DELTA INTERNATIONAL LTD. A

v.

SHY AM SUNDER GANERIWALLA AND ANR.

APRIL 9, 1999

[G.B.

PATTANAIK AND M.B.

SHAH, JJ.] B

Transfer of Property Act, 1882-Sections 105 and 107-Lease or

,,, .:Jnce---Test to determine-Intention of the parties under the agreement­

A.1·i.:ertainment of such intention-Where camouflage is alleged or is apparent

the intention has

to be gathered from the terms of such agreement-In case C

of camouflage or attempt to avoid the rigours of any legislation, the mask

is to be removed or veil lifted from the self-serving instrument and true

intention

to be gathered from the relevant circumstances-In cases of cpntracts

expressly for licence

with exclusive possession of the property, then there

remains a very narrow distinction between licence and

lease-In such cases, D

terms of the agreement be read literally without any inference whether the

parties intended

to cause a landlord-tenant relationship-In cases where

tenant himself having no right, title or interest

to create sub-tenancy hands

over possession

of property

fo third person, such third person. cannot claim

to be a sub-tenant-A person having no right cannot confer any title of

tenancy or sub-tenancy-Having regard to the terms and of the agreement E

. as a whole, the agreement held to be one of leave and licence and not of

lease-W.B. Premises Tenancy Act, 1956, Section 14(1).

Deeds and Documents-Construction of agreement-Intention of parties

to the agreement-In case the terms

of the agreement having two meanings, F

the lawful meaning should be preferred-In case of parties capable of

understanding their rights fully and having agreed that the document to be

construed in a particular

way-No

.inference should be drawn so as to

construe it in a· different way.

Words and Phrases-Words "demise" and "demised premises"-G

Meaning of-In the context of lease and licence-Easements Act, 1882.

The original owner of the suit premises created a tenancy iii favour of

M, a private limited Co. Appellant-pl1intitr, was inducted into the suit premises

as monthly tenant under M. Appellant was maintaining and running a petrol

service station for sale of motor spares and components at .the tenanted H

541

-542 SUPREME COURT REPORTS (1999] 2 S.C.R.

·A premises and had erected. certain structures on the said premises. Appellant

was subsequently amalgamated.

By an agreement, appellant executed a leave

and licence agreement in favour of

ESSO, which -in turn permitted the

respondent to

run the petrol service station. In clause 12 of the agreement

it

~as mentioned that it was only a licence and that the agreement should

not be tr.eated or used or dealt with or construed by the parties in any way

B as lease or to confer any relationship as landlord and tenants between the

parties. Clause 18 of the agreement provided for the "licence fee" for the

demised premises and the same was payable for the said demised premises

.as provided therein, i.e. a sum totalling to six months' fee for this premises

to be paid in advance

and to be adjusted per month. Specific provision was

C made in the deed that after obtaining the consent of the landlord, the licensor

would

grant a sub-lease in respect of the said premises for a

perio~ of at least

. ten years and the licem1or would endeavour to obtain a lease on the terms

. . . . '

which would not be inconsistent with the standard terms on which a sub-

. . .

lease was obtained by the licensee and the standard form of the ·lease was

also attached with the deed; Jn the agreement it was provided that the licensee

D was not obliged to pay any part of the outgoings in respect C)f the premises

which indicates

that the charges attendant upon occupation of the plant and

machinery

at the said premises in good repair and was required to obtain

necessary insurance policies for

the business. The licensee was permitted

to carry on the business in the name of the licensor. It was also specifically

E provided in Clause 9 of the agreement that the licensor should be at liberty

to withdraw and/or revoke the leave and licence in

~ase there was any default

of the terms mentioned in the document. Clause 16 of the deed further

provided that.if the sub-lease was to be granted, then the license~ would be

required to purchase the equipment, fittings and fixtures as mentiOned in the

F

Second Schedule a(a price menti6ned therein Within a period of one year

from the date thereof. Admittedly, the sub-lease was not granted and the

amount as agreed was also not paid by anyone. .

The appellant filed a suit in the High Court for a perpetual injunction

restraining the respondent-defendants from using any

of the fixtures,

fittings

G and accessories lying at the suit premises; for damages and for wrongful use

and occupation of the premises from the date of determination of leave and .

· licence as claimed in the plaint and for a decree of possession of the suit

premises. Single Judge passed a decree

in favour of the appellant by holding

that the agreement in question was only a licence and was not a sub-lease . . In appeal, the decree was reversed by a Division Bench of the High Court

H holding that the agreement in question constituted lease on the basis of

--

--

DELTA INTERNATIONAL LTD. v. S.S. GANERIWALLA 543

exclusive possession. Hence this appeal by the appellant-plaintiff. A

Allowing the appeal, this Court

HELD : 1.1. To find out whether the document creates a lease or a

licence

the real test is to find out

"the intention of the parties", keeping in

mind

that in cases where a contract for licence is executed by handing over B exclusive possession of the premises, the distinguishing line between the

lease and the licence is absolutely thin. In such cases, the terms of the

documents are to be read as they are and it would be unreasonable to draw

an inference that the parties intended to create a relationship of landlord and

tenant despite express contrary terms in the deeds which are binding between C

the parties. Though exclusive possession is one of the most relevant factors

for deciding

whether it is a lease or a licence, but at the same time, when

the

terms of the document are clear leaving no doubt that the parties never

intended

to execute a lease deed, in that set

.of circumstances, exclusive

. possession would lose its importance. [557..,H; 566-B)

Associated Hotels

of India Ltd. v. R.N. Kapoor, [1960) 1

SCR 368 and

Rajbir Kaur v. S. Chokesiri, [1989) 1 SCC 19, relied on.

D

1.2. The intention of the parties is to be gathered from the documen~s

itself. Mainly, the intension is to be gathered from the meaning and the

words used in the documents except where it is alleged that the document E

is a camouflage. If the terms of the documents evidencing the agreement

between the parties are not clear, the surrounding circumstances and the

conduct of the parties have also to be borne in mind for ascertaining the real

relationship between the parties. Thus ifthe document is .a camouflage, the

mask

or veil is required to be removed for determining the true intent and p

purpose of the document.

[S.58-B)

..

MN. Clubwala v. Fida Hussain Saheb, (19641 6 SCR 642, referred to.

Errington

v. Errington, (1952) 1 All ER 149 and

Cobb and Anr v. lane,

(1952) 1 All ER 1199, referred to. . G

--- 2.1. Jn the absence of a written document and when somebody is in

exclusive possession with

no special evidence how he got it, the intention is

to be gathered from the other evidence which may be

available. on record, and

in such cases exclusive possession of the property would be the most relevant

circumstance to

arrive at the conclusion that the intention of the parties was H

544 SUPREME COURT REPORTS [1999) 2 S.C.R.

A to create a lease. [558-C)

2.2.

If the dispute arises between the very parties to the written

instrument, the intention is to be gathered from the document read as a

whole.

