Mrs. M. N. Clubwala & ANR Vs. Fida
Hussain Saheb & Ors  INSC 23 (3 February 1964)
03/02/1964 MUDHOLKAR, J.R.
CITATION: 1965 AIR 610 1964 SCR (6) 642
R 1968 SC 919 (7) R 1974 SC 396 (8) RF 1976
SC1860 (12) F 1988 SC1845 (13)
Licence or Lease-Provision requiring notice
to vacate-If inconsistent with licence-Intention of parties-To be ascertained
from Agreement-Inference from circumstances and conduct, if formal document
absent-Exclusive possession if conclusive evidence of lease.
in disputes regarding extra fees in respect
of meat-stalls in a private market owned by the appellants, the
respondents--stall-holders filed a suit alleging that the relationship between
them and the appellants was that of lessees and lessors; while according to the
appellants, the respondents 643 were only their licensees. The stall-holders
have been executing agreements, signed by the stall-holders alone, in which the
payment is styled as rent. Though the building in which the market is located
is owned by the appellants it could not be used as a market for the sale of
meat or comestibles without the permission of the municipal council, and a
number of duties have been imposed upon the owners including that of closing
the market and that market functioned only within 'he stated hours. The City
Civil Court Judge finding that the respondents were bare licensees dismissed
their suit. His decision was affirmed in appeal.
On a further appeal the High Court reversed the
findings of the Courts below holding that from the general tenor of the
document the terms created only a tenancy in respect of the stalls and not a
mere licence or permissive occupation saying that if the occupation of the
stall-holders was only permissive the condition as to the payment of rent,
eviction for default in payment of rent for more than 3 days, the provision for
annual repairs being carried out by the landlord, the further provision that
repairs that might be occasioned by the carelessness of the respondents should
be carried out at their expense and the adequate provision for 30 days notice
for vacating the stalls if they were required by the landlord would all seem to
be inconsistent and irrelevant. On appeal by special leave:
Held: (i) While it is true that the essence
of a licence is that it is revocable at the will of the grantor the provision
in the licence that the licensee would be entitled to a notice before being
required to vacate is not inconsistent with a licence, and the mere necessity
of giving such a notice would not indicate that the transaction was a lease.
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, which 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.
(ii)The fact that a person has exclusive
possession is not conclusive evidence of his being a lessee. If, however,
exclusive possession to which a person is entitled under an agreement with a
landlord is coupled with an interest in the property, the agreement would be
construed not as a mere licence but as a lease.
Associated Hotels of India Ltd. v. R. N.
Kapur,  1 S.C.R. 368, Errington v. Errington and Woods,  1 K. B. 290,
Cobb. v. Lane,  1 All. E.R. 1199, Clove v. Theatrical Proprietors Ltd.
and Westby & Co. Ltd.  3 All. E.R. 483. Smith & Son v. The
Assessment Committee for the Parish of Lambeth, [1882-831 10 Q.B.D. 327 and
vutrum Subba Rao v. The Eluru Municipal Council, I.L.R.  A.P. 515,
(iii) In view of the duties cast upon the
landlord and the circumstances of the present case the intention of the parties
was to bring into existence merely a licence and not a lease and the word
'rent' was used loosely for 'fee'.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 151 of 1963.
Appeal by special leave from the judgment and
decree dated February 17, 1959 of the Madras High Court in Second Appeal No.
252 of 1957.
S. T. Desai and R. Ganapathy Iyer, for the
R. Gopalakrishnan, for the respondents Nos.
February 3, 1964. The Judgment of the Court
was delivered by MUDHOLKAR J.-This is an appeal by special leave from the
judgment of the High Court of Madras reversing the decisions of the courts
below and granting a number of reliefs to the plaintiffs-respondents.
The main point which arises for consideration
in this appeal is whether the plaintiffs-respondents are the lessees of the
appellants who were defendants 4 and 5 in the trial court or only their
licensees. In order to appreciate the point certain facts need to be stated.
The appellants are the owners of a private
market situate in Madras known as Zam Bazar Market. There are about 500 odd
stalls in that market and meat, fish, vegetables, etc., are sold in that
market. The practice of the appellants has been to farm out to contractors the
right to collect dues from the users of the stalls. Defendants 1 to 3 to the
suit were the contractors appointed by the appellants for collecting rent at
the time of the institution of the suit.
