M/S. Didi Modes Pvt. Ltd. And ... vs M/S. Hind Trading & Manufacturing ...
1996 Latest Caselaw 264 Del

ORDER

Dalveer Bhandari, J.

1. This appeal is directed against the judgment and a decree dated 25th February, 1993 passed by the learned single Judge in Suit No. 746/81. The plaintiff M/s. Hind Trading and Manufacturing Company has filed a suit for recovery of the possession of the premises in question and for the recovery of licence fee and damages. In the plaint, the case set up by the plaintiff is that the plaintiff firm is a Joint Hindu Family partnership firm registered under the Indian Partnership Act. The appellant company was the defendant in the suit, attorney to the partnership firm by paying licence fee. The plaintiff firm had taken a plot B-243, Phase I, New Industrial Area, New Delhi from the President of India on a perpetual lease under the deed dated 18-6-1973 and as such the plaintiff firm is a perpetual lessee of the said plot. After taking the said plot on lease the plaintiff firm constructed the building to run the industry for the purpose of sanitary fittings and castings. The plaintiff is the owner of the building constructed on the plot.

2. Defendant No. 2 requested the partners of the plaintiff firm of grant a licence in its favour in respect of the part of the building constructed on this plot. The firm acceded to the request and granted licence in favour of defendant No. 2 who acted as the Director of defendant No. 1 at that time. A regular deed of licence was executed on 25th June, 1975 by the licensee and licensor.

3. According to the terms of licence deed, the licensor allowed the licensee to use the basement, mezzanine floor and portion of the ground floor of the building B-243, Phase I, New Okhla Industrial Estate, New Delhi. The other terms and conditions mentioned in the licence deed were that the licence fee was Rs.500/- per day which included the electricity charges for one day subject to the minimum of Rs. 3,500/- per week commencing from the 25th June, 1975. The licence fee was payable in advance everyday and, in case the licensee failed to pay in advance the licence fee, the licensor was entitled to terminate the licence without any further notice. It was provided in the licence deed that the licensee had no right, title or interest to possess the said portion except to use the same as the licensee. Defendant No. 2 continued to pay licence fee at the rate of Rs. 500/- per day or a long time but during the year 1978, he created a dispute regarding the electric connection which was provided in the building. Because the defendant wanted separate electric connection in the building, separate electric connection was taken in the building and out of the amount of licence fee, the charges of electricity were deducted, the amount for a period of 30 days. The defendant started complaining that there was electric disconnection with effect from 19-5-1978 and he wanted to get a separate electric connection in the building.

4. The plaintiff filed a suit in the Court of Senior Sub-Judge against the defendant for a permanent injunction restraining the defendant from installing a new electric meter in the building. The suit was dismissed for non-prosecution. The defendant also filed an application under Section 45 of the Delhi Rent Control Act before the Rent Controller for restoration of the electric supply. The defendant claimed tenancy rights over the suit property. The Rent Controller passed the interim order, restoring the electric connection to the licensee after holding that a prima facie relationship of a landlord and tenant has been established. The said observation was made by the Rent Controller while deciding the interim application. It may be relevant to mention that no Court has finally adjudicated on the issue relating to the relationship of the parties.

5. The case of the plaintiff is clear that the intention of the parties was only to create licence and not a lease. There was no transfer of interest or title in favour of the defendant and in fact, the plaintiff was and is prohibited from transferring, selling, assigning or otherwise parting with the possession of all or in part of the industrial plot except with the consent in writing of the lessor. Admittedly, no such consent was obtained by the plaintiff.

6. The lease for more than one year cannot be created unless it is registered. The deed is nothing but a simple licence deed and could be terminated at Will. The plaintiff terminated the licence orally on 16-8-1977 which was confirmed by a telegraphic communication dated 29-8-1977 addressed to defendant No. 2. The plaintiff filed a suit for possession and recovery of licence fee and damages.

7. The defendant contested the suit. The defendant had taken a number of preliminary objections but contested the suit primarily on the ground that though the parties had apparently executed a licence but in fact they intended to create a lease.

