Jagdish Chander Khurana & Anr. vs Ghanshyam Dass
2010 Latest Caselaw 4299 Del

*        IN THE HIGH COURT OF DELHI AT NEW DELHI

%                    Judgment Reserved on: 09th September, 2010
                    Judgment Delivered on: 15th September, 2010

+                          RSA No.129/1981

JAGDISH CHANDER KHURANA & ANR.         ...........Appellant s
             Through: Mr.G.L.Rawal, Sr.Advocate with
                      Mr.Kuljeet Rawal, Advocate.

                     Versus

GHANSHYAM DASS                                    ..........Respondent
            Through:             Mr.V.B.Andley, Sr.Adv. with
                                 Mr.Rajinder Mathur, Mr.R.K.Kataria,
                                 Mr.K.Ch.Baliar Singh & Mr.Priyank
                                 Sharma, Advocates

CORAM:
HON'BLE MS. JUSTICE INDERMEET KAUR

       1. Whether the Reporters of local papers may be allowed to
          see the judgment?

       2. To be referred to the Reporter or not?                Yes

       3. Whether the judgment should be reported in the Digest?
                                                            Yes

INDERMEET KAUR, J.

1. This second appeal has impugned the judgment and decree

dated 25.5.1981 endorsing the judgment and decree dated

28.1.1977 passed by the trial judge whereby the suit of the plaintiff

was dismissed. Brief facts of the case are as follows:

(i) The appellant before this court is the plaintiff Jagdish

Chander Khurana. Appellant is stated to be the owner of the shop

no.29, Qutub Road, Delhi including the machinery installed therein.

(ii) The plaintiff was running this workshop in the name of Gian

Ishwari Engineering Works as its sole proprietor; plaintiff no.2, his

brother, was looking after the business and dealing with the

defendant on behalf of plaintiff no.1.

(iii) Due to technical difficulties plaintiff could not run the

business smoothly. A license was executed with the defendant and

one Sadanand Nijhawan for a period one year i.e. from 1.9.1961 to

31.8.1962 with a clause for further renewal.

(iv) Sadanand Nijhawan has since left the business. The license

was thereafter renewed between the plaintiff and the defendant

alone. The license fee was Rs.250/- per month. After 31.8.1966

license was not renewed any further.

(v) Plaintiff requested the defendant to hand over peaceful

possession of the workshop to him but to no avail. Registered A/D

notice dated 8.2.1967 was served upon him.

(vi) Defendant verbally assured the plaintiff that he would vacate

the workshop as and when alternate arrangement was made by

him; in spite of these assurances the workshop was not vacated.

(vii) On 29.5.1974 the license was revoked by the plaintiff.

(viii) Thereafter the present suit was filed. This suit was for

permanent injunction with a prayer that the defendant be directed

to stop the workshop business at the aforenoted property and to

hand back the same to the plaintiff.

(ix) In the written statement the defendant had contested the

suit. He has described himself as a tenant and not a licensee;

further the suit has been undervalued for the purposes of court fee

and jurisdiction; defendant is carrying on business since the last

more than 12 years; sum of Rs.250/- paid by the defendant to the

plaintiff is lease money and not license money; relationship

between the parties is that of a landlord and tenant.

(x) Trial judge framed six issues. Issue no.3 and Issue no.4 were

relevant and inter alia reads as follows:

3. Whether the shop and machinery in dispute was given to the defendant on licence basis. OPP

4. Whether the document of licence is a sham and colourable document and not enforceable. OPD

(xi) The findings on issue No.3 as held by the trial judge inter alia

read as follows:

"A mere perusal of the terms reproduced above shows that the deftd had not merely been permitted to take possession of the shop and the machinery lying therein but that a right of possession was conferred upon him. The exclusive possession of the shop and the machinery passed on to him and that is why a condition was put on the defendant restricting the sub-letting, assigning or parting with the possession of the premises and the machinery by him. The term that the defendant could not create lien, charge or mortgage over the shop machinery also shows that exclusive possession and rights over this shop machinery mere given to the defendant. It was held in 1970 R.C.T. 443 that an important feature of the leases‟s right is, his right to possession and enjoyment of the demise to the exclusion of the lessor. In the present and the plaintiffs were to have no right in the shop in suit or the machinery fitted therein during the alleged license period i.e. from 1.9.64 to 31.8.65. They could not ask the deft to vacate the workshop/shop during this period and even on the expiry of the alleged licence period, the licence could to continued at the request of the licence and not on the sole discretion of the plaintiffs. The plaintiffs did not have any right to terminate the alleged licence of the defendant till 31.8.65. On the other hand, it is the defendant who could terminate the agreement after giving one months notice in writing to the plaintiffs. The right to terminate the agreement had clearly been given to the defendant. It implies that interest and property in the shop and machinery passed to the plaintiff on the execution of this agreement. An important requisite of a license is that it is revocable at the will of the granter. This is not the case in the agreement in question in this suit and the statements of the plaintiff as PW-1 and as PW-2 and one as the DW-2 Shri. Sada Nand the brother of the deft. also show that the defendant has been in exclusive possession of the shop and machinery in question to the exclusion of the plaintiff has been effecting changes therein and the plaintiffs have absolutely no connection with the business being run in the premises. The deft. is therefore a lessee in respect of the shop and the machineries given to him at the time of execution of the agreement Ex. P-1 and has never been a licence therein.

9. The ld. counsel for the plaintiff has argued that the workshop and not merely the shop and been given to the deft and that no lease can be created in respect of the workshop and cited AIR 1975 Supreme Court 758 in trying to support his contention. This authority however, does not help him. In that case, a lease of cinema house i.e. the building and the fitting sand other fixture was granted in favour of the deft. and the Supreme Court held that a lease of a cinema house was not covered by the definition of Accommodation as given in Section 2 (1) (a) of the U.P. (Temporary) Control of Rent and Evictions Act (3) of 1947 as amended by Act Npo.17 if 1954 and that the eviction proceedings could not be instituted against the lessee under the said Act. I, therefore, hold that the shop and the machinery in question was given to the defendant on lease and not on license bases. The issue is decided in favour of the defendant and against the plaintiffs."

Issue no.3 was accordingly decided against the plaintiff. No

separate evidence was led on issue no.4, but in view of the finding

on issue No.3 the disputed document i.e. the agreement dated

8.10.1964 Ex.P-1 had been held to be a lease between the parties.

Suit was dismissed.

(xii) The first appellate court endorsed the judgment and finding

of the trial judge. It was held that there is no infirmity in the order

of the trial court. The document Ex.P-1 was a lease which had

been executed between the parties.

2. On 8.9.1981 the following substantial question of law was

formulated by this court which inter alia reads as follows:

"Whether the agreement between the parties amounts to a licence in law?"

3. On behalf of the appellant/plaintiff arguments have been

addressed at length. It is stated that the suit of the plaintiff has

been wrongly dismissed; both the courts below had incorrectly

interpreted the provisions of the said agreement i.e. Ex.P-1. The

trial judge had on a pick and choose approach reproduced only

portions of the said document. Attention has been drawn to the

preamble of the document as also clauses 7, 8 and 11. It is

submitted that a perusal of these clauses clearly negative the

findings of the trial court; this document is a license and not a

lease. The factors which had weighed in the mind of the trial judge

to hold that this document is a lease was based on the factors of

(i) an exclusive possession coupled with (ii) the restrictions

contained in the document of subletting by the licensee as also the

fact that (iii) the licensor has no right to exclusively terminate the

agreement. It is submitted that these clauses by themselves were

not sufficient to arrive at the aforestated erroneous finding. The

document has to be read as a whole and no one clause can be

restricted and read in conjunction with another clause while

ignoring the others. Learned counsel for the appellant has placed

reliance upon AIR 1993 Delhi 187 Smt.Vidya Wati (deceased)

through her L.Rs. vs. Hans Raj (deceased) through his L.Rs. to

support his submission on this count. It is pointed out that the

facts of the said case are almost similar to the facts of the present

case. In the said case also tools and equipments as also the

premises of a barbar shop had been leased out/licensed out to the

defendant; on the construction of the document the dominant

intention of the parties gathered was that only the business was

given on lease and not the shop. On the same analogy it is

submitted that the tools and machinery of the business house of

the plaintiff had been leased out to the defendant for a limited

purpose; the purpose being to run his business which he could not

do for technical reasons; the premises containing this business

were incidental to the main intention of the parties which intention

was to licence out the property. Reliance has also been placed

upon a judgment of the Supreme Court reported in AIR 1965 SC

716 Uttamchand vs. S.M.Lalwani wherein also the guidelines laid

down for construing a document as to whether it is a lease or a

license had been detailed. Reliance has also been placed upon JT

1996 (6) SC 665 Vayallakath Muhammedkutty vs. Illikkal

Moosakutty. In this case the Supreme Court had held that

although exclusive possession is a determining factor in construing

whether a document is a lease or license but at the same time it is

not correct to say that exclusive possession is conclusive by itself;