Two of these persons died and their legal
representatives have not been impleaded in appeal as they have no interest in
the subject-matter of litigation. The third has been transposed as respondent
No. 7 to this appeal. They were, however, alive when the special leave petition
was filed and were shown as appellants 1 to 3, but two of them were struck out
from the record after their death and the third trans- posed as Respondent No.
7. Though the building in which the market is located is owned by the
appellants it cannot 645 be used as a market for the purpose of sale of meat or
any other article of human consumption without the permission of the municipal
council under s. 303 of the Madras City Municipal Act, 1919 (hereafter referred
to as the Act).
Before such a permission is granted the owner
has to obtain a licence from the Municipal Commissioner and undertake to comply
with the terms of the licence. The licence granted to him would be for one year
at a time but he would be eligible for renewal at the expiry of the period.
Section 306 of the Act confers power on the Commissioner to require the owner,
occupier or farmer of a private market for the We of any animal or article of
food to do a number of things, for example to keep it in a clean and proper
state, to remove all filth and rubbish therefrom, etc. Breach of any condition
of the licence or of any order made by the Commissioner would result, under s.
307, in suspension of the licence and thereafter it would not be lawful for any
such person to keep open any such market. Section 308 of the Act confers powers
on the Commissioner to make.
regulations for markets for various purposes
such as fixing the days and hours on and during which any market may be held or
kept for use, requiring that in the market building separate areas be set apart
for different classes of articles. requiring every market building to be kept
in a clean and proper state by removing filth and rubbish therefrom and
requiring the provision of proper ventilation in the market building and of passages
of sufficient width between the stalls therein for the convenient use of the
building. We are told that regulations have been made by the Commissioner in
pursuance of the powers conferred upon him by S. 308 of the Act. Thus as a
result of the Act as well as the regulations made there under a number of
duties appear to have been placed upon the owners of private markets. It would
also appear that failure to comply with any of the requirements of the statute
or the regulations would bring on the consequence of suspension or even
cancellation of the licence. We are mentioning all this because it will have
some bearing upon the interpretation of the documents on which the plaintiffs
have relied in support of the contention that the relationship between them and
the appellants is that of tenants and landlord.
646 The suit out of which this appeal arises
came to be filed because disputes arose between the plaintiffs and the
defendants 1 to 3 who became the contractors for collection of rent as from
February 9, 1956. These disputes were with regard to extra carcass fees and
extra fees for Sunday Gutha which were claimed by the contractors. The
respondents further alleged that the relationship between them and the
appellants was, as already stated, that of lessees and lessors while according
to the appellants, the respondents were only their licensees. The respondents
further challenged the extra levies made by the contractors, i.e., the original
defendants 1 to 3 who are no longer in the picture. The reliefs sought by the
respondents were for an injunction against the appellants and the defendants 1
to 3 restraining them from realising the extra levies and for further
restraining them from interfering with their possession over their respective
stalls as long as they continued to pay their dues. The First Additional City
Civil Court Judge before whom the suit had been filed found in the respondents'
favour that the extra fees sought to be levied by the contractor were
sanctioned neither by the provisions of the Municipal Act nor by usage but upon
the finding that the respondents were bare licensees dismissed their suit.
The appellate bench of the City Civil Court
before whom the respondents had preferred an appeal affirmed the lower court's
decision. The High Court reversed the decision of the courts below and in the
decree passed by it pursuant to its judgment granted a number of reliefs to the
Here we are concerned only with reliefs (ii)
(e), (f) and (g) since the appellants are not interested in the other reliefs.