8. In order to correctly appreciate the controversy, it is desirable to set out the terms of the agreement. The relevant terms are reproduced as under.

"1. That the LICENSOR is owner in possession of the entire building constructed on the plot measuring about 2520.8 Sq. Yds. bearing Plot No. B-243, situated at Okhla Industrial Area, Phase I, New Delhi-44. The LICENSOR had obtained the perpetual lease of the said plot from the President of India as per deed dated 18th June, 1973. The LICENSEE hereby agree not to violate any of the terms of the said perpetual lease dated 18th June, 1973.

2. That the said LICENSEE shall be entitled to use the electricity connections i.e., light and power connections fitted in the said building owned by the LICENSOR.

3. That the LICENSEE shall be entitled only to use the entire basement, the entire mezzanine floor, and a portion on ground floor, i.e., one hall measuring 42' x 29' and one room measuring 13' x 8' of their said building.

4. That the LICENSEE shall pay in advance to the LICENSOR a daily license fee at Rs.500/- (Rupees five hundred only) per day which includes electricity charges for one day subject to a minimum of Rs. 3,500/- (Rupees Three thousand and five hundred only) per week commencing from Wednesday, the 25th day of June, 1975. The Licence fee shall be payable in advance every day. In case the LICENSEE fails to pay in advance the Licence fee for any day the LICENSOR shall be entitled to terminate the license without any further notice and the LICENSEE shall then remove his goods machinery and other articles then lying in the said basement, mezzanine floor and the portion of ground floor of the said building.

5. That in the event of any portion of the building belonging to the LICENSOR being damaged on account of and act of default, negligence or omission on the part of the LICENSEE he shall forthwith execute all the necessary repairs thereto or in the alternative pay adequate compensation to the LICENSOR, on that account besides the Licence fee agreed as above.

6. That the LICENSEE shall have no right, title or interest to possess the said basement, mezzanine floor and portion of ground floor of the said building except to use the same as a licensee for the aforesaid purposes on the condition of his paying the agreed daily licence fee.

7. That the LICENSOR shall be entitled to terminate the license hereby granted to the LICENSEE if and when any objection is raised by the President of India or any other authority on his behalf to the said user by the LICENSEE. In the said event the LICENSEE agrees to remove his articles, goods etc. that may be lying in the said building at once and that the LICENSEE shall be liable to pay such amount which may be claimed by and on behalf of the President of India from the LICENSOR with respect to said building.

8. That the LICENSER shall not store place or use the portion of the building belonging to the said LICENSOR in any manner contrary to law or in any rules, regulations or statute applicable to the said building."

