Dharmarth Trurt vs Jagan Nath

(1) In this suit for the recovery of Rs. 53.000/ an objection to the admissibility of an agreement was raised by the learned counsel for the defendant

at the time of recording of the statement of witness scribe of the document produced by the plaintiff. Mr. Gupta contented that the document in question was necessarily to be registered under the provisions of section 17 of the Registration Act. According to him as the document was not so registered it was not admissible in evidence. The learned counsel for the plaintiff however contented that the document was a deed of licence and as such was not required to be registered under the provisions of the registration Act. The statement of the scribe witness was therefore, not recorded in full. Arguments have been addressed by both the learned counsel on this point.

(2) Whether the document was a lease or only a licence shall have to be decided on a reference to the contents of the deed itself. For this purpose

the form of the document may be looked in to but the form alone would not be of as much help as the substance of the document would be. It is the intention of the parties that would determine the character of the deed and it will be from the terms and conditions of the document itself and also from other attending circumstances and the conduct of the parties that would be the main factors to be taken in to consideration for correct interpretation of the deed. There is no gainsaying the fact that if the document creates an interest in the property it is a lease but if it only given permission to another person for making use of the property of which the legal possession continues with the owner, it is a licence. The transfer of exclusive possession by itself may not be enough to establish that the document created a lease as there may be circumstances that may negative such as impression. There is clear distinction between the concept of lease and that of the licence. The distinction has now been well brought out in a number of Supreme Court judgments such as AIR 1959 S. C. 1262, 1976 (3) S. C. Cases 485, 1976 (3) S. C. Cases 7512, A. I. R. 1965 S.

C. 610, The consensus of judicial opinion in this regard now appears to be that the determining factor as to whether a document created a lease or

was a license was to ascertain from the terms and conditions of the document the intention of the parties.

(3) In para 27 of the judgment of the Supreme Court reported in A. I. R. 1959 S. C. 1262 after stating that there was a marked distinction

between a lease and a licence and after noting the definition of both these concepts, it has been laid down as follows :

The following propositions may therefore be taken as well established;

(i) to ascertain whether a document creates a licence or lease the substance of the document must be preferred to the form;

(ii) the real test is the intention of the partieswhether they intended to create a lease or a licence;

(iii) if the document creates an interest in the property it is a lease but if it only permits another only to use the property of which the legal

possession continues with the owner, it is a licence;

(iv) if under the document a party gets exclusive possession of the property, prima facts, be is considered to be a tenant but circumstances may be

established which negative the intention to create a lease.

(4) The same principles of law nave been laid down and followed in AIR 1975 Allahabad 373 wherein it has been laid down as follows;

The cardinal touchstone on which the relationship between the parties who claim to be licence holder or licencee or lessor or lessee must be decided whether the grant creates an interest or estate in the property which is the subject matter of the agreement. Delivery of exclusive possession is a relevant factor but it would be conducive to the existence of a lease only when it is coupled with an interest in the property and not

otherwise.

The same principle of law has been laid down in AIR 1972 Madras 372.

(5) From a perusal of the contents of the agreement in question it appears that it has been executed by the defendant in favour of the plaintiff. In the

beginning it has been stated that it was a deed of licence permitting the defendant to use the shop in question for purpose of selling sweatmeat to the pilgrims who visit the shrine of Shri Vaishnav Devi Jee. The defendant has stated that he will pay Rs. 1,11,000/ for use and occupation of this shop for a period of one year, to the plaintiff out of which an amount of Rs. 45,000/ has been paid at the time of the execution of the document and for the remaining amount of Rs. 66,000/ four installment s of different amounts are contemplated to have been fixed. One of the conditions accepted by the defendant was that without the consent of the plaintiff, he was not entitled to transfer or sublet the shop to anybody and in case he did so he would be liable to be objected and also would be liable to pay damages to the plaintiff, in case the plaintiff obtained less amount for the remaining period of grant at auction. He further undertook to sell the sweatmeats at the rate fixed by the Food and Supplies Deptt: and also undertook to affix the rate list at a conspicuous place in the shop. He further agreed vide Clause 6 of the deed that if any condition or term c i the deed was violated by him within the period of the grant, he will be liable to immediate eviction and would be bound to handover the possession to the plaintiff. By another clause he agreed that if there was any violation of the condition of the grant the plaintiff would be entitled to enter upon the possession of the shop and for that purpose the plaintiff would be entitled to use even force.

(6) From a perusal of these conditions and other conditions laid down in the deed it was obvious that though the possession of the shop had been

transferred to the defendant no interest therein has been created in favour of the defendant. The conditions am terms were such which would negative the claim of the defendant that the deed created an interest in the property in his favour. The plaintiff handed over the property to the defendant on the terms and conditions stated in the deed itself which show that the plaintiff was entitled to enter into the property even during the period of licence and in that event the defendant agreed that the plaintiff may use even force in making such entry. One of the conditions was that the defendant would sell only sweetmeats and some other salt preparations and nothing else. Moreover the defendant himself had termed the deed as a licence. That clearly showed his intention. On a perusal of the document as a whole it is not possible to accept the view of Mr. Gupta that the document in question was a lease deed and therefore was compulsorily registrable under the Registration Act The objection is therefore overruled and it is held that the deed in question is only a licence and does not require to be registered compulsorily u/s 17 of the Registration Act. It is further held that in view of this finding the document is properly stamped.

(7) It is therefore, directed that the witnessscribe may be summoned so that his remaining statement is recorded. Put up on 12th Sept. 1978.