# SORAN LAL NARAINDAS v. LAXMIDAS RAGHUNATH GADIT

- **Citation:** [1971] 3 S.C.R. 319
- **Court:** Supreme Court of India
- **Decided:** 1971-01-08
- **Bench:** J. C. Shah, S. Hegde, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/soran-lal-naraindas-v-laxmidas-raghunath-gadit-5195
- **Pages:** 5

## Headnote

Lease and licence-Difference between-Tes~ of exclusive possession·
-Language of document must be read wi#l surrounding circumstances.
The plaintiff commenced an action in the City Civil Court, Bombay
for a decree in ejectinent against the defendant alleging that the defendant was occupying loft on the upper floor of a building under an agreement of licence and the licence had been duly terminated and withdrawn.
The defendant contended that he was tenant of the loft, that the tenancy
had not been duly terminated as required by law; that he was entitled to
the protection of the Bombay Rents, Hotel and Lodging Rates Contract
Act, 1947; and \bat the court had no jurisdiction to try the suit.
The
trial court dismissed the suit.
The decree was confirmed in appeal by
the High Court of BombfU'. The plaintiff applied for certificate under
Aft. 133(1) (a) of the Constitution and in the alternative under Art.
133(1) (c) thereof.
The High Court passed an order certifying the case
under Art. 133 (I) (c), and the plaintiff appealed.
HELD : (I) A certific~te granted by the High Court must be supported by adequate reasons.
It is obligatory upon the High Court to set
out the question of public or private importance which in their opinion
falls to be determined in the proposed appeal.
In th~ present case since
there was no merit in the appeal it was not necessary to
vacate the
certificate. [318 G]
(2) A licence confers a right to do or continue. to do something in
or upon immovable property of grantdr which but for the grant Of the
right may be unlawful, but it create no estate or interest in the immovable property of the grantor. A lease on the other hand creates an interest
in the property demised. [322 G]
Intention of the parties to an instrument must be gathered from the
terms of the agreement examined in the light of surrounding circumstan·
ces.
The description given by the parties may be evidence of the intention but is not· decisive. The crucial test in each .case
is
whether the
.. instrument is intended to create dr not to create an interest in the pro-·
pcrty, the subject matter of the agreement. If it is in fact intended to·
create interest in the property it is a lease, if it does not, it is a licence.
In determining whether the agreement creates a lease or a licence, the
test of excrnsive possession though not
decisive,
is
of
significance.
[322 H-323 Bl
Mrs. M. N, Clubwa/a v. Fida Hussain Saheb & Ors., [1964] 6 S.C.R.
642. relied on.
In the present case on a carefol consideration of .the covenants and in
the light of the relevant surroundmg circumstances. 1t must held that the
exclusive possession given to the defendant was mtended to confer an .
mterest in the loft and on that account the agreement operated as a
lease and not as a licence. [323 DJ
320
SUPREME COURT REPORT1
[1971] 3 ;S.C.lt.