9. Number of witnesses were examined and a large number of documents have been placed on record. Mohinder Kumar Jain, one of the partners of the plaintiff firm appeared in the witness box. In his statement, he has deposed that the defendants have damaged the property by making holes in the RCC pillars of the basement and by making unauthorised construction of sheds, etc. He further stated that they also damaged the staircase wall; since defendant No. 2 had to pay the amount of licence fee in advance but had failed to pay the same, as such plaintiff was entitled to charge interest at the rate of 18 per cent, till date of payment. He also mentioned that he had been protesting to defendant No. 2 about using the premises for manufacture of garments. The manufacture of garments was not permissible in accordance with the terms of the lease deed between the plaintiff and the DDA. It is also mentioned that premises had been in possession of defendant No. 2. Defendants had employed a chowkidar who used to guard. Defendant No. 2 and his employees used to lock it. The key was with him. There are two entrance gates to the property in question. One is for the exclusive use of the defendants where they have their own security guard and one is for common use by the plaintiff as well as by the defendant. P.W. 3 who appeared as a witness for the plaintiff stated that he had been carrying on the business of estate agent for the last 25-30 years in the Okhla Industrial area. The deal between the plaintiff and defendant No. 2 had been struck through him and he had done the negotiations in the matter. He mentioned in the cross-examination that he did not know what was the difference between the lease and the licence. The document was executed at the advice of an Advocate who had told the plaintiff that the property in dispute had been built on leasehold land of the DDA and it could not be let out on rent. He further mentioned that he did not know if according to the agreement of lease between DDA and the owner, the owner could part with possession thereof in favour of any person. Exs. P-l to P-38 have been filed. Ex. D-l is the letter dated, 17-8-1981 by defendant No. 1 to the plaintiff, demanding the receipts of the rent paid by it. Ex. D-2 is also the letter dated 8-5-1981 to the plaintiff asking for white washing of the entire building. Ex. D-3 is another letter dated 8-5-1981 by defendant No. 1 to the plaintiff demanding the receipts for the rent paid. Ex. D-4 is the letter dated 25-4-81 by defendant No. 2 to the plaintiff informing the plaintiff that he was not a licensee under the plaintiff and there was no question of terminating the alleged licence. In this letter, he denied his liability to pay the damages as claimed by the plaintiff. Ex. D-5 is the letter by defendant No. 1 asking for the receipt of the rent paid. Ex. D-7 is a letter dated 18-3-81 by defendant Xo. 1 informing the plaintiff that the electricity connection remained disconnected since 19-5-78 and, therefore, the plaintiff was not entitled to payment of Rs. 2,500/- towards the electricity charges. The defendants are liable to pay a sum of Rs. 12,500/- towards the rent. Ex. D-8 is also a letter dated 7-1-81 written on behalf of the defendant addressed to the plaintiff forwarding pay order for Rs.25,000/- towards the rent for October and November, 1981. Ex. D-9 is the letter written by the defendant to the plaintiff sending an amount of Rs. 12,500/- towards rent for month of August, 1990. Ex. D-10 is the letter by defendant to the plaintiff by which the plaintiff was informed that defendant No. 1 was the tenant and the defendant No. 2 was not a licensee and defendant No. 2 was not liable to pay the amount. Ex. D-11 is a letter dated 14-8-80 to the same effect as is Ex. D-10. Ex. D-12 is another letter by defendant No. 1 to the plaintiff informing the plaintiff to pay Rs. 2,500/- on account of electricity charges as the electricity was disconnected. Ex. D-13 is a letter dated 28-4-80 written by defendant No. 1 informing the plaintiff that defendant No. 1 is a tenant and defendant No. 2 is not a licensee at all and is not liable to pay any amount towards tenancy. Exs. D-15, D-18, D-19, D-20, D-22, D-23, D-24, D-26, D-27, D-28, D-30, D-31, D-32, D-33, D-34, D-35, D-37 and D-38 are the letters written by the defendants on the same lines.

10. The crucial question for consideration in this case is whether the instrument executed between the parties creates a licence or a lease. Similar question has come up for consideration before Indian and English Courts in number of cases.

11. The Division Bench of Calcutta High Court in Ram Pratap Kayan v. The National Petroleum Co. Ltd., , has observed as under:

"If the effect of the instrument is to give the holder an exclusive right of occupation of the land, though subject to certain reservations or to a restriction of the purposes for which it may be used, it is in law a demise of the land itself. If the contract was merely for the use of the property in a certain way on certain terms while it remained in the possession and under the control of the owner, it is a licence.

Exclusive possession would be taken to have been given if the nature of the acts to be done by the grantee was such as required a right of exclusive occupation."

12. The Supreme Court had an occasion to deal with similar controversy in the case of Associated Hotels of India Ltd. v. R. N. Kapoor, .

13. In this case the Supreme Court critically examined a large number of English and Indian cases and formulated few propositions which are mentioned hereinunder:

"(1) To ascertain whether a document creates a licence 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 licence;

(3) if the document creates an interest in the 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 licence; 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. Judged by the said tests, it is not possible to hold that the document is one of licence. Certainly it does not confer only a bare personal privilege on the respondent to make use of the rooms. It puts him in exclusive possession of them, untrammelled by the control and free from the directions of the appellants. The covenants are those that are usually found or expected to be included in a lease deed. The right of the respondent to transfer his interest under the document, although with the consent of the appellants, is destructive of any theory of licence. The solitary circumstance that the rooms let out in the present case or situated in a building wherein a hotel is run cannot make any difference in the character of the holding. The intention of the parties is clearly manifest, and the clever phraseology used or the ingenuity of the document writer hardly conceals the real intent. I, therefore, hold that under the document there was transfer of a right to enjoy the two rooms, and, therefore, it created a tenancy in favour of the respondent."

