Report No. 70

Chapter 90

Definition of Lease

Section 105

90.1. Introductory.-

We now come to the other type of transfer dealt with in the Act, namely, lease. We shall come to the precise text of the definition later. But at the outset it is necessary to emphasise that the essence of a lease is the transfer of the exclusive possession of the immovable property. In English law, this is usually stated by pointing out that it is essential for the establishment of the relationship of landlord and tenant that there should be a "demise".1 Demise is the grant of a right to the exclusive possession of land.2 There must be a lessor and a lessee, so that there cannot be a demise from one person to himself, except, of course, by way of trust.

A lease transfers only a limited interest in the property. It follows, therefore, that there must be reserved to the landlord a reversion upon the lease. A reversion is that estate in the land which remains vested in the landlord during the continuance of the term granted to the tenant.3

1. Woodfall Landlord and Tenant, (1968), Vol. I, p. 2. para. 2.

2. Woodfall Landlord and Tenant, (1968), Vol. I, p. 2, para. 3.

3. General of Onterio v. Mercer, (1883) 8 Appeal Cases 767 (772).

90.2. Codification.-

This Act codifies for the first time the law relating to landlord and tenant. Prior to the passing of this Act, the Hindu law was held to be strictly applicable to a tenancy created by express contract between Hindu,1 and the English rules regarding, the relation of landlord and tenant were applied whenever no precise rule regarding the subject was to be found in Hindu law or other laws.2

Even in the case of a tenancy created after the passing of the Transfer of Property Act, if it does not come strictly within this Act, the rule of English law may be applied.3 But it has been held by the Privy Council that the Act,4 though founded on English law and drafted in the first instance by eminent lawyers in England, has only applied the English law so far as it was considered to apply to India. Before therefore resorting to English decisions for determining the relations of landlord and tenant, it should be seen what the law in India is.

Before the Act, "lease" meant that if the owner of land consented by deed that another person should occupy the land for a certain time, there was a lease.5

1. Russick La11 v. Loknath, ILR 5 Cal 688.

2. Tara Chand v. Ram Gobind, ILR 4 Cal 778.

3. Kishori Mohan v. Nand Kumar, ILR 24 Cal 720 (723).

4. Hansraj v. Bejoy Lal, AIR 1930 PC 59 (60).

5. Nagindra v. Jurna, 39 CWN 96.

90.3. Contractual tenancy.-

In the scheme of the Act, the lease can arise only out of contract, although once a lease is created, certain incidents may be annexed by law. It is well-known that Rent Acts impose restrictions upon the recovery of possession by landlords of certain classes of buildings. When a tenant continues in occupation solely by reason of the protection afforded by the Rent Act, he becomes, according to the parlance usually adopted, "statutory" tenant-an expression conveniently coined1 to denote a person enjoying a statutory relationship distinct from the contractual relationship previously existing.

The following passage from Megarry's Miscelleny-at-Law2 makes interesting reading:-

"The Rent Acts, too ('a byword for confused draftsmanship') have evoked a rich volume of judicial vituperation. In this 'extraordinary and unique legislation' the Acts were passed in a hurry, the language used was often extremely vague, and the language 'resembles that of popular journalism rather than terms of the art of conveyancing'. It is a patchwork legislation, has not been framed with any scientific accuracy of language, and presents great difficulties of interpretation to the Courts that have to give practical effect to it........... In one case, Scratton, L.J. said, 'I regret that I cannot order the costs to be paid by the draftsmen of the Rent Restrictions Acts, and the members of the Legislature who passed them and are responsible for the obscurity of the Acts'."

1. Fumasli v. Comyn and Wish, 1924 Law Times 490.

2. R.E. Megarry Miscellany-at-Law, pp. 351, 352.

90.4. Exclusive possession-lease and license.-

Since the grant of exclusive possession is of the essence of a lease, it follows that a lease is distinct from a licence to use the premises.1 Nothing, of course, turns merely on the phraseology adopted in the document. Even the fact that there are certain, special restrictions or reservations as to possession may not be conclusive. However, if there is no intention, in substance, to grant exclusive possession, it is not a lease.

In England, the distinction becomes of particular importance, not only in the context of Rent Control Legislation, but also in regard to special types of premises such as theatre refreshment rooms, advertisement boardings, furnished rooms and the like. Here again, the test of exclusive possession, though not decisive in itself, is a consideration of a first importance-a matter dealt with at length in a judgment of the High Court of Australia of great learning.2

1. Cf. section 52, Indian Easements Act, 1882.

2. Radach v. Smith, (1959) 101 CLR 209 (Australia).

90.4A. Importance of the distinction.-

The distinction between lease and license may have important repercussions not only in the law of property, but also in the law of civil wrongs-and sometimes in the criminal law. For example, where rooms are let to a tenant and the relationship is one of lease, then it is a trespass on the part of the landlord who enters and excludes the tenant from the rooms, but not so if the person concerned is merely a lodger having only a licence to sleep in one room and to eat and during in another room.1

This does not, of course, mean that a person who is a licensee has no legal rights. Even a gratuitous licence revocable by the licensor may involve an obligation to give notice-a proposition which became material in an Australian case.2 Again, the arbitrary revocation of a licence may, in the circumstances of the case, lead to legal liability.

