This article is written by Appabrita Saha, an advocate practicing at the Delhi High Court.
The most commonly drafted conveyance in India, for either residential purpose or commercial purpose, is Leave and License for a specified period (usually for 11 months) compared to a tenancy agreement or lease agreement. Often, these agreements are misconstrued and used interchangeably, which gives rise to confusion. Section 52 of the Indian Easement Act, 1882 (Act), defines License. In simple words, when somebody grants to a another, or to a particular number of persons, a right to only use the immovable property of the grantor, for a purpose which is not unlawful.
The other two kinds of rental agreements are rent agreement and lease agreement governed by the Rent Control Act and the Transfer of Property Act,1882, respectively. The difference between the said rental agreements is well-known. Section 105 of the Transfer of Property Act defines Lease. In simple words, when somebody transfers the right of immovable property to another for a specific period in return of a price to be paid periodically. The price may be in terms of money, a share of crops, service or any other thing which is useful, to the transferor by the transferee, and the transferor accepts such terms and conditions. The transferor is the lessor and transferee is the lessee. The amount received for the transfer is the rent. On the other side, Tenancy is when somebody let out his/her premises on rent, or when a tenant occupies a rental home, such activities fall under the ambit of the Rent Control Act. Each State has its own Rent Control Act, for example, Maharashtra has the Rent Control Act, 1999, Delhi has the Rent Control Act, 1958 and West Bengal has the West Bengal Premises and Tenancy Act, 1997. The one who let out the premises is the landlord and the one who occupies is the tenant. The object of the Rent Control Act is to settle disputes between the landlord and the tenant.
The above-mentioned legislations are unique and have balanced provisions to protect the licensor and licensee, lessor and lessee and landlord and tenant, respectively. It is easy to understand that the above-mentioned agreements are different from one another and have a separate identity of its own.
The parties often enter into Leave and License agreement, it being one of the simplest forms of agreement to enter into without the slightest knowledge that if in the least the legislation i.e. the Indian Easement Act, 1882 (Act) governing such agreement is applicable at that part of the country or not. The Act is restricted and extended to only those states mentioned in section 1 of the Act.
Therefore, a question arises whether a licensor remains remediless if a licensee refuses to vacate the premises after the expiry of the period mentioned in the agreement or if principles could be applied and if the disputes arising out of such Agreement is arbitral?
This article is an effort to seek out an answer to the confusion regarding the law. Firstly, regarding the appliance of the principle of Indian Easement Act, 1882, there has been a plethora of Judgments, wherein it is held, that even if the Act is not extended to some States, the principal could be applied. In Shiv Dyal vs. Ram Dass, AIR 1926 Lah 473, it was observed that in the State of Punjab where Easements Act does not apply, the principles of English law (equity, just and good conscience) may be applied. Judgments, for instance, Karam Ilahi vs. Ghulam Musafa, AIR 1927 Lah 492 and Mirza Ahmad Jan vs. Ghulam Hussan, AIR 1944 Lah 417 can also be relied. There is a view that in those part of the country where the said Act is not applicable there is no reason as to why the principles of the Act, which maintains the principles of English common law – just, equity and great conscience cannot be applied. The principles of English Common Law should be considered legitimate.
The primary reason for seeking guidance from the Indian Act is that the provisions of this Act are more suited to Indian requirements than the principles of English Common Law. In Cases, for instance, Daya Ram vs. Deo Ram, AIR 1926 Nag 376, Bhola Nath vs. Radha, AIR 1924 Cal 844, Baroda Prosad Pal And Anr. vs. Asutosh Pal And Ors., AIR 1941 Cal 289, Bhupati Bhusan Mondal And Ors. vs. Jadunath Ghosal And Ors., AIR 1955 Cal 70, Nritta Kumari Dassi vs. Puddomoni Bewah, ILR 30 Cal 503 Jangbahadur Singh vs. Thithar Singh, AIR 1935 Pat 188, Daw Gyan vs. U. Maung Maung, AIR 1936 Rang 58, Tan Sit Shan v. U Po Nyun, AIR 1939 Rang 421, it is held that the principles of Act is applicable to those parts of the State where the Act is not in force.
