T.K. Jacob vs Gracykutty and Others

Varghese Kalliath, J.—This is an appeal by the first defendant. Suit was one for mandatory injunction and for damages. The court below has given elaborately with all details the facts of the case and the rival contentions of the parties. Nevertheless, for the purpose of disposing this appeal, I shall give a small resume of the facts.

The plaint property, is an extent of 90 cents of land and the sheds thereon, except the temporary sheds belonged to Kanattu-puthenveettil George alias Vakkachan, who died on 23-10-1971. Plaintiffs are the legal representatives of Vakkachan. There is no dispute in this case that plaintiffs have got title to the suit property. 1st defendant T.K. Jacob executed a document in favour of Vakkachan, which according to the plaintiffs, is a document of licence and according to the first defendant, is a document, evidencing a commercial lease. Being a commercial lease for 90 cents of property wherein the first defendant has constructed buildings before the crucial date, viz. 20-5-1967, it was contended that though the first defendant cannot claim fixity of tenure, plaintiffs are not entitled to recover the property and so they are not entitled to any relief in the suit.

From the facts I have narrated above, it is clear that the chief question that has to be considered in the case is whether the document evidences a lease or licence. In cases when the court is called upon to decide or to construe a document to determine the legal character and incidence of a disputed document as to whether it is a lease or licence, courts are naturally resort to rely on and depend upon the prcedents on the subject. There are several decisions of the Supreme Court and other High Courts including this Court dealing with the salient features which have to be looked into for the purpose of deciding the question whether the document evidences a lease or licence. The court below accepted the finding of the land Tribunal which, after considering certain precedents on the point raised construed the document as one evidencing a licence. This finding is seriously challenged by the appellant. Certainly I am also bound to consider the precedents of the Supreme Court and of this Court, keeping in mind the chief features to be looked into for a correct decision on the question whether the document evidences a lease or licence.

The recent decision of the Supreme Court on the subject is reported in Rajbir Kaur and Another Vs. S. Chokesiri and Co., ). Venkatachaliah, J. speaking for the Bench consisting of Chief Justice and himself has articulately and lucidly considered the question referring to the fundamental principles, in the decisions of the Supreme Court. The Supreme Court said AIR 1988 SC1850 --

"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. In the last analysis the question whether a transaction is a lease or a licence "turns on the operative intention of the parties" and that there is no single., simple litmus test to distinguish one from the other."

The property in question is an extent of 90 cents. It is within the Municipal Corporation limits. The document shows that in the property, there were trees and the executant reserved his rights to take the yield of the trees. The document is Ext. Bl. It is dt. 31-3-1967. As per the document, defendant obtained certain rights stated in the document and for that, he has agreed to pay a remuneration (rent) of Rs. 350/ - per mensum for the first five years and thereafter, for the next five years Rs. 375/-. Thus the period fixed in Ext. Bl is ten years. Of course, there is a clause that after ten years, if the first defendant wants, the period can be extended on a rent to be fixed on mutual agreement of the parties. In the document, it is stated that the property is taken for a commercial purpose, to wit, stacking timber. It is also provided in the document that necessary sheds can be constructed by the defendant for facilitating the commercial purpose of the defendant. , There it is stated that he is allowed to do it as a licensee and further it is provided that after the expiry of the period, the structures Court by the defendant have to be removed by him and vacant possession of the property has to be given to the owner of the property --Vakkachan.

As I said earlier, this document was construed to be a licence by the Tribunal when the matter was referred to by the Court below. That finding was accepted by the court below and court below decreed the suit. The defendant appeals.

The latest decision of this Court referred to by counsel for appellant is 1989 (2) KLT 425, corresponding to ILR 1990 Ker 279 ( Peramanand Gulabchand and Co. v. MooligiVisanji). This Division Bench decision also has considered the important Supreme Court decision and certain other decisions touching the question how leases and licences have to be distinguished.

In Qudrat Ullah Vs. Municipal Board, Bareilly, , Krishna lyer, J. had occasion to consider the question in detail. This decision has been referred to in - Rajbir Kaur and Another Vs. S. Chokesiri and Co., . Krishna lyer, J. said that . "there is no simple litmus test to distinguish a lease as defined in Section 105 of the Transfer of Property Act from a licence as defined in Section 52 of the Easements Act, but the character of the transactions turns on the operative intent of the parties. To put it pithily, if an interest in immovable property, entitling the transferors to enjoyment, is created, it is a lease; if permission to use land without right to exclusive possession is alone granted, a licence is the legal right."

