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B. V. D'Souza (Capt.) v. Antonio Fausto Fernandes .
Factual and Procedural Background
The respondent (building owner) instituted a civil suit for eviction against the appellant after service of a notice to vacate. The respondent characterised the appellant’s occupation as that of a mere licensee who had overstayed. The appellant resisted eviction, asserting that he was a month-to-month tenant protected by the Goa, Daman and Diu Buildings (Lease, Rent and Eviction) Control Act, 1968 and that, by virtue of Section 56 of that Act, the civil court lacked jurisdiction. The trial court decreed eviction in favour of the respondent; the District Judge affirmed the decree on first appeal; and the High Court dismissed the appellant’s second appeal on the view that the findings below were concurrent findings of fact. The present judgment is on a further appeal by special leave to the Supreme Court of India.
Legal Issues Presented
- Whether the written instrument marked Exhibit 20 created a licence or a lease in favour of the appellant.
- If Exhibit 20 is a lease, whether the eviction suit is barred by the Goa, Daman and Diu Buildings (Lease, Rent and Eviction) Control Act, 1968.
Arguments of the Parties
Appellant's Arguments
- Exhibit 20, though labelled an “agreement of leave and licence,” in substance grants exclusive possession and therefore amounts to a lease.
- Clauses concerning payment of monthly rent, prohibition on sub-letting, and renewal at the appellant’s option show an intention to create tenancy rights.
- Under the Rent Act, a civil suit for eviction is not maintainable against a protected tenant.
- Allowing form to prevail over substance would defeat the protective purpose of Rent Acts.
Respondent's Arguments
- The parties expressly described their relationship as that of licensor and licensee; the court should respect that description.
- Reliance on exclusive possession as a test is “outdated,” as indicated by Lord Denning, M.R. in Shell-Mex and B.P. Ltd. v. Manchester Garages Ltd. (1971) 1 All ER 841.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Associated Hotels of India Ltd. v. R.N. Kapoor, AIR 1959 SC 1262; (1960) 1 SCR 368 | The decisive test is the intention of the parties; exclusive possession ordinarily indicates a lease, though not conclusively. | The Court adopted this test and compared Exhibit 20’s clauses with those in Associated Hotels to hold that the instrument created a lease. |
| Sohan Lal Naraindas v. Laxmidas Raghunath Gadit, (1971) 1 SCC 276; (1971) 3 SCR 319 | Documents styled as licences may, on true construction, amount to leases. | Used to reinforce the conclusion that, despite nomenclature, Exhibit 20 conferred tenancy rights. |
| Shell-Mex and B.P. Ltd. v. Manchester Garages Ltd., (1971) 1 All ER 841 | Observation (by Lord Denning, M.R.) that exclusive possession is “no longer decisive.” | Cited by respondent; the Court distinguished the observation, holding that exclusive possession remains a relevant—though not sole—indicator. |
Court's Reasoning and Analysis
1. The Supreme Court first rejected the High Court’s view that the matter involved only concurrent findings of fact. The core question—whether Exhibit 20 created a lease—is one of legal construction, attracting appellate scrutiny under Section 100 CPC.
2. Examining Exhibit 20, the Court noted:
- Monthly payment of Rs 350, described functionally as rent;
- A prohibition on sub-letting or parting with possession—language typically found in tenancy agreements;
3. In line with Associated Hotels, the Court emphasised that substance prevails over form. Mere labels such as “licensor” or “licensee” cannot obscure the creation of an interest in the property when the terms convey exclusive possession and renewal rights.
4. The respondent’s reliance on Shell-Mex to discount the significance of exclusive possession was unpersuasive. The Court acknowledged that exclusive possession is not conclusive but affirmed its continued relevance alongside the intention of the parties and the creation of a proprietary interest.
5. No special relationship or gratuitous motive existed; monetary consideration was the sole basis for occupation. These surrounding circumstances further pointed towards a lease.
6. Consequently, Exhibit 20 was construed as a lease, making the appellant a month-to-month tenant protected by the Rent Act. Because Section 56 bars civil suits for eviction of protected tenants, the underlying suit was not maintainable.
Holding and Implications
APPEAL ALLOWED; DECREES OF COURTS BELOW SET ASIDE; SUIT DISMISSED.
Immediate Effect: The appellant retains possession as a statutory tenant, and the respondent’s eviction suit stands dismissed. Broader Implications: The decision reiterates that the courts will look beyond contractual labels to determine the real nature of occupancy, thereby safeguarding tenants from attempts to circumvent Rent-control legislation.
L.M Sharma, J.— The only point involved in this appeal is whether the document (Ex. 20) executed by the parties at the time the appellant was inducted in the disputed premises is an agreement of leave and licence or a deed of lease. The building belongs to the respondent, and the appellant claims to be in its occupation as a month to month tenant. The respondent instituted the suit in the civil court, out of which this appeal by special leave arises, for a decree for eviction of the appellant alleging that he has been in occupation of the building as a licensee and has illegally refused to vacate in spite of service of notice. The appellant's defence is that he is a tenant protected by the provisions of the Goa, Daman and Diu Buildings (Lease, Rent and Eviction) Control Act, 1968, and in view of Section 56 thereof the suit in the civil court is not maintainable. Agreeing with the plaintiff respondent, the trial court passed a decree which was confirmed on appeal by the District Judge. The High Court dismissed the second appeal filed by the appellant observing that it was concluded by concurrent findings of fact.