Thus, in a West Indias case3 cited by Woodfall, the Crown had granted a licence at an annual rent during Her Majesty's pleasure. On failure by the licensee to pay the "rent" when due, the Governor revoked the licence without making a demand for the rent. It was held that the licence in the circumstances conferred an interest in land and the interest was terminable for good cause only, and the revocation was therefore invalid.

This preliminary discussion, it is hoped, will enable us to deal more conveniently with the text of the definition of lease and certain matters of detail.

1. Lane v. Dixon, (1847) 3 CB 776.

2. Australian Blue Metal v. Hughes, 1963 AC 74 (PC).

3. Attorney-General v. McDoom, (1960) 2 West Indies Reports 373, cited by Woodfall.

90.5. "Lease" defined.-

Lease is defined in section 105 as follows:-

"105. 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."

90.5A. Analysis.-

The essential features of a lease under section 105 are:-

(a) Transfer1 of a right of enjoyment of immovable property.

(b) The transfer must be made for a certain time, express or implied or in perpetuity. This is subject to section 106, as we shall discuss later.

(c) The transfer must be one for consideration.

(d) The consideration must be-(i) premium or rent as defined by the section, and (ii) either or both of them.

The first requirement raises no problems, except that where it is not clear whether exclusive possession is transferred,2 the question may arise whether it is a lease or licence.

1. AIR 1954 Assam 45 (48).

2. See supra.

90.6. Term of the lease.-

Let us now consider the second requirement the term of a lease. According to section 105, a lease must be made for a certain time, express or implied, or in perpetuity. Mulla has pointed out1 that the words "a certain time" seem inconsistent with the phrase "a lease of uncertain duration" which occurs in section 108 (i), where that phrase is used to describe yearly or monthly tenancies. A lease from month to month is a lease for uncertain duration, properly speaking.2 Centainty, however, according to Mulla,3 need not be ascertained at the time of creation because, if in the fluxion of time a day will arrive which will make it certain, that is sufficient.

1. Mulla, (1973), p. 650.

2. Collector of Bombay v. Laxmi Bai, ILR 48 Born 342.

3. Mulla, (1973), p. 650, citing Goodright v. Richardson, (1789) 3 Term Reports 462.

90.7. Inconsistency.-

After all is said and done, however, one does feel that there is a certain amount of inconsistency between section 105 and section 106 read with section 108(i). Under section 106, the duration of leases, in the absence of contract or local law or usage to the contrary, is fixed by a fiction of law, with reference to the purpose for which the property is let. The "implication", if any,1 is not by contract regarding the duration of such leases, but is brought in by the terms of section 106. That section lays down a rule of construction which applies to cases where no period is agreed to between the parties.2 A tenancy from year to year or from month to month really arises in the absence of a contract, and by presumption of law under section 106.3

1. (a) Ram Kumar v. Jagdish Chander, AIR 1952 SC 23; (b) AIR 1960 Pat 344.

2. See (a) AIR 1950 Cal 23 (29), para. 23; (b) AIR 1959 Cal 181 (185), para. 26.

3. Mulla, (1973), p. 652.

90.8. No change.-

Having regard to this position, it was suggested to us that the best course would be to make the provisions of section 105 (in regard to certainty of time) expressly subject to the provisions of section 106, and we recommend accordingly. The limit of the lease in the case of a transaction falling under section 106 is not by its terms capable of being ascertained. It is only by virtue of the section that the limit is created. As was pointed out by the Assam High Court,1 a lease from year to year is for an uncertain duration, which does not purport to be a definite period, as the interest of the lessee does not terminate at the end of a definite period. It is for this reason that the suggestion was made but we do not consider it necessary.

1. Mafuzuddin v. Manindra, AIR 1951 Assam 141.

90.9. Tenancy at will.-

It is to be noted that a tenancy at will being an interest in property like any other lease, it must be determined before the lessor can sue for the ejectment of the tenant from the property.1 The rationale is that the term is, in this case, capable of being made certain later.

1. (1875) 24 Suth WR 172 (173).

90.10. There still remains to be considered another question concerning the term of a lease. Can there be a lease for the period so long as lessee pays rent? A discussion of this question renders necessary an examination of the relevant aspects of English law and Indian law.