Bharat Petroleum Corporation Ltd. Vs. Chembur Service Station
J U D G M E N T
R.V.RAVEENDRAN, J.
1. Leave granted.
2. The appellant - Bharat Petroleum Corporation Ltd. (also referred to as BPCL) is a Public Sector Undertaking under the administrative control of the Ministry of Petroleum & Natural Gas, Union of India, engaged in refining, distributing and selling petroleum products, such as Motor Spirit (MS/Petrol), High Speed Diesel (HSD), Kerosene, Liquefied Petroleum Gas (LPG), etc. all over the country. It is the successor-in-title of Burmah-Shell Oil Storage and Distributing Company of India Ltd. (for short `Burmah Shell').
3. On 2.9.1971, Burmah Shell took on lease a piece and parcel of land admeasuring about 680 sq.yds. bearing CTS Nos. 339 and 339/1 situated at V.N. Purav Marg, Chembur, Mumbai, for the purpose of a Storage Depot or Service Station with the right to erect and maintain all manner of equipment, plant, machinery, tanks, pumps and structures. In the said plot, Burmah Shell erected and installed the Dispensing pumps together with underground tanks and other equipment, fittings and facilities for storage of petrol, High Speed Diesel (HSD) and other products and constructed some structures for carrying on the business of sale and supply of such products. The said service station is also referred to as a Retail Petroleum Outlet (for short `the RPO'). On 1.4.1972, the appellant entered into a Dispensing Pump and Selling Licence agreement (for short `DPSL Agreement') with the respondent, appointing it as the dealer for selling the petroleum products of the appellant from the said RPO.
4. The undertaking of Burmah Shell was taken over by the Central Government and subsequently vested in Bharat Petroleum Corporation Ltd., appellant herein, in accordance with the provisions of the Burmah Shell (Acquisition of Undertakings in India) Act, 1976 on 24.1.1976.
5. The respondent had originally two partners, Dharma Vir Joshi and Mahesh Mangtani and on the death of Dharma Vir Joshi, a fresh dealership agreement described as `Dispensing Pump and Selling Licence' was executed between the appellant and respondent on 1.12.1995. In terms of the said agreement, the respondent was functioning as a dealer of the appellant.
6. During a surprise inspection on 9.3.2007 carried out by the Quality Control Cell of the appellant in the presence of the Manager of the respondent, it was noticed that one of the dispensing units (No.OIC 3633) was giving a short delivery of 20 ml. of HSD (that is, when tested for accuracy against a five litre calibrated measure, the display showed 5.02 litres).
When the Dispensing Unit was checked on flash mode 55555 twice, it gave short delivery of 210 ml. (that is as against 5 litres, the display showed 5.21 litres). Therefore, the Electronic Register Assembly (ERA) of the said dispensing unit was removed from the Unit and was sent for inspection to MIDCO - the manufacturer of the dispensing Unit. MIDCO gave a report on 27.3.2007 stating that there was a deviation in the counting ERA and the Microcontroller chip hardware in the ERA was not the original component supplied by them with the Dispensing Unit. The appellant, therefore, issued a show cause notice to the respondent on12.6.2007 alleging that the respondent had manipulated/altered the original chip with a view to making illegal gain by cheating the customers of the company, thereby causing breach of trust, and calling upon the respondent to show cause within 15 days, as to why action should not be taken including termination of the dealership. The respondent sent a reply dated 10.7.2007 denying the allegations in the show cause notice.
7. The respondent filed a suit (Suit No.913/2008) in the Court of Small Causes, Bombay for the following reliefs :
a. for a declaration that it is the tenant of the appellant in respect of the structures and equipment and sub-tenant of the appellant in regard to the land comprised in the suit premises (CTS Nos. 339 and 339/1, V.N. Purav Marg, Chembur, Mumbai, measuring 6118 sq. ft.);
b. for a declaration that the supply of petrol and petroleum products by the appellant at the suit premises was an essential supply under section 29 of the Maharashtra Rent Control Act, 1999;
c. for a declaration that the show cause notice dated 12.6.2007 was illegal and did not constitute a just and sufficient cause for cutting off or 5withholding the essential supply of petrol and petroleum products;
d. for a permanent injunction restraining the appellant from forcibly dispossessing respondent from suit premises or in any manner interfering with the possession of the respondent in regard to the suit premises; and
e. restraining the appellant from withholding or cutting off the supply of petrol and petroleum products from the suit premises.
An application for temporary injunction was also filed to restrain the appellant from forcibly dispossessing the respondent from the premises or interfering with its possession of the suit premises and from withholding or cutting off of any supply of petrol and petroleum products.
