The Punjab Handloom Weavers Apex Co-Operative Society Ltd. vs Smt. Gian wati

P.C. Pandit, J.—A shop, situate in Bazar Sarafan Ambala City, was taken on a monthly rent of Rs. 50 by the Punjab Handloom Weavers Apex Co-operative Society Ltd., Chandigarh, hereinafter called the ''Apex Society'', from its owner Shrimati Gian Wati. Later on, she filed an ejectment application against her tenant on the ground that the Apex Society had sublet the premises in favour of the Ambala Handloom Weaving Industrial Co-operative Society, Ambala City, hereinafter referred to as the ''Industrial Society''.

The Apex Society resisted this application and denied the alleged subletting and also pleaded that no valid notice u/s 106 Transfer of Property Act had been served on them before filing the eviction application It was also averred by them that no notice u/s 79 of the Punjab Co-operative Societies Act, 1961, had been given by the landlord.

The following three issues were framed by the Rent Controller.

Whether the respondent has sublet the premises or transferred his rights under the lease, if so, to what effect?

Whether a vaild notice u/s 106 of the Transfer of Property Act was not served upon the respondent before filing this application?

Whether the respondent was entitled to a notice of three months u/s 79 of the Co-operative Societies Act and what shall be the effect if such a notice was not served on the respondent?

All these issues were found in favour of Shrimati Gian Wati, with the result that the ejectment application was granted

Against that order, the Apex Society went in appeal before the Appellate Authority, Ambala, which dismissed the same, after affirming the findings of the Rent Controller on all the three issues. The Apex Society has come here in revision.

It is common ground that in order to succeed, the landlord in the instant case had to prove that the tenant had, without her written consent, transferred their rights under the lease or sublet the entire building. It is not the case of the landlord that the tenant had transferred their rights under the lease in the present case. The only question to be determined is whether the Apex Society had sublet the entire building. The case of the Apex Society was that there was no subletting by them and the Industrial Society was merely their licensee. The difference between a lessee and a licensee has been laid down by the Supreme Court in Konchada Ramamurthy Subudhi (dead) by his legal Konchada Ramamurthy Subudhi and Another Vs. Gopinath Naik, where it was observed;

Before we approach the question of the construction of the compromise deed, we may refer to two decisions of this Court bearing on the distinction between a lease and a license and the principles for distinguishing one from the other. This Court observed in Mrs. M.N. Clubwala and Another Vs. Fida Hussain Saheb and Others,

Whether an agreement creates between the patties 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.

This Court further observed that exclusive possession is not conclusive 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 license but as a lease. (See Associated Hotels of India Ltd. Vs. R.N. Kapoor,

In Associated Hotels of India Ltd. Vs. R.N. Kapoor, Subba Rao J., as he then was, summarised the propositions as follows:

The following propositions may, therefore, be taken as well-established: (1) To ascertain whether a document creates a license or lease, the 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 lease or a license; (3) if the document creates an interest in property, it is 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 license; 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 be established which negative the intention to create a lease

Lord Denning, speaking for the judicial Committee of the Privy Council in Isack v. Hotal De Paris, 1960 1 All E. R. 348-352 observed:

There are many cases in the books where exclusive possession has been given of premises outside the Rent Restriction Acts and yet there has been held to be no tenancy. Instances are Errington v. Errington and Woods 1952 1 All E. R. 149 and Cobb v. Lane, 1952 1 All E. R. 1199 which were referred to during the argument It is true that in those two cases there was no payment or acceptance of rent-though of great weight is not decisive of a tenancy where it can be otherwise explained: see Clarke v. Grant, 1949 1 All E. R. 768. A Lord Greene, M.R., said in Booker v. Palmer, 1942 2 All E. R. 674 -677.

There is one golden rule which is of very general application namely, that the law does not impute intention to eater into legal relationship where the circumstances and the conduct of the parties negative any intention of the kind.