Those reliefs are :
"(ii) that the respondents defendants,
in particular defendants 1 to 3 (respondents 1 to 3) be and hereby are
restrained from in any manner interfering with the appellants- plaintiffs 1 to
4, 6 and 7 carrying on their trade peacefully in their respective stalls at Zam
Bazar Market, Rovapettah, Madras and imposing any restrictions or limitations
upon their absolute right to carry on business as mentioned hereunder 647 (e)
Interfering with the possession and enjoyment of the respective stalls by the
appellants plaintiffs 1 to 4, 6 and 7 so long as they pay the rents fixed for
(f) increasing the rents fixed for the
appellants-plaintiffs' 1 to 4, 6 and 7 stalls under the written agreements
between the said plaintiffs and defendants 4 and 5;
(g) evicting of the appellants-plaintiffs 1
to 4, 6 and 7 or disturbing the plaintiffs and their articles in their stalls
by defendants 1 to 3." Further we are concerned in this case only with the
relationship between the meat vendors occupying and using some of the stalls in
the market (as the plaintiffs- respondents belong to this category) and the
appellants- landlords. What relationship subsists or subsisted between the
appellants and other stall-holders vending other commodities is not a matter
which can be regarded as relevant for the purpose of deciding the dispute
between the appellants and the respondents.
It is common ground that under the licence
granted by the Municipal Corporation, the market is to remain open between 4
A.m. and II P.m. and that at the end of the day the stall- holders have all to
leave the place which has then to be swept and disinfected and that the gates
of the market have to be locked. None of the stall-holders or their servants is
allowed to stay in the market after closing time. In point of fact this market
used to be opened at 5 A.M. and closed, at 10 P.m. by which time all the
stall-holders had to go away. It is also common ground that the stalls are open
stalls and one stall is separated from the other only by a low brick wall and
thus there can be no question of a stall-holder being able to lock up his stall
before leaving the market at the end of the day. The stall-holders were
required to remove the carcasses brought by them for sale by the time the
market closed. Meat being an article liable to speedy decay the stall-holders
generally used to finish their 648 business of vending during the afternoon
itself and remove the carcasses. They, however, used to leave in their stalls
wooden blocks for chopping meat, weighing scales, meat choppers and other
implements used by them in connection with their business. These used to be
left either in boxes or almirahs kept in the stall and locked up therein.
It is also an admitted fact that some of the
stall-holders have been carrying on business uninterruptedly in their stalls
for as long as forty years while some of them have not been in occupation for
more than five years. It is in evidence that these stall-holders have been
executing fresh agreements governing their use and occupation of stalls and
payment of what is styled in the agreements as rent whenever a new contractor
was engaged by the appellants for collecting rents.
The next thing to be mentioned is that the
agreements referred to the money or charges payable by the stall- holders to
the landlords as 'rent' and not as 'fee. It has, however, to be noted that the
dues payable accrue from day to day. Thus in Ex.A- 1 the rent of Re. 1 /- is
stid to be payable every day by 1.00 P.m. In all these agreements there is a
condition that in case there is default in payment of rent for three days the
stall-holder was liable to be evicted by being given 24 hours' notice. A
further condition in the agreements is that a stall-holder may be required by the
landlord to vacate the stall after giving him 30 days' notice. There is a
provision also regarding repairs in these agreements. The liability for the
annual repairs is placed by the agreement upon the landlord and these repairs
are ordinarily to be carried out in the month of June every year. Where,
however, repairs became necessary on account of the carelessness of a
stall-holder they were to be carried out at the expense of that stall- holder.
It may be also mentioned that these agreements are obtained by the contractors
from the stall-holders in favour of the landlord and bear the signatures only
of the stall- holder,.;.
It was contended before us by Mr. R.
Gopalakrishnan that in order to ascertain the relationship between the
appellants and the respondents we must look at the agree- 649 ments alone and
that it was not open to us to look into extraneous matters such as the
It is claimed on behalf of the respondents
that the lease in their favour is of a permanent nature. But if that were so,
the absence of a registered instrument would stand in their way and they would
not be permitted to prove the existence of that lease by parol evidence. From
the fact, however, that with every change in the contractor a fresh agreement was
executed by the stall-holders it would be legitimate to infer that whatever the
nature of the right conferred by the agreement upon the stall-holders, it could
not be said to be one which entitled them to permanent occupation of the
stalls. It could either be a licence as contended for by the appellant or a
tenancy from month to month. In either case there would be no necessity for the
execution of a written agreement signed by both the parties. Here, the
agreements in question are in writing, though they have been signed by the
stall-holders alone. All the same, oral evidence to prove their terms would be
excluded by s. 92 of the Evidence Act. To that extent Mr. Gopalakrishnan is
right. Though that is so, under the 6th proviso to that section the surrounding
circumstances can be taken into consideration for ascertaining the meaning of
the word 'rent' used in the agreements. Indeed, the very circumstance that rent
is to fall due every day and in default of payment of rent for three days the
stall-holder is liable to be evicted by being given only 24 hours' notice it
would not be easy to say that this 'rent' is payable in respect of a lease. On
the other hand, what is called rent may well be only a fee payable under a
licence. At any rate this circumstance shows that there is ambiguity in the
document and on this ground also surrounding circumstances could be looked into
for ascertaining the real relationship between the parties. Indeed, the City
Civil Court has gone into the surrounding circumstances and it is largely on
the view it took of them that it found in favour of the appellants.