it is not the sole criteria. Learned counsel for the appellant has

also placed reliance upon AIR 1976 Patna 282 Indu Bhusan Bose

Choudhary vs. Hari Bhajan Singh and Ors. as also AIR 1973

Allahabad 257 Narain Kumar vs. Onkar Nath Agarwal to

substantiate his argument that merely because the

appellant/plaintiff did not have an exclusive right to terminate the

license it would not bar him from instituting the suit in the present

form.

4. Arguments have been countered by learned counsel for the

respondent. It is submitted that a plain reading of the document

clearly shows that the dominant intention of the parties was to

create a lease and i.e. how the exclusive possession of the

premises had been handed over to the defendant. Attention has

been drawn to the various clauses of the disputed document Ex.P-

1; attention has also been drawn to the cross-examination of PW-1

and PW-2, the brother of the plaintiff wherein the word "workshop"

finds mention. Submission of the counsel being that the workshop

makes a reference to the premises which was the subject matter of

the agreement between the parties which reflects upon their

intention; the intention being to lease out the said premises.

Attention has been drawn to that part of the cross-examination of

PW-1 wherein he has stated that he has not paid any sales tax or

income tax of the workshop since it had been handed over to the

defendant; he has no connection with the business of M/s Prison

Mechanical Works which is the business of the defendant; he has

not replaced the machinery since then; he has not maintained the

accounts of the workshop; earlier there was one employee and now

there are 3-4 employees. PW-2 in his cross-examination has stated

that neither he and nor his brother PW-1 has any connection with

the business of the defendant; defendant used to open the

premises in the morning; one more latte machine and drilling

machine had been installed by the defendant. Attention has also

been drawn to the testimony of the witnesses of the defendant;

DW1 and DW3 are the neighbours or the defendant; DW2 is his

brother; DW4 is his son and DW5 was an inspector of the MCD. It

has come in their evidence that defendant used to open the

workshop in the morning and lock the same at night; latte

machines had been increased from one to four-five; press and

grinder had been added. The defendant himself was examined as

DW6. Learned counsel for the defendant has drawn the attention

of this court to the definition of "workshop" in the Webster‟s

English Dictionary as also the definition of "factory" and

"business"; submission being that what had been given by the

plaintiff to the defendant was the "workshop" and not the

"business" as has been now been contended by the learned counsel

for the appellant.

5. Counsel for the respondent has placed reliance upon a

judgment of the Supreme Court reported in AIR 1959 SC 1262

Associated Hotels of India Ltd. vs. R.N.Kapoor as also another

judgment reported in (2004) 3 SCC 595 C.M.Beena and Anr. vs.

P.N.Ramachandra Rao to substantiate his submission that the real

intention of the parties to the document has to be deciphered from

the complete reading of the document, the surrounding

circumstances including the conduct of the parties before and after

the creation of this relationship. For the same proposition, reliance

has been placed upon AIR 1965 SC 610 Mrs.M.N.Clubwala & Anr.

vs. Fida Hussain Saheb and Ors. It is submitted that the exclusive

possession of the property had vested with the defendant; interest

in the property had passed in favour of the defendant; this is

evident from the renewal clause in favour of the defendant; this

circumstance was consistent with the deed being one of a lease.

For the same proposition reliance has been placed upon (1989) 3

SCC 574 Capt.B.V.D‟Souza vs. Antonio Fausto Fernandes. Reliance

has also been placed upon a judgment of the Bench of Punjab and

Haryana reported in AIR 1978 P&H 204 Kidar Nath vs. Swami

Parshad & Ors to substantiate his submission that the

interpretation of a document as to whether it is a lease or license is

a question of law. It has lastly been submitted that the submission

of learned counsel for the appellant at this stage i.e. at the stage of

second appeal propounding an argument that the business had

been leased out to the defendant and not the premises which were

a licence was never an argument raised before either of the two

courts below and such an argument cannot be raised at this stage.

