Thursday, March 10, 2011

"Lease" and "Licence" Differentiated : Supreme Court

Justice Raveendran

The Supreme Court in Bharat Petroleum Corporation Ltd. v. Chembur Service Station, has examined the
difference between Lease and Licence. While discussing various judicial pronouncements on the subject, the
Supreme Court held as under;

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."

The 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 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 exclusive
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 business. 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 in 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 of 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 the 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
against 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 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.

Definition of License and Granting of License

April 30, 2015 by kanchi Leave a Comment

By Yamini Rajora, National Law University, Jodhpur

Editor’s Note: The usage of license to signify a transaction is widely used by laymen, who
rarely think in terms of jural relations. In the following study, the author has made an
attempt to explain the meaning of licence and how a licence is granted in India. Moreover, it
is important to have an understanding of the difference between a lease (that is a tenancy),
easement and a licence under general law so that one knows what one is dealing with in any
particular case. Therefore, the author has also sought to draw a line between these
concepts.

Introduction

Property is perhaps the most important and the most complicated and extensive branch of
modern law. Under this field of law, the rights, claims, duties and obligations of the parties
involved with any kind of property become the subject of study.

“Chameleon-hued” was the expression once applied by Hohfeld to the term “license” in a
passage where he added that it was “a word of convenient and seductive obscurity; and the
task of dealing at all adequately with the intricate and confused subject would, in and of
itself, require a long article.” The subject is indeed intricate and confused; and yet it is one
which particularly appealed to his keenly analytical mind and which was peculiarly
susceptible of instructive treatment under methods of rigid analysis.

Earlier, licence was described as the fact that a landowner communicated his consent to
another’s using his land; while at other times licence was described the legal relationship
whereby the other could use the land without being liable for trespass. In present times,
licence is referred to as a validation by the owner of the land for the acts of the licensee
which would otherwise be committed unlawfully.
The traditional concepts of “bare” or “mere” licenses, licenses “coupled with an interest” or
“with a grant,” licenses “acted upon” or “executed,” and licenses “upon valuable
consideration” were used earlier. Most of these concepts assumed certain differences in the
legal consequences of various transactions, and therefore furnished a poor starting point for
determining what the legal consequences of a given transaction should be. It also made it
easy to overlook important license transactions which these phrases did not suggest.

A factual classification of licenses which starts with the differences in the parties’ intentions
will place in one group the transactions wherein the parties have contemplated that the
interests created should be revocable. But the transactions where the parties have
contemplated irrevocable interests require further subdivision. A large number of licenses
are not at all lacking in formality; they are called licenses solely to distinguish them from
leases. Another large group of licenses are so called because they are oral; previous
discussion has been confined almost entirely to these. Licenses of another group present a
different problem because they are written but unsealed. Still other licenses are so called,
although they are in writing .and under seal, because they lack technical conveyance
language.

According to some scholars, the legal instrument of “License” in immovable properties was
developed to deal with the legal complications of lease and rental rights under Indian law. In
particular, this legal instrument was developed to enable property owners to restrict lessees
and evict them more easily. Still, many property owners that intended to protect themselves
by entering a leave and license agreement (i.e. a license agreement to use an immoveable
property for a certain purpose), find themselves facing court decisions ruling that their
agreement was in fact a lease agreement. Some of the mistakes made by such property
owners may be avoided.

In the present work, an attempt has been made to explain the meaning of licence and how a
licence is granted in India. In India, Indian Easements Act of 1882 governs such
transactions. Section 52, 53 and 54 are the relevant provisions to understand concept and
grant of licence in India. The following project work aims to differentiate between leases and
licence along with lease and easement. The main difference between a license and a lease
is that a license does not create a right in property itself, therefore eviction is practically
immediate and hassle free. It is important to have an understanding of the difference
between a lease (that is a tenancy) and a licence under general law so that one knows what
one is dealing with in any particular case.

The negative definition of licence under Indian law makes it necessary that before a right can
be shown to be a licence only, it must be proved not to be an easement or an interest in the
property1.

Licence under English Law

According to English Law, a licence is purely a personal privilege or right enabling the
licencee to do something on the land of the licensor which would otherwise be unlawful2. It is
an excuse by reason of the consent of the licensor for doing an act which would otherwise
be unlawful. It is merely a leave to do a thing, which enables the licencee to do lawfully what
he could not otherwise do except unlawfully.

1
Ajab Singh v. Shital Puri, AIR 1993 All. 138
2
Head v. Hartley, 42 Ch. D. 461
A licence is merely a permission to do an act, which without such permission would amount
to a trespass3.A dispensation or licence properly passeth no interest, nor alters or transfers
property in anything, but only makes an action lawful, which without it had been unlawful4.

Licence is only a permission to do something on an immovable property like occupation, or

enjoying fruit thereof, or using it for some other purpose.

License is an official permit or permission to carry on some business or do some act which
without the license would be unlawful and the words license and permit are often used
synonymously5. Licence is interchangeable with permission. Permission or licence is granted
for use of an immovable property for a particular purpose given by the granter to the grantee
which as of a necessity in his retention of dominant right of possession over the immovable
property with the granter.

Licence under Indian Law

In India, the Indian Easements Act, 1882 provides for law relating to licences in property law.
Section 52 of Indian Easements Act, 1882 defines Licence as under:

“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 immovable property of the grantor, something which would, in
the absence of such rights, be unlawful, and such right does not amount to an easement or
an interest in the property, the right is called a licence.”

From the above definition of licence, it seems that if a person himself has acquired a right or
interest in an immovable property through an instrument, the right conveyed in his favour in
that instrument, will not be licence. In India, judicial and legislative definitions of licence have
followed the English definitions of the term6.

Under Section 52, if a person is given the right to use the immovable property in a particular
way under certain terms while retaining control and possession of the same, the person so
permitted is only a licencee7. The question that arises in this context is that whether the
relationship is that of landlord-tenant or licensor-licensee. The relationship depends on the
intention of the parties that whether there was interest in the land or merely personal
privilege without any interest.

A licence cannot be granted only in favour of definite number of persons and not in favour of
fluctuating body or individuals. The agreement involved in the case, even if binding on the
defendants, cannot be considered to be at least a bilateral agreement between the
representatives of the two parties and containing reciprocal conditions. A licence is a
personal right given to the licencee and, therefore, Section 56 of the Easements Act, 1882
provides that licence cannot be transferred by the licencee or exercised by his servants and
agents.