2. We do not agree with the High Court that the findings of the courts below were those of fact so as to be binding on the High Court under Section 100 of the Code of Civil Procedure. The case has to be decided on the nature of possession of appellant which is dependent on a correct interpretation of the document Ex. 20.
3. The document Ex. 20 has been described as an agreement of leave and licence and the parties as the licensor and the licensee. But it is significant to note that in the very first sentence of the document the respondent is described as “Landlord hereinafter called the Licensor”. However, this cannot answer the disputed issue as it is firmly established that for ascertaining whether a document creates a licence or lease, the substance of the document must be preferred to the form. As was observed by this Court in Associated Hotels of India Ltd. v. R. N. Kapoor AIR 1959 SC 1262, (1960) 1 SCR 368, the real test is the intention of the parties — whether they intended to create a lease or licence. If an interest in the property is created by the deed it is a lease but if the document only permits another person to make use of the property “of which the legal possession continues with the owner”, it is a licence. If the party in whose favour the document is executed gets exclusive possession of the property, prima facie he must be considered to be a tenant; although this factor by itself will not be decisive. Judged in this light, there does not appear to be any scope for interpreting Ex. 20 as an agreement of leave and licence.
4. The document has been placed before us by the learned counsel for the appellant. Although as stated earlier, it has been described as an agreement of leave and licence and the parties as the “licensor” and the “licensee”, its provisions unmistakably indicated that the appellant was being let in as a tenant on the monthly rental of Rs 350 (besides water and electricity charges) to be paid regularly on or before the 5th day of each consecutive month. By clause 5, it was agreed that the appellant “shall not sub-let, under-let or part possession of the premises to any stranger nor shall he keep the premises vacant for more than 3 months without the consent of the licensor”, that is, the respondent. The question of executing a sub-lease or sub-letting can arise only by a tenant. If a licensee inducts any person in the property as his tenant, it cannot be described as sub-letting. In clause 15 it is stated that on the expiry of the period, the deed “shall be renewable thereafter at the will of the licensee”; and in the event of the licensee not desiring to renew, “shall give one month's notice in writing”. These terms are not consistent with the respondent's case of licence, and indicate that an interest in the property was created in favour of the appellant in pursuance of which he was put in possession with a right of renewal. When compared with the terms of the documents set out in the judgments in Associated Hotels India Ltd. v. R. N. Kapoor AIR 1959 SC 1262, (1960) 1 SCR 368 and Sohan Lal Naraindas v. Laxmidas Raghunath Gadit (1971) 1 SCC 276, (1971) 3 SCR 319, relied upon by the learned counsel for the appellant, which were construed by this Court as creating lease in spite of their description as licence deeds, the appellant's case stands out as stronger. If the approach adopted by the courts below in interpreting the document is accepted, it shall defeat the object of the Rent Acts, by permitting the parties to camouflage the real nature of the transaction by resorting to skilful drafting.
5. Mr Dholakia, learned counsel for the respondent, strenuously contended that the test of exclusive possession is an outdated one which should not now be taken into account for the purpose of deciding the nature of possession. Reliance was placed on the observations of Lord Denning, M.R in Shall-Mex and B.P Ltd. v. Manchester Garages Ltd. (1971) 1 All ER 841 We do not agree that exclusive possession of a party is irrelevant as is suggested; but at the same time as has been observed in the earlier cases of this Court, referred to above, it is not conclusive. The other tests, namely, intention of the parties and whether the document creates any interest in the property or not, are important considerations. The observations in the English case, relied upon by the learned counsel for the respondent cannot be understood to suggest that the test of exclusive possession has been now rendered irrelevant and redundant as they are immediately followed by the statement:
“As I have said many times, exclusive possession is no longer decisive.”
The position stands further clarified by the following statement in the concurring judgment of Buckley, L.J:
“The only clause which points one way or the other, I think, is clause 19 in Schedule 1 which Lord Denning, M.R has already read, which clearly recognises that notwithstanding the bargain between the parties, the plaintiffs retained rights of possession and control over the property in question. That seems to me to be consistent only with the fact that this transaction was in truth a licence transaction and not a tenancy under which the defendants would obtain an exclusive right to possession of the property during the term of the tenancy, subject, of course, to any rights reserved by the plaintiffs.”
We are also not in a position to agree with Mr Dholakia when he says that if the parties themselves have chosen to describe the transaction as a licence, we cannot make out a different case for them. It is well settled that the main purpose of enacting the Rent statutes is to protect the tenant from the exploitation of the landlord, who being in the dominating position is capable of dictating him terms at the inception of the tenancy; and, the Rent Acts must receive that interpretation which may advance the object and suppress the mischief. By adopting a different approach the Rent laws are likely to be defeated altogether.
6. The surrounding circumstances are also consistent with the deed being one of lease. The notice to vacate the premises was served on the appellant after several years of expiry of the term of the agreement. It is not suggested on behalf of the respondent that there is any relationship between the parties or that they were friends which induced him to allow the appellant to occupy the building. Realisation of rent which has been described in the document (Ex. 20) as “compensation reserved for use and occupation” was the sole consideration of the transaction. In this background the description of the parties as lessor and lessee or the rent as compensation does not carry much weight.
7. For the reasons mentioned above, we hold that Ex. 20 was in reality a document of lease and the appellant has been enjoying the exclusive possession thereof in the capacity of month to month tenant. As a result the suit was, in view of the provisions of the Goa, Daman and Diu Buildings (Lease, Rents and Eviction) Control Act, not maintainable. The appeal is accordingly allowed but without costs, the decree passed by the courts below is set aside and the suit is dismissed.
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