Shortly stated, the function of the court is to find out the intent of the parties. It is a very difficult task to know the intent of the parties on the basis of the recitals of the document. But, the Court can rely safely only on the language of the document, the language which has been used by the parties to manifest the intention of the parties. If the Court goes for extraneous evidence, I would say, that may lead to more difficulties and confusion. But, there are certain principles to be borne in mind. The first principle is, the mere saying that the document is a lease or a licence is not the end of the matter. The Court, on the authority of precedents, can very well say that the document, though, is styled as a licence the intention of the parties in executing the document was not to create a transact ion of licence. That power is inhered in the process of construing a document questioned in the suit. But, the investigation of the Court must be to find out the operative intent of the parties and as often repeated by the Supreme Court that there is no litmus test to find out the intention of the parties. But, the experienced mind of the Court can apply the, principles laid down by the decisions of both English and Indian Courts and can correctly decoct the operative intent of the parties by reading the document as a whole and applying the legal norms of construction of documents handed down by the precedents of Supreme Court and the authoritative pronouncements of Courts in India and England.

In regard to the question whether a document creates a lease, at one time, it was considered that exclusive possession is a sure test but courts now did not accept that exclusive possession alone is sufficient, to hold that the document is a lease. In certain cases even if there is exclusive possession, it can be a licence. This aspect of the matter has been stated in Halsbury''s Laws of England, Volume 23, paragraphs 1022 and 1023, which has been referred to in Qudrat Ullah Vs. Municipal Board, Bareilly, . It is stated thus (at page 398 of AIR 1974 SC) :--

"The fact that the agreement grants a right of exclusive possession is not in itself conclusive evidence of the existence of a tenancy, but it is a consideration of the first importance,

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

Krishna lyer, J. has stated a grant which confers the right to exclusive possession may operate as a licence in the following circumstances which negative the intention to create a lease. His Lordship quotes paragraph 1025 of Halsbury''s Laws of England:

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

I had occasion to consider this question in two reported decisions -- 1985 KLT22 and 1988 (1) KLT 335. In 1985 KLT 22, I said thus :--

"Precedent is the life-blood of legal system, so it is said, and we take this to convey the common sense idea that similar cases are decided similarly. The final type of reason offered in favour of a rigid doctrine of stare decisis is that it offers to litigants some measure of certainty about the likely outcome of a case and that certainty in the law is what is most fair and just. I should also remember that aphorism that in the decision process the Courts are dominantly coerced not by the essays of their predecessors but by a surer thing -- by an intuition of fitness of solution to problem. General propositions do not decide concrete cases and ''the life of the law has not been logic; it has been experience''. Certainly I am bound to follow the precedents of the Supreme Court and the decisions of this Court on the subject. I should not speculate upon improvements in those precedents. A just solution for the particular case is the crucial factor in the decision process. I try to remember that equitable rule of decision that considerations of justice are directly relevant to the justification of any decision."

I may also refer to the English decision of Lord Denning in Errington v. Errington (1952) 1 All ER 149 : (1952) 1 KB 290, Denning, L.J. pointed out:--

"The difference between a tenancy and a licence is, therefore, that in a tenancy an interest passes in the land, wherein in a licence it does not. In distinguishing between them, a crucial test has sometimes been supposed to be whether the occupier has exclusive possession or not. If he was let into exclusive possession he was said to be a tenant, albeit only a tenant at will; see Doed Tomes v. Chamberlaine (1839) 5 M&W 14; Lynes v. Snaith (1899) 1 QB 486; where if he had not exclusive possession he was only a licensee.

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 a tenant, nevertheless he will not be held to be so if the circumstances negative any intention to create a tenancy. Words alone may not suffice.

Paties cannot turn a tenancy into a licence merely by calling it one. ''But if the circumstances and the conduct of the parties show that all that was intended was that the occupier should be granted a personal privilege with no interest in the land, he will be held only to be a licensee."

From the above quote, it is possible to say that there are circumstances which would negative the intention to create a tenancy when the occupier has got exclusive possession of the property. Relying on the statutory provisions contained in Section 105 of the T.F. Act and Section 52 of the Easements Act, the crucial aspect to be considered to ascertain the operative intent of the parties to create a lease is where there is transfer of possession for the purpose of enjoyment. In regard to this, I may refer to what Vaughan, C. J. has said in Thomas v. Sorrell 124 ER 1098

"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 unlawful."

With these preliminarities, I shall examine the document in question. It is dated 31-3-1967. It has to be remembered that the era of land reforms started in the State as early as in 1961 and it came to a definite shape in the year 1964. One of the provisions contained in the Land Reforms Act is intended to annihilate the feudal system of landlord and tenant relationship. With that intention in mind, the Legislature has enacted Section 74 of the Kerala Land Reforms Act, for short, the Act. Section 74 reads thus :--

"74. Prohibition of future tenancies.--(1) After the commencement of this Act, no tenancy shall be created in respect of any land.