8. The appellant resisted the suit and the application for temporary injunction by contending that the respondent was neither a tenant, nor a sub-tenant, nor a deemed tenant. The Court of Small Causes by interim order dated 13.5.2008 directed the appellant to maintain status quo as on that date, that is, the respondent "shall remain in possession of the suit premises" and the appellant shall "continue to supply petrol and petroleum products to the petrol pump in the suit premises", till the preliminary issue regarding jurisdiction to entertain the suit was framed and a decision was rendered thereon.
9. Feeling aggrieved, the appellant filed an appeal. A Division Bench of the Small Causes Court, by order dated 26.8.2008, partly allowed the appeal. It set aside the order of the trial court in so far as it directed the appellant to continue the supply of petrol and petroleum products in the suit premises to respondent. The direction that the appellant shall maintain status quo by permitting the respondent to continue with the possession of the suit premises was not disturbed. The appellate bench held that the respondent had prima facie established its induction in the suit premises as a licensee in the light of the agreements dated 1.4.1972 and 1.12.1995. The said order dated 26.8.2008 of the appellate bench of the Small Causes Court was challenged by the respondent by filing W.P. No.6689/2008, to the extent it reversed the direction for supply of petroleum products. The said order was also challenged by the appellant in W.P.No.8130/2008 to the extent that it permitted the respondent to remain in possession of the suit premises.
10. The respondent's writ petition (WP No.6689/2008) was dismissed by a learned Single Judge by judgment dated 1.10.2008. The writ petition filed by the appellant (W.P. No.8130/2008) was disposed of by a brief order dated 729.1.2009, observing that "Instead of getting embroiled with the larger issues raised in the present petition, in my opinion, interest of justice would be subserved if the petition is disposed of, by clarifying the order of status quo granted by the Lower Court to mean that the said order of status quo shall not preclude the petitioner (BPCL) from taking recourse to recovery of possession of the suit property from the respondent (plaintiff) by following due process of law including by resorting to action under the provisions of the Public Premises Act, if permissible." The said order is challenged in this appeal by special leave.Subsequent events
11. Certain subsequent events require to be noticed. The respondent filed a second suit (Suit No.2557/2008) in the City Civil Court, Mumbai, praying for the following reliefs:
a. a declaration that supply of petrol and petroleum products in the suit premises to respondent by the appellant is an essential supply under the Essential Commodities Act, 1955;
b. for a declaration that the notice dated 12.6.2007 is illegal and a further declaration that the appellant is not entitled to terminate/set aside 8the dealership under the agreement dated 1.12.1995; and
c. for an injunction restraining the appellant from stopping the supply of petrol and petroleum products or acting upon the notice dated 12.6.2007.
12. On 19.3.2009, the appellant terminated the dealership agreement and informed the respondent that it shall have no right to use the retail outlet premises for any purpose whatsoever and the facilities (Motor Spirit and/or High Speed Diesel pumps, storage tanks, pipes and fittings and all other facilities erected and provided by the company at the retail outlets) or to sell any petroleum products lying in the retail outlets. Supply of petroleum products to the said Retail Petroleum Outlet was also stopped. The said termination however made it clear that the order was without interfering with or disturbing the order of status quo in regard to the possession passed on 30.5.2008 and affirmed the orders dated 26.8.2008 and 29.1.2009 passed by the appellate bench and the High Court respectively.
13. The respondent filed a third suit (Suit No.706/2009 in the City Civil Court, Bombay) for the following reliefs : (a) a declaration that the termination notice dated 19.3.2009 was illegal and unenforceable and that the dealership agreement dated 1.12.1995 continues to subsist; 9(b) for a permanent injunction restraining the appellant or giving effect to the termination notice dated 19.3.2009; and (c) for an order restraining the appellant from discontinuing or withholding supply of petrol and petroleum products and CNG to the petrol pump premises and declare that the supply of petrol and petroleum products to the said premises is an essential supply.Contentions of appellant
14. The appellant has urged the following contentions :
a. The dealership granted by the appellant in favour of the respondent was in the nature of an agency for sale of the petroleum products supplied by the appellant, in the appellant's property, under the appellant's emblem (BPCL Petrol Pump or Service Station). The respondent as the dealer/agent uses the petrol pump premises and the equipments therein as an agent of the appellant. The respondent does not have any right, title or interest in the premises.
b. A person appointed by the appellant, as its dealer to sell the petroleum products supplied by the appellant through the company retail outlet premises under the terms of a Dispensing Pump and Selling Licence (DPSL) agreement, on termination of the selling agreement - cessation of supplies ceases to be a dealer. Consequently he can neither sell any petroleum products in the retail outlet premises, nor use the appellant's retail outlet premises or facilities for any other purpose, nor create any obstruction to the running of the retail outlet by the appellant directly or through another dealer - regular or ad hoc.