Keeping in view the above mentioned principles, let us see what the intention of the parties was in the instant case, whether they intended to create a lease or a license For this peruse, it is necessary to examine the terms of the agreement that was entered into between the Apex Society and the Industrial Society before the litter was put into possession of the shop in question. The said agreement dated 20th December, 1961, reads:

That the said society agrees to take the Apex Co-operative Handloom Cloth Sale Depot, Ambala City, on agency system. The Society will act as the agent of the Apex Society for the sale of Handloom goods only of all types and varieties produced by the Co-operative Societies.

The Ambala Weaving Co-operative Industrial Society Ltd. Ambala City, will pay a commission of Rs. 5% to the Apex Society on the sale of all types of handloom goods.

The Society will store its own sticks an I sale must not be less than Rs. 3,000/- in any month.

The record of the Society will remain open for inspection by the staff of the Apex Society at all reasonable times.

This agreement will stand for one year from the date of handing over charge to the Society and can be extended if mutually agreed.

Furniture of the Apex can be used by the Society and will be returnable in good condition at the cancellation of agreement.

All expenditure is to be incurred by the Co-operative Industrial Society except rent of the shop which will be paid by the Apex monthly.

In case sale is less than Rs. 3,000/- in any month, Apex will charge Rs. 150/- as commission of that month.

The society will engage its own staff.

The Society will use the Cash memos, bearing the name of the Apex Society. The Society can of course write in the cash memos, the term agents for the Apex Society and thus print its own name also on the Cash Memos.

The Society will be responsible for keeping the accounts complete.

In case any party does not abide by the conditions of this agreement the other party can get this agreement cancelled after giving one month''s notice.

If any dispute arises as to the interpretation of any of the above clauses of this agreement or in its working, this agreement in actual practice or in connection with any matter connected thereto, the matter will be referred to the Registrar, Co-operative Societies, Punjab, Jullundur, for arbitration. His decision would be final and binding on both the parties.

A perusal of this agreement would show that the Industrial Society was doing the business in the shop as the agent of the Apex Society. The rent of the shop had to be paid every month by the Apex Society. The Apex Society had the right to go to the shop at any time and inspect the accounts maintained by the Industrial Society and it was the latter''s responsibility for keeping them complete. The goods were to be sold in the name of the Apex Society and it would be the r cash-memos, which would be used by the Industrial Society. The Industrial Society could, however, print its own name also on the cash-memos, but only as the agents for the Apex Society. The furniture of the Apex Society lying in the shop could be used by the Industrial Society, and the same would be returnable in good condition to the former at the time of the cancellation of the agreement. The agreement was to be for one year in the first instance, but the same could be extended if mutually agreed. The Industrial Society had to pay a commission of Rs 5 per cent to the Apex Society on all the sales If the sale in any month was less than Rs. 3,000/., then the Apex Society would charge Rs 150/- as commission from the Industrial Society in that month. It is pertinent to mention that there was no transfer of any interest in the lease-hold rights in the shop in question by the Apex Society in favour of the Industrial Society and the latter had not become the tenant of the said shop. The legal possession of the premises continued with the Apex Society and it was doing the business in the shop in question through its agent, namely the Industrial Society. It was a permissive use of the shop granted by the tenant to the Industrial Society. The tenant had not divested itself of the right to re-enter the premises. The monthly rent as already stated, had to be paid by the Apex Society and there was no liability on the part of the Industrial Society to pay the same to the landlord. This was the sole responsibility of the Apex Society. No interest in the shop was transferred by the Apex Society. Subletting necessarily implies the transfer of some of the lease-hold rights in the premises in favour of the sub-tenant. As is clear from the various terms of the agreement, quoted above, the intention of the parties, in my opinion, was to create a license and not a lease.

I would, therefore, hold that no subletting had been proved by the landlord in the instant case. The result is that this petition succeeds, the orders of the Appellate. Authority and the Rent Controller are reversed and the application of ejectment filed by the landlord is dismissed.

In the circumstances of this case, however, I leave the parties to bear their own costs throughout.