(2) Any tenancy created in contravention of the provisions of sub-section(I) shall be invalid."

Dealing with that section, Subra-monian Poti, Ag. C.J. an activist Judge, progressive in his thoughts and outlook said thus:--

"According to the appellants Section 74 of the Kerala Land Reforms Act prohibits tenancy only to the extent of not conferring benefits of the Act in the tenant but otherwise the tenancy will operate. I cannot agree. The provision in Section 74 is a provision reflecting a wholesome policy, the policy of terminating feudal relationship in the State in regard to lands falling within the scope of the Kerala Land Reforms Act -- vide 1981 KLT 95 (Kannan v. Kunhabdulla)."

I am not very sure whether a commercial tenancy cannot be created after the commencement of the Act. I do not want to venture to give an answer to that question in this case. Section 74 is in Chapter II of the Act. Section 3(l)(iii) of the Act provides for a commercial lease and commercial leases are exempted leases insofar as the provisions of Chapter II have no application, it is made clear in Section 3(1) itself and when Section 3(1) says "nothing in this Chapter shall apply to ..... leases of land or of buildings or of both specifically granted for industrial or commercial purposes ..... and the case of the defendant is that the transaction in dispute is a lease coming within Section 3(1)(iii) of the Act, it is possible to say that such a lease is not within the ken of Chapter II because it is specifically stated so, and so, all the provisions in Chapter II are not applicable to such a lease. In that event, perhaps, the provision contained in Section 74 also may be eliminated. I am not giving any opinion on this question. I leave it there. But, the fact remains that the intention of the Legislature was well-known that as far as possible, further leaves have to be discouraged. It is also clear that one of the prime devoir of the Act itself is to give fixity of tenure to the tenant and deprive the landlord practically all vestiges of ownership in the property. In this context, the date of Ext. Bl, viz. 31-3-1967, assumes great importance. The investigation to find out the operative intent of the parties has to be silhouetted in this setting.

Coming to the question of exclusive possession, counsel for appellant in his able arguments, submitted that exclusive possession is a concept which has to be considered in the backdrop of the purpose of the transaction and exclusive possession must be for the purpose for which the grant is made. This is a debatable point. At any rate, in this case, it is difficult to hold that the defendant get exclusive possession over the land. I say so, because the owner has been given the right to take the yield of the trees and in regard to the trees, no right, whatsoever, is granted to the defendant. There is no clear evidence in this case as to how many trees are there in the land in question. Nevertheless, when the trees are there, they have to be properly cared for, managing has to be done and the yield has to be taken. Perhaps, toughing and furrowing of the entire land may be required for the proper up,-keep of the trees. For that purposes, defendant''s permission is not required as per the document. If there is a lease, certainly the permission from the lessee is required for the less or to take the yield. I may postulate an eventuality of holding that the document in question is a lease. If I hold so, by the operation of the provisions of the Act, perhaps, the defendant may get a right on the trees also. Certainly, if it is not a commercial lease, even if there is a reservation to take the yield of certain trees, the tenant will get absolute right and that has been held so by this Court in several decisions. It is difficult to contemplate such an operative intent for the parties.

It is in evidence that two suits were filed by the plaintiffs against the first defendant. In 1976, O.S. No. 307 of 1976 was filed for arrears of licence fee. In that suit, it is said that a contention was raised by the defendant u/s 106 of the Act that he is a commercial tenant. But, that question was not decided by the Court. In the second suit, O.S. 682 of 1983, which was a suit for injunction restraining the first defendant from closing a gate and putting up additional structures in the plaint schedule property, the same contention was raised by the defendant. The matter was referred to the Tribunal and I am told that the Tribunal recorded a finding that the defendant is not a tenant. The Court decreed the suit. Counsel for appellant submitted that it is not certain whether that decree has become final. He also submitted that in a suit for injunction, there was no necessity for referring the question of tenancy to the Tribunal. But, the fact remains that a decree was given against the defendant, which is an indication that the defendant cannot claim exclusive possession of the property, because what was sought to be prevented was a construction of a gate. In my judgment, on a proper construction of the document, it is not at all difficult to hold that the relationship created by the document between the parties is that of a licensor and licensee.. I fully confirm the finding of the Tribunal which has been incorporated as the finding of the court below.