c. Even if the termination of the dealership is invalid, the only relief that could be claimed by the ex-dealer/agent is award of compensation. A court could not therefore grant temporary injunction requiring the appellant to maintain status quo, thereby permitting the respondent to hold on to the petrol pump premises and prevent the use thereof by the appellant in the manner it deems fit. Contention of Respondent
15. The respondent contended as follows: (a) The DPSL agreement executed on 1.4.1972 appointing the respondent as a dealer, granted an exclusive licence to the respondent to use the petrol pump premises for a period of 15 years; that as the licensee is in lawful occupation of the premises, he could not be dispossessed forcibly from the premises but could only be evicted in a manner known to law. (b) As it was in possession of the premises as a licensee as on 1.2.1973, it became a deemed tenant by virtue of Section 15A of the Bombay Rents, Hotel and Lodging House Rates (Control) Act, 1947 (for short `the old Bombay Rent Act'); and consequently it became entitled to the protection against eviction under that Act. When the said Act was repealed and replaced by the Maharashtra Rent Control Act, 1999 (for short `the MRC Act'); the protection against eviction continued to be available to it under the MRC Act. (c) There was no error or defect in the Dispensing Unit and the decision to suspend the supplies and terminate the licence were illegal and unwarranted. Questions arising for consideration
16. On the contentions raised, the questions that arise for our consideration are :
i. What is the nature of a licence that is granted to the respondent by the appellant under the DPSL agreement ?
ii. Whether the High court was justified in upholding the grant of an interim order of status quo directing the appellant not to interfere with the respondent's `possession' of the petrol pump premises and requiring the appellant to resort to appropriate legal action to secure possession from the respondent ?
iii. Whether the licence to use the petrol pump premises for the purpose of sale of the petroleum products 12of the appellant granted to respondent on 1.4.1972 could be construed as a licence as defined in Section 5(4A) of the old Bombay Rent Act so as to attract section 15A of the said Act which provided that any person who was in occupation of any premises as a licensee as on 1.2.1973 shall on that date be deemed to have become a tenant of the landlord in respect of the premises in his occupation ? The contract
17. Both parties agreed and submitted that the rights and obligations of parties are governed by the terms of the DPSL agreement dated 1.12.1995. We may therefore refer to the relevant provisions thereof : "WHEREAS the Company has at the request of the Licensees agreed to permit the Licensees to enter upon the Company's premises described in the Schedule and shown on the blueprint attached hereto (hereinafter referred to as "the said premises") as the Licensees of the Company for the purposes, and upon the terms and subject to the conditions hereinafter mentioned. ..." NOW THESE PRESENT WITNESS AND IT IS HEREBY AGREED AND DECLARED AS FOLLOWS :
Subject to the conditions contained hereinafter the Company hereby grants Licence unto the Licensees for a period of 15 (fifteen) years and during the continuance of this Licence to enter upon the said premises and to use the Motor Spirit and/or H.S.D. Pumps, Storage Tanks, Pipes and Fittings and all other facilities erected and provided by the Company upon the said premises, and also any additional facilities at any time during the continuance of this Licence provided by the Company upon the said premises (all of which are hereinafter for brevity referred to as "the said facilities") for the purpose of the sale of Motor Spirit and/or H.S.D., Motor Oils, Greases and other Motor accessories, as the Licensees of the Company.
The Company expressly reserves to itself the right to take back the whole or any portion of the said premises or the said facilities or alter them at any time during the continuance of this Licence at its sole discretion. x x x x4. The said premises and the said facilities shall at all times during the continuance of this Licence remain the absolute property and in sole possession of the Company and no part of the said facilities shall be removed by the Licensees nor shall the position of any constituent part thereof or of the said premises be changed or altered without the previous written consent of the Company.5. The premises and the said facilities hereby licensed to the Licensees shall only be used for stocking and selling/dispensing the Petroleum Products of the Company and shall not be used for any other purpose except as may be permitted in writing by the Company.x x x x. Neither the Licensees nor the Licensees' servants or agents shall interfere in any way with the working parts of the pumps or other equipment provided by the Company. x x x x.
This Licence may be terminated without assigning any reason whatsoever by either party giving to the other not less than ninety days notice in writing to expire at any time of its intention to terminate it and upon the expiration of any such notice this Licence shall stand cancelled and revoked. The requisite period of notice may be reduced or waved by mutual consent. x x x x 15. Upon the revocation or termination of this Licence for any cause whatsoever the Licensees shall cease to have any rights whatsoever to enter or remain on the premises or to use the said facilities and shall be deemed to be trespassers if they continue to do so. Upon such termination or revocation either under Clause 12 or Clause 13 hereof, if the Licensees or their servants and/or agents remain on the premise, the Company shall be at liberty to evict them by using such means as may be necessary and prevent them from entering upon the licensed premises. x x x x
The Licensees hereby expressly agree and declare that nothing herein contained shall be construed to create any right other than the revocable permission granted by the Company in favour of the Licensees in respect of the Licensed premises/facilities strictly in accordance with the terms hereof. In particular nothing herein contained shall be construed to create any tenancy or other right of occupation whatsoever in favour of the Licensees." (emphasis supplied)Re : Questions (i) and (ii)
18. Licence is defined in section 52 of the Indian Easements Act, 1882 as under : "52. `License' defined : 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 license." 15The definition of licence makes it clear that a licence granted by the owner enables a licensee a right to do or continue to do certain specified things in or upon an immovable property.