14. The Supreme Court in Associated Hotels of India Ltd. v. S. B. Sardar Ranjit Singh, , decided the controversy whether the occupier of the separate apartment in a premises is a licensee or a tenant, the test is -- has the landlord retained control over the apartment. The fact that the apartment is a room in a hotel may lead to the inference that the hotel keeper retains the general dominion of the entire hotel including the apartment and that the occupier is in the position of a lodger or inmate. The relevant portion of the said judgment is reproduced hereinbelow:

"The test of exclusive possession, though not conclusive, is a very important indication in favour of tenancy. The argument is that as the landlord is living in the premises, that fact raises the presumption that he intends to retain the control of the whole of the premises and that the occupation of the other parts is that of a lodger or inmate and not that of a tenant, and reliance was placed on Helman v. Horsham and Worthing Committee, 1949-2 KB 335, and the cases referred to therein. Those cases consider what constitute rateable occupation. In the case last cited, Denning, L.J. seems to have expressed a contrary opinion. Normally an occupier of an apartment in a hotel is in the position of a licensee as the hotel keeper retains the general control of the hotel including the apartment. But it is not a necessary inference of law that the occupier of an apartment in a hotel is not a tenant. Where, as in this case, the hotel-keeper retains no control over the apartment."

15. The Supreme Court in the case of Qudrat Ullah v. Municipal Board, Bareilly, , while deciding similar controversy has observed as under:

"There is no simple litmus test to distinguish a lease as defined in S. 105, Transfer of Property Act from a license as defined in S. 52, Easements Act, but the character of the transaction turns on the operative intent of the parties. To put it pithily, if an interest in immovable property, entitling the transferors to enjoyment, is created, it is a lease; if permission to use land without right to exclusive possession is alone granted a license is the legal result."

The Court in this case further held that:

"In determining whether an agreement creates between the parties the relationship of landlord and tenant or merely that of licensee or lessee the decisive consideration is the intention of the parties. The parties to an agreement cannot, however, turn a lease into a license merely by stating that the document is to be deemed a licence or describing it as such; the relationship of the parties is determined by law on a consideration of all relevant provisions of the agreement nor will the employment of words appropriate to a lease prevent the agreement from conferring a licence only if from the whole document it appears that it was intended merely to confer a licence. In the absence of any formal document the intention of the parties must be inferred from the circumstances and the conduct of the parties.

NATURE OF GRANT OF EXCLUSIVE POSSESSION. The fact that the agreement grants a right of exclusive possession is not in itself conclusive evidence of the existence of a tenancy, but it is a consideration of the first importance.

In deciding whether a grantee is entitled to exclusive possession regard must be had to the substance of the agreement. To give exclusive possession there need not be express words to that effect; it is sufficient if the nature of the acts to be done by the grantee requires that he should have exclusive possession.

The grant of an exclusive right to a benefit can, however, be inferred only from language which is clear and explicit. If an exclusive right of possession is subject to certain reservations or to a restriction of the purposes for which the premises may be used, the reservations or restriction will not necessarily prevent the grant operating as a lease.

WHEN GRANT CONFERRING EXCLUSIVE POSSESSION OPERATES MERELY AS LICENCE. A grant which confers the right to exclusive possession may operate as a licence in the following circumstances which negative the intention to create a lease.