## Text

A
B
c
D
E
F
G
II
SORAN LAL NARAINDAS
v.
LAXMIDAS RAGHUNATH GADIT
January 8, 1971
.
319
[J. C. SHAH, C.J., K, S. HEGDE AND A. N. GROVER, JJ.]
Lease and licence-Difference between-Tes~ of exclusive possession·
-Language of document must be read wi#l surrounding circumstances.
The plaintiff commenced an action in the City Civil Court, Bombay
for a decree in ejectinent against the defendant alleging that the defendant was occupying loft on the upper floor of a building under an agreement of licence and the licence had been duly terminated and withdrawn.
The defendant contended that he was tenant of the loft, that the tenancy
had not been duly terminated as required by law; that he was entitled to
the protection of the Bombay Rents, Hotel and Lodging Rates Contract
Act, 1947; and \bat the court had no jurisdiction to try the suit.
The
trial court dismissed the suit.
The decree was confirmed in appeal by
the High Court of BombfU'. The plaintiff applied for certificate under
Aft. 133(1) (a) of the Constitution and in the alternative under Art.
133(1) (c) thereof.
The High Court passed an order certifying the case
under Art. 133 (I) (c), and the plaintiff appealed.
HELD : (I) A certific~te granted by the High Court must be supported by adequate reasons.
It is obligatory upon the High Court to set
out the question of public or private importance which in their opinion
falls to be determined in the proposed appeal.
In th~ present case since
there was no merit in the appeal it was not necessary to
vacate the
certificate. [318 G]
(2) A licence confers a right to do or continue. to do something in
or upon immovable property of grantdr which but for the grant Of the
right may be unlawful, but it create no estate or interest in the immovable property of the grantor. A lease on the other hand creates an interest
in the property demised. [322 G]
Intention of the parties to an instrument must be gathered from the
terms of the agreement examined in the light of surrounding circumstan·
ces.
The description given by the parties may be evidence of the intention but is not· decisive. The crucial test in each .case
is
whether the
.. instrument is intended to create dr not to create an interest in the pro-·
pcrty, the subject matter of the agreement. If it is in fact intended to·
create interest in the property it is a lease, if it does not, it is a licence.
In determining whether the agreement creates a lease or a licence, the
test of excrnsive possession though not
decisive,
is
of
significance.
[322 H-323 Bl
Mrs. M. N, Clubwa/a v. Fida Hussain Saheb & Ors., [1964] 6 S.C.R.
642. relied on.
In the present case on a carefol consideration of .the covenants and in
the light of the relevant surroundmg circumstances. 1t must held that the
exclusive possession given to the defendant was mtended to confer an .
mterest in the loft and on that account the agreement operated as a
lease and not as a licence. [323 DJ
320
SUPREME COURT REPORT1
[1971] 3 ;S.C.lt.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2443'of A
1966.
.
Appeal from the judgment and order dated January 21, 25
of the Bombay High Court in First Appeal No. 769 of 1963.
F. S. Nariman, P. C. Bhartari a.nd J. B. Dadao,hanji. for the
appellant.
B
D. V. Patel, Ramesh Malik and Ganpat Rai, for the respondent.
The Judgment of the Court was deliyered by
Shah, C.J.
Sohan Lal Naraindas-hereinafter referred to c
as 'the plaintiff'-commenced an action in the City Civil Court,
Bombay, for a decree in ejectment against Laxmidas Raghunathhereinafter· called 'the defendant'- iilleging that the defendant
was occupying a loft 19' x 15' on the upper floor of a building
at Pragraj Galli, Mulji Jetha Market, Bombay under an agreement
of licence dated November 3, 1958 and tliat the licence had been
duly terminated and withdrawn but the defendant had failed and
D
neglected to vacate the loft notwithstanding the demand.
The
defendant contended that he was a tenant of the loft, that the
tenancy had not been duly' terminated as required hy law, that
he was entitled to the protection of the Bombay Rents Hotel &
Lodging House Rates Contract Act 1947 and that the Court had
no jurisdiction to try the suit.
E
The Trial Court dismissed the suit holding that the defendant
was a tenant of the plaintiff and not his licensee.
The decree
was confirmed in appeal, by the High Court of Bombay. The
High Court held that on the terms of the agreement and in the
light of the surrounding circumstance> the relatiorrship between
the parties was that of landlord and tenant.
Wi\11· certificate F
~ranted by the High Court the plaintiff has a.ppealed to this Court.
The certificate granted by the High Court is defective.
The
'plaintiff applied for certificate under Art. 133(1) (a) of the Constitution and in the alternative under Art. 133(1)(c) of the Constitution.
The High Court passed an order certifying the case
G
1 under Art. 133(1)(c). A certificate granted ?Y th~ !Jigh Court
must be supported by adequate reasons. It ts obhgatory upon
the High Court to set out the question of public or private importance which in their opinion fall to be determined in the proposed
appeal.
Sjnce we are of the view that there is no merit in this
appeal, we have not thought it fit to vacate the certificate.
H
The agreement dated November 3, 1958 was recorded formally in writing and was duly executed.
The plaintiff was the.
lessee of a shop No. 11 in Pragraj Galli, Mulji Jetha Market, and
A
B
c
D
E
F
SOHAN LAL v. LAXMIDAS (Shah, C.J.)
321
the loft _of that shop was the subject matter of that agreement.
The penod of the agreement was one year.
It was stated in the
agreement that the loft "was. given on leave al).d licence basis for
use amroccupation" of the defendant on the terms and conditions mentionc:_d therein. The relevant conditions w~re-
" I. The owner (the plaintiff) has agreed to grant