3
Clifford v. Neil, (1896) 12 App. Div. 17
4
Thomas v. Sorrell, (1673) Vaughan 33
5
Parsons v. People, (1904) 32 Colo. 221
6
Krishna v. Rayappa, 4 Mad. H.C.R. 98
7
B. B. Katiyar, Law of Easements and Licences, 14th Edn. (New Delhi: Universal Law Publishing Co. Pvt. Ltd.,
2012) 885
The Supreme Court in Associated Hotels of India Ltd. v. R.N. Kapoor8 summed the concept
of Licence as under:

“Under the aforesaid section, if a document gives only a right to use the property in particular
way or under certain terms while it remains in the possession and control of the owner
thereof, it will be a licence. The legal possession, thereof, continues to be with the owner of
the property, but the licencee 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.”

It important to take note of essential features of licence as under9 :

1. A licence is not connected with the ownership of land / property but creates only a
personal right or obligation;
2. Licence only creates a right or interest in the immovable property to do something,
under the authority of the grantor of the licence.
3. A licence cannot be transferred or assigned;
4. Licence is purely permissive right arising only by permission, express or implied, and
not by adverse exercise or in any other way10;
5. It only legalize a certain act which would otherwise be unlawful and does not confer
any interest in the property itself in or upon or over which such act is allowed to be
done11.
6. A licencee cannot sue outsiders in his own name.

Kinds of Licence
A licence may be of the following two kinds:

1. Bare licence which is purely a matter of personal privilege, and

2. Licence coupled with a grant or interest in the land.

Whether the act allowed to be done is a bare licence or something more than a licence
depends on the terms of the transaction.

When a landowner permits another to use the land under circumstances in which it is
reasonable to foresee that the licensee will spend money or otherwise change position in the
belief that the license will not be revoked, the license may become irrevocable. For example,
if a person owns two parcels, one of which has no access to a public road, sells the
landlocked parcel to another person, and gives him permission to build a driveway across
the lot the seller has retained, the license becomes irrevocable when the buyer invests in the
property, reasonably believing that the permission will not be revoked.

1. Bare Licence

A bare licence is a personal permission or consent, granted without consideration, to enter,

traverse over or be present upon the land of another. A bare licence is a licence granted

8
Associated Hotels of India Ltd. v. R.N. Kapoor, AIR 1959 SC 1262
9
Khan Saheb Muhammad Khan v. State of Orissa, ILR 1954 Cut. 671
10
Section 62, Indian Easements Act
gratuitously which is not coupled with the grant of an interest in the land, e.g. the licence
which one necessarily grants to one’s guests. Such a licence may be revoked at any time.

A bare licence is a defence to what would otherwise amount to the tort of

trespass.[xix]Where the licencee oversteps the ambit of the licence, his status will therefore
be that of trespasser12. If the person is permitted to enter the land for one purpose but enters
for another purpose[xxi], or whilst on the land begins to pursue a different purpose to that
which he is authorised[xxii], again he becomes a trespasser, where it is known or
understood that the occupier would not have given consent.[xxiii]

If a person is allowed to do the act on the land without interfering with the nature of the land
or without taking any profits from the land, then it is a case of bare licence. Bare licences
may be created expressly or impliedly and no formalities are required – a bare licence may
arise by implication from circumstances or conduct.[xxiv]

Bare licenses generally are not assignable (transferable) and are revocable at will by the
property owner. Bare licence becomes irrevocable when the licensee acting upon the licence
executes a work of a permanent character and incurs expense in doing so.

2. Licence coupled with a grant or interest in land

A licence coupled with a grant or interest in land arises where there is a permission to enter
onto another’s land for the purpose of removing something from that land (such as
timber)[xxv]. This licence combines the grant of an interest (such as a profit a prendre) with
an ancillary permission to enter the land to realise or exploit that interest.[xxvi]

A license coupled with an interest arises when a person acquires the right to take
possession of property located on someone else’s land, as when a lender acquires the right
to repossess an automobile that is located on private property after the borrower has
defaulted on a loan.

A licence may be coupled with the grant of an interest in the land, as when standing timber is
sold on terms that the purchaser is to sever the timber: the sale of the timber on these terms
implies the grant to the purchaser of a licence to enter the land in order to obtain the timber.
Such a licence is irrevocable so long as the interest to which it is annexed lasts, and unless
otherwise agreed it can be assigned.

If the person is allowed to take exclusive possession of the land, to plant trees over it, then it
is not a bare licence but it is a licence that is coupled with grant or interest in land. If the
licence gives the licensee a right to make a construction on land, it is not a bare license but it
is a licence coupled with an interest in land. In such a case, the licensee who has entered
possession after execution of the licence, is entitled to maintain a suit against the trespasser
who has dispossessed him.[xxvii]

Licenses coupled with an interest usually are both assignable and irrevocable, at least until
the holder of the license has had a reasonable time to retrieve the property that gave rise to
the license. Where such operative facts give a privilege accessory to and in aid of the
exercise of a power, or other legal interest, otherwise vested in the licensee.

Lease and Licence: Distinction

12
Hillen and Pettigrew v. ICI (Alkali) Ltd, (1936) AC 65s
As defined by Section 105 of the Transfer of Property Act, 1882:

A lease of immovable property is a transfer of a right to enjoy such property, made for a
certain time, express or implied, or in perpetuity, in consideration of a price paid or promised,
or of money, a share of crops, service or any other thing of value, to be rendered periodically
or on specified occasions to the transferor by the transferee, who accepts the transfer on
such terms.
The transferor is called the lessor, the transferee is called the lessee, the price is called the
premium, and the money, share, service or other thing to be so rendered is called the rent.

The requirements for a lease are:

 exclusive possession of a defined area of land,

 for a fixed period (or series of periods) of time,
 with the intention to create an estate in land – that is an interest in the land itself
which can be assigned or sold.

A licence is simply a permission to use land. It allows someone access to the land of another
for an agreed purpose. It is an authority that justifies what would otherwise be a trespass. It
does not confer any interest in land.

Whether a transaction amounts to a lease or license, is a question that has been considered
in a whole host of judicial pronouncements and cases continue to be handed over. The
question that whether a transaction is lease or license depends upon the intention of the
parties and whether exclusive possession has been given or not.

The test to determine that whether a transaction is a lease or a licence is:

1. The intention of the parties, which is to be gathered from the terms of the contract. If
the terms are not clear, then the surrounding circumstances shall determine the
intention of the parties.[xxviii]
2. In the absence of a written document and when somebody is in exclusive
possession, then the intention is to be gathered from other evidence such as
exclusive possession would be the most relevant circumstance to arrive at the
intention of the parties at the time of making the lease.
3. If dispute arises then intention to be gathered from the reading of the document as a
whole.
4. Lease or licence is matter of contract between the parties. The contract is to be
construed or interpreted on the well-laid principles for construction of contractual
terms.