19. In Associated Hotels of India Ltd. v. R.N. Kapoor (AIR 1959 SC 1262) this Court referred to the difference between a lease and licence.: "There is a marked distinction between a lease and a licence. Section 105 of the Transfer of Property Act defines a lease of immovable property as a transfer of a right to enjoy such property made for a certain time in consideration for a price paid or promised. Under Section 108 of the said Act, the lessee is entitled to be put in possession of the property. A lease is therefore a transfer of an interest in land. The interest transferred is called the leasehold interest. The lessor parts with his right to enjoy the property during the term of the lease, and it follows from it that the lessee gets that right to the exclusion of the lessor......" After referring to the definition of licence in Section 52 of the Easement Act, this court held: "Under the aforesaid section, if a document gives only a right to use the property in a particular way or under certain terms while it remains in possession and control of the owner thereof, it will be a licence. The legal possession, therefore, continues to be with the owner of the property, but the licensee is permitted to make use of the premises for a particular purpose. But for the permission, his occupation would be unlawful.
It does not create in his favour any estate or interest in the property. There is, therefore, clear distinction between the two concepts. The dividing line is clear though sometimes it becomes very thin or even blurred. At one time it was thought that the test of exclusive possession was infallible and if a person was given exclusive possession of a premises, it would conclusively establish that he was a lessee. But there was a change and the recent trend of judicial opinion is reflected in Errington v. Errington [1952] 1 All E.R. 149, wherein Lord Denning reviewing the case law on the subject summarizes the result of his discussion thus at p. 155 : "The result of all these cases is that, although a person who is let into exclusive possession is, prima facie, to be considered to be tenant, nevertheless he will not be held to be so if the circumstances negative any intention to create a tenancy." "...
The following propositions may, therefore, be taken as well-established : (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..."In C.M. Beena vs. P.N. Ramachandra Rao - 2004 (3) SCC 595, this Court explained a Licence thus : "Only a right to use the property in a particular way or under certain terms given to the occupant while the owner retains the control or possession over the premises results in a licence being created; for the owner retains legal possession 17 while all that the licensee gets is a permission to use the premises for a particular purpose or in a particular manner and but for the permission so given the occupation would have been unlawful."
20. Licences can be of different kinds. Some licences with reference to use of immovable property may be very wide, virtually bordering upon leases. Some licences can be very very narrow, giving a mere right enabling a person to visit a premises - say a museum or a lecture hall or an exhibition. In between are the licences of different hues and degrees. All licences can not be treated on the same footing. We may refer to some illustrations to highlight the difference. Illustration
A. An owner of a property enters into a lease thereof, but to avoid the rigours of Rent Control legislation, calls it as a licence agreement. Though such a lease is captioned as a `licence agreement', the terms thereof show that it is in essence, a lease. Such a licence agreement which puts the licensee in exclusive possession of the premises, untrammeled by any control, and free from any directions from the licensor (instead of conferring only a bare personal privilege to use the premises) will be a lease, even if described as licence. For example, if the 18exclusive possession of an apartment or a flat or a shop is delivered by the owner for a monthly consideration without retaining any manner of control, it will be a lease irrespective of whether the arrangement is called by the owner as a `lease', or `licence'. As far as the person who is let into exclusive possession, the quality and nature of his rights in respect of the premises will be that of a lease or a tenant and not that of a licensee. Obviously such a `licensee' cannot be `evicted' or `dispossessed' or prevented from using the premises without initiating legal action in accordance with law. Illustration
B. The owner of a land constructs a shopping mall with hundred shops. The owner of the mall earmarks different shops for different purposes, that is sale of different types of goods/merchandise, that is shops for exclusive clothing for men, shops for exclusive clothing for women, shops for hosieries, shops for watches, shops for cameras, shops for shoes, shops for cosmetics and perfumes, shops for watches, shops for sports goods, shops for electronic goods, shops for books, shops for snacks and drinks etc. The mall owner grants licences in regard to individual shops to licensees to carry on the identified or earmarked 19business. The licensor controls the hours of business, regulates the maintenance, manner of display, cleanliness in the shops.