INSTANCES OF AGREEMENTS CREATING LICENCES. A licence is normally created where a person is granted the right to use premises without becoming entitled to exclusive possession thereof, or the circumstances and conduct of the parties show that all that was intended was that the grantee should be granted a personal privilege with no interest in the land. If the agreement is merely for the use of the property in a certain way and on certain terms while the property remains in the possession and control of the owner, the agreement will operate as a licence, even though the agreement may employ words appropriate to a lease.

Not so much the law as the fitment of the terms of a deed into the legal mould makes the forensic essay none too easy."

16. The Bombay High Court while dealing with similar controversy in the case of M/s. Mohan Sons (Bombay) Private Ltd. v. Lady Sonoo Jamsetji Jejeebhoy, , has observed as under:

"The agreement had the usual preamble in which all the introductory particulars which are to be found in a lease were mentioned. But the parties were described as licensors and licensees. Out of a total area 2300 square feet, the licensee was given the right to use and occupy about 1800 Sq. Ft. Then followed the terms and conditions subject to which the so-called licence was granted. Some of the clauses were as follows. Clause No. 1 provided that the licensee, was given leave and licence to occupy the licensed premises without creating any sort of tenancy rights in favour of the licensee. The licensor agreed not to revoke the leave and licence for a period of five years except in accordance with the terms of the agreement. Clause 2 provided that the licensor shall be deemed to be in exclusive possession of the licensed premises. The last clause provided that if the compensation for the licensed premises payable under the agreement remained unpaid for a period of one month after the same had become due or if any of the terms and conditions contained in the agreement on the part of the licensee to be observed or performed were not observed or performed, then it would be lawful for the licensor to forthwith terminate and revoke the licence and upon such termination the licensor shall be at liberty to enter upon the licensed premises and take possession thereof.

Held, the circumstance that exclusive possession was given ordinarily indicated that the transaction was a lease and not a licence. In such a case the party, who wanted to contend that the agreement was a bare agreement of leave and licence, would have to show that there were special circumstances why the licensor gave exclusive possession of the premises to the licensee. The fact that the agreement was for a period of five years was also a circumstance indicating that the transaction was a lease. When the agreement was for a fairly long period and when exclusive possession was given under the agreement and when there were no special circumstances justifying the creation of a licence, there should not be any difficulty in holding the agreement to be a contract of tenancy. If any doubt remained in mind about the true nature of the transaction, then the clinching effect of the last clause should remove it and there should not be any difficulty in holding that the document evidenced an agreement of tenancy and not an agreement of leave and licence, all the necessary or vital features of tenancy were incorporated in that clause."

In this case the learned single Judge has held that a lease cannot be converted into a licence merely by calling it a licence. It will have to be determined whether in the circumstances of the present case, the possession of the tenant was that of a licensee or a lessee.

17. The learned counsel for the petitioner also cited Kidar Nath v. Swami Parshad AIR 1978 Punj and Har 204. In this case the exclusive possession of the premises was given to the transferee and he was required to pay certain sum every month describing it as licence fee. Machinery was installed by the transferee and the Electric meter was in his name. There was no stipulation that the transferee was not competent to make any repairs in the premises. The Court held that the transferee was a tenant as his interest had been created with exclusive possession and no circumstance to negative the intention to create lease were brought on record.

18. The Division Bench of the Calcutta High Court in Abhay Singh Surana v. M/s. W. Evans and Co. Ltd., , has also come to the conclusion that intention of the parties is paramount in construing the documents whether it is a licence or lease. The Court has held as under:

"Interpreting Ext. E as a whole we have come to the conclusion that in the grab of agency agreement, really a lease has been executed. The lease was only terminable at six months' notice on either side. Had it been a licence, this clause would not have found any place there. Looking into the facts we find that the employees of the defendant No. 2 are all over the suit premises and the goods of defendant No. 2 company are all over the godown of the suit premises. Defendant No. I has not produced any document to show that it was assessed at that stage by either the Income-tax or the Sales Tax or any other authorities to show the volume of business done from suit premises. Therefore, taking the entire facts and circumstances into consideration, we have come to the conclusion that the defendant No. 1 has parted the possession of the suit premises to defendant No. 2.