But in cases where the landlord alleges that the tenant has sub-let

the premises and relies upon a deed entered into, inter se, between himself

B and the alleged licensee, the landlord who is not a party to the deed is

not

bound by what emanates from the construction of the deed, the tenant and

the sub-tenant may jointly set-up the plea of a licence against the landlord

which is camouflage ; in such cases, the mask is to be removed or the veil

is to be lifted

and a true intention behind a facade of a self-serving conveniently

C drafted instrument is to be gathered from all the relevant circumstances. Same would be the position where the owner of the premises and the person

in need of the premises execute a deed labelling it as ~ licence deed to avoid

the operation of rent legislation. [558-D-F)

2.3.

Primafacie, in the absence of a sufficient title or interest to carve

D out or to create a similar tenancy by the sitting tenant in favour of a third

person, the person in possession to whom the possession is handed over

cannot claim that the sub-tenancy was created in his favour; because a

person having no

right cannot confer any title to tenancy or subtenancy. A

tenant protected under statutory provisions with regard to occupation of the

premises having no right to

sub-le~ or transfer the premises, cannot confer

E any better title. But, this question is not required to be finally determined

in this matter. (558-G-H)

F

2.4. Further, lease or licence is a matter of contract between the

parties. Section 107 of the Transfer of Property Act, 1882 inter alia provides

that leases of immovable property may be ma'de either by a registered

instrument or by an oral agreement accompanied by delivery of possession;

if it is a registered instrument; it shall be executed by both the lessee and

the lessor. This contract between the parties is to be interpreted or construed

on a well-laid principle for construction of contractual terms, viz., for the

purpose of construction of contracts, the intention of the parties is the

G meaning of the words they have used and there can be no intention independent

of that meaning; when the terms of the contract are vague or having double

intendment, one which is lawful should be preferred; and the construction

may be put on the instrument perfectly consistent with his doing what he has

a

right to do. (559-A-C)

H Rodger v. Comptoir D' Escomple de Paris, (1869) LR 2

PC 393;

-

I·

DELTA INTERNATIONAL LTD. v. S.S. GANERIWALLA 545

Fausset v. Carpenter, [183112 Dow & Cl.; Harrington v. Kloprogge, [1785) A

2 B&B 678 n.(a) and Cantor Art Services Ltd. v. Kenneth Bieber Photography

Ltd., [196911 WLR 1226, C.A., referred to.

Kim Lewison, Q. C. : The Inerpretation of Contracts, referred to.

3.1. In the

present case it is nowhere pleaded that the deed executed B

between the parties is a camouflage to evade the rigours of provisions of the

Rent Act nor is it stated that a sham document is executed for achieving

some

other purpose. In these set of circumstances, the intention of parties

is required to be gathered from the express words of various terms provided

by them in the deed.

i560-G)

3.2. The document contemplates three types of agreements, the first of

which is leave and licence. Clause 12 of the agreement was not provided by

a illiterate layman

or poor person in need of some premises for his residence

or business, but was executed by two companies where it can be presumed

c

that it was mentioned after full understanding and to avoid any wrong inference D

of intention. When the parties which are capable of understanding their

rights fully, expressly agreed and declared that the documents should not be

construed

in any manner as creating any relationship as landlord and tenant

between them, it would be impermissible to

conjecture or infer that their

relationship should be construed as that of landlord and tenant because

certain terms mentioned in the deed can have a double intendment. This E

clause stares in his face is construing it as a lease deed. [561-B-D)

3.3. Secondly, the parties to the document were fully

aware that lease

or sub-lease could not be granted and a lawful lease deed could be executed

only

after obtaining the consent of the landlord and the document if treated

as a sub-lease, would be illegal. [561-E-F)

F.

3.4. In the present case, exclusive possession of the property was

handed over to the defendant coupled with the fact that in clause 18, the

parties have used the phrase "demised premises" which means, that the

intention of the parties was to create relationship of landlord and tenant G

between the parties. It is true that the word 'demise' indicates either lease

or conveyance depending upon the terms of the documents. But, at the same

time

the said word is to be construed by finding out what is sought to be

conveyed

or transferred in the context of all the terms of the documents. If

the privilege of occupying the premises exclusively is granted on certain

terms and conditions specifically as a licensee or what is agreed to be H

546 SUPREME .COURT REPORTS [1999] 2 S.C.R.

/'

,, A granted, is exclusive possession of the premises on certain terms and· ·

conditions as a licensee, then there is no question of h.oldi!lg to the contrary •

:rhis would be clear from various meanings, which could be assigned to the

word "demis~~'.. Hence for determining whether th~ phrase "demised

premises" should be construed llS a lease or a licence as expressly stated

in the agreement, the phrase

or word is to be construed in the context in

.

/.

B which it is used. In the present case, the phrase "demised premises" was

used for recovering the licence

fee. If the intention of the parties was to

create a lease, then the word

"rent" would have been easily used at all the

places. "Demised premises", in the present case, included not only the

· premises but fittings, fixtures and the petrol service station also. Licence

C was granted .specifically to run the petrol service station on the terms and

conditions specified therein. There are a number of other terms and conditions

in the document which indicate.that it was a licenc~ deed. It is true that there

are c.er.tain other clauses which may indicate. the different intentfon if they

are construed in isolation such as a term to the effect that the licensee was

entitled to grant a sub-licence to operate the petrol station or that they were ·

D entiOed to instal other machinery. But, at the same time, these clauses are

to .be read in the context of the fact that the ticensor had decided not to run

the business of petrol service station and that by the impugned deed, right

to run the said business along with .th~ pre~ises was given to the licensee.

E

p.

. [562-H; 563-A-C; 564.::D-F; 565~A-B]

... '· .

Hind v. Gray, 9 LJCP 253; Taylor v. Caldwell, 32 L.J.Q.B 164; Line

v. Stephenson, [1~38] 5 Bing NC 186 and Young& Co. v. Liverpool Assessment

Committee,

(1911) 2 KB 195 DC, referred

to.·

Stroud's Judicial Dictionary of Works and Phrases; Butterworths'

Works and Phrases; Halsbury's Laws (4th Edn), referred to.

. 3.4. On facts, the disputed document contemplates thr~e types of

agreements, one, that of a leave and licence; secondly, in case a consent is

obtaiped from the landlord, for· execution of sub-lease which would create an

interest

in the property

as a sub-tenant and thirdly, for purchase of equipment,

G fitti~g a~d. fixtures. The sec;ond and third parts of the agreement never came

into operation. Hence in the circumstances of the case it must

be held that

the agreement is a deed of

"leave and licence" and not a "lease". [567-C]

MN. C/ubwala v. Fida Hussain Saheb, (1964) 6 SCR 642, relied on.

Capt. B.V.D. Souza v. Antonio Fausto Fernandes, (1989) 3 SCC 574,

H distinguished.

' .

1 ; DELTA INTERNATIONAL LTU. v. S.S. GANERIWALLA [SHAH, J.) 547

Inderjeet Singh Sia/ v. Karam Chand Thapar, [1995) 6 SCC 166; A

Vayallakath Mahameddkutty v. lllikkal Mossakutty, [1996) 9 SCC 382;

Sohan Lal Naraindas v. Laxmidas Raghunath Gadit, [1971 I 1 SCC 276;

Waman Srinivas Kini v; Ratilal Bhagwandas & Co., [1959) Supp. 2 SCR

217; Uttamchand v. S.M Lalwani, AIR (1965) SC 716; Tutsi v. Paro, [1997)

·2 SCC 706 and K. Achyuta Bhat v. Veeramaneni Manga Devi, [1989) l SCC B

9, referred to.