In Booker v. Palmer[xxix], Lord Green stated that-

“There is one golden rule to be followed is that law does not impute an intention to enter into
contractual relationships where the circumstances and the conduct of the parties negative
any intention of the kind.”

In Cubb v. Lane[xxx], Lord Denning said that-

“The question in all these cases is one of intention: Did the circumstances and conduct of
the parties show that all that was intended was that the occupier should have a personal
privilege with no interest in the land.”
The definition in Section 52 of the Act referred to above does not refer to exclusive
possession. If there is no exclusive possession then the arrangement cannot be a lease and
must be a licence. The general rule is that the Court will look at the substance of the
agreement rather than the form in which it is expressed.[xxxi]

The major differences between lease and licence are:

 A Lease is a transfer of right to enjoyment (exclusive possession) of that property by

the lessor the lessee, made for a certain term in consideration of a fee subject to the
terms set out in the lease agreement while a licence is the granting of a permission to
use the land in consideration of a fee subject to the conditions set out in the licence.
 A lease grants exclusive possession for a fixed period (term). A licence does not
grant exclusive possession.
 A lease creates an interest in the land which can be transferred to the lessee for the
period of the lease. A licence does not create or transfer an interest in the land.
 A lease can be transferred (assigned) to another party and if registered on the title is
binding on a new owner of the land. A licence is not transferable.
 A lease is not revocable (other than subject to any conditions set out in the lease
(e.g. a redevelopment clause). A licence is revocable.

Licence and Easement: Distinction

As per Section 4 of the Indian Easements Act, 1882; easement is defined as right which
the owner or the occupier of certain land possesses, as such, for the beneficial enjoyment of
that land, to do and continue to do something, or to prevent and continue to prevent
something being done, in or upon, or in respect of certain other land not his own.

An easement is right or interest in immovable property for the land belonging to

another[xxxii]. When once an easement is validly created, it is annexed to land. The benefit
of it passes with the dominant tenement and the burden of it passes with the servient
tenement to every person into whose occupation the dominant and servient tenements
respectively come.[xxxiii]

The major points of difference between an easement and a licence are the following:

1. An easement is a right appertaining to property while a license is only a personal

right.
2. An easement is a right in rem and is enforceable by all and against all into whose
hands the servient and the dominant tenements respectively may come, while a
license is only a right in personam and therefore, not so enforceable.
3. An easement can be assigned with the property to which it is annexed, but a license
cannot be assigned at all except where it is a license to attend a place of public
entertainment.
4. A right of easement is not revicable at the will of the grantor while a license is so
revocable, except where the grantor is stopped by his conduct from exercising the
power of revocation conferred by law.[xxxiv]
5. A license is permissive right traceable to a grant from the licensor either expressly or
impliedly. But an easement is acquired either by assertive enjoyment by the
dominant owner or by a negative covenant between the parties or by grant or by
statute.
6. An easement may be positive or negative in character, a license is invariably positive
and cannot be negative in character. It may be that there are cases in which a
negative pbligation might be cast on the licensor with the object of protecting a
 licence coupled with a grant but such obligation is due to the grant accompanying the
licence and not to the licence per se.[xxxv]

Granting of Licence
The provisions relating to granting of licence are the same as those governing the
easements. The provisions relating to granting of licence in India are Sections 53 and 54 of
the Indian Easements Act, 1882.

Two preliminary questions that arise when entering into a Leave and Licence agreement are
– who can grant a licence and how a licence is granted.

The first question is answered in section 53 of The Indian Easements act, 1882, that states
that a licencee may be granted by anyone in the circumstances and to the extent in and to
which he may transfer his interests in the property affected by the licence. In other words,
one cannot grant a licence and one cannot receive a licence if the licensor does not possess
a sufficient lawful interest in the property.

The second question is answered in section 54 of The Indian Easements act, 1882, that
states that a the grant of a licence may be express or implied from the conduct of the
grantor, and an agreement which purports to create an easement, but is ineffectual for that
purpose, may operate to create a licence. This definition is very important. Owners of
properties should mind that their behavior may create a licence, even without a formal
licence agreement.

Licence is, therefore, a grant of a right to do something upon an immovable without creating
interest in the property. It is therefore, distinguishable from an allied grant such as a lease or
an easement. Both lease and easement create an interest in the property. Licence is only a
permission to do something on an immovable property like occupation, or enjoying fruit
thereof, or using it for some other purpose.

Power to grant a licence

Section 53 provides for the power to grant a licence. It states that – A licence may be
granted by anyone in the circumstances and to the extent in and to which he may transfer
his interests in the property affected by the licence.

Power to grant a licence is co-extensive with the power to transfer. A man can grant a
license in the circumstances and to the extent he can transfer his interest in the property
affected thereby.[xxxvi] The power to grant a license is only a personal right attaching only a
personal obligation on the grantor is more extensive than the power to impose an easement
which affects the property itself.

A licence by a mortgagee or co-tenant who is lawfully in the sole possession and enjoyment
of the property, to do a thing which he could himself lawfully do is a valid
licence.[xxxvii]Anyone who can transfer property even if he is not the owner can grant a
licence. The licence can also be revoked by such a person.[xxxviii]

The grant of licence may be express or implied which can be inferred from the conduct of the
grantor.[xxxix] Under Section 52, there is a grant of the right made by the grantor. Without a
grant in the general sense, no licence can be created.[xl]
An agreement for licence can subsist and continue to take effect only so long as the licensor
continues to enjoy a right, title and interest in the premises. On the termination of the right ot
the title, the agreement for licence comes to an end. If the licensor is an tenant, the
agreement for licence by him terminates with the tenancy, and the licence ceases to be
licensee.[xli]

In order to grant a licence, the licensor need not be the owner of the property. The tenancy
rights are also immovable rights of the tenant and therefore, he can grant the licence. But by
virtue of Section 53, the tenant can grant the licence subject to the limitation and the extent
to which he may be able to transfer the interest, viz., the tenancy rights. A tenant is
empowered to transfer his interest but he cannot do so beyond the term of his lease.[xlii]

Form of Licence – Express or Implied

Section 54 provides that – The grant of a licence may be express or implied from the
conduct of the grantor, and an agreement which purports to create an easement, but is
ineffectual for that purpose, may operate to create a licence.

A licence is notionally created where a person is granted the right to use the premises
without becoming entitled to the exclusive possession of them 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 legal interest.