The ingress and egress to the shop licensed to the licensee is through the corridors in the mall leading from three or four common access points/entrances which are under the control of the licensor. The licensee is however entitled to stock the shop with brands of his choice though he does not have the right to change the earmarked purpose, entertain any clientale or customers of his choice and fix the prices/terms for his goods. He can also lock the shop at the end of the business hours and open it whenever he wants. No one else can trade in that shop. In such a case, in spite of the restrictions, controls and directions of the licensor, and in spite of the grant being described as licence, the transaction will be a lease or tenancy and the licensee cannot be dispossessed or evicted except by recourse of law. Illustration
C. In a shopping complex or in a mall the owner gives a licence to a person to use a counter to sell his goods in consideration of a fee. The access is controlled by the licensor and there is no exclusive use of any specific space by the licensee. At the end of the day, the licensee can close the counter. The space around the counter is visited and used by customers to the mall and not exclusively by the customers of the licensee. In such a case, if the licence is terminated, the licensor can effectively prevent the licensee from entering upon his premises and the licensee will have no right to use the counter except to remove his belongings. In such a licence it may not be necessary for the licensor to sue the licensee for `possession' or `eviction'. Illustration
D. A much narrower version of a licence is where an exhibitor of cinematograph films, or a theatre owner permits a `customer' or `guest' to visit an entertainment hall to view and enjoy a movie or a show for the price of a ticket. The licensee is permitted to occupy a seat in the theatre exclusively for the period of the show. Or a cloakroom with toilet facilities in a public building permits a visitor to use the toilet/closet facilities on payment of a fee. The licensee is permitted to use the toilet/closet exclusively to relieve himself. In such cases, the licence is for a specific purpose and for a specific period.
The licensee has no other right to enter the premises, nor the right to continue to occupy the seat 21in the theatre or use the toilet/closet continuously. Such a licensee can be forcibly removed by the licensor if the licensee overstays or continues to occupy the seat beyond the show, or refuses to leave the cloakroom. It is not necessary for the licensor to sue the licensee.Illustration
E. A reputed manufacturer of textiles owns several retail outlets in different parts of the country. The outlets are housed in premises owned by the manufacturer or premises taken by it on lease. The manufacturer employs a sales manager on salary for each outlet to manage the outlet and sell its products and entrust him with the keys of the premises, so that he can open the outlet for business and close the outlet at the end of the day. Or the manufacturer, instead of engaging a sales manager, appoints an agent who is permitted to sell only the products of the manufacturer in the retail outlet, and receive a commission on the turnover of sales. The manufacturer stipulates the manner of sale, and the terms of sale including the prices at which the goods are sold.
The manufacturer also checks the products sold periodically to ensure that only its products (and not fakes) are sold. The manufacturer also reserves the right to terminate the services of the sales manager/agent. In such cases on termination of the services 22of the employee/agent, the manufacturer can physically prevent the sales manager/agent from entering the retail outlet and make alternative arrangements for running the outlet. There is no need to approach a court to `evict' the sales manager/agent.
21. Where an employer or principal permits the use of its premises, by its employee or agent, such use, whether loosely referred to as `possession' or `occupation' or `use' by the employee or the agent, is on behalf of the employer/principal. In other words, the employer/principal continues to be in possession and occupation and the employee/agent is merely a licensee who is permitted to enter the premises for the limited purpose of selling the goods of the employer/principle. The employee/agent cannot claim any `possession' or `occupation' or `right to use' independent of the employer/principal who is the licensor. In such cases if the employee is terminated from service, he cannot obviously contend that he is in "occupation" of the premises and that he can be evicted or dispossessed only by initiating action in a court of law. Similarly the agent who is permitted to enter the premises every day to sell the goods cannot, on termination of the agency, contend that he continues to be in exclusive occupation of 23the premises and unless evicted through a court of law entitled to continue in occupation.
This is because licence that is granted to the employee/agent is a limited licence to enter upon and use the premises, not for his own purposes or his own business, but for the purposes of the employer/principal, to sell its goods in the manner prescribed by the employer/principal and subject to the terms and conditions stipulated in the contract of employment/agency in regard to the manner of sales, the prices at which the goods are to be sold or the services to be rendered to the customers. In such cases, when the employment or agency is terminated and the employer/principal informs the employee/agent that his services are no longer required and he is no longer the employee/agent, the licence granted to such employee/agent to enter the retail outlet stands revoked and the ex-employee/ex-agent ceases to have any right to enter the premises. On the other hand, the employer/principal who continues to have possession will be entitled to enter the premises, or appoint another employee or agent, or legitimately prevent the ex-employee/ex-agent from entering upon the premises or using the premises. In such cases, there is no need for the licensor (that is the employer or the principal) to file a suit for eviction or injunction 24against the ex-employee or ex-agent. The licensor can protect or defend its possession and physically prevent the licensee (employee/agent) from entering the outlet.