Save and except the claims and assertions made by the defendants there is no concrete evidence of any service having been rendered by defendant No. 1 to defendant No. 2 in the capacity of an agent of the latter. Therefore, it cannot be said that the primary object of the agreement was to secure the service of defendant No. 1 as agent by defendant No. 2 and accommodation was a subsidiary object. From the facts and circumstances surrounding and appertaining the transaction it is clear that the primary object of the agreement (Ext. 3) was to secure accommodation for defendant No. 2 from defendant No. 1 at an agreed rental. The agreement was merely a facade or a device calculated and designed to conceal the real intent and object of the transaction. Therefore, we hold that the transaction behind the facade was really subletting of suit premises. Not the form but the substance is the determinant."

19. The Supreme Court in Shri Dipak Banerjee v. Smt. Lilabati Chakroborty, has held that exclusive right of possession was interest in the premises in lieu of some compensation of rent is basic ingredient of a lease.

20. The Division Bench of the Kerala High Court in M/s. Peramanand Gulabchand and Co. v. Mooligi Visanji, , has held that the owner had parted with his right to enjoy the premises during the term of agreement and that the occupier (licensee) got that right to possession to the execution (exclusion) of the owner and thereby constituting the occupier lesser (lease) of the plan scheduled premises. Therefore, the Court held that agreement entered between the plaintiff and the defendant represents a leased transaction.

21. A similar question was considered by English Courts also in a number of cases. In Cobb v. Lane, (1952) 1 All ER 1199 : 1952-1 TLR 1037, it was held that:

"the fact that exclusive occupation was given by an agreement was no longer enough of itself to negative the relationship of licensor and licensee, and thus to establish that of landlord and tenant. The present case shows that the conferring of a right to exclusive occupation is still a consideration of principal importance and also provides an example of a detailed analysis of an agreement for occupation, called a licence, with a view to deciding whether in law a tenancy was created thereby."

22. In another leading case Addiscombe Garden Estates, Ltd. v. Crabbe, 1957 (3) All ER 563 : 1957-3 WLR 980, it was held that:

"the relationship between the parties to the agreement was to be determined by law and not by the description given to the agreement by the parties, and this agreement, on a consideration of all its relevant provisions, and having regard to its showing an intention to confer a right to exclusive possession, created the relationship of landlord and tenant between the parties to it."

23. In Customs and Excise Comr. v. Pools Finance, (1937) Ltd., (7) (1952) 1 All ER 775 : (1952) 1 TLR 792, it is held that:

"it is not necessary to go so far as to find the document a sham. It is simply a matter of finding the true relationship of the parties. It is most important that we should adhere to this principle, or else we might find all landlords granting licences and not tenancies, and we should make a hole in the Rent Acts through which could be driven-- I will not in these days say a coach and four -- but an articulated vehicle."

24. In another leading case decided by Court of Appeal, Civil Division Sheel Mex and BP Ltd. v. Manchester Garages Ltd., reported in 1971 All ER 841 : (1971) 1 WLR 612, Lord Denning while deciding this case came to the conclusion that exclusive possession is no longer decisive "we have to look at the nature of transaction to see whether it is a personal privilege or not, Sachs, L. J. while deciding the said case mentioned:

"On looking at the substance of the matter as a whole, it becomes apparent that the dominant objective of the contractual relationship between the parties was to further the promotion of the sale of the plaintiffs' products on the site which they had selected, with the aid of the structures and equipment which they had provided and over which they were to exercise a right of control -- including a right to deal with the layout and equipment as they desired from time to time. The general tenor of the relevant document of 1st August, 1969 points strongly in this direction when taken as a whole."

