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M.V Panchapakesan v. K. Swaminathan.
Concise Analytical Summary of the Judgment
Factual and Procedural Background
The appellant instituted O.S. No. 1382 of 1962 seeking recovery of possession of a portion of the premises at Door No. 12, Doraiswami Road, T. Nagar, Madras (measuring 48 ft. × 60 ft.) and arrears of rent. The appellant's pleaded case was that the suit property had been given to the respondent on lease in December 1948 subject to conditions; the respondent put up a shed in 1949 for a fuel (firewood) shop and later a bank in 1952; the respondent paid Rs. 15 per