22. In this behalf we may refer to the decision of this court in Southern Roadways Ltd. Madurai v. SM Krishnan (1989) 4 SCC 603. In that case, Southern Roadways appointed the respondent as its commission agent for carrying on its business in Madras city. Southern Roadways took on lease a godown and put it in the possession of the respondent for the purpose of carrying on the agency business. The agreement between the parties provided that Southern Roadways could remove the agent at any time without notice and upon removal, it could occupy the godown and also use the services of the employees engaged by the agent. In the course of audit, mismanagement and misappropriation by the agent was discovered and as a result Southern Roadways terminated the agency and took possession of the godown and appointed another person as agent. The respondent prevented the new agent and the appellant from carrying on the business in the godown premises.
Therefore the appellant filed a suit for injunction against the respondent. A learned Single Judge granted a temporary injunction. On an appeal by the ex-agent, the division bench of the Madras High Court vacated the injunction which was challenged before this court by Southern Roadways. This Court allowed the appeal. This court held: "At the outset, we may state that we are not so much concerned with the rival claims relating to actual possession of the suit premises. Indeed, that is quite irrelevant for the purpose of determining the rights of the company to carry on its business. Mr. Venugopal, learned Counsel for the appellant also discreetly did not advert to that controversy. He, however, rested his case on certain facts which are proved or agreed. They may be stated as follows : The company was and is the tenant of the suit premises and has been paying rent to the owner. The lease in respect of the premises has been renewed up to November 22, 1993. It was the company which has executed the lease and not the respondent. The respondent as agent was allowed to remain in possession of the premises. It was only for the purpose of carrying on company's business. His agency has been terminated and his authority to act for the company has been put an end to. These facts are indeed not disputed. On these facts the contention of counsel is that when the agency has been terminated, the respondent has no legal right to remain in the premises or to interfere with the business activities of the company. The principal has right to carry on business as usual after the removal of his agent.
The Courts are rarely willing to imply a term fettering such freedom of the principal unless there is some agreement to the contrary. The agreement between the parties in this case does not confer right on the respondent to continue in possession of the suit premises even after termination of agency. Nor does it preserve right for him to interfere with the company's business. On the contrary, it provides that the respondent could be removed at any time without notice and after removal the company could carry on its business as usual. The company under the terms of the agreement is, therefore, entitled to assert and exercise its 26 right which cannot be disputed or denied by the respondent. ...under law, revocation of agency by the principal immediately terminates the agent's actual authority to act for the principal unless the agent's authority is coupled with an interest as envisaged under Section 202 of the Indian Contract Act .
When agency is revoked, the agent could claim compensation if his case falls under Section 205 or could exercise a lien on the principal's property under Section 221. The agent's lien on principal's property recognised under Section 221 could be exercised only when there is no agreement inconsistent with the lien. In the present case the terms of the agreement by which the respondent was appointed as agent, expressly authorises the company to occupy the godown upon revocation of agency. Secondly, the lien in any event, in our opinion, cannot be utilised or taken advantage of to interfere with principal's business activities. The crux of the matter is that an agent holds the principal's property only on behalf of the principal. He acquires no interest for himself in such property. He cannot deny principal's title to property. Nor he can convert it into any other kind or use. His possession is the possession of the principal for all purposes. In this case, the respondents' possession of the suit premises was on behalf of the company and not on his own right. It is, therefore, unnecessary for the company to file a suit for recovery of possession. The respondent has no right to remain in possession of the suit premises after termination of his agency. He has also no right to interfere with the company's business."
23. In this case, the DPSL Agreement clearly demonstrated that licence granted by the appellant enabled the licensee (respondent) to enter upon the retail outlet premises only 27for the limited purpose of using the facilities (that is Motor Spirit/HSD Pumps, storage tanks etc.) for purposes of sale of appellant's Motor Spirit, HSD, Motor oils, Greases or other motor accessories (together referred to as `Products of the appellant') as a licensee of the appellant at the prices specified by the appellant. The respondent could not sell any other goods or the products of any one else. It could not charge a price different from what was stipulated by the appellant. The respondent could not enter the outlet premises if the licence granted to the respondent to sell the appellant's petrol and petroleum products was terminated.
In other words, the respondent-licensee had no licence to enter the petrol pump premises or use the `facilities', if it could not sell the products of the appellant. The relevant terms of the DPSL agreement extracted in para 17 above show that the licence was given to the licensee to enter the appellant's outlet premises and use the equipment/facilities provided by the appellant for the exclusive purpose of sale of the products of the appellant. This has been completely lost sight of by the courts below.