The High Court, however, has based itself
upon the agreements themselves. To start with it pointed out-and, in our
opinion rightly-that the use of the word 'rent' in, Ex. A-1 did not carry the
respondents' case far. The reasons.
650 given by it for coming to the conclusion
that the transaction was a lease, are briefly as follows :
(1) Notice was required to be given to the
stallholder before he could be asked to vacate even on the ground of
non-payment of rent;
(2) the annual repairs were to be carried out
by the landlord only in the month of June;
(3) the stall-holder was liable to carry out
the repairs at his own expense when they are occasioned by his carelessness;
(4) even if the landlord wanted the stalls
for his own purpose he could obtain possession not immediately but only after
giving 30 days' notice to the stall-holder;
(5) the possession of the stalls by the
respondents had been continuous and unbroken by virtue of the terms of the
agreement and that the terms of the original agreement were not shown to have
been substituted by fresh agreements executed by the respondents.
The High Court, therefore, held that from the
general tenor ,of the documents it is fairly clear that as between the
appellants and the respondents the terms created only a tenancy in respect of
the stalls and not a mere licence or permissive occupation. After saying that
if the occupation of the stall-holders was only permissive the condition as to
payment of rent, eviction for default in payment of rent for more than 3 days,
the provision for annual repairs being carried out by the landlord, the further
provision that repairs that might be occasioned by the carelessness of the
respondents should be carried out at their expense and the adequate provision
for 30 days' notice for vacating the stalls if they were required by the
landlord would all seem to be inconsistent and irrelevant, it observed :
"As a matter of fact, there is no
evidence whatsoever to show that any of these plaintiffs were at any time
turned out of their possession of their 651 stalls at the will of the landlords
or for default of any of the terms and conditions stipulated in the agreements.
The specific provision for 30 days' notice for vacating and delivering
possession seems to be conclusive of the fact that the plaintiffs were to
occupy the stalls as permanent tenants and not as mere licensees. The terms of
the agreements further disclose that the plaintiffs were to be in exclusive
possession of these stalls for the purpose of their trade as long as they
comply with the terms and until there was a notice of termination of their
tenancy in respect of the shops held by them. The very tenor of the agreements,
the intention behind the terms contained in the agreements and the measure of
control established by the terms of the agreements, all point only to the fact
that the plaintiffs were to be in undisturbed and exclusive possession of the
stalls as long as they paid the rent and until there was a valid termination of
their right to hold the stalls as such tenants." While it is true that the
essence of a licence is that it is revocable at the will of the grantor the
provision in the licence that the licensee would be entitled to a notice before
being required to vacate is not inconsistent with a licence. In England it has
been held that a contractual licence may be revocable or irrevocable according
to the express or implied terms of the contract between the parties. It has
further been held that if the licensee under a revocable licence has brought
property on to the land, he is entitled to notice of revocation and to a
reasonable time for removing his property, and in which to make arrangements to
carry on his business elsewhere. (See Halsbury's Laws of England 3rd edn. vol.