Though I hold that the defendant is a licensee, I feel that I am bound to answer the question as to whether the defendant is entitled to the reliefs u/s 106 of the Act. Section 106 reads thus :--

"106. Special provisions relating to leases for commercial or industrial purposes.--(1) Notwithstanding anything contained in this Act, or in any other law, or in any contract, or in any order or decree of court, where on any land leased for commercial or industrial purpose, the lessee has constructed buildings for such commercial or industrial purposes before the 20th May, 1967, he shall not be liable to be evicted from such land, but shall be liable to pay rent under the contract of tenancy, and such rent shall be liable to be varied every twelve years.

Explanation ;-- For the purposes of this section,--

(a) ''lessee'' includes a legal representative or an assignee of the lessee; and

(b) "building" means a permanent or a temporary building and includes a shed.

(1 A) The lessor or the lessee may apply to such authority as may be prescribed for varying the rent referred to in Sub-section (1), and thereupon such authority may, after taking into consideration such matters as may be prescribed and after giving the lessor and the lessee an opportunity of being heard, pass such orders on the application as it deems fit.

(2) If, between the 18th December, 1957 and the date of commencement of this Act, any decree or order of court has been executed and any person dispossessed by delivery, such person shall, on application before the Land Tribunal, be entitled to restoration of possession:

Provided that, before restoration, such person shall be liable to pay ---

(i) the compensation paid by the landlord for any improvements in the land and subsisting at the time of restoration;

(ii) the compensation for any improvements effected subsequent to the delivery;

Provided further that fie shall not be entitled to restoration if the property has passed on to the possession of a bona fide transferse for value.

(3) Nothing contained in Sub-section (1), Sub-section (1A) and Sub-section (2) shall appty'' to lands owned or held by the Government of Kerala or a local authority.."

In Abdul Rahiman v. lype 1965 KLT 247 a Division Bench of this court had occasion to consider the scope and width of Section 106 of the Act read with Section 3(1) (iii) of the Act. This Court said thus:--

"Section 3(l)(iii) excludes three kinds of leases, namely, leases of land, leases of buildings and leases of both, from fixity of tenure. After these categories of leases are thus excluded under that provision, one category from them, namely, leases relating to lands whereon lessees have constructed buildings prior to the relevant date, alone is again brought within the provision relating to fixity of tenure on certain conditions by Section 106. The other two types of leases, namely, leases of buildings and leases of buildings and land, are not entitled to Fixity of tenure".

Admittedly, when the document was executed, it was not in respect of land alone; it was land with building. So even if the document is construed as a lease it is a lease of building and land and so Section 106 of the Act is not applicable. I hold so.

Counsel submitted that though a con -tention has been taken u/s 60 B of the Easements Act, there is no material point in pressing that contention, since there are clear statements in Ext. Bl that the defendant inbound to demolish the buildings and give the property without the structures and in sueh cases, this court in 1988 (1) KLT 335 has held that Section 60B of the Easements Act has no application.

Another point has to be considered in this case. It concerns the question of mesne profits decreed by the court below. In the plaint on the basis that the relationship has been terminated and the plaintiffs are entitled to mesne profits from the defendant, the plaintiffs claimed mesne profits at the rate of Rs. 1,500/-. The Court below considered this aspect of the matter in paragraph 14 of its judgment. There is no dispute that after the termination of the licence, defendant is liable to pay mesne profits. What must be the quantum of mesne profits is a matter to be decided by the court on the basis of evidence. The plaintiffs have adduced some evidence in this regard. Plaintiffs have examined P.W. 2. He is also a person, who has got certain area of land near to the disputed property for the same purpose, namely, for stacking timber. According to him, he got the property under Ext. A 14 agreement of lease dt. 19-7-1982. P. W. 2 is the person, who obtained the property. He has said that though the document shows that the amount to be paid to the owner is Rs. 900/- per month, actually from 1-2-1982 onwards, he is paying an amount of Rs. 1,100/- per month. This fact is not borne out by any record. But it has to be noted that Ext. A 14 takes in only 56 cents of land.

Counsel for appellant submitted that the maximum rent fixed is only Rs. 375/ - and now the court has fixed the mesne profits at the rate of Rs. 1,500/-. It is extraordinarily excessive. I have adverted to the evidence on this aspect of the matter. I feel that it would be only fair and proper in the circumstances of the case to fix the amount at Rs. 1,100/-instead of Rs. 1,500/-. The decree to that extent has to be modified. The past mesne profits have to be quantified at the rate of Rs. 1,100/- from March, 1983 till date of suit and for that amount, plaintiffs are entitled to 6% interest per annum. Further, I make it clear that at the same rate, plaintiffs are entitled to future mesne profits till date of decree and after decree for three years or till the recovery whichever is earlier.

With the above modification, the judgment and decree of the court below are confirmed. Appeal is disposed of as above. No order as to costs.