Delta International Ltd. v Shyam Sunder Ganeriwalla (1999)

Associated Hotels (case 15) gave the four propositions; Delta International is the modern restatement that applies them the other way and adds the qualifications a good answer needs:

- Exclusive possession is "one of the most relevant factors", but "when the terms of the document are clear leaving no doubt that the parties never intended to execute a lease deed, in that set of circumstances, exclusive possession would lose its importance." - The word demise in a document does not by itself make it a lease; it is construed in context. - A licence does not cease to be a licence merely because notice is required before the occupier must vacate. - Where the grantor had no power to grant a lease, that is a reason for reading exclusive possession as consistent with a licence.

It also records — usefully, and from the Supreme Court itself — that the four propositions come from "a minority judgment rendered by Subba Rao, J."

The premises were No. 4-D, Council House Street, Calcutta. The owner had let to Mallika Investment Company, which had let monthly to Dewar's Garage (India) Pvt. Ltd., which ran a petrol service station there and had put up structures. Dewar was later amalgamated into Delta International Ltd., the appellant.

By an agreement of 18 July 1970 Dewar executed a leave and licence in favour of ESSO Standard Eastern Inc., and ESSO in turn permitted Shyam Sunder Ganeriwalla to run the petrol service station. ESSO's undertakings later vested in Hindustan Petroleum by Act of Parliament.

In 1985 Delta sued in the Calcutta High Court for a perpetual injunction, damages for wrongful use and occupation at Rs 20,000 a month from 1 May 1985 (the date the leave and licence was said to have been terminated), and possession. The Single Judge held it a licence and decreed the suit. The Division Bench reversed, holding it a lease mainly on the basis of exclusive possession, in these words: "to put it pithily, if an interest in immovable property entitling the transferees 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 result".

Delta appealed.

Whether the deed of 18 July 1970 was a lease (in substance a sub-lease) or a leave and licence.

A licence. The appeals were allowed, the Division Bench set aside and the Single Judge restored: the Court holding, in terms, "we hold that the agreement dated 18-7-1970 is a deed of" leave and licence and not a lease.

1. The question is intention, and there is no litmus test. Adopting Rajbir Kaur v S. Chokesiri and Co., the question "turns on the operative intention of the parties and there is no single, simple litmus test to distinguish one from the other".

2. The statutory contrast. From the same case: "While the definition of 'lease' in Section 105 of the Transfer of Property Act, 1882, envisages the transfer of a right to enjoy the property, on the other hand the definition of a 'licence' under Section 52 of the Indian Easements Act, 1882, consistently with the above, excludes from its pale any transaction which otherwise, amounts to an 'easement' or involves a transfer of an interest in the property, which is usually involved in the case of a transfer of right to enjoy it."

3. Exclusive possession is not decisive — and the reason why. Rajbir Kaur again, and this is the passage to carry into an exam: "Wherever there is exclusive possession, the idea of a licence is not necessarily ruled out. English law contemplates what are called 'Possessory Licences' which confer a right of exclusive possession, marking them off from the more usual type of licences which serve to authorise acts which would otherwise be trespasses. Thus 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."

That last limb decided this case: Delta was itself only a monthly tenant and could not create a sub-tenancy without the landlord's prior written consent under s. 14(1) of the West Bengal Premises Tenancy Act, and no consent had been obtained.

4. The English authorities. Errington v Errington (exclusive possession gives a prima facie tenancy "nevertheless he will not be held to be so if the circumstances negative any intention to create a tenancy"); Cobb v Lane, where Denning LJ asked whether "all that was intended was that the occupier should have a personal privilege with no interest in the land", and Somervell LJ noted that it was the Rent Restriction Acts that made the distinction important; and Lord Greene MR in Booker v Palmer: "There is one golden rule which is of very general application, namely, that the law does not impute intention to enter into legal relationship where the circumstances and the conduct of the parties negative any intention of the kind."

5. Construe the contract, not its consequences — with a qualification. Buckley J's rule was accepted: "for the purpose of arriving at the true construction of the contract, I must disregard what would be the legal consequences of construing it one way or the other way." But the Court added the qualification that decides the case: "when the terms of the document are ambiguous and are holding a double intendment then the meaning which is lawful is to be preferred." Since a sub-tenancy without consent would have been illegal, the lawful construction — a licence — was preferred.

6. The word demise. Clause 18 used "demised premises" three times. That did not convert the deed into a lease: the word "is to be construed by finding out what is sought to be conveyed or transferred in the context of all the terms of the document". Here it appeared alongside the words licence fee — Rs 3,950 per month, Rs 23,700 for six months in advance — and if a lease had been intended the word rent "would have been easily used at all the places". The demised premises included not only the land but the fittings, fixtures and the petrol service station.

7. Notice does not make a licence a lease. From M.N. Clubwala v Fida Hussain Saheb: "the mere necessity of giving a notice to a licensee requiring him to vacate the licensed premises would not indicate that the transaction was a lease", and s. 62(c) of the Easements Act itself contemplates a licence deemed revoked on the expiry of a limited period or the fulfilment of a condition. The decisive consideration remains that "This intention has to be ascertained on a consideration of all the relevant provisions in the agreement. In the absence, however, of a formal document the intention of the parties must be inferred from the circumstances and conduct of the parties."

8. No plea of camouflage. The Court noted that "no contention was raised by the defendants to the effect that the licence deed is a camouflage to circumvent the provisions of law or to defeat the rights of the owner or the tenant who granted the licence and inducted the licensee in possession." Where the line is thin, "the terms of the document are to be read as they are and it would be unreasonable to draw an inference that the parties intended to create a relationship of landlord and tenant despite express contrary terms in the deed which are binding between the parties."

The licence was to run a petrol station set up by the licensor; a sub-lease was reserved for the future if the landlord's consent could be obtained, with a standard form of lease annexed; the occupier paid no part of the outgoings, rates and taxes remaining with the licensor; he was to keep the plant and machinery in repair and to take out insurance for the business; the licensor could revoke on default; and he was permitted to carry on business in the licensor's name — which, as the Court said, would make no sense if the premises had simply been let.

1. Whether an instrument is a lease or a licence depends on the intention of the parties gathered from the whole document; there is no single litmus test. 2. Exclusive possession loses its force where the terms are clear that no lease was intended, and in particular where the grantor had no power to grant a lease. 3. Where the words admit of a double meaning, the lawful construction is preferred. 4. Neither the word demise nor a requirement of notice before vacating converts a licence into a lease.