25. Buckley, LJ. while agreeing with the judgment delivered by other Lords has mentioned that:

"It is clear authority that in considering whether a transaction such as we have before us in this case constitutes a licence or a tenancy the Court is not to have regard to the label which the parties give to the document or to the formal language of the document, but to the substance of the transaction. During the course of his argument counsel for the defendants has taken us through the detailed provisions of the document with which we are here concerned and has pointed out that many of the clauses in it are clauses which could appropriately find their place in a tenancy agreement. That I think is perfectly true; but it is not to say that they do not equally appropriately find their place in a licence. One must look at the transaction as a whole and at any indications that one finds in the terms of the contract between the two parties to find whether in fact it is intended to create a relationship of landlord and tenant or that of licensor and licensee."

26. Lord Templeman of the House of Lords in celebrated case AG Securities v. Vaughan and in Antoniades v. Villiers, 1988 (3) All ER 1058, had examined the issue of licence and of lease. The Court gave its analysis of the agreement entered into by the parties and observed as under:

"Parties to an agreement cannot contract out of the Rent Acts; if they were able to do so the Acts would be a dead letter because in a state of housing shortage a person seeking residential accommodation may agree to anything to obtain shelter. The Rent Acts protect a tenant but they do not protect a licensee. Since parties to an agreement cannot contract out of the Rent Acts, a document which expresses the intention, genuine or bogus, of both parties or of one party to create a licence will nevertheless create a tenancy if the rights and obligations enjoyed and imposed satisfy the legal requirements of a tenancy. A person seeking residential accommodation may concur in any expression of intention in order to obtain shelter. Since parties to an agreement cannot contract out of the Rent Acts, a document expressed in the language of a licence must nevertheless be examined and construed by the Court in order to decide whether the rights and obligations enjoyed and imposed create a licence or a tenancy.

A person seeking residential accommodation may sign a document couched in any language in order to obtain shelter. Since parties to an agreement cannot contract out of the Rent Acts, the grant of a tenancy or two persons jointly cannot be concealed, accidentally or by design, by the creation of two documents in the form of licences. Two persons seeking residential accommodation may sign any number of documents in order to obtain join shelter. In considering one or more documents for the purpose of deciding whether a tenancy has been created, the Court must consider the surrounding circumstances, including any relationship between the prospective occupiers, the course of negotiations and the nature and extent of the accommodation and the intended and actual mode of occupation of the accommodation. If the owner of a one bedroom flat granted a licence to a husband to occupy the flat provided he shared the flat with his wife and nobody else and granted a similar licence to the wife provided she shared the flat with the husband and nobody else, the Court would be bound to consider the effect of both documents together. If the licence to the husband required him to pay a licence fee of 50 pounds per month and the licence to the wife required her to pay a further licence fee of 50 pounds per month, the two documents read together in the light of the property to be occupied and the obvious intended mode of occupation would confer exclusive occupation on the husband and wife jointly and a tenancy at the rent of 100 pounds.

Landlords dislike the Rent Acts and wish to enjoy the benefits of letting property without the burden of the restrictions imposed by the Acts. Landlords believe that the Rent Acts unfairly interfere with freedom of contract and exacerbate the housing shortage. Tenants on the other hand believe that the Acts are a necessary protection against the exploitation of people who do not own the freehold or long leases of their homes. The Court lacks the knowledge and the power to form any judgment on these arguments, which fall to be considered and determined by Parliament. The duty of the Court is to enforce the Acts and in so doing to observe one principle which is inherent in the Acts and has been long recognised, the principle that parties cannot contract out of the Acts.

The enjoyment of exclusive occupation for a term in consideration of periodical payments creates a tenancy.

In my view the substance and reality of these agreements was to confer on the appellant exclusive possession of the flat for a term in consideration of periodical payments, Street v. Mountford, 1985 (2) All ER 289 : 1985 AC 809, establishes that in such a situation a tenancy is created."

27. On careful analysis of leading and celebrated Indian and English decisions following conclusions are irresistible:

"(a) The Courts while deciding controversy in cases of lease and/or licence must gather the real intention of parties executing the document.

(b) The Courts must took into the dominent purpose of the relationship which parties created while entering into the agreement.

(c) Clever phraseology and ingenuity must not be permitted to over shadow the real intention of the parties.