A mere licence passes no interest nor alters or transfers property in any way but merely
makes an act lawful which without would have been unlawful. It is necessary that the licence
be in writing or registered.[xliii] Where the licence is coupled with a grant of immovable
property or of an interest in immovable property, which is compulsorily registrable, it must be
in writing or registered.[xliv]

 Implied Licence

A licence may be implied from the conduct of the licensor whereby he allows something to
be done on his land by another person who believes the land to be his own.[xlv] A plea of
implied licence may be based on the right of equity to intervene, must have for its foundation
either a contract or the existence of some fact which the legal owner is stopped from
denying.[xlvi]

An everyday-life example of implied licence is in the case of a shopkeeper in the invitation to

customers to enter his premises to do business.

Licence may also be implied from the conduct of the licensor which induces in the mind of
the licensee a reasonable belief that the former consents to the latter’s doing of certain acts,
the doing of which would have been unlawful but for such consent.[xlvii]

The consent may also consist of words, spoken or written or acts and omissions on the part
of the licensor that would invoke reasonable belief in the mind of the licensee that what he
does is either actively approved or not objected to by the licensor.

A licence to enter upon the land of another is not implied by the sale of goods which are
stored upon the land, by a person other than the person against whom it is claimed, nor the
failure of the tenant to keep the premises in repairs authorises the landlord to enter upon it
for that purpose, in the absence of a contract to that effect.
  Express Licence

An express license is one which in direct terms authorizes the performance of a certain act;
as a license to keep a tavern given by public authority. Express licences govern more
specific situations where the permission has been expressly directed towards a particular
individual. An example is where owner invites guests for dinner or to stay in a room on his
property. The licence governs only the specified period of the stay and any re-entry after that
period without further permission would constitute trespass.

It is important to note that a person cannot grant a licence to himself or to himself jointly with
another. Therefore, it must be granted by an owner of the property who is different from the
licensee.

As a grant forms the basis of an easement as well as a licence, an agreement which

purports to create an easement may operate to create a licence only if it is ineffectual for
certain reasons to create such easement. As both an easement and licence legalize acts
which would have been unlawful otherwise, both go hand in hand but while licence stops, an
easement goes further and incorporates itself with the property of the grantee, the beneficial
enjoyment of which is its principal characteristics. The rule in England where an easement is
created only by grant under seal has a very salutary effect. In India, the cases between
landlords and tenants, in which a grant by the former to the latter, of a right of easement, is
ineffectual to create an easement in the strict sense of the term, are covered by this
rule.[xlviii]

Conclusion

Such a statement does not reveal whether it is a transaction or a legal relationship. If the
latter, it may be revocable or irrevocable, and may have, in either case, a variety of other
characteristics. If a transaction, it may be unwritten, or written but unsealed, or couched in
unusual terms, or designed for a special purpose; its legal consequences will vary with these
circumstances.

The conclusion that the term license implies nothing does not mean that there is no law of
licenses. There is license law, but it must be stated in terms of particular types of cases.
Where a licensor gives no reason to expect otherwise, the licensee’s privileges can be
terminated at will. Where a licensor manifests an intention that the privilege shall be more
enduring, the consequences depend upon other circumstances. If it offends no legal policy,
the license may create a true easement. If it offends the rule requiring a sealed instrument, it
will probably create an easement, but the licensee can obtain relief only through equitable
procedure. If enforcement of the license would encumber the land with relatively useless
burdens, neither the parties’ expectations nor their formalities nor their expenditures will give
the interest the characteristics of an easement.

This simple rationalization of license cases is largely impeded by the ambiguous usage of
license to signify sometimes a transaction, sometimes a relationship. All the recent writers
agree that one of the usages should be adopted and the other rejected, but disagree on
which to adopt and which to reject.

The usage of license to signify a transaction is widely used by laymen, who rarely think in
terms of jural relations. It is often compared with the terms lease and easement, which
usually signify certain kinds of transactions. So long as the legal vocabulary contains the
nouns licensor and licensee to designate the parties to the transaction, and the verb to
license for the process of transacting, it is fanciful to imagine that lawyers will refrain from
describing these operative facts as a license.

The usage of license to signify a relationship can be more readily eliminated. Usage of the
additional term license suggests distinctions which seldom exist. The recognition of legal
relations as distinguished from operative facts demands terms which suggest the distinction,
just as fee and leasehold suggest something different from lease.

Edited by Kanchi Kaushik

[i] Mini Peter Philips v. Dina J. S. Fanibanda, 2008 (1) AIR Bom. R. 475

[ii] Charles E. Clark, Licences in Real Property Law, 21 Columbia Law Review 757-782
(1921)

[iii] Ram Sarup Gupta v. Bishun Narain Inter College & Ors., 1987 AIR 1242

[iv] Mohd. Yusuf v. Suraj Bali Singh, AIR 1916 All. 219

[v] P. Perumal Naidu v. Krishnaswamy Naidu, AIR 1998 Mad. 148

[vi] Ajab Singh v. Shital Puri, AIR 1993 All. 138

[vii] Head v. Hartley, 42 Ch. D. 461

[viii] Ibid.

[ix] Clifford v. Neil, (1896) 12 App. Div. 17

[x] Thomas v. Sorrell, (1673) Vaughan 33

[xi] Parsons v. People, (1904) 32 Colo. 221

[xii] A. N. Agrawal v. Hukum Singh, 1997 (1) AWC 279

[xiii] Krishna v. Rayappa, 4 Mad. H.C.R. 98

[xiv] B. B. Katiyar, Law of Easements and Licences, 14th Edn. (New Delhi: Universal Law
Publishing Co. Pvt. Ltd., 2012) 885

[xv] Associated Hotels of India Ltd. v. R.N. Kapoor, AIR 1959 SC 1262

[xvi] Khan Saheb Muhammad Khan v. State of Orissa, ILR 1954 Cut. 671

[xvii] Section 62, Indian Easements Act

[xviii] Supra note 7

[xix] Goldsack v. Shore, (1950) 1 KB 708

[xx] Hillen and Pettigrew v. ICI (Alkali) Ltd, (1936) AC 65

[xxi] R v. Pratt, (1855) 119 ER 3198

[xxii] Supra note 10

[xxiii] R v. London CC, (1918) 1 KB 68

[xxiv] R (Beresford) v. Sunderland CC, (2004) 1 AC 889

[xxv] Muskett v. Hill (1839) 5 Bing (NC) 694

[xxvi] Supra note 7

[xxvii] Mithan Lal v. Ram Chandra, 1963 AWR (HC) 200

[xxviii] B. B. Katiyar, Law of Easements and Licences, 14th Edn. (New Delhi: Universal Law
Publishing Co. Pvt. Ltd., 2012) at 900

[xxix] Booker v. Palmer, (1942) 2 All ER 674

[xxx] Cubb v. Lane, (1952) 1 All ER 1199 (1202)

[xxxi] Street v. Mountford [1985] AC 809

[xxxii] Bhaurao A. Kasar v. Vinod R. Kasar, 2006 (2) Bom. CR 201

[xxxiii] Swapan Sinha v. Usha Rani Sahana, 2001 (3) Cal. LT (HC) 166

[xxxiv] Vishnu v. Rango Ganesh, 18 Bom. 385

[xxxv] Supra note 10

[xxxvi] Section 8, Indian Easements Act.