24. It should be noted that the appellant has installed specialized equipments (that is HSD/Petrol/oil 28dispensers/pumps attached to storage tanks through pipes/fittings) and the licence given to the respondent was to enter upon the premises to use the said equipment/facilities provided by the appellant for the purpose of sale of the appellant's products (that is motor spirit, HSD, motor oil, grease etc.) at the rates/prices fixed by the appellant. If the respondent could not sell these petroleum products on account of suspension/termination, there is no occasion or need for the respondent to enter upon the outlet premises as it cannot sell any other goods or use the outlet for any other purpose.
Therefore the licence to enter and use the outlet premises also comes to an end when the licence is terminated or supply of appellant's products is stopped. Clause 15 of the DPSL Agreement specifically provides that on revocation or termination of the licence for any cause whatsoever, the licensee shall cease to have any right to enter or remain in the premises or use the facilities. As the licence is only to enter the appellant's outlet premises to use the facilities for sale of appellant's petroleum products, if the licence to use the appellant's facilities for sale of appellant's products comes to an end and supply of appellant's products for sale by the respondent is stopped, there is no question of the licensee 29entering the outlet premises at all or remaining in the outlet premises or using the outlet premises.
25. To reiterate, the permission granted to the respondent by the appellant to enter the outlet premises is for the purposes of using the equipments/facilities belonging to the appellant installed in the outlet, to sell the products of the appellant. Under the licence (DPSL) agreement, the respondent cannot enter the premises for any purpose other than for using the facilities or equipment installed by the appellant or for any purpose other than selling the petroleum products of the appellant. Therefore the licence to enter the premises and the licence to use the facilities/equipment is incidental to the licence to sell the products of the appellant as a licensed dealer, distributor or agent. In this case the premises is a land held on leasehold by the appellant wherein it has constructed/erected certain structures and housed certain facilities/ equipment. The premises is known as appellant's `company owned retail outlet'. The goods/products sold belong to the appellant.
If the appellant decides to stop the supply of its goods for sale in the said outlet, automatically the licence granted to the respondent to enter premises and use the facilities become redundant, 30invalid and infructuous. There is no licence in favour of the licensee to use the premises or use the facilities independent of the licence to sell the goods of the appellant. Further the agreement makes it clear that the agreement does not create any tenancy rights in the premises; that it is terminable by 90 days notice on either side and it is terminable by the appellant even without giving such notice in the event of breach. Therefore there cannot be an injunction restraining the appellant from entering upon its outlet premises or using the outlet for its business or inducting any new dealer or agent.
26. Where the licence in favour of the licensee is only to use the retail outlet premises or use the equipments/facilities installed therein, exclusively in connection with the sale of the goods of the licensor, the licensee does not have the right to use the premises for dealing or selling any other goods. When the licensee cannot use the premises for any purpose on account of the stoppage of supply of licensor's goods for sale, it will be wholly unreasonable to require the licensor to sue the licensee for `possession' of such company controlled retail outlet premises.
This is not a case where the licensee has 31alleged that any amount is due to it from the licensor by way of commission or remuneration for services, or that on account of non-payment thereof it is entitled to retain the retail outlet premises and facilities of the licensor by claiming a lien over them under section 221 of the Indian Contract Act, 1872. In regard to a licence governed by a commercial contract, it may be inappropriate to apply the principles of Administrative Law, even if the licensor may answer the definition of `State' under Article 12 of the Constitution of India. In view of the above, it is unnecessary to examine whether appellant is a `state' within the meaning of that expression under Article 12 of the Constitution of India, nor necessary to keep in view the requirement that if the licensor answers the definition of `state', a duty to act fairly and reasonably without any arbitrariness or discrimination is also implied. Be that as it may.
27. It is made clear that this decision applies only to licences where the licensor is the owner/ lessee of the premises and the equipment (in this case dispensing pumps and other equipment) and where the licensee is engaged merely for sale of the products of the licensor. In other words, this decision would apply to petrol stations which are known as CCROs (`Company Controlled Retail Outlets'). If the licensee is himself the owner/lessee of the premises where the petroleum products outlet is situated or where the exclusive right to use the premises is given to the licensee for carrying on any business or dealing with any goods unconnected with the licensor, this decision may not apply and it may be necessary for the licensor to have recourse either to a Civil Court for a mandatory injunction to give up the premises, or the Estate Officer under the Public Premises Act for `eviction' as the case may be, depending upon the nature of licence and the status and relationship of the parties.