For this proposition reliance has been placed upon 20 (1981) DLT

141 Kuldip Singh Dhingra vs. New Delhi Municipal Committee as

also another judgment of the Supreme Court reported in AIR 1966

SC 1024 Krishnapasuba Rao Kundapur (dead) after him His L.R.

and Anr. v.s Dattatrya Krishnaji Karani.

6. In rebuttal it is submitted that provisions of Section 91 of the

Indian Evidence Act are attracted; the contents of a document

which speak of the words "license" "licensor" and "licencee" have

to be read over and above the oral testimony of the witnesses.

7. This court is sitting in second appeal. It is not in dispute that

the construction of a document i.e. as to whether it is a lease or a

license raises a substantial question of law. In AIR 2000 SC 3009

Santa Kumari vs. Laxmi A.J.Amma, the Supreme Court has

reiterated this. This question has also not been agitated before

this court.

8. The document which is a subject matter of dispute between

the parties is Ex.P-1 dated 8.10.1964 inter alia reads as follows:

"Agreement This agreement of licence is made between shri Jagdish Chander Khurana s/o Shri Harichand Khurana r/o A-26, Jangpura Extension, New Delhi, hereinafter called the Licensor of the first part and Shri Ghansham Dass Sadarang Nijhawan r/o Prision Mechanical Works, Shop No.29, New Qutub Raod, Delhi, hereinafter called the Licensee of the second part.

Whereas the Licensor is the proprietor of Gian Ishwari Engineering Works, Shop No.29, New Qutub Road, Delhi, and whereas he could not continue the said workshop due to certain technical difficulties And whereas the Licensee has approached the Licensor for granting the license for carrying on different items of production of motor parts and tools in the said workshop And whereas the Licensor has agreed to do so.

Now both the parties mutually agree as follows:

1. That the Licensor has given License of the Shop No.29, New Qutub Road, Delhi and tools of machinery as mentioned in the Schedule attached herewith on the basis of licence fee to be paid by the Licensee to the Licensor at Rs.250/- per mensem by the 5th of every English calendar month in advance.

2. That the period of the licence is shall run from 1st day of September 1964 to 31st day of August 1965 and it can be renewed for the period of one year at the option of the Licensor on the request of the Licensee on the same terms and conditions.

3. That the licensor shall have the right to inspect the workshop at any time during the working hours to check the working of the machinery mentioned in the schedule hereinabove written.

4. That the licensee shall be liable to pay the license fee for the whole period at the agreed rate of Rs.250/- per mensem during the continuation of this agreement period and in case he leaves and/or terminates this agreement he shall give one month‟s notice in writing to the Licensor of his intention to do so.

5. That the licensee shall pay all the electric bills to the proper authorities at the usual and proper time.

6. That the licensee shall pay the renewal of licence fee to the Licensor on 31st of March every year.

7. That repairs and breakage shall be responsibility of the licensee who shall return and give possession of the machinery as per items mentioned in the schedule hereinabove written to the Licensor in proper workable condition.

8. That the licensee undertakes to keep the machinery of the licensor in proper condition of the working order and shall not create any lien, charge, mortgage over the same at any cost and the said machinery shall be in the custody of the Licensee as trust property and will not do any act

whereby the licensor is put to any injury or harm.

9. That licensee is allowed to make extension of the machinery on his own cost within the permissiable limits of the license and power supply and the rules framed thereunder by authority for separate installation of the motor for each unit of the lea the machine without causing damage to the property.

10. That licensee shall be responsible for contraventions and infringement of rules framed by the competent authorities and work the machinery for the day shift only

11. That the Licensee shall not sub-let, assign or part with possession of the shop and machinery in any manner without the consent of the Licensor in writing.

12. That at the time of the termination and/or expiration of this agreement, the Licensee shall handover the shop and the machines as per scheduled hereinabove written to the Licensor under his valid receipt in a proper working condition without removing any permanent fixture or structure and shall not claim any refund or compensation for the same from the Licensor.

13. In case there is any dispute with regard to this agreement arising out between the parties the same shall be referred to the arbitration of in accordance with the Indian Arbitration Act then in force.