23, p. 431). Thus 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. Indeed, s. 62(c) of the Indian Easements Act. 1882 itself provides
that a licence is deemed to be revoked where it has been either granted for a
limited period, or 652 acquired on condition that it shall become void on the
performance or non-performance of a specified act, and the period expires, or
the condition is fulfilled. In the agreements in question the requirement of a
notice is a condition and if that condition is fulfilled the licence will be
deemed to be revoked under s. 62. It would seem that it is this particular
requirement in the agreements which has gone a long way to influence the High
Court's finding that the transaction was a lease. Whether an agreement creates
between the parties the relationship of landlord and tenant or merely that of
licenser and licensee the decisive consideration is the intention of the
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. (lbid p. 427). Here the
terms of the document evidencing the agreement between the parties are not
clear and so the surrounding circumstances and the conduct of the parties have
also to be borne in mind for ascertaining the real relationship between the
Again, as already stated, the documents
relied upon being merely agreements executed unilaterally by the stall-holders
in favour of the landlords they cannot be said to be formal agreements between
the parties. We must, therefore, look at the surrounding circumstances. One of
those circumstances is whether actual possession of the stalls can be said to
have continued with the landlords or whether it had passed on to the
stall-holders. Even if it had passed to a person, his right to exclusive
possession would not be conclusive evidence of the existence of a tenancy
though that would be a consideration of first importance. That is what was held
in Errington v. Errington and Woods(1) and Cobb v. Lane(1).
These decisions reiterate the view which was
taken in two earlier decisions: Close v.Theatrical Properties Ltd. and Westby
& Co. Ltd.,(1) and Smith & Son v. The Assessment Committee for the
Parish of Lambeth(1). Mr. S. T. Desai appearing for the appellants also relied
on the decision of the High Court of (1)  1 K.B. 290. (2)  1 All.
(3)  3 All. E.R.483. (4) (1882-83) 10
Q.B.D. 327 at 330.
653 Andhra Pradesh in Vurum Subba Rao v. The
Eluru Municipal Council (1) as laying down the same proposition. That was a
case in which the High Court held that stall-holders in the municipal market
who were liable to pay what was called rent to the municipality were not
lessees but merely licensees.
The fact, therefore, that a stall-holder has
,exclusive possession of the stall is not conclusive evidence of his being a
lessee. If, however, exclusive possession to which a person is entitled under
an agreement with a landlord is coupled with an interest in the property, the
agreement would be construed not as a mere licence but as a lease.
(See Associated Hotels of India Ltd. v. R. N.
Kapoor(2). In the case before us, however, while it is true that each
stall-holder is entitled to the exclusive use of his stall from day to day it
is clear that he has no right to use it as and when he chooses to do so or to
sleep in the stall during the night after closure of the market or enter the
stall during the night after 11-00 P.m. at his pleasure. He can use it only
during a stated period every day and subject to several conditions. These
circumstances, coupled with the fact that the responsibility for cleaning the
stalls, disinfecting them and of closing the Market in which the stalls are
situate is placed by the Act, the regulations made thereunder and the licence
issued to the landlords, is on the landlords, would indicate that the legal
possession of the stalls must also be deemed to have been with the landlords
and not with the stall-holders. The right which the stall-holders had was to
the exclusive use of the stalls during stated hours and nothing more. Looking
at the matter in a slightly different way it would seem that it could never
have been the intention of the parties to grant anything more than a licence to
the stall-holders. The duties cast on the landlord by the Act are onerous and
for performing those duties they were entitled to free and easy access to the
stalls. They are also required to see to it that the market functioned only
within the stated hours and not beyond them and also that the premises were
used for no purpose other than of vending comestibles. A further duty which lay
upon the landlords was to guard the entrance to the market. These duties (1)
I.L.R.  A.P. 515 at pp. 520-4.
(2)  1 S.C.R. 368.
654 could not be effectively carried out by
the landlord by parting with possession in favour of the stall-holders by
reason of which the performance by the landlords of their duties and
obligations could easily be rendered impossible if the stall-holders adopted an
unreasonable attitude,. If the landlords failed to perform their obligations
they would be exposed to penalties under the Act and also stood in danger of
having their licences revoked. Could, in such circumstances, the landlords have
ever intended to part with possession in favour of the stall-holders and thus
place themselves at the mercy of these people? We are, therefore, of the
opinion that the intention of the parties was to bring into existence merely a licence
and not a lease and the word rent' was used loosely for 'fee.
Upon this view we must allow the appeal, set
aside the decree of the High Court and dismiss the suit of the respondents inso
far as it relates to reliefs (ii) (e), (f) and (g) granted by the High Court
against the appellants are concerned. So far as the remaining reliefs granted
by the High Court are concerned, its decree will stand. In the result we allow
the appeal to the extent indicated above but in the particular circumstances of
the case we order costs throughout will be borne, by the parties as incurred.
Appeal partly allowed.