CIVIL APPELLATE JURISDICTION : :Civil Appeal Nos. 2198-99 of

1999.

From the Judgment and Order dated 2.12.97 of the Calcutta High Court C

in A.F.O.D. No. 148 and 165of1992.

Gopal Subramanium, D.P. Gupta, Baskar P. Gupta, Ranjan Dev, U. Banerjee,

Surendra Dube, Sanjay Sen, Pratik Jalay~n, Suehit Mohanty, Mrs. Indra

Sawhney, K.V. Vishwanathan, Anil Aggarwala, K.V. Vijaya Kumar, A.K. Raina,

R.D. Upadhyay, Ajit M. Singh and Girdhar G. Upadhyay for the appearing D

parties.

The Judgment of the Court was delivered by

SHAH, J. Leave granted.

These appeals are filed against the Judgment and Decree dated 2nd

December, 1997 passed by the Division Bench of the High Court of Calcutta

in Appeal from Original Decree Nos. 148 of 1992 and 165 of 1992. Undisputed

facts of the matter are· that original owner of the premises was Abhiram

Mullick (Since deceased) who created tenancy of the premises; namely, No.

E

4D, Council House Street, Calcutta in favour of Mallika Investment Company F

Privated Limited. Dewars'Garage India Private Limited was inducted into the

premises· as the monthly tenant under Mallika Investment Company Private

Limited. Dewar's Garage (India) Private Ltd. (in short 'Dewar') was maintaining

and running a petrol service station for sale of motor spares and components

at the tenanted premises. Dewar had erected and built certain structures on G

the said premises. Dewar was subsequently amalgamated into Delta

International

Limited (appellant-plaintiff)., By an agreement dated 18th July, 1970, they were executed leave and license agreement in favour of ESSO

Standard Eastern fnc. (in short ESSO). The ESSO in turn permitted Shyam

Sunder Ganeriwalla, respondent no. I, to run a petrol-service station. By an

Order passed in Company Petition No. 331 /91, Dewar was amalgamated with H

548 SUPREME COURT REPORTS [1999] 2 S.C.R.

A plaintiff (Delta International Limited). Further, the business undertakings and

the estates

of

ESSO also had been taken over by the Act of Parliament and

has been transferred and assigned by the Central Government

in favour of

Mis. Hindustan Petroleum Corporation Limited. In 1985, Delta International

Limited filed Civil

Suit No. 491/85 in the High Court of Calcutta for a perpetual·

injunction restraining the Defendants and/or their servants, agents and assigns

B · from using any of the fixtures, fittings and assessories lyfr1g at suit premises;

for damages, for wrongful use and occupation

of the premis.es at the rate of

Rs.

20,000 p.m. from lst May, 1985, that is, the date of termination of leave

and license as claimed in the plaint and for decree for possession

of the said

premises and other reliefs. The learned

Single Judge passed the decree in

C favour of the plaintiff by holding that the agreement .in question was only a

license agreement and it was not a sub-lease. In appeal, the said Judgment

was reversed by holding that the agreement in question constitutes a lease

mainly on the basis

of exclusive possession and the Division

Bench observed

that "to put is pithily, if an interest in immovable property entitling the

transferees to enjoyment

is created, it is a lease, if permission to use land

D without right to exclusive possession is alone granted, a licence is the legal result."

At the time of hearing of this appeal, learned Counsel for the parties

exhaustively referred to the material terms and conditions

of the agreement

E in which the term 'leave and license' is used. In support of their contentions,

they also referred to various decisions which have laid down tests to find

out

in which set of circumstances even though the document is termed as a leave

and license could be construed as a lease.

F

G

Learned counsel for the appellant submitted that : -

I. Learned

Single Judge of the High Court was right in holding that

the document does not create any lease because intention

of the

parties was quite manifest from the document as well as clause

12 which stared in the face.

2. Appellant

its~lf was a monthly tenant of the premises and could

not create a sub-tenancy without the prior written consent

of the

·

landlord in view of the provisions of Section 14(1) of the West

Bengal Premises Tenancy Act, 1956.

It is nobody's case that

such consent was obtained. [para I

of the deed]

/

3. The

!icerise was for the purpose of running the petrol station

H which had been set up by the appellant and which the appellant

DELTA INTERNATIONAL LTD. v. S.S. GANERIWALLA [SHAH, J,] 549

no longer wished to operate. [paras 2 and 3 of the . deed] A

4. The possible grant of sub-lease was specifically reserved for

future

in the event that the appellant was

able to obtain a

consent from its landlord Mallika Investment Company Private

Limited. [paras 4, 5 and 6

of the Deed]

5. The license is stated to be for the benefit of the respondent to

B

"use, occupy, enjoy, run and work" the petrol station. [clause I]

6. The respondent was not obliged to pay any portion of the

outgoings

in respect of the premises despite the fact that fifty

per cent

of municipal rates, taxes etc. were normally payable by

c the occupier of the premise; thus even the charges attendant

upon occupation

of the premises were to be paid by the appellant.

(clauses 3 and 4]

7. The respondent was obliged to keep the plant and machinery at

the said premises

in good repair. [clause 5]

D

8. The respondent was obliged to take out necessary insurance

policies for the business. [clause

8]

9. The appellant was entitled to revoke the license in the event of

any breach or default on the part of the respondent. [clause 9]

IO. Clause I I specifically permits the respondent to carry out E

business in the name of the appellant which normally would not

be permitted

if it is not a license to run the business.

11. Clause 12 manifests the intention of the parties that the document

was executed

only for the purpose of creating license and not

lease.

F

12. Clauses 13 to 17 specifically make provision for the possible

future grant

of sub-lease by the appellant to the respondent in

the event that the appellant obtains a consent from the tenant.

These clauses also contemplate various terms which would be

provided

in the prospective sub-lease. G

13. Clause 18 provides for the payment of advance license fees by

the

respondent and the term ~demised premises' used thrice in

the clause must be read in conformity with other clauses of the

document and the intention

of the parties.

14. The right given to the respondent to give it on sub-license was H

. A

550 SUPREME COURT REPORTS [1999] 2 S.C.R .

given, as respondent .was

only to operate. petrol

station.·.

[clause 19] .... · ..

On the basis of the aforesaid terms of the document, Mr. Ashok D~;~i,

learned Senior counsel for the appellant submitted that the construction of

the document would depend upon its pith and substance and not upon the

B labels that the parties may put upon it. Paramount test for determining whether

it

is lease or license is 'the intention of the parties'.

He'submitted that

exclusive possession

of the premises being granted, although an important

factor, does not preclude the court from holding that the document

is in fact

·

a license, particularly in cases where if the granter did not have the power

C to grant a lease or is forbidden by the provisions of the Rent Control legislations.