In witness whereof the parties have set their respective hands on this day (on 8.10.64), month and year above written at Delhi.

Witnesses:-

1.

2. Licensor Licensee"

9. The nomenclature of the document describes it as an

agreement. Thereafter in each of the sub paras reference is made

to the word „licensor‟ and „licensee‟. Supreme Court in the case of

Uttamchand (supra) had laid down the test of "dominant intention"

to determine the character of the document by posing a question to

itself as to what is the dominant intention of the parties in

executing the said document.

10. This license had been given to the defendant for „carrying on

different items of production of motor parts and tools in the said

"workshop". Under clause (i) the defendant had agreed to pay a

sum of Rs.250/- per month to the plaintiff payable in advance on 5th

day of each month. The period of license was from 1.9.1964 to

31.8.1965 with renewal for another period of one year at the option

of the plaintiff and the request of the defendant on the same terms

and conditions. The plaintiff had a right to inspect the workshop

during working hours to check the working of the machinery; the

details of the machinery had been mentioned in the schedule

written hereinabove. Clause (iv) gave an option to the defendant to

terminate this agreement by giving a one month notice; electricity

bills were to be paid by the defendant. Repairs and breakage were

also the responsibility of the defendant with a rider in clause (vii)

that the defendant would thereafter return and give possession of

the machinery back to the plaintiff in a proper workable condition.

The defendant in clause (viii) had also given an undertaking to

keep the machinery of the plaintiff in a property working condition

and not to create any lien, charge or mortgage over the same. The

defendant would retain it as a trust property and he would not do

anything which could cause any injury or harm to the plaintiff. The

defendant was given option to expand the machinery at his own

cost within the permissible limits of the power supply available.

The defendant was also directed not to sublet, assign or part with

the possession of this shop and machinery to any third party; after

the expiry of this agreement the defendant would hand over the

shop and machines as per the schedule back to the plaintiff in a

proper working condition under receipt. Disputes between the

parties would be referred to a Arbitrator under the Arbitration Act.

11. This is the sum and substance of the document which is the

subject matter of scrutiny before this court.

12. The question to be answered before this court is as to

whether this document had created a lease between the parties or

was it a mere license. In the case of C.M.Beena (supra) the

Supreme Court had reiterated that though a deed of license may

have been executed, it was open to the parties to the document to

show what was the relationship agreed between them and whether

what it really intended to be brought into existence was a

relationship of a landlord-tenant.

13. The definition of a „lease‟ as contained in Section 105 of the

Transfer of Property Act, 1882 and a „license‟ as defined under

Section 52 of the Indian Easement Act, 1882 is relevant. This

distinction between the two can be culled out by finding out the

real intention of the parties which is deciphered not only from a

complete and close reading of the document itself but also from the

attendant circumstances. The conduct of the parties before and

after the creation of this relationship is also of relevance to find out

their intention. The guidelines laid down by the Supreme Court in

the case of Uttamchand (supra) are juxta positioned on the

„dominant intention‟ of the parties. What was this dominant

intention?

14. This agreement had evidenced that the shop along with the

machinery and tools (no further details of the tools and the

machinery have been mentioned in Ex.P-1) had been given for the

exclusive use to the defendant; this arrangement had earlier

commenced in 1961 and was being renewed time and again; the

written document Ex.P-1 was executed on 8.10.1964 for a period of

one year with option to the parties to renew the same on the same

terms and conditions for a further period of time. A monthly fee of

Rs.250/- was paid by the defendant to the plaintiff for the shop,

tools and machinery. This was a composite fee for the shop and

the machinery. A singular option was given to the defendant to

terminate this agreement by giving a one month notice; there was

no such option with the defendant. The defendant was also

directed not to part with the possession of the shop and machinery

to any third party; he could not create any mortgage or lien on the

machinery. The defendant had also been permitted to expand the

machinery within the limits permissible of the power supply

available to the unit. Plaintiff had no right to interfere with the

business of the company; or to direct the defendant to vacate the

premises or handover the machinery during the subsistence of the

agreement. In fact, a full-fledged business was being run by the

defendant in this workshop since about 12 years up to the date of

the filing of the suit. The defendant was in possession of these

premises even three years prior to the date of this agreement i.e.

three years prior to 1964. Even though this license as is evident

from Ex.P-1 expired in 1965, the defendant chose not to file the

present suit right upto 1974; he waited for nine years even

thereafter.