[xxxvii] Illustration (c) to Section 8 of Indian Easements Act

[xxxviii] Municipal Committee Ambala v. Lal Chand 1969 Cur. LJ 580 (Punj.)

[xxxix] Supra note 7

[xl] Aggrawal and Modi Enterprises v. NDMC, 123 (2005) DLT 154

[xli] Ludhichem Industries v. Ahmed R. V. Peer Mohammad, AIR 1981 SC 1998

[xlii] Jaganath v. Jayantilal, AIR 1980 Guj. 41

[xliii] Supra note 13

[xliv] Section 54, 69, 107 and 123 of Transfer of Property Act and Section 17 of the Indian
Registration Act

[xlv] Ramsden v. Dyson, 1 HL 129

[xlvi] Canadian Pacific Railway Co. v. King, AIR 1932 PC 108

[xlvii] Pratap Singh v. Dhun Singh, 13 ALJR 886

[xlviii] Kesava v. Puddu, 1 Mad. HCR 258

DIFFERENCE BETWEEN LEASE AND LICENSE

April 27, 2014 · by Vivek Kumar Verma · in Property Law. ·
The term ‘lease’ and ‘license’ are defined under Section 105 of the Transfer of Property Act and Section 52 of the
Indian Easements Act respectively.

Section 105 of Transfer of Property Act:

“Lease Defined. A lease of immovable property is a transfer of a right to enjoy such property, made for a certain
time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops,
service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the
transferee, who accepts the transfer on such terms.”
Section 52 of the Easements Act, 1882:
“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.”
CASE LIST
Associated Hotels of India Ltd. vs. R.N. Kapoor, [1960] 1 SCR 368 (Supreme Court,
1959)

o A lease is a transfer of an interest in land. The interest transferred is called the leasehold interest. The Lesser

parts with his right to enjoy the property during the term of the lease and the lessee gets that right to the

exclusion of the Lesser.

o In case of license, the legal possession 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.
Mrs. M.N. Clubwala v. Fida Hussain Saheb, [1964] 6 SCR 642 (Supreme Court,
1964)

o Whether an agreement creates between the parties the relationship of landlord and tenant or merely that of

licensor and licensee the decisive consideration is the intention of the parties. This intention has to be

ascertained on a consideration of all the relevant provisions in the agreement.

Chandu Lal vs. Municipal Corporation of Delhi, AIR 1978 Delhi 174 (Delhi High
Court, 1978)

o The intention of the parties is the real test for ascertaining the character of a document.

o If a document gives only a right to use the property in a particular way but its possession and control remains

with the owner thereof, it will be a license. In such a case the legal possession remains with the owner of the

property, the licensee being permitted to make use of the property for a particular purpose.

o Exclusive possession does not militate against the concept of a license, if the circumstances negative any

intention to create a tenancy.

o A license only makes an action lawful which without it would be unlawful, but does not transfer any interest

in favor of the licensee in respect of the property.

o In the case of a license there is something less than a right to enjoy the property in the licensee, while on the

other hand, in the case of a lease, there is a transfer of a right to enjoy the property.

o A bare licensee having no interest in the property cannot maintain an action for its possession.
Rajbir Kaur and Anr. vs. S. Chokesiri and Co. AIR 1988 SC 1845

o The question whether a transaction is a lease or licence “turns on the operative intention of the parties and

there is no single, simple litmus test to distinguish one from the other.”

o The grant only for the right to use the premises without being entitled to the exclusive possession thereof

operates merely as a licence.

o Exclusive possession itself is not decisive in favour of a lease and against a mere licence, for, even the grant

of exclusive possession might turn out to be only a licence and not a lease where the grantor himself has no

power to grant the lease.

Delta International Limited vs. Shyam Sundar Ganeriwalla & Another, AIR 1999
SC 2607

o To find out whether the document creates lease or license real test is to find out ‘the intention of the parties’;

keeping in mind that in cases where exclusive possession is given, the line between lease and licence is very

thin.
Municipal Corporation of Delhi vs. Pradip Oil Corporation and Anr., 100 (2002)
DLT 442 (Delhi High Court, 2002)

o A mere license does not create interest in the property to which it relates. Lease on the other hand, would

amount to transfer of property.

o License may be personal or contractual.

o A licensee without the grant creates a right in the licensor to enter into a land and enjoy it.

o By reason of a license, no estate or interest in the property is created.

o A license, inter alia, (a) is not assignable; (b) does not entitle the licensee to sue the stranger in his own name;

(c) it is revocable and (d) it is determined when the grantor makes subsequent assignment.
Madhu Behal and Anr. vs. Rishi Kumar and Anr., (2009) 3 PLR 628 (Punjab &
Haryana High Court, 2009)

o It is never a nomenclature in the document that governs the decision as to whether a document as a ‘lease’ or

a ‘licence’.

o The essential feature that distinguishes a lease from licence is always a transfer of interest in the demised

property in a transaction of lease while a licensee does not involve any such transfer of interest.

o The lease is heritable while license is personal to the grantee.

o The legal possession of the property is inevitably transferred to a tenant under lease while in a transaction of

license the legal possession continues with the licensee and the licensee has a mere right of user of the

premises in a particular fashion mentioned under the document.

Summary: Lease vs. License – Differences

Lease License

transfer of an interest mere permission to do something

without any transfer of interest
both transferable and heritable neither transferable nor heritable

Comes to an end only in accordance can be withdrawn at any time at the

with the terms and conditions pleasure of the grantor
stipulated in the contract

entitled to any improvement or Not so entitled

accession made to the property

unaffected by the transfer of the comes to an end immediately if the

property by sale in favour of third property is sold to a third party
party and continues

lessee has the right to protect the licensee cannot defend his possession
possession in his own right in his own name as he does not have
any propriety right in the property

does not come to an end either by comes to an end with the death of
death of the grantor or the grantee either grantor or the grantee

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Lease
Section 105 of the Transfer of Property Act talks about lease. It is transfer of a right to enjoy an immovable property
for a certain time, or in perpetuity against consideration of a price paid or promised (premium). Features: Lessee
acquires a transferable interest and can sub-lease. It is both…
In "Land & Property"
 Difference between Agreement of Sale and
Sale Deed

In "Difference Between"
Admissibility of Unregistered Document
In "Commercial Laws"
Tags: difference between lease and license, exclusive possession, intention, lease,License, Section 105 of Transfer of Property
Act, Section 52 of the Easements Act,Supreme Court

he burning question before us at present, appears to be the distinction between a

lease and a licence. This delicate question has been brought before the Supreme
Court more than once, which fact in itself indicates that we are still wanting a
clear-cut distinction between the two terms, lest we repeat our past errors.