He emphasised that dominant intention

is to be found out in such cases from

D

the document itself. He referred to the following principles stated

in· the ·-'

decisions of this Court to advance his contention : ·, '·' ·

(a) The construction of a document would depend upon .its pith and

substance and not upon the labels that the parties may put upon it.

This principal was laid down b{ this Court in the decisions of Inderjeet

Singh Sia/

& Anr. v. Karam Chand Thapar and

Ors., [1995] 6 SCC

166 at p. 173 and Vayallakath Muhammedkuty v. lllikkal Moosakutty,

[1996] 9 sec 382 at p. 387.

E (b) The paramount test is 'the intention of the parties' as stated in the

case

of Capt. B.

V. D 'Souza v. Antonio Fansto Fernandes, [1989] 3

stc 574 at p. 577 and [1996! 9_SCC 382 at p. ,387(sup.;,). ·

--·

(c) Exclusive possession of the premises being granted, although an ... .

.-.. • .-important factor, does not preclude the Court from holding -that the ... .

F · document is in fact a license as d~cided in the case or Saha~· {af/·.'·

Naraindas v. Laxmidas Raghunath Gadit, [1971] I SCC 276 at P• 279

and

Rajbir Kaur and Anr. v. Mis

S. Chokesiri & Co:: [1989] I SCC'.

19atp.31-33. .-. ,.• .•

(d) Even where exclusive possession is granted, only a license will be

G created if the granter did not have the power to grant a lease. This

. principal was laid down

in the case of[l989]

I sec 19(supra).

(e) The appellant, as a monthly tenant, was forbidden by Section 14(1)

of the Act to sublet the premises without the prior written consent of

the landlord. It is nobody's case that the prior written consent of the

H landlord was in fact obtained in the present case. It is, therefore, not

. DELTA INTERNATIONAL LTD. v. S.S. GANERIWALLA [SHAH, J.) 5Sl

possible to contend that any sub-lease was granted and any such A

· purported disposition would be unenforceable and void. (Decided in

the case of Waman Shriniwas Kini v. Ratilal Bhagwandas & po.

(1959) Suppl. 2 SCR 217 at 221.

(f) Where the dominant intention is to use the premises with fittings

and fixtures for the purpose of running a business, the same does not B

tantamount to a lease of immoveable property as decided in the case

of Uttam Chandv. S.N La/wani, AIR (1965) SC 716, paras 11 and 12.

As against this, Mr. D.P. Gupta, learned senipr counsel for the respondent

no. 1 submitted that for resolving the dispute that the document is a lease

or a license, the legal principles have been laid down in a Jong line of C

decisions which inter alia are as under : -

(a) The Court looks at the substance of the· transaction and not the

label which the parties may have agreed to put on the transaction. The

Court is entitled to decide whether or not the agreement between the D

parties is a mere camouflage to get round the rigours of rent control

legislations.

(b) Irrespective of the label that may have been put upon the

transaction by the parties, the Court would gather the true intention

of the parties as to whether an interest in land or premises was sought E

to be created or not.

(c) Exclusive possession is a most significant indicator to hold that

the document creates lease.

In support of his contentions, learned counsel for the respondent referred

to the decisions of this Court in the cases of As~ociated. Hotels (P) Ltd v. F

R.N. Kapoor, (1960) 1 SCR 368, Sohonlal Naranidas v· .. Laxmidas Raghunath

Oadit, [1971] 1SCC276, Capt. B. V. De'Souza v. Antonio Fansto Fernandes,

[·1989] 3 sec 574, Tulsiv~ Paro (dead), [1997] 2.See 706 and K Achuta Bhat

v. Veeramaneni Man~a Devi & Anr .. [1989] 1 sec 9.

Further, the learned counsel for the respondent referred to various

.clauses of the Deed for finding out the intention of the parties and referred

to certain terms such as :-

(a) The licensee is described iri the agreement so as to include its

G

successors and assigns as per the Memorandum of Agreement. H

552 SUPREME COURT REPORTS . [1999) 2 S.C.R.

A (b) The expression "demised premises" has been used three times in.

clause

18 which leaves no doubt that interest in the property is

created.

(c) The operative clause

is in the language of a formal lease. What is

granted and given to use, occupy, enjoy, run and work is the premises

B described in the First Schedule together with the plant and machinery,

fixtures and fittings set out

in the

Second Schedule.

(d) ESSO was to pay for electricity, was liable to repair the fittings and

fixtures and to keep them

in proper running and usable condition, was

entitled to bring

in and instal other machinery, was to take out necessary

C licenses and insurance policies, could continue the business either in

its own name

or in the name of Dewar (subject to indemnity) and

would not assume any liability or responsibility for taking over the

existing employees. [clauses 5,6, 7, 8 and I I]

(e)

ESSO would have the right to grant leave and license to a third

D party during the continuance of the agreement. [clause I3]

E

(f) It was contemplated that if the Dewar is able to obtain a lease of

the said premises on terms which would not be inconsistent with

ESSO's standard form, then Dewar will grant a sub-lease to ESSO for

at least a period

of

IO years with three renewal options. [clause I5 (a)]

From the aforesaid submissions

it is apparent that the common contention

of the learned counsel for both the parties is that the Court has to gather and

find out the true 'intention

of the parties' as to whether the document creates

a lease or license; the dominant intention

of the parties is to be gathered from

the terms

of the document irrespective of the labels that the parties may put

F upon it. It is to be stated that even though it is the common contention of

the learned counsel for the parties that dominant intention

of the parties is

to be gathered from the document, yet all throughout the question had

remained a vexed one, having no easy solution and precise mathematical

tests. Because ultimately 'intention

of the parties' is to be inferred. For this

G purpose, we would first refer to the tests laid down by this

Cl'>Urt in the case

of Associated Hotels of India Ltd v. R.N. Kapoor, [I 960] I SCR 368 which

are relied upon

in subsequent

decisions. In minority judgment rendered by

Subba Rao, J. the Court held that there is a clear distinction between lease

and license: the dividing line

is clear, though sometimes it becomes very

thin·

or even blurred and observed that for such determination following

H propositions may be taken as well established :

,!>-..

D.ELTA INTERNATIONAL LID. v. S.S. GANERIWALLA [SHAH, J.} 553

(1) To ascertain whether a document creates a licence or lease, the A

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

Ie~se or a licence;

(3} HJ6e document creates an interest in the property, it is a lease; but B

if it only permits another to make use of the property, of which the legal

possession continues with ~he 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 C

be established which negatived the intention to create a

lease."

Before laying down the aforesaid proposition, the Court held as under:-

"At one time it was thought that the test of exclusive possession was

infallible and

if a person was given exclusive possession of a premises, D

it would conclusively establish that he was a lessee. But there was

a change and recent trend

of judicial opinion is reflected in Errington

v. Errington, wherein Lord Denying reviewing the case law on the

subject summarizes the result

of his discussion thus at p. 155;

"The result of all these cases is that, although a person who is E

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

negative any intention to create a

tenancy."

