any

· relationship between the parties or that they were friends which

+-induced him to allow the appellant to occupy the building. Realisation

of rent which has been described in the document (Ext. 20) as "com-c

pensation reserved for use and occupation" was the sole consideration

)

of the transaction. In this background the description of the parties as

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

weight.

7. For the reasons mentioned

above, we hold that Ext. 20 was in D

reality a document of lease and the appellant has been enjoying the

exclusive possession thereof

in the capacity of month to month tenant.

As a result the suit was,

in view of the provisions of the Goa, Daman

and

Diu Buildings (Lease, Rent and Eviction) Control Act, not main­

tainable. The appeal

is accordingly allowed but without costs, the

decree passed

by the courts below is set aside and the suit is dismissed. E

T.N.A. Appeal allowed.