28. In this case in pursuance of a routine inspection certain serious irregularities were viewed and as a consequence supply of its products was stopped, suspended and a show cause notice was issued calling upon respondent to show cause why action should not be taken including termination of the dealership for the reasons stated therein. Therefore when such a notice is issued as a precursor to termination, the respondent licensee ceases to have right to sell the goods in the outlet premises and does not get the cause of action either to seek continuance of the supply of the products or remain in and use the premises. The show cause notice was followed by a termination of the licence of dealership on 19.3.2009. Even 33if the termination or non-supply amounts to breach of contract, the remedy of the agent-licensee at best is to seek damages, if it is established that the dealership was wrongly determined or supply was wrongly stopped. Consequently, the licensee does not have any right to use the premises nor any right to enter upon the premises after the termination of the agency.Re: Question No.(iii)
29. The contention of the respondent is that as it was a licensee from 1.4.1972, it become a deemed tenant under section 15A of the old Bombay Rent Act (which provided that any person in occupation of a premises as a licensee as on 1.2.1973, became a deemed tenant) and consequently can be evicted only by filing a petition for eviction under the Rent Act.
30. To appreciate the said contention of the respondent, it is necessary to refer to the relevant provisions of the relevant rent law. We may first refer to the definitions of `tenant' and `licensee' under the old Bombay Rent Act and MRC Act. Section 7(15)(a) of the MRC Section 5(11) of the Old Act reads as follows :- Bombay Rent Act (15) "tenant" means any "Tenant" means any person by 34 person by whom or on whose whom or on whose account rent account rent is payable for is payable for any premises any premises and includes,-
and includes - (a) such person,- (a) Such sub-tenants and other persons as have derived (i) (i) who is a tenant, or title under a tenant (before (ii) (ii) who is a deemed tenant, the 1st day of February, 1973; or(iii)(iii) who is a sub-tenant as (aa) any person to whom permitted under a contract interest in premises has been or by the permission or assigned or transferred as consent of the landlord, or permitted or deemed to be (iv) (iv) who has derived title permitted, under section 15; under a tenant, or(v) (v) to whom interest in x x x x x x x premises has been assigned or transferred as permitted, (bb) such licensees as are deemed to be tenants for the by virtue of, or under the purposes of this Act by provisions of, any of the section 15A; repealed Acts; x x x x x x x (b) a person who is deemed to be a tenant under section 25; (c) a person to whom interest in premises has been assigned or transferred as permitted under section 26; x x x x x x x Section 7(5) of the MRC Act Section 5(4A) of the old Bombay Rent Act (5) `Licensee', in respect (4A) `licensee', in respect of any premises or any part of any premises or any part thereof, means the person thereof,
means the person who is in occupation of the who is in occupation of the premises or such part, as premises or such part, as the case may be, under s the case may be, under a subsisting agreement for subsisting agreement for licence given for a licence licence given for a licence free or charge; and includes fee or charge; and includes any person in such any person in such 35occupation of any premises occupation of any premises or part thereof in a or part thereof in a building vesting in or building vesting in or leased to a co-operative leased to a co-operative housing society registered housing society registered or deemed to be registered or deemed to be registered under the Maharashtra Co- under the Maharashtra Co-operative Societies Act, operative Societies Act, 1960 (Mah. XXIV of 1961) but 1960; but does not include a does not include a paying paying guest, a member of a guest, a member of a family family residing together,
A residing together, a person person in the service or in the service or employment employment of the licensor, of the licensor, or a person or a person conducting a conducting a running running business belonging business belonging to the to the licensor, (for a licensor or a person having person having any accommodation for accommodation for rendering rendering or carrying on or carrying on medical or medical or paramedical para-medical services or services or activities in or activities in or near a near a nursing home, nursing home, hospital or hospital, or sanatorium or sanatorium, dharmashala, a person having any home for widows, orphans or accommodation in a hotel, like premises, marriage or lodging house, hostel, guest public hall or like house, club, nursing home, premises........." hospital, sanatorium, dharmashala, home for widows, orphans or like premises, marriage or public hall or like premises......." (emphasis supplied)
31. The old Bombay Rent Act recognised such licensees as `deemed tenants' under section 15A and they are covered under the definition of a tenant under section 7(15)(a) of the MRC Act. Section 15A of the old Bombay Rent Act read as follows : - 36 "15A. Certain licensees in occupation on 1st February 1973 to become tenants- (1) Notwithstanding anything contained elsewhere in this Act or anything contrary to in any other law for the time being in force, or in any contract where any person is on the 1st day of February 1973 in occupation of any premises, or any part thereof which is not less than a room, as a licensee he shall on that date be deemed to have become, for the purpose of this Act, the tenant of the landlord, in respect of the premises or part thereof, in his occupation. (2) The provisions of sub-section (1) shall not affect in any manner the operation of sub- section (1) of section 15 after the date aforesaid." Significantly there is no provision either in the old Bombay Rent Act or under the MRC Act, enabling or treating any person who became a licensee after 1.2.1973 as a deemed tenant.
32. The occupation by the respondent was not occupation on its own account, but occupation on behalf of the appellant. Therefore the respondent was not in `occupation' of the outlet in its own right for its own proposes, but was using the outlet and facilities in the possession a