The Court of Appeal again in Cobb v. Lane considered the legal

position and laid down that the intention

of the parties was the real F

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 intention : Did the

circumstances and the conduct

of the parties show that all that was

intended was that the occupier should have a personal privilege with

G

no interest in the

land?" H

554 SUPREME COURT REPORTS .[1999] 2 S.C.R,

A At this stage, it would be worthwhile to quote some more instructive

B

c

D

E

F

G

H

discussion from the case of Cobb and Another V. Lane; (1952) I All. E.R. I 199

rendered by three learned Judges in theirjudgments given separatf'ly :-

. Somervell, L.J: observed :

"Certainly under the old cases (and I doubt if this has been· affected

by the modern authorities),,

if all one finds is that somebody has been

in occupation for

an indefinite period with no special evidence of how

he got there or

of any arrangement being made when he went into

occupation, it

may be that .the court will find a tenancy at will. I am

assuming that there is no document, or clear evidence as to terms. The

modern cases establish that, it there is evidence of the circumstances

in which the person claiming to

be. a tenant at will

went into

occupation those circumstances ·must be considered in deciding what

the intention of the parties was. "

The learned judge further obsel"Ved :

"No doubt, in former days, except for the question of the statute, the

distinction between a tenancy, whether at will or for a per,iod, ·and a

licence was not so important

as it has become since the Rent

Restrictions Acts came into operation. In many cases

under· those

Acts it has a special importance.

That fact has led to an examination

of the distinction, and 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. further observed to the same effect as under :

"Under the old cases there would have been some colour for

saying that the brother was a tenant at will, but the old cases can no

longer

be relied on.

Owing to the impact of the Rent Acts, the courts

have had to define more precisely the difference between a tenant and

a licensee." .... The question in all these cases is one of intention : Did

the circumstances .and the conduct

of the parties show that all that

was intended was that the occupier should have a personal privilege

with no interest

in the

land?"

Delivering concurring judgment, Romer. L.J, further considered the facts

and observed :

"She was not a tenant at will, and unless she was, she could not

DELTA INTERNATIONAL LTD. v. S.S. GANERIWALLA [SHAH, J.] 555

create the tenancy on which the defendant relies. In the absence of A

. a sufficient title or interest in her to carve out or to create a similar

tenancy

in the defendant, his claim. I say, fails in limine.

"

Further, in his judgment, Lord Denning, J. referred to an earlier decision

in the case of Errington V. Errington, (1952)'1 Ail.E.R. 149 wherein the Court

held that the test

of exclusive possession is by no means decisive. For B

detennining what was the intention of the parties the Court relied upon

following observations from the decision

in the case of Booker v. Palmer,

(1942) All England Law reporter 677 wherein Lord Greene, M.R. held :

"To suggest there is an intention there to create a relationship of

landlord and tenant appears to me to be quite impossible. There is one C

golden rule which is of very general application, namely, that the

law does not impute intention

to enter into legal relationship where

the circumstances

and the conduct of the parties negative any

intention

of the kind.

"

Alongwith other cases, the aforesaid case was referred to and relied D

upon in the case of Rajbir Kaur and Another v. Mis. S. Chokesiri and Co.,

[1989] 1SCC19, this Court considered and held that ultimately the question

whether a transaction

is a lease or licence

"turns on the operative intention

of the parties and there is no single, simple litmus test to distinguish one from

the other."

The relevant discussion in paragraph 22 is as under : -

"22. It is essential to the creation of a tenancy that the tenant be

granted the right to the enjoyment of the property and that, fmther,

E

the grant be for consideration. While the definition of 'lease' in F

Section 105 of the Transfer of Property Act, 1882, envisages the

transfer

of a right to enjoy the property, on the other hand the

definition

of a 'licence' under section 52 of the Indian Easements Act,

1882, consistently with the above, excludes from its pale any

transaction which otherwise, amounts

of an

"easement" or involves G

a transfer of an interest in the property, which is usually involved in

the case of a transfer of right to enjoy it. These two rights viz.

Easements and lease in their very nature, are appurtenant to the

property. On the other hand, the grant only for the right to use the

premises without being entitled

to the exclusive possession thereof

operates merely

as a licence. But the converse implications of this H

556

A

B

c

D

E

F

G

H

SUPREME COURT REPORTS [1999) 2 S.CR.

. .

' • ' ' ' I • •

proposition need not necessarily and always be true, Wherever there

is exclusive possession, the idea of a licence is not necessarily ruled

out. English law contemplates what are called 'Possessory Licences'

which confer a right of exclusive possession, marking them off from .

the more usual type

of licences which

serv~ tq a~thorise acts w(lich .

would otherwise be trespassess. Thus eXclusive possession itself is

not decisive in favour of a lease and against a mere licence, for, even

the grant

of exclusive possession might tum out

to be only a licence

and not a lease

where the grantor himself has no power to grant the

lease.

In the last analysis the question whether a transaction is a

lease

or a licence

"turns on the operative intention of the parties"

and that there is no single, simple litmus test to distinguish 'one from

the other.

The

"solution that would seem to have been found is as

one would expect, that it must depend

on the intention of the parties.

"

(Emphasis added)

Dealing with the contention that intention

of

the parties is to be

determined upon a proper construction

of the deed entered into between

the parties, and that alone

is a decisive matter, the Court dealt with

the said contention

in paragraph 32 and observed as under : -

"Indeed learned counsel placed strong reliance on the following

observations by this Court

in Mrs. MN Clubwala v. Fida Hussain

Saheb,

[1964] 6

SCR 642: -

"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 ascertained

on a consideration of all the relevant provisions

in the agreement.

" (Emphasis supplied)

The proposition

of Dr. Chitale as to the conclusiveness of what

emanates from the construction

of the documents has, in this case,

its own limitations. The import, significance and conclusiveness

of

,.,..

such documents making, or evidencing, the grants fall to be examfried

in two distinct contexts. The dispute may arise between the very

parties

to

the· written instrument, where on the construction of the

deed one party contends that the transaction

is a 'licence' and the

other that it

is a 'lease'. The intention to be gathered from the

document read as a whole

has, quite obviously, a direct bearing.

But in cases where, as here, the landlord alleges that the tenant has

-·

)

)

-

DELTA INTERNATIONAL LTD. v. S.S. GANERIWALLA [SHAH, J.] 557

sublet the premises and where the tenant, in support of his own A

defence sets up the plea of a mere licensee and relies upon a deed

. entered into, inter se, between himself and the alleged licensee, the

landlord

who is not a party to the deed is not bount by emanates

from the construction

of the deed At best, it is a piece of evidence,

the weight to be accorded to which will necessarily depend upon all

B

the other circumstances of the case. The tenant and the subtenant,

who jointly set

up a plea of licence against the landlord may choose

to camouflage the truth and substance of the transaction behind a

facade

of a self-serving and

conveniently drafted instrument."

Learned Counsel for the respondent had also relied upon the decision C

of this Court in the case of Sohan Lal Naraindas v. Laxmidas Raghunath

Gadit,

[197

I] 1 SCC 276, (paras 6 & 9) wherein the Court has observed as

under : -

"6. An attempt was deliberately made to camouflage the true nature

of the agreement, by reciting in several clauses that the agreement D

was for lease and licence and it emphasise the pretence, it was also

recited that the defendant was not

to have any right as tenant or sub­

tenant

in respect of the loft.