The most recent decision which I have at hand is the one inSohan Lal
Naraindas v. Laxmidas Raghunath Gadit, reported in (1971) 1 SCC 276: (1971) 2
SCJ 583: (1972) Bom LR 144 (SC), where Their Lordships of the Supreme Court
held that the crucial test is the intention of the parties, i.e. whether they intended to
create a lease or a licence, and that the test of exclusive possession, though not
decisive is of significance. Such reasoning was expressed earlier in Ramamurthy
Subudhyv. Gopinath (AIR 1968 SC 919) and in M.N. Clubwala (Mrs) v.Fida
Hussain (AIR 1965 SC 610) and also in Associated Hotels of India
Limited v. R.N. Kapoor (AIR 1959 SC 1262), where Their Lordships held that the
document by itself could not be a deciding factor whether a particular transaction
was a lease or a licence.

THE DISTINCTION

Section 105 of the Transfer of Property Act, reads:

"A lease of immovable property is a transfer of a right to enjoy such property,

made for a certain time, express or implied, or in perpetuity, in consideration of a
price paid or promised or of money, a share of crops, service or any other thing of
value to be rendered periodically, or on specified occasions to the transferor by the
transferee, who accepts the transfer on such terms.

The transferor is called the lessor, the transfree is called the lessee, the price is
called the premium, and the money, share, service or any other thing to be so
rendered is called the rent."

Section 52 of the Easements Act reads:

"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
licence."

If we focus our attention only upon the question of rights in the above two
definitions, we find that in both cases there is a transfer of a right. It may be noted
that in a lease the Right consists in enjoying such property transferred, and so also
in a licence the Right consists in doing something in or upon the immovable
property of the Licensor, though without the creation of an interest in the property.

Although it is not clearly stated that a lease creates an interest in the property,
inasmuch as the opposite is stated in case of a licence, yet by judicial dicta we have
come to believe that a lease creates an interest in the property merely to highlight a
contradistinction between a lease and a licence. We have, therefore, imputed such
creation of a right or interest in the property, not due to the existence of a positive
statement to that effect in the definition of a lease, but merely because of the
statement of its non-creation in case of a licence.

This imputation of the creation of a right in the property in case of lease, is in

reality a high overtone because all that follows from the definition is that the
transfer is solely of 'a right to enjoy' which is equivalent to the 'right to do so, in or
upon the immovable property,' as stated in the definition of a licence.

Considering that the Transfer of Property Act and the Indian Easements Act, were
both passed in the same year, 1882, obviously the concept of a Right would not
have been different. We cannot conceive that a lease gives a right to enjoy the
property in any manner the transferee feels best, as against a licensee who could
have his rights directed in a particular manner as per the terms of the grant. In fact,
we are quite settled on the principle that if a tenant does any
alteration/modification/improvement, etc., he does so at his own risk, since he does
not have any property rights over the subject-matter of the demise, and he would
not be allowed to contend that he had rights in the property due to which he did the
alteration/modification. As long as he keeps on paying the rent, the dichotomy of
owner and tenant shall subsist and consequently his interest in the property is in no
way better or, is as precarious as that of the licensee.

As against this, we find that Section 60(b) of the Easements Act clearly states that
a licence becomes irrevocable when "the licensee, acting upon the licence has
executed a work of permanent character and incurred expenses in the execution",
which goes to show that a licensee can create rights in the property, or, for every
practical effect, he is on a safer position than a tenant, whose tenancy could always
be terminated with an appropriate notice as provided in Section 106 of the Transfer
of Property Act.

No doubt, we can still argue that the security in tenure of the licensee arises not by
virtue of the creation of "an interest in the property" but in the creation of a right
over the property, i.e. his rights are purely above the surface of the land, as against
the rights of the owner which lie from the surface to below.

But if we adopt this argument, we reach a paradoxical situation. We conceive that

the interests of the licensee restricts only to the structure above the surface. Then,
does the structure have no foundation? Aren't these foundations embedded in the
soil? Is this not immovable property? Does not this structure with its foundation
constitutes an integral whole? Can we then conceive immovable property as layers
of movable property put together? The obvious answer is "NO". The conclusion is
that a licensee can acquire interest in the property if he, under the licence, puts up a
work of permanent character and incurs expenditure.

The statement, therefore, that a lease alone creates interest in the land and that the
licence does not so create, is definitely a high overtone due to the laying of too
great an emphasis on the words "does not amount to an easement or an interest in
the property" as found in the definition of a licence, as against its absence in the
definition of a lease.

A DEPARTURE

It is elementary to state that a definition, in order to conform to the rules of logic,

must be "per genus et diferentium". If we turn to the definition of the licence as per
Section 52 of the Easements Act it surely has a "genus" and a "diferentium";
thegenus is a wider category to which it belongs, viz. the right which is acquired
under the grant and the diferentium is the right which "does not amount to an
easement or an interest in the property". Such diferentium, no doubt, has been used
to distinguish a licence from an easement, considering that an easement, as defined
in Section 4 of the Easements Act clearly indicates that it is a right which creates
an interest over the property of another. The qualification that a licence does not
create an interest in the property therefore, is used in contradistinction or as
a diferentium to the definition of an Easement. When this diferentium or
contradistinction is dislodged from the context of the Easements Act and is used to
contradistinguish or differentiate from a lease, it obviously loses all its sense and
causes all the confusion.

With due respect to all the established authority therefore, I beg to submit that the
theory which tries to create a dichotomy between a lease and a licence on the basis
that the former creates an interest in the property and that the latter does not, is
surely untenable. The respective definition of lease and licence have their proper
meanings within the context of their respective acts, viz. the Transfer of Property
Act and Easements Act. But when we try to establish a universality to these
definitions and set one against the other by extricating them from their respective
contexts, we find that we reach paradoxical situations and get into a wild-goose
chase.

If this be not so, let us test the orthodox theory once again. When highlighting the
distinction between Lease and Licence, it is noted in Mulla's Commentaries on the
Transfer of Property Act (5th Edn., 1966 at p. 659) that a licence "does not entitle
the Licensee to sue a stranger in his own name" apparently under the orthodox
notion that a licensee has no interest in the property. If this statement be true, does
it mean that a licensee cannot evict a trespasser? Can he not maintain a suit based
on his possessory right? Surely he can. How can we then accept the statement as
given in Mulla?