the leave the licence for use and occupation of the said
loft (Medo) of the said shop for a period one year commencing from 4so Vad 13 S. Y. 2014 to Aso Vad 12
S. Y. 2{)15.
2. The Licensee (the defendant) shall pay to the
Owner monthly compensation or Licensee fee at the
rate of Rs. 250 / • per month, and the Licensee has paid
Rs. 3000/- (Rupee three thousand) only to the Owner
as compensation or licence fee for the said period in
advance on or before the execution of this agreement.
3. The Licensee shall have no right as a tenant or
sub-tenant in respect of the said loft (Medo) of the
said shop.
The Licensee shall not sub-let, allow to use,
transfer or assign in any way the said loft (Medo) of the
shop to any one else.
4. The Owner shall bear and pay the rent of the
said shop.
5. The Licensee shall use and occupy the said loft
(Medo) of the said shop as a cloth merchants only and
shall not be entitled to carry on any other business.
6. The parties hereto shall give one month's clear
notice of their intention to terminate this agreements
in writing.
7.
8. If the Licensee commits breach of any of the
terms of this agreement in that case the Owner shall be
entitled to tem1inate and recoke the leave and licence
G
hereby granted without giving notice to the Licensee."
H
The defendant was put in exclusive possession of the loft. The
plaintiff did not reserve possession of any pan of the loft or a
right of entry therein.
The loft had a separate entrance. The
customers of the defendant used the separate entrance to the loft
during the business hours and his stock of cloth remained in the
loft after business hours.
The plaintiff and defendant were both
cloth merchants, and the only consideration for granting the
licence was the payment of Rs. 250/- per month.
There is no
7-LS07Sup./71
322
SUPREME COURT REPORTS
[1971 ]3 S.C.R.
A
evidence that the loft was given to the defendant out of sympathy
or because of friendship, or relationship, or any similar motive.
It was stipulated that the plaintiff may terminate the agreement
by giving one month's clear notice, the agreement could not be
terminated by notice of a shorter duration.
An attempt was deliberately made to camouflage the true 8
nature· of. the agreement, by reciting in several clauses that the
agreement was for leave and licence, and to emphasise the presence it was also recited that the defendant was not to have any
right as tenant or sub-tenant in respect of the loft.
At the trial the elder brother of the defendant was examined
as a witness.
He stated that the agreement dated November 3,
C
1958 was intended to be an agreement of lease, but the pl?intiff
insisted that the agreement be drafted with the conditions set out
therein.
Section 52 of the Easements Act defines a "Licence" :-
"Where one person grants to another, or to a definite number of other persons, a right to do, or continue
to do, in or upon the immovable property of the grantor, something which would, in the absence of such right
be unlawful, and such right does not amount to an
easement or an interest in the property, the right is
called a licence "
Section 105 of the Transfer of Property Act defines "lease" :-
"A lease of immovable property is a transfer of a
right to enjoy such property, made for a certain time, .
express or implied, or in perpetuity, in consideration of
a price paid or promised, or of money, a share of crops,
service or any other thing of value, to be rendered
periodically or on specified occasions to the transfer or
by the transferee, who accepts the transfer on such
terms.
D
F
A licence confers a right to do or continue to do something in or G
upon immovable property of grantor which but for the grant of
the right may be unlawful, but it creates no estate or interest in
the immovable property of the grantor.
A lease on the other
hand creates an interest in the property demised.
Intention of the parties to an instrument must be gathered
from the terms of the agreement examined in the light of the
surrounding circumstances.
The description given by the parties
may be, evidence of the intention but is
not decisive.
Mere
H
A
B
c
D
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SOHAN LAL v. LAX?.1itoAs (Shah, C.J.)
323
use of the words appropriate to the creation of a lease will not
preclude the agreement operating as a licence.
A recital that the
agreement does not create a tenancy is also not decisive.
Tho
crμcial test in each Cl!$e is whether the 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 i.; a licence.
1n· determining whether the agreement creates a lease 9r a licence
the test of exclusiv epossession, though not decisive, is .of signifi·
cance.
Mrs. M. N. Clubwala v. Fida Hussain Saheb and Ors(1).
The Trial Court regarded exclusive possession of the premises
given to the defendant as conclusive of the question whether the
loft was in the occupation of the defendant as a tenant.
The
Court observed that on a consideration of the clauses of the
agreement it was unable to reach a conclusion whether the agtee·
ment was intended to operate as a lease or as a licence but since
exclusive possession was given it must be regarded a lease.
The
High Court considered all the covenants and the attendant cirr
cumstances and reached the conclusion that having regard to th~
exclusive possession given to the defendant it was intended
IOI
confer an interest in the loft and on that account the agreement
operated as n lease and not as a licence.
We have carefully considered the covenants in the light of the
relevant surrounding circumstances.
We are unable to disagree
with the view taken by the High Court that by the terms of the
11greement an interest was created in the loft in favour of the
def eHdant.
The appeal fails and is dismissed with costs.
G.C.
Appeal dismissed.
(I) [1964!6S.C.R.642.