9. Intention of the parties to an instrument must be gathered from the

terms

of the agreement examined in the light of the surrounding E

circumstances. The description given by the parties may be evidence

of the intention but is not decisive. Mere use of the words appropriate

to the creation

of a lease will not preclude the agreement operates

as a licence.

A

recital that the agreement does not create a tenancy

is also not decisive. The crucial test in each case is whether the F

instrument is intended to create or not to create an interest in the

property the subject-matter

of the agreement. If it is in fact intended

to create an interest

in the property it is a lease, if it does not, it is

a licence. In detennining whether the agreement creates a lease or a

licence the test

of exclusive possession, though not decisive, is of

significance." (Emphasis added)

From the aforesaid discussion what emerges

is :-

()To find out whether the document creates lease or license real test

G

is to find out 'the intention of the parties'; keeping in mind that in cases

where exclusive possession

is given, the line between lease and licence is H

558 SUPREME COURT REPORTS [1999] 2 S.C:.R.

A very thin.

(2) The intention

of the parties is to be gathered from the document

itself. Mainly, intention

is to be gathered from the meaning and the words

used

in

tpe document except where it is alleged and proved that document

is a cam~uflage. If the terms of the document evidencing the agreement

B between the parties are not clear, the surrounding circumstances and the

conduct

of the parties have also to be borne in

mind for ascertaining the real

relationship between the parties.

(3)

In the absence of a written document and when somebody is in

C exclusive possession with no special evidence how he got in, the intention

is to be gathered from the other evidence which may be available on record,

and in such cases exclusive possession

of the property would be most

relevant circumstance to

arrive at the conclusion that the intention of the

parties was to create a lease.

D ( 4) If the dispute arises between the very parties to the written instrument,

the intention

is to be gathered from the document read as a whole. But in

cases where the landlord alleges that the tenant has sublet the premises and

where the tenant

in support of his own defence sets up the plea of a mere

licensee and relies upon a deed enter into

inter se, between himself and the

E alleged licensee, the landlord who is not a party to the deed is not bound by

what emanates from the construction

of the deed; the tenant and the sub­

tenant may jointly set up the plea

of a license against the landlord which is

a camouflage. In such cases, the mask is to be removed or veil is to be lifted

and the true intention behind a facade

of a self-serving conveniently drafted

instrument

is to be gathered from all the relevant circumstances.

Same would

F be the position where the owner of the premises and the person in need of

the premises executes a deed labelling it as a licence deed to avoid the

operation

of rent legislation.

(5)

Prima facie, in ~bsence of a sufficient title or interest to carve out

G or to create a similar tenancy by the sitting tenant, in favo1.w of a third person,

the person

in possession to whom the possession is handed over cannot

claim that the sub-tenancy was created

in his favour; bec.ause a person

having

no right cannot confer any title of tenancy or

sub-ten~ncy. A tenant

protected under statutory provisions with regard to occupation

of the premises

having no right to sublet or transfer the premises, cannot confer any better

H title. But, this question is not required to be finally determined in this matter.

-

,,;-..,

....

--

DELTA INTERNATIONAL LTD. v. S.S. GANERIWALLA [,SHAH, J.] 559

(6) Further lease or licence is a matter of contract between the parties. A

. Sedion ·107 of the Transfer of Property Act inter alia provides that leases

of immoveable property may be made either by registered instrument or by

oral agreement accompanied by delivery of possession; if it is a registered.

instrument, it shall be executed by both the lessee and the lessor. This

contract between the parties is to be interpreted or construed on the well laid B

prinCiples for construction of contractual terms, viz. for the purpose of

construction

of contracts, the intention of the parties is the meaning of the

words they have used and there can be no intention independent of that

meaning; when the tenns of the contract are vague or having double intendment

one which is lawful should

be preferred; and the construction may be put on

the instrument perfectly consistent with his doing only what he had a right C

to do.

For construction of contracts between the parties and for the

interpretation of such document learned Senior Counsel, Mr. Desai, has rightly

relied upon some paragraphs from "The Interpretation of the Contracts" by

Kim Lewison, Q. C. as under : D

1.03 For the purpose of the construction of contracts; the intention''.

of the parties is the meaning of the words they have used There is

no intention independent of that meaning.

6.09 Where the words ofa contract are capable of two meanings, one E

of which is lawful and the other unlawful, the former construction

should

be preferred .

Sir Edward Coke [Co. Litt 42a) expressed the proposition thus :

"It is a general rule, that whosoever the words of a deed, or of one

of the parties without deed, may have a double intendment and the F

one standeth with law and right, and the other is wrongful and against

law the intendment that standeth with law shall be taken."

In more modem times that statement was approved by the Privy

Council

in Rodger v. Comptoir D'Escomple de Paris, (1869) L.R. 2 P.C. 393, in which Sir Joseph Napier delivering the advice of the Board G

said :

"The rule that words shall be construed most strongly against him

how uses them gives place to a higher rule; higher because it has a

moral element, that the construction shall not be such as to work a

wrong." H

560 SUPREME COURT REPORTS [1999] 2 S.C.R.

A Similarly, in Faussetv. Carpenter. (1831) 2 Dow. & Cl. 232, the House

of -Lords accepted the submission of cou.nsel that the Court :

" ... in judging of the design and object of a deed, will not presume

that a party executing the deed, meant to do and did what he was

wrong in doing, when a construction may be put on the instrument

B perfectly consistent with his.doing only what he had a right to do."

However, the question of'construction should not be approached with

a leaning

in one direction or another. Thus although the law frowns

upon covenants in restraint

of trade, nevertheless such a covenant

should not be approached on the basis that it

is prima facie illegal.

C

"You are to construe the contract, and then see whether it is legal."

D

E

F

Illustrations

l. A bond was conditioned to assign all-offices. It was held that it

should be construed as limited to those offices which it was lawful

to assign.

Harrington v. Kloprogge, (1785) 28 & B 678 n.(a).

2. A contract for the assignment

of a lease provided that if licence to

assign was delayed beyond a certain date, the purchaser would pay

the purchase price to the vendor and the

·vendor would "thereupon

allow the purchaser to enter into occupation pending completion"

and the purchaser would pay the rent and other outgoings. It was

held that "allow," menat, "lawfully'', and consequently did not cover

entry into occupation in breach

of covenant. Cantor Art Services ltd.

v. Kenneth Bieber Photography Ltd., (1969) 1 W.L.R. 1226,

C.A."

In our view, the submission of the learned counsel for the appellant

requires to be accepted because as stated above, it

is nowhere pleaded that

the deed executed between the parties

is a camouflage to evade the rigours

of the provisions of the Rent Act nor is it stated that a sham document is

execute for achieving some other purpose. In these set of circumstances, the

intention

of the parties is required to be gathered from the express words of

G various terms provided by them in the deed. For this purpose, clause 12 of

the document is to be taken into consideration and due weight is required to

be given to what parties have stated.

It provides as under : -

"12. It is hereby expressly agreed upon and declared by and between

the parties that these presents shall not be treated or used or dealt

H with or construed by the parties in any way as a tenancy or lease or

--

DELTA INTERNATIONAL LTD. v. S.S. GANERIWALLA [SHAH, J.] 561

as a document within the preview of the West Bengal Premises Tenancy A

Act or any modification or amendment thereof or to confer any

relationship as landlord and tenant between the parties hereto."