Also, to give meaning to the agreement entered by and between the parties where the Act is not applicable, one can rely upon C.M. Beena vs. P.N. Ramachandra Rao where it is mentioned that by reading the whole document and/or the Agreement, if any, executed by and between the parties, from the conduct and surrounding circumstances, the real intention of the parties can be determined. It shall help in observing the difference between a lease and leave and licence.
Further, the Court also held that the conduct of the parties before and after the creation of the relationship is also of relevance to find out their intention. In Achintya Kumar Saha vs. Nanee Printers, Supreme Court also held a similar view, wherein a problem relating to tenancy and licence was settled by only referring to the intention of the parties, and it had been held by the court that intention of the parties becomes the determining factor to conclude the important nature of the agreement made. Moreover, the Court opined that the encompassing circumstances should even be taken under consideration while deciding the real intention of the parties. A similar view was also observed by the Supreme Court in case of Rajbir Kaur v. S. Chokosiri and Co.
In the case of Delta International Ltd v Syam Sundar Ganeriwalla, a dispute between the parties was whether the agreement between them was lease or leave and licence. Nowhere, in the document was mentioned of any provision which may make it evaded from the provisions mentioned under W.B. Premises Tenancy Act, 1956. The Supreme Court, held that in absence of pleadings that the deed executed between the parties was a camouflage to escape the rigours of the provisions of the Rent Act or it is stated that a sham document was executed for accomplishing some other purpose, the intention of the parties would be required to be gathered from the words and phrases mentioned by them in the deed.
In the case of Vayallakath Muhammodkutty vs. Illikkal Moosakutty, the Court held that a simple restriction on sub-letting of the premises in the Agreement does not make it a lease agreement. The Court further made an observation that sometimes questions of subletting does not arise in case of a licence agreement.
It was further held by the Supreme Court in Khalil Ahmed basher Ahmed vs. Tufelhussein Samasbhai Sarangpurwala, that in an agreement where the transferee is entitled to enjoy the immovable property without any interference, it should be considered as a lease agreement.
In Associated Hotels of India vs. R.N Kapoor, the Court clearly stated the difference between these two concepts. The Supreme Court held that an agreement which only grants the right to use the premises, while possession and power remain with the owner, it be considered as leave and licence. The Court observed that there is only a thin line of difference between these two concepts. When one gets possessory right and the right to enjoy the property, it might be a lease, not leave and licence. In the case of Mrs M.N. Clubwala vs. Fida Hussain Saheb, the Supreme Court addressed the question that whether an agreement between the parties creates a connection of landlord and tenant or merely that of licensor and licensee and held that the intention of the parties is the determining factor. The intention is to be determined upon considering all the relevant clauses mentioned in the agreement.
In Municipal Corporation of Delhi vs. Pradip Oil Corporation, Supreme Court made an important observation that leave and licence does not create interest in the property whereas in lease it would amount to transfer of property. The leave and Licence could also be personal or contractual. A licensee without the grant creates a right within the licensor to enter into the premises and only enjoy. No interest in the property are created in case of leave and licence. A leave and licence, inter alia, is not assignable, does not entitle the licensee to sue the stranger in his name, it is revocable and determined when the grantor makes a subsequent assignment.
Given the above-mentioned question whether disputes arising out of such agreement is arbitral, the Supreme Court of India, in various judgments held that matter governed by special statute with statutory protection are non-arbitral.
Thus, from the above facts and judgments, one based on the pith and substance of the agreement and avoiding mere labelling of the Agreement can depend on either of the two legislations namely, the Transfer of Property Act,1882 or Rent Control Act. However, the present monthly fee should even be considered to be one of the important components to decide the law that might rescue the parties. Also, the legislations provide provisions for either revocation in case such is Leave and License Agreement, serve a notice of termination if it is a lease agreement and notice of eviction if it is a Rent agreement otherwise could also be termed as a trespasser and action can be taken under the due process of the law. The pre-deposit amount also can be used when the monthly fee not paid.
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