# Associated Hotels of lndJa v. R. N. Kapur

- **Citation:** [1968] 2 S.C.R. 559
- **Court:** Supreme Court of India
- **Decided:** 1967-12-07
- **Case number:** Civil Appeal No. 372 of 1965
- **Bench:** S. M. Sikri, J. M. Shelat, K. S. Hegde
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/associated-hotels-of-lndja-v-r-n-kapur-4234
- **Pages:** 6

## Headnote

Lease or Licence--Tes.t for determining.
The appellant filed a suit for
eviction of the respondent from the
appellant's house. The suit was dismissed by the trial court. In appeal,
a compromise was entered into between the parties and a
decree was
passed in terms of the compromise.
The compromise provided for the
respondent's continuation of possession of the house for five years. but
it enabled the appellant to execute the decree by evicting the respondent
if the responclent failed to pay rent for any three consecutive months.
When the appellant sought to evict the respondent, the latter claimed protection from eviction as a tenant under the Orissa House-Rent Control
Act, 1958.
On the question whether the con1promise decree created a lease or a
licenct,
HELD : The facts that the appellant had filed a suit for eviction of
the respondent and the compromise decree enabled him to execute the
decree by evicting the respondent, show, that the intention of the parties,
which is the decisive test, \Vns not to enter into the relationship of a land~
lord and tenant, in spite of the fact the word 'rent' was used in the compromise.
Therefore, the respondent was not entitled to any protection
against eviction. [562 C; 563 A-Cl
Associated Hotels of lndJa v. R. N. Kapur,
[1960] 1 S.C.R.
368,
State of Punjab ''- British India Corporation, [1964] 2 S.C.R. 114 and
M. N. Cluhwala v. Fida Hussain Saheb, [1964] 6 S.C.R. 642, follower!.
Issac v. Hotel De Paris, (1960] 1 All E.R. 348, applied.
Sumatibai Waman Kirlikar v. A. B. Shirgaonkar, A.l.R. 1949
Born.
402, approved.