15. In 1970 MhLJ 113 (SC) Lakhi Ram Ram Das vs. Vidyut Cable

and Rubber Industry the Supreme Court had held that in order to

determine as to whether a document is a lease or license, what has

to be read is the substance of the document, the real intent of the

parties and to balance the rights of the parties as to whether he is

in exclusive possession or whether it is only a permissive user. The

Supreme Court had further held that an important feature of the

rights of a party is this right of exclusive possession and the

enjoyment of the property to the exclusion of the lessor.

16. This is evident from a reading of Ex.P-1. The defendant

had exclusive use, possession and enjoyment of the shop along with

the machinery i.e. the „workshop‟ during the period of the

subsistence of this agreement. These facts clearly negative this

document to be a licence. It could not be said to be a permissive

user by the plaintiff to the defendant.

17. In Webster‟s English dictionary a "workshop" has been

defined as a room or building in which productive work or

manufacture on a small scale is carried out; a „factory‟ is a building

or a group of buildings where goods are manufactured by a

collective production; „business‟ has been defined as a regular

employment, profession or occupation. PW-1 has time and again

made a reference to the disputed premises as a "workshop"; the

definition as aforenoted also supports the stand of the respondent

that a "workshop" is a building in which some manufacturing

activity is carrying on; the manufacturing activity cannot be

disassociated from the building; one is an integral part of the other.

This also manifests the intention of the parties; the intention being

that the plaintiff had given this "workshop" to the defendant i.e.

the room consisting of this business.

18. In para 4 of the plaint plaintiff has described himself as a

proprietor of M/s Gian Ishwari Engineering Works. The suit has

however not been filed in the name of the firm. The industrial

license was in the name of the plaintiff; but admittedly the renewal

fee was paid by the defendant; It was however stated that this

amount was paid by the defendant on behalf of the plaintiff. The

prayer in the plaint was that the defendant should be restrained

from carrying out the business of the workshop; for the first time in

the replication plaintiff had asked for the restoration of the

possession of the workshop. Defendant was carrying on business

under the name & style of Prison Mechanical Works. He had

proved Ex.DW-5/8, Ex.DW-5/9, Ex.DW-5/12, Ex.DW-5/13 & Ex.DW-

5/15 to 21 i.e. cash memos ranging from the years 1963 right up to

1972 showing his business being conducted from the disputed

premises i.e. 29, Qutub Road, Delhi. This becomes relevant in view

of the fact that the plaintiff had given right to the defendant to

increase his machines and expand his business.

19. The oral version of the witnesses as pointed out supra also

show that the defendant was exclusively managing the business.

He would open the workshop in the morning and close it at night;

electricity and water charges were being paid by him. There was

no interference from the plaintiff; so much so that initially there

was one latte machine and thereafter three more machines had

been added; the employees had also increased from one to four.

20. All these attendant circumstances read along with Ex.P-1

make it amply clear that the parties had intended to create a

landlord-tenant relationship i.e. a lease.

21. Smt.Vidya Wati (supra) on which heavy reliance has been

placed upon by learned counsel for the appellant is distinct on its

own facts. In the said case the special fittings and fixtures which

included all sorts of modern tools, machinery, fans, air

conditioners, fittings, fixtures, furniture, telephone worth more

than Rs.32000/- (in the year 1967) had been given for use to the

defendant. It had been held that this equipment could not be

described as fittings and fixtures enjoined for a more beneficial

enjoyment of the building. It was in these circumstances that the

court had held that dominant intention of the parties was to create

a lease of the business; the premises i.e the shop had however not

been given on lease. In the instant case apart from the word

„machinery and tools‟ there is no further details or description of

the said machinery and tools; there was no evidence to suggest

that this machinery and tools were given for running a particular

business i.e. of Gian Engineering Works.

22. Section 91 of the Indian Evidence Act also has no application

in the instant situation. In AIR 1959 SC 57 D. Pattabiramaswamy

vs. S.Hanymayya the Supreme Court has categorically held that

interpretation of a document which constitutes the direct interest

and is the foundation of the case of parties is a question of law.

23. There is no merit in the appeal; it is dismissed.

INDERMEET KAUR, J.

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