(d) The substance of the document must be preferred to the form of the document.

(e) The Court must ascertain whether the agreement creates any interest in the property.

(f) In some cases even the label given to the transaction may be deceptive and formal language employed in drafting the document may also be misleading, therefore, the Courts have to look into substance of the matter and make all out endeavour to gather the real intention of parties in order to do substantial justice."

28. Learned counsel for the appellant submitted that the conclusions arrived at by the learned single Judge are erroneous, untenable and against the settled principles of law.

29. Learned counsel for the appellant further submitted that the respondent had taken the plot in question from the President of India on a perpetual lease on 18-6-1973. The parties though intended to execute a lease but because of the said perpetual lease agreement dated 18-6-1973 with the President of India, the parties were helpless and could not enter into a lease agreement and perhaps that is how the parties entered into an agreement of licence. Entering into a lease agreement obviously would have been quite contrary to the terms of the perpetual lease dated 18-6-1973. The parties have taken legal advice, and perhaps on the basis of legal advice, the parties have entered into the agreement of licence.

30. If the agreement is properly scrutinised, then it becomes abundantly clear that the parties, in fact, wanted to create a lease and not a licence. This is also fully established by the fact that the respondent had given the premises in question for manufacturing of garments.

31. The learned counsel further submitted that the exclusive possession of the premises was given to the appellant by the respondent also clearly establishes that in fact the parties intended to create a lease and not a licence.

32. Though the licence fee of Rs.500/-per month was fixed but the rent was always given and accepted on a monthly basis. It was never computed on the basis of per day licence fee, Rs. 15,000/- per month was paid and accepted as rent irrespective of the number of days in a month. This also shows that the parties had always construed the agreement as a lease.

33. According to the term of agreement, it was the obligation of the tenant to carry out repairs. This clause is also usually incorporated in the lease agreement.

34. The Additional Rent Controller on 17-8-1977 while deciding the interim application has observed that the relationship of landlord and tenant existed. This order was never challenged because the parties in fact, intended to create a lease and not a licence.

35. The possession of the premises remained with the appellant uninterrupted, also shows that in fact, the parties intended to create a lease only. A large number of documents placed on record also clearly show that all through the parties have considered that it was a lease and not a licence.

36. The respondent always demanded only rent and not the licence fee of the premises from the appellant that also establishes that the premises in question was a lease and not a licence.

37. It may be pertinent to mention that in this case the parties could not enter into the lease agreement, therefore, they had to create a licence which is clearly borne out even from the language of the agreement.

38. Learned counsel for the respondent while repudiating the submissions of the counsel for the appellant, strenuously submitted that only by giving exclusive possession of the premises, it cannot be inferred that the parties intended to create a lease and not a licence. The parties must be governed by the agreement.

39. Learned counsel for the respondent also submitted that in the lease deed a right is created in the immovable property whereas no such right is created in case of a licence. The parties have entered into a licence agreement and consequently the appellant must vacate the premises forthwith.

40. We have considered rival contentions of the parties when the instant case is seen in the perspective of well known norms and parameters as laid down by Indian and English decisions, the conclusion becomes irresistible that whatever may be the label, form or nomenclature of the agreement, the Courts must look to the substance of the matter and make every effort to gather real intention of the parties to the agreement. When this crystallised principle of law is applied to this case then the only possible conclusion would be that the parties clearly intended to create a lease and not a licence. The real intention of parties is gathered from the agreement, the statements of the parties and documents filed in support of their contentions. In this view of the matter, findings of the learned single Judge are accordingly set aside.

41. Since we have arrived at the conclusion that the appellant and the respondent intended to create a monthly lease of Rs. 15,000/-. The tenant does not enjoy the protection of the Delhi Rent Control Act after amendment where the monthly rent is more than Rs. 3,500/- per month. Consequently the respondent is entitled to the possession of the suit premises forthwith.

42. The appeal is accordingly dismissed but looking to the peculiar facts and circumstances of this, the parties are directed to bear their own costs.

43. Appeal dismissed.