## Text

55 9
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KONCHADA RAMAMURTIIY SUBUDIIl & ANR.
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v.
GOPINAm NAIK
December 7, 1967
[S. M. SIKRI, J. M. SHELAT AND K. S. HEGDE, JJ.]
Lease or Licence--Tes.t for determining.
The appellant filed a suit for
eviction of the respondent from the
appellant's house. The suit was dismissed by the trial court. In appeal,
a compromise was entered into between the parties and a
decree was
passed in terms of the compromise.
The compromise provided for the
respondent's continuation of possession of the house for five years. but
it enabled the appellant to execute the decree by evicting the respondent
if the responclent failed to pay rent for any three consecutive months.
When the appellant sought to evict the respondent, the latter claimed protection from eviction as a tenant under the Orissa House-Rent Control
Act, 1958.
On the question whether the con1promise decree created a lease or a
licenct,
HELD : The facts that the appellant had filed a suit for eviction of
the respondent and the compromise decree enabled him to execute the
decree by evicting the respondent, show, that the intention of the parties,
which is the decisive test, \Vns not to enter into the relationship of a land~
lord and tenant, in spite of the fact the word 'rent' was used in the compromise.
Therefore, the respondent was not entitled to any protection
against eviction. [562 C; 563 A-Cl
Associated Hotels of lndJa v. R. N. Kapur,
[1960] 1 S.C.R.
368,
State of Punjab ''- British India Corporation, [1964] 2 S.C.R. 114 and
M. N. Cluhwala v. Fida Hussain Saheb, [1964] 6 S.C.R. 642, follower!.
Issac v. Hotel De Paris, (1960] 1 All E.R. 348, applied.
Sumatibai Waman Kirlikar v. A. B. Shirgaonkar, A.l.R. 1949
Born.
402, approved.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 372 of
1965.
Appeal by special leave from the judgment and order dated
September 23, 1963 of the Orissa High Court in Miscellaneous
Appeal No. 59 of 1961.
B. Parthasarathy and M. S. K. Sastri for M/s. J.B. Dadachan;i
and Co .. for the appellants.
·
K. R. Chaudhuri for respondent No. I.
H
The Judgment of the Court was delivered by
Sikri, J,
This appeal by special leave is dir~cted against the
judgment of the High Court of Orissa allowing the appeal and
560
SUPREME COURT REPORTS
[1968] 2 S.C.R.
/
setting aside the judgment of the District Judge Ganjam-Boudh,
Bcrhampur, who had affirmed the order passed by the Munsif,
Bcrhampur, dismissing M.J .C. No. 220; 60 of Gopinath Naik,
respondent before us, hereinafter referred to as the Judgment.
Debtor.
The facts in this case are tlot in dispute.
One Konchada
R:11namurti Subudhi, deceased, now represented by his legal represcnratives and appellants before us-hereinafter r~krred to as
the Decree Holder-and Bhagirathi Naiko, now represented by
Gopinath Naik, Judgment Debtor, filed a compromise petition
under 0. XXlll, r. 3 of the Code of Civil Procedure in the Court
'Jf Subordinate Judge, Bcrhampur, in 'T.A. No. 13 of 1955.
In
terms of this compromise petition a decree was passeu
The
Decree Holder filed an application for execution of the decree
and the Judgment Debtor filed the application (M.J.C. No. 220/
60) under s. 47, C.P.C., in the Court of Munsif, Berhampur,
obj~,ting to the execution of the decree.
The Munsif dismissed
this :.pp,lication of the Judgment Debtor and the District Judge
affirmed the order.
The High Court, however, on appeal, set
aside the order of the District Judge.
The only poin.t raised before us is whether ihe compromise
decree created a lease or a licence.
It is common ground that if
a lease was created the Judgment Debtor would be entitled to
protection against being ejected by virtue of the provisions of
Orissa House-Rent Control Act (Orissa Act XXXI of 1958)--
hereinafter referred to as the Act,
The terms of the compromise were as follows :
"i. Respectable people have settled the subject
matter of this appeal and the suit and so both parties
agreed to compromise as follows :-
(a) That the defendant-respondent should vacate
the suit house on or before 1-7-60 (five years) failing
which the appellant-plaintiff will be entitled to execute
this decree and recover possession of the suit house
through court after the date fixed above.
(b) That in respect of all arrears of rent claimed
in the suit and the rent due during the pcndency of the
suit and of this appeal. as calculated up to 30-6-55, the
defendant has paid to the plaintiff the sum of Rs. 1.125
only (Rupees One thousand and one hundred twcntyfivc only).
( c) That in resnect of furure rent, i.e .. with effect
fro.,] 1-7-55 the defendant shall pay to the plnintilf at
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X. R. SUBUDHI V. GOPINATH (Sikri, J.)
the rate of Rs. 50 a month by the end of each month
until delivery, and a sum of Rs. 300 is paid to plaintiff
to be kept as deposit for six months rent to be adjusted
towards rent for the period of last six months ending
with 1-7-1960.
( d) In case the defendant fails to pay the rent for
any three consecutive months the plaintiff will be at
liberty to adjust the advance towards arrears and also
to evict the defendant from the suit house without waiting till 1-7-1960 by executing the decree and also realise
the amount accrued due by then, from the defendant by
executing this decree.
( e) That the house fell to the share of a minor son
of plaintiff-qppellant, namely, Konchada Koteswarrao
for whom the appellant-plaintiff is the guardian, and the
plaintiff-appellant· will be responsible for the due compliance of the terms of this compromise.
2. That each party do bear its own costs in both
courts.
3. That a decree may be passed in the above terms."
561
The High Court has held that the compromise decree created
a lease and not a licence.
The learned counsel for the appellants contends that the
intention of the decree holder was only to give accommodat~on
to the judgment debtor, and as he had filed a suit to eject the
judgment debtor it could not have .been his intention to create
a fresh tenancy.
He places reliance on the decision in Ramjibhai
Virpal Shah v. G. M. Bhagat(') where the Bombay High Court
has elaborately considered the Jaw bearing on the subject of the
interpretation of the compromise decrees and the distinction
between a lease and a licence.
Before we approach the question of the construction of the
compromise deed, we may refer to two decisions of thls Court
bearing on the distinction between a lease and a licence and the