The aforesaid term of the document is not provided by an illiterate

layman or poor person in need of some premises for his residence or business,

but is executed by two companies where it can be presumed that it is mentioned B

after full understanding and to avoid any wrong inference of intention. It

specifically mentions that only a license was created and not a lease. The said

clause is in positive as well as negative form providing that the agreement

was a licence and should not be treated or used or dealt with or construed

by the parties in any way as lease or to confer any relationship as landlord C

and tenants between the parties. When the parties which are capable of

understanding their rights

fully, expressly agreed and declared that document

should

not be construed in any manner as creating any relationship, as

landlord and tenant between them, it would be impermissible to conjecture or

infer that their relations should be construed as that of landlord and tenant

because of certain terms mentioned in the deed can have double intendment. D

As stated above, intention of the parties is the meaning of the words they

have used and there could be no intention independent of that meaning. The

learned Single Judge of the High Court rightly, therefore, held that this clause

stares in his face in construing it as a lease deed.

Secondly, parties to the document were fully aware that lease or sub-E

lease could not be granted and therefore, specific provision is made in the

deed that if the consent of the tenant is obtained for creation of sub-lease,

deed for the same would be executed on the terms and conditions which were

set out in the document; detailed provisions are made in various clauses of

the deed for obtaining permission and execution of

leaso deed. Parties were F

conscious that a lawful lease deed could be executed only after obtaining

consent

of the landlord and the document if treated as sub-lease, would be

illegal.

Paragraphs 4, 5 and 6 of the deed specifically provide that after

obtaining the consent of the landlord, licensor would grant a sub-lease in

respect of the said premises for a period of atleast ten years and the licensor

would endeavour

to obtain a lease on the terms which would not be G

inconsistent with the standard terms on which a sub-lease is obtained by the

licensee for the purpose of selling his products through the

Petrol Service

Station and a copy of the standard form of the lease was also attached with

the deed.

Thirdly, no contention was raised by the defendants to the effect that H

562 SUPREME COURT REPORTS [1999] 2 S:C.R.

A license deed is a camouflage to circumvent the provisions of law or to defeat

the rights of owner or tenant who granted the licence and inducted the

licensee in possession. Further, In cases where contract for license is executed

by handing over exclusive possession of the premises, the distinguishing line

between the lease and license is absolutely thin. In such cases, their terms

of the document are to be read as they are and it would be unreasonable to

B draw inference that parties intended _to create relationship of landlord and

tenant despite express contrary terms in the deed which are binding between

the parties.

However, Mr. D.P. Gupta, learned Senior Counsel for the respondent

C vehemently relied upon various terms of the document in support of his

submission that the document should be construed as a lease deed. He

submitted that construe the document as it is and disregard what would be

the legal consequences of construing it one way or the other way. For that.

purpose, he referred to the following observations of Buckley J. from the

D paragraphs which are sought to be relied upon from the Interpretation of

Contn1cts by Kim Lewison, Q.C. :

"My first duty is to construe the contract, and for the purpose

of arriving at the true construction of the contract, I must disregard

what would be the legal consequences of construing it one way or

E the other way."

For this proposition there cannot be any dispute. The contract is to be

construed on the basis of the terms of the document disregarding the legal

consequences. However, when terms of the document are ambiguous and are

holding double intendment then the meaning which Is lawful is to be preferred.

F As stated above, in the license deed, the parties have specifically made it

clear that they were not executing lease deed, but only a license deed and

it should not be construed as a lease deed or a deed creating relationship of

landlord and tenant between them. It was known to them that without prior

consent, creation of sub-tenancy would be illegal. Hence, it would not be

G correct to arrive at a conclusion which is contrary to the law and the express

tenns of the agreements. Learned counsel for the respondents further submitted

that in the present case, exclusive possession of the property was handed

over to the defendant coupled with the fact that in clause 18, the parties have

used the phrase 'demised premises' which means that the intention of the

parties was to create relationship of landlord and tenant. In our view, this

H submission of the learned counsel cannot be accepted. Exclusive possession

--

-

...

DELTA INTERNATIONAL LTD. v. S.S. GANERIWALLA [SHAH, J.] 563

as discussed above is not the sole inditia to establish the relationship of A

landlord and tenant between parties. It is true that the word 'demise' Indicates

either lease or conveyance depending upon the terms of the document. But,

at the same time said word is to be construed by finding out what is sought

to be conveyed or transferred in the context of all the terms of the document.

If privilege of occupying the premises exclusively is granted on certain terms B

and conditions specifically as a licensee or what is agreed to be granted is

exclusive possession of the premises on certain terms and conditions as a

licencee, then there is no question of holding to the contrary. This would be

clear from various meanings which could be assigned to the word 'demise'.

In Stroud's Judicial Dictionary of Words and Phrase', the word 'demise' is

given different meaning and it is stated that it is to be interpreted in context C

of other terms. This would be clear from the meaning given to the said word:

''On the demise of a brewery, with the exclusive privilege of

supplying ale, it would seem that no covenant can be implied with

respect to such a privilege from the word 'demise' (Hind v. Gray 9

L.J.C.P. 2S3). D

An instrument is not a demise or lease, although it contain the usual

words of demise, if its contents show that such was not the intention

of the parties Taylor v. Caldwell, 32 L.J.Q.B. 164; and, on the other

hand, an agreement only may sometimes be a lease. "

In Butterworths 'Words and Phrases' the word 'demise' has been

explained as under : •

"The relationship of landlord and tenant is one of contract, but

E

a lease also operates as a conveyance. The usual word for this

purpose is 'demise', but neither this word nor any formal words of F

conveyance are necessary. Provided the Instrument shows the parties'

intent that the one is to divest himself of the possession and the other

is to come into the possession for a determinate time, either immediately

or in the future, it operates as a lease. This is so whether it is in the

ordinary form of a demise, or in the form of a covenant or agreement, G

or in the form of an offer to let or take on certain terms and an

acceptance appearing on correspondence. (27 Halsbury's Laws (4th

Edn) para 107)

'It is true that the word dem!se [in a lease] does imply a covenant

for title, but only when there is no express covenant inconsistent with H

564

A

B

c

SUPREME COURT REPORTS [1999] 2 S.C.R.

such a construction'. Line.v. Stephenson, (1838) 5 Bing NC 183 at 186,

per Lord Denman CJ.

'The terms

of the lease, in my opinion establish an exclusive

occupation. The word

"demise" primafacie alone would be sufficient

to establish that. I do not go so far

as to say that where the word "demise" is used in a lease or agreement no evidence would be

admissible to displace the presumption arising from its use, but the

word

primafacie would establish an exclusive

occupation." Young &

Co. v. Liverpool Assessment Committee, (1911) 2KB 195 at 215, DC,

per Avory J."