One may still argue that to file a suit based on the possessory right, is a right which
a possessor/licensee has over the property and not in the property. My comment to
this is that such reasoning is a sheer absurdity. I concede that there can be
possession of "incorporeal rights", but considering that in licences, we are dealing
only with tangible property it is obvious that our possessory right is not in the
abstract but over a tangible property. Such possession therefore crystallises upon
the "corpus"/subject-matter, i.e. the property licensed and hence the argument that
one right emanates from over the property and not from in the property, is a sheer
sophistry.

AN ASSESSMENT

In the decision in Sohan Lal Naraindas v. Laxmidas Raghunath Gadit reported in

(1971) 1 SCC 276: (1971) 2 SCJ 583: 1972 Bom LR 144 (SC), Their Lordships of
the Supreme Court write:
"Intention of the parties to an instrument must be gathered from the terms of the
agreement examined in the light of the surrounding circumstances. The description
given by the parties may be evidence of their intentions but is not decisive. Mere
use of the words appropriate to the creation of a lease will not preclude the
agreement operating as a licence. A recital that the agreement does not create a
tenancy is also not decisive. The crucial test in each case is whether the instrument
is intended to create or not to create an interest in the property the subject-matter of
the agreement. If it is in fact intended to create an interest in the property, it is a
lease. If it does not it is a licence. In determining whether an agreement creates a
lease or a licence the test of exclusive possession though not decisive is of
significance."

Let us try to study the above passage by splitting up into three parts as follows:

First Part.—"Intention of the parties to an instrument must be gathered from the

terms of the agreement examined in light of surrounding circumstances. The
description given by the parties may be evidence of their intention but is not
decisive. Mere use of the words appropriate to the creation of the lease will not
preclude the agreement operating as a licence. A recital that the agreement does not
create a tenancy is also not decisive."

It follows from the above that intention overrides the written document; that even
though the document is styled as a lease, yet it may be a licence; that even an
averment that the document is not a lease, is inadequate. In short, the Supreme
Court feels that we should allow the parties to retract from their written
commitment by alleging some intentions, which would suit best their conveniences
at the time of litigation.

And with such rationale as adopted by the Supreme Court, the reader is preplexed
as to what is the fate of Section 92 of the Evidence Act which excludes evidence of
any oral agreement or statement for the purpose of contradicting, varying, adding
or subtracting from the written terms of the contract. Does not the rationale of the
Supreme Court violate the provisions of Section 92 of the Evidence Act? The
obvious answer is 'yes'.

Section 35 of the Stamp Act, clearly states that instruments not duly stamped are
inadmissible in evidence. No doubt, this provision is more in the nature of
hindrance to the plaintiff than to the defendant, because it is the plaintiff who will
place reliance on it, whereas the defendant will be interested only in destroying it.
But it is possible to conceive (as it often happens) that the Plaintiff is interested in
trying to class the document as a lease, notwithstanding that it is written as a
licence, and institute eviction proceedings in the Rent Tribunal so as to pay a lower
Court Fee, as the Rent Tribunals have a fixed Court Fee which is lower than the
regular Court Fee prescribed for recovering possession of immovable properties.
Thus, if the above ratio is to be of a universal application, i.e. both to the plaintiff
and the defendant, we reach the conclusion that its effect is only to leave the doors
wide open for the plaintiff to violate this Section 35 of the Stamp Act.

Similarly, Section 17(1) of the Registration Act makes leases from year to year or
from periods exceeding one year, compulsorily registerable; and Section 49(c) of
the Registration Act, categorically states that a document not registered as per the
requirements of Section 17, shall not be received in evidence.

How, then will a party be allowed to class a document differently when he has
clearly violated the provisions of the Registration Act? How, will then an
unregistered instrument creating a lease (since a licence is not required to be
registered) be accepted in evidence? If the instrument creating a licence is
registered, it is all the worse. How will the party be allowed to retract from his
admission made before the registering authority?

From the above discussion, I beg to submit that the rationale adopted by Their
Lordships of the Supreme Court is far from satisfactory. And with this, I shall pass
on to examine the second part of the passage reproduced above.

Second Part.—"The crucial test in each case is whether the instrument is intended
to create or not to create an interest in the property the subject-matter of the
agreement. If it is in fact intended to create an interest in the property, it is a lease.
If it does not, it is a licence."

I think that I need not comment at length on this passage as I have already dealt
with it above, under the sub-heading "A DEPARTURE".

To put it shortly, I beg to stress that the attempt in trying to establish a dichotomy
on the basis of the interest created in the property is a monument of misdirected
energy. As I noted above, the fact that the definition of the licence states that it
does not create an interest in the property, has to be understood in its proper
context, viz. when put in contrast to an easement and not when it is put in contrast
with a lease. The logical definition of lease and licence lose all their meaning when
withdrawn from their contexts of their respective Acts.

I, therefore, beg to submit that this passage loses all its force.

Third Part.—"In determining whether an agreement creates a lease or a licence

the test of exclusive possession though not decisive is of significance."

Let us conceive that I give my rooms on a licence to someone. Does it mean that I
can invade into his privacy? Does it mean that I can treat these rooms as a waiting
room in Railway Station? What then is the good in saying that I still retain
possession over these rooms and that my licensee has no exclusive possession?
Will the mere fact of my keeping some items of furniture (say a bed-cum-sofa, as it
is usually done in Bombay) give me joint possession over the room? I may at the
most claim possession over these items of furniture, but surely it would be absurd
to say that my licensee did not have exclusive possession.

If one is not prepared to accept this reasoning, then I may ask:

What about the electric fittings installed by a landlord in the premises leased by
him to his tenant?

Or think of a lease agreement where the landlord stipulates a clause to enter and
inspect the premises at any time. Does it abridge the exclusive possession of the
tenant? No doubt, the owner, whether lessor or licensor always retains constructive
possession. But what we are concerned, is actual physical possession while
establishing exclusiveness. And we find that exclusive possession exists both in
cases of leases as well as in case of licences.

My submission, therefore, is, that exclusive possession is no test at all.

THE CRUCIAL TEST

With due respect to all the authorities, I beg to submit that if we are to follow the
law strictly, we would not be allowed to look beyond the document. We shall have
to take the document, either as a lease or a licence, on its face value and that would
be in consonance with Section 92 of the Evidence Act and Section 35 of the Stamp
Act and Section 49(c) of the Registration Act. Besides, it would be in consonance
with the principle of 'Estoppel by Deed' as envisaged in Section 115 of the
Evidence Act, which principle rests upon a fundamental rule that "No man shall be
allowed to dispute his own solemn Deed", as rightly expressed by Lord Mansfield.

