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Report No. 67

5.27. Test of exclusive possession not conclusive.-

As Denning, L.J., (as he then was) observed,1 the difference between a tenancy and a licence is, therefore, that in a tenancy, an interest passes in the land, whereas, in a licence, it does not. He, however, added, "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, whereas if he had not exclusive possession he was only a licencee. This test has, however, often given rise to misgivings because it may not correspond to realities. The test of exclusive possession is by no means decisive."

In the context of the definition of 'lease' in the Stamp Act, the distinction between lease and licence becomes material, because, if the document is not a lease, the charge for leases under the first part of the definition of lease would not be attracted. At the same time, it should be noted that the inclusive part of the definition of 'lease' is not confined to leases proper, and may cover documents which are not leases as defined in the Transfer of Property Act. In particular, clause (b), which relates to "kabuliyat or other undertaking in writing not being a counterpart of a lease, to cultivate, occupy or pay or deliver rent for immovable property" is somewhat widely worded. No doubt, a licence does not become a lease merely because a "rental" is reserved, the licences like exploring and prospecting licences (in respect of minerals) are not regarded as leases for the purposes of the definition in the Stamp Act. Here, the general test of transfer of interest as indicated by sole and exclusive occupation2 could be utilised.

1. Errington v. Errington, (1952) 1 KB 290.

2. Board of Revenue v. South Indian Railway Co., ILR 48 Mad 368: AIR 1925 Mad 434.

5.28. But it is to be noted that in clause (b), the words used are not sole and exclusive occupation, but an undertaking to occupy immovable property.1 A case could, therefore arise where, even though the document specifically says that it should not be construed to create a tenancy, the rights conferred by the document on the party by the owners are of such a nature that it would fall under clause (b).

1. Burmah Oil Co., ILR 55 All 874: AIR 1933 All 735 (FB).

5.29. Redraft.-

In the light of the above discussion, we recommend that the definition of lease should be revised as follows:-

"(16) 'lease' means a lease of immovable property as defined in section 105 of the Transfer of Property Act, 1882, and includes also-

(a) a patta;

(b) a kabuliyat, or other undertaking in writing, not being a counterpart of a "lease", to cultivate, occupy or pay or deliver rent, for, immovable property;

(c) any instrument by which tolls of any description are let;

(d) any writing on an application for a lease intended t3 signify that the application is granted.

Explanation.-In this section, "immovable property" includes land, benefits to arise out of land and things attached to the earth, or permanently fastened to anything attached to the earth."1

1. This is necessary in order to avoid any argument that the definition in the Transfer of Property Act be attracted.

5.30. Section 2(16A)-Marketable Security.-

Under section 2(16A), "marketable security" means a security of such a description as to be capable of being sold in any stock market in India or in the United Kingdom. The definition was added in 1904, when this definition and section 23A were added and Article 6 (agreement relating to deposit of title deed) etc., was amended. The object of the amendment was to save instruments of deposit of marketable securities from the ad valorem duty under Article 6. There are no Indian cases on this definition, though there are a number of English cases on the corresponding provision in the English Act.1

1. Section 122, Stamp Act, 1891 (English).

5.31. Recommendation.-

We recommended that the mention of 'United Kingdom' in this definition should be omitted, having regard to changed political conditions. There have been suggestions1 to omit "in India" also, but we do not think that the clause need be so widened.

1. In reply to the Questionnaire issued by us-Question 10.

5.32. Section 2(17)-"Mortgage deed".-

Section 2(17) defines a "mortgage deed" as including every instrument whereby, for the purpose of securing money advanced, or to be advanced, by way of loan, or an existing or future debt, or the performance of an engagement, one person transfers, or creates, to or in favour of another, a right over or in respect of specified property. It may be noted that a mortgage of movable property is also covered by the definition.1 Another point to be noted is that this definition includes charges also,2 as the words "over or in respect" of property are wide. The body of the Stamp Act makes no distinction between legal and equitable mortgages. But the charging provision3 makes a distinction. The duty is different, if the mortgage is in the shape of an agreement by way of deposit of title deeds.4

A deed which contains all the provisions which one would normally find in a mortgage deed, would, however, be chargeable as a legal mortgage. The mere fact that the document also contains the bargain with regard to deposit of title deeds, will not make it an agreement for the deposit of title deeds,5 within the meaning of Article 6. The above points do not indicate a need to change the definition.

1. Miran Baksh v. Emperor, AIR 1945 Lah 69 (72) (FB).

2. As to charges, see section 100, Transfer of Property Act.

3. Article 6, as contrasted with Article 40(b).

4. As to the position under the Registration Act, see AIR 1939 PC 167.

5. Indian Stamp Act (in re:), AIR 1954 Born 462 (463), para. 2 (FB).

5.33. Section 2(18)-"Paper".-

In section 2(18), "paper" is defined as including vellum, parchment or any other material on which an instrument may be written.

It needs no change.

Indian Stamp Act, 1899 Back

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