Hence for determining whether the phrase 'demised premises' should be

construed as a lease or a license as expressly stated

in the agreement, the

phrase or the word

is to be construed in

context in which it is used. In the

present case the said phrase

is used in clause 18 three times along with the

tenn 'license fee' which was to be paid by the licensee and the manner

of its

D payment. It provides that 'license fee' for the demised premises was Rs. 3950

per month and the license fee was payable for the said demised premises

as

provided therein, that is to say Rs.23,700 for six months in advance and that

the said license fee

is to be adjusted in respect of the demised premises per

month. The phrase 'demised premises'

is used for recovering the license fee.

E If the intention of the parties was to create lease, then the word 'rent'

would

have been easily used at all the places. 'Demised premises', in the present

case, includes not only the premises, but fittings, fixtures and the petrol

service station also. License was granted specifically to run the petrol service

station on the terms and conditions specified therein. There are number

of

other terms and conditions in the document which indicate that it was a

F license deed. Firstly, the license was for the purpose of running the petrol

service station which was set up by the licensor. The possible grant

of sub­

lease was reserved for the future

in the event of Delta obtaining consent from

its landlord Mallika Investments Company. The

licensee was not obliged to

pay any part

of the outgoings in respect of the premises which indicate that

G the charges attendant upon occupation of the premises were to be paid and

borne by the licensor.

He was also required to keep the plant and machinery

at the said premise

in good repair and was required to obtain necessary

insurance policies for the business. A further clause to the effect that licensee

was permitted to carry

on business in the name of the licensor indicates that

the premises were not let out

othe~ise there was no question of permitting

H the use of the licensor's name. It is true that there are certain other clauses

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DELTA INTERNATIONAL LTD. v. S.S. GANERIWALLA [SHAH, J.] 565

which may indicate a different intention if they are construed in isolation such A

as a term to the effect that licensee was entitled to grant sub-licence to

operate the petrol station or that they were entitled to instal other machinery.

But, at the same time, these clauses are to be read in the context of the fact

that the licensor had decided not to run the business of petrol service station

and that by the impugned deed, right to run the said business along with the

premises was given to the licensee. Further, clause 9 specifically provides that B

licensor shall be at liberty to withdraw and or revoke the leave and licence

in case there is any default of the terms mentioned in the document. Clause

16 provides that if the sub-lease is granted then licensee was required to

purchase the equipments, fittings and fixtures as mentioned in the Second

Schedule at a price of Rs.2,50,000 within a period of one year from the date C

thereof. Admittedly, sub-lease is not granted and the .amount of Rs.2,50,000

as agreed is also not paid by anyone.

Hence, even though it is not necessary to discuss, however, we would

briefly refer to other decisions upon which learned Counsel for the parties

relied

upon. Learned Counsel for the respondent relied upon the decision in D

the case of Capt. B.

V. D'Souza v. Antonio Fausto Fernades, [1989] 3 SCC 574

and submitted that the main purpose of enhancing the rent statutes is to

protect the tenant from the exploitation of the landlord, who being in 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 E

and suppress the mischief. He, therefore, submitted that using of the words

leave and licence or some other terms in the document should be construed

in a way so as to advance the object of the Rent Act. In our view, in the

present case, there is no question of such exploitation by the landlord.

'Dewar' itself

was inducted by a tenant in the premises and at the time of

executing the leave and licence document, parties were under the impression F

that they would obtain the consent of the landlord for granting sub-lease.

That contemplation

was not achieved. Hence, the said judgment has no

bearing in interpreting the tenns of the document which is executed between

two Companies knowing full welJ their

rights and the legal implications of the

tenns provided in the document. He also referred to the decision in the case G

of Tulsi V. Paro (Dead), [1997] .2 SCC 706 where in this Court after considering

the revenue records for the period from 1951-52 to 1971-72 mentioning the

appellant was not in a possession as the "tenant at will", held that .the theory

of licence was untenable and in that context observed that a licensee has no

right in property and not to speak of any right to exclusive possession of the

property and animus of possession always remains with the licensor and the H

566 SUPREME COURT REPORTS [1999] 2 S.C.R.

A licensee gets the possession only with the consent of licensor and is liable

to vacate when so asked. In the said case, there was no written document

between the parties and considering the facts of the case particularly exclusive

possession for a period of 20 years and the revenue records, the Court held

that it was unthinkable to conclude that appellant of that case was licensee.

As stated above, exclusive possession is one of the most relevant factor for

B deciding whether it is a lease or licence. But, at the same time, when the tenns

of the document are clear leaving no doubt that parties never intended to

execute lease deed, in that set of circumstances,. exclusive pos.session would

lose its importance. Dealing with the similar question in the case of M.N.

Clubwala v. Fida Hussain Saheb, (1964) 6 S.C.R. 642, this Court observed

C as under :-

D

E

F

G

H

"While it is true that the essence of a licence is that it ls revocable

at the will of the grantor the provision in the licence that the licensee

would be entitled to a notice before being required to vacate is not

inconsistent wi* the licence. In England it has been held that a

contractual luc~nce may be revocable or irrevocable according to the

express of implied terms of the contract between the parties. It has

further been held that if the licensee under revocable licence has

brought the property on to the land, he is entitle to notice of revocation

and to a reasonable time of removing his property, and in which to

make arrangements to carry on his business elsewhere. Thus the mere

necessity of giving a notice to a licensee requiring him to vacate the

licensed premises would not indicate that transaction was a lease.

Indeed, section 62(c) of the Indian Easements Act, 1882 itself provides

that a licence is deemed to be revoked where it has been efther

granted for a limited period, or acquired on condition that it shall

become void

on the performance or non-performance of

a specified

act, and the period expires, or the condition is /ulfllled. In the

agreements in question the requirement of a notice is a condition and

if that condition is fulfilled the licence will be deemed to be revoked

under section 62. It would seem that it is this particular requirement

in the agreements which has gone a long way to influence the High

Court's finding that the transaction was a lease. 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 ascertained on a

consideration

of all the relevant provisions in the agreement. In the

absence, however, of a formal document the intention of the parties

DELTA INTERNATIONAL LTD. v. S.S. GANERIWALLA [SHAH, J.] 567

much be inferred from the circumstances and conduct of the parties." A

Lastly, it is to be noted that if the document is a camouflage as-stated

earlier, the mask or veil is required to be removed for determining the true

intent and purpose of the document. In the present case, there is no pleading

by the defendants that the document was a camouflage so as to defeat the

rights of a tenant who had inducted the appellant or that of the owner of the B

. premises. As stated earlier, the document contemplates three types of

agreements, one, that of a leave and licence; secondly, in case a consent is

obtained from the tenant, for execution of sub-lease which would create

interest in the property as sub-tenant and thirdly, in case of sub-lease, for

purchase of equipment, fitting and fixtures at a price of Rs.2,50,000. Second C

and third part of the Agreement never came into operation. Hence, for the

reasons discussed above, we hold that the agreement dated 18th July, 1970

is a deed of 'leave and licence' and .not a 'lease'.

In the result, the appeals are allowed, the judgment of the Division

Bench dt. 2.12. 1997 is set aside and the order passed by the learned Single D

Judge in Suit No. 491 of 1985 is restored. In the circumstances of the case,

there shall be no order as to costs.

R.K.S. Appeals allowed.