How would the Court feel if a person who executes a sale deed, on finding that the
price of the property sold, has shot up, all of a sudden turns the corner and affirms
that he really intended to execute a mortgage by conditional sale?

In a very recent decision from Bombay, viz. Belapur Company

Limited v. Maharashtra State Farming Corporation, reported in 1972 Bom LR
246, His Lordship Justice Vimadalal, has considered very extensively the ambit of
proviso (6) to Section 92 of the Evidence Act.

Justice Vimadalal, after analysing a catena of authorities and reported decisions,

mostly of the Supreme Court, expounded a very sound principle of law, that the
fundamental rule of construction of a document is to ascertain the intention of the
parties to it from the words used in the document which is considered to be the
written declaration of their minds. If the words are clear of the intentions expressed
and the language applies to existing facts, extrinsic evidence is inadmissible for
construing the deed or for ascertaining the real intention. Extrinsic evidence is
admissible only to explain doubtful words. The subsequent conduct of the parties is
not relevant or admissible for the purpose of construing a written document and
consequently whatever transpired subsequent to the written contract is not
admissible for ascertaining the terms.

In the above cited decision, reliance has also been placed on the decision in Kamla
Devi v. Tkakatmal reported in AIR 1964 SC 859. The relevant passage at p. 863
reads:

". . . . when a court is asked to interpret a document, it looks at its language. If the
language is clear and unambiguous and applies accurately to existing facts, it shall
accept the ordinary meaning, for the duty of the Court is not to delve deep into the
intricacies of the human mind to ascertain one's undisclosed intention, but only to
take the meaning of the words used by him, that is to say, his expressed intentions.
Sometimes, when it is said that a court should look into all the circumstances to
find the author's intention, it is only for the purpose of finding out whether the
words apply accurately to existing facts. But if the words are clear in the context of
the surrounding circumstances, the Court cannot rely on them to attribute to the
author an intention contrary to the plain meaning of the words used in the
document."

After considering various other decisions, Justice Vimadalal relies on the standard
work of Odgers on the Construction of Deeds and Statutes and the relevant passage
cited by His Lordship is found at p. 43 of the 5th Edn. (1967), which reads thus:

"Rule V.—When is extrinsic evidence admissible to translate the language.—It is

to be noticed that extrinsic evidence here does not mean evidence of the writer's
intention but evidence to enable the Court to interpret the language used. It is only
admissible as so often with the subject of construction, when there is some doubt
as to what the words mean or how they are to be applied to the circumstances of
the writer."

To this I would like to add the passage found at page 44 (op. cit.), which clearly
repeats the saying of our Supreme Court in the decision reported in AIR 1964 SC
859 and referred to above. The said passage in Odgers reads:

"However, evidence is not admissible to contradict the plain and unambiguous

terms of a document by attempting to show that the intentions of the parties were
to give a meaning of the provisions contrary to the words which the document
plainly contains."

Justice Vimadalal also places reliance on a passage from Chitty on Contracts,

which passage is found at paragraph 661 in the 23rd Edn. and reads as follows:
"Extrinsic evidence of this sort does not usurp the authority of the written
instrument. It is the instrument which operates. The extrinsic evidence does no
more than assist its operation, by assigning a definite meaning to terms capable of
such explanation or by pointing or connecting them with the proper subject-
matter."

Without boring my reader with any further questions, I would like to ask a simple
question. Do we expect the Court to impose a contract between the parties? And
that too in violation of the rules of evidence, the stamp and the registration
requirements? The inevitable answer is "NO".

If we turn to Field's commentaries on the Evidence Act (10th Edn., 1972, Vol. V at
p. 4972), we find the following:

"When both parties are equally conversant with the true state of facts, it is absurd
to refer to the doctrine of Estoppel."

How does this synchronise with the statement of Their Lordships of our Supreme
Court which says: "A recital that the agreement does not create a Tenancy is also
not decisive"?

I was myself in the habit of inserting such clauses whenever I had to draft a lease
agreement for my clients. But as soon as I saw this statement of the Supreme
Court, in the decision cited above, I had no other alternative but to add another
clause which went to say that the Licensee was signing the agreement only after
obtaining independent legal advice from his own advocate, who signed with him
below in token of his perfect understanding of each and every clause of the licence
agreement. And on one occasion when I saw some doubts on the face of my client,
I advised him to secure an Affidavit from his prospective licensee to annexe it to
the licence agreement and have it all registered, lest his licensee got some super
ideas at a future date. What better can we advocates do in putting down the facts as
told to us by our clients?

The rulings of Supreme Court are undoubtedly opening the doors to the
unscrupulous. It would be preferable if Their Lordships were to leave the parties to
stand by their commitments and accept the consequences of their own deeds. In
fact, if such ruling were to be pronounced, all the parties would have been more
cautious when signing an agreement whether of lease or a licence. If our legislators
felt that there was evasion of their strict laws regarding tenancies, it is open for
them to insert a simple clause to the effect that all the sections of the various Rent
Control Acts, extended also to licence agreements.

It is said that the law is the protector of interests. But with the present rationale
adopted by the Supreme Court, it is far from it. The licensor does not know if his
licensee is going to give a "volte de face" and brand himself as a tenant and invoke
protection under the Rent Control Acts. So also a lessee is unsafe because he does
not know if his lessor will call himself a licensor and circumvent all the Rent
Control Acts and put him on the streets if he refuses to succumb to his extortions
of an abrupt increase in rent or for like reasons. We are definitely in the midst of a
whirlpool.

If the distinction between lease and licence was made clear by our Supreme Court,
how do we find that this issue is appearing frequently before our High Courts? One
of the recent reported cases is the one of Eswari Amma v. M.K. Korah, reported in
(1972) 1 MLJ 218. The very fact that the same issue has come up before the
Supreme Court more than once is a clear indication that something is wanting.

I submit that if our Lordships were to state that the parties are to stand by their
written commitments, it would only enhance the cause of justice; the parties would
know exactly where they stand in relation to each other; they would be more
careful while signing agreements and would be in position to take their respective
stands, instead of being left at the whims of the other party or the startling
interpretations which the Court would attribute to their writings; they would know
that the Courts would not upset the certainty of their agreements.

If the parties feel that the agreement which they executed did not express their real
intentions, they would have the remedy of filing a suit for rectification of their
agreements by invoking Section 26 of the Specific Relief Act, no sooner the
agreements are executed. But it would be highly inequitable and a sheer injustice if
they are allowed to carry on with their agreements over years and all of a sudden
try to get smart. The line of reasoning as adopted by our Supreme Court makes the
contracting parties feel as fence-sitters.