principles for distinguishing one from the other.
This Court
obse:·ved in M. N. Cl11b1va/a v. Fida Hussain Saheb( 2 ) :
"Whether an agreement creates between the parties
the refationship of landlord and tenant or merely that
of licensor and licensee the decisive consideration is the
intention of tl~e parties. This intention has to be ascertained on a consideration of all the relevant provisions
in the agreement."
I) A.LR. [19541 Born. 370.
L2SupCI/6~-5
(2) [1964] 6 S.C.R 642-652, 653.
"7
562
SUPREME COURT REPORTS
[1968] 2 S.C.R.
This Court further observed that exclusive possession is not conA
elusive evidence of a lease.
"If, however, exclusive possession
to which a person is entitled under an agreement with a landlord Is coupled with an interest in the property, the agreement
would be construed not as a mere licen.ce but as a lease. (See
Assoriat~d Hotels oj India Ltd. v. R. N. Kapur)"(').
In /L<;·ocfrucd Hotels of India Ltd. v. R. N. Kapur( 1 ) Subba
Raci, J .. as he then was, summarised the propositions as follows :
"The following propositions may, therefore, be
t•tken as well-established : ( 1 ) To ascertain whether a
document creates a licence or lease, the substance of
the document niust be preferred to the form: (2) :he
real tc>t is the intention of the parties-whether they
intcntlccl to create a lease or a licence; (3) if the document creates an interest in the property, it i:; a lease;
but. if it only permits another to make use of the property, of which the legal possession continues with the
owner. it is a licence; and ( 4) if under th~ document
a party gets exclusive possession of the property, prima
facie, he is considered to be a tenant; but circumstances
may be established which negative the int~ntion to create
a lease."
Lord Denning, speaking for the Judicial Committee of the
Privy Council in Issac v. lfatel De Paris(2) observed :
"There are many cases in the books where exclusi\'~ possession has been given of premises outside the
Rent Restriction Acts and yet there has been held to
be no tenancy.
Instances arc Frrington v. Errington
& Woods(') and Cobb v. Lane('), which were referred
to during the argument.
It is true that in those two
cases there was no payment or acceptance of rent, but
even payment and acceptance of rent-though of great
we.ight-is not decisive of a tenancy where it can be
otherwise explained : see Clarke v. Grant('). As Lord
Greene. M.R., said in Rooker v. Palmer(•) :
'There is one golden rule which is of very general
application, namely, that the law does not impute intention to enter in'lo legal relationships where the circumstances and the conduct of the parties negative any intention of the kind.'•
(IJ (1960] I S.CR. 368-384.
(Jl [t952] I All E.R. 149,
(5) [1949] I All E.R. 76,.
(2) [1960] I All E.R. 348-152.
(41 (1952] I All E.R. 1199.
(6) ( 1942] 2 All F.R, 674-677,
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K. R. SUBUDHI v. GOPJNATH (Sikri,}.)
563
Keeping in mind the above observations, what was the inten·
tion of the parties ? It seems to us that the fact that the decree
holder had brought a suit for ejectmellt of the judgment debtor
and that a compromise was entered into in that suit is important.
It is difficult to impute to him a11 intention to create a fresh
tenancy while the fact that he brought the suit s~ows that his
intention was to eject the judgment debtor after havmg purported
to terrninate the tenancy.
Coming to the terms of the compromise, it is true, as stressed
by the learned counsel for the respondent, that the word "rent"
has been ;.:sed, but the word "rent" is not conclusive, for as
observed by this Court in State of Punjab v. British India Car·
poration Ltd., (1) "in its wider sense rent means any payment
made for the use of land or buildings and thus includes the pay·
ment by a licensee in respect of the use and occupation of any
land or building. In its narrower sense it means payment made
by tenant to landlord for property demised to him."
The learned counsel further stresses the point that Rs. 300
were paid as deposit for six months' rent "to be adjusted towards
rent for the period of last six months ending with 1-7 -1960", but
it seems to us that that amount was really paid as a security for
the amounts due under the compromise deed, as it was only to
be adjusted against the rent for the last six months.
~ut what
is very significant is cl. ( d) which enables the decree holder to·
execute the decree if the judgment debtor· falls to pay rent for
any three consecutive months.
This, it seems to us, shows that
the intention of the parties was not to enter into the relationship·
of a landlord and tenant. We may mention that the importance
of this fact was adverted to in Sumatibai Waman Kirlikar v. A. B.
Shirgaonkar{') where Chagla, C.J., observed:
"On the failure of the defendant to pay any of the
amount which is fixed as rent on its due date, the only
right the decree gave to the judgment-creditor was to
have it executed for the amount which remained due;
it did not entitle the judgment-creditor to take posses·
sion of the land on default of payment of rent"
The High Court stre.ssed the fact that a long period of five
years was granted to the judgment debtor for continuation of the
possession. In our view, the length of the period, in the circumstances, does not militate against the construction that the compromise only create~ a licence, . for the decree holder apparently
had lost in the trial co~rt and it was only in the court of appeal
that this compromise was arrived at.
(I) [1964] 2 S.C.R. 114-123.
(2) A,T.R. 1949 Pon•. 4i2-4:4.
564
SUPREME COURT REPORTS
[1968) 2 S.C.R.
For :he aforesaid reasons we hold that the compromise deed
did not create a lease.
Therefore, the judgment debtor is not a
tenant within s. 2 ( 5) of the Act which defines "tenant'· to mean
"any person by whom or on whose behalf rent is payable for
any house and includes every person who, from time to time,
derives title under a' tenant, or a person continuing in possession
after the termination of his tenancy otherwise than under the
provisions of this Act, and shall include any person against whom
a suit for ejectment is pending in a Court of competent jurisdiction but not a person against whom a decree or order for eviction has been made by such a Court."
In thP result the appeal is allowed, the judgment of the High
Court set dside and that of the District Judge restored.
The
appellants will have their costs incnrred in this Court. ·
V.P.S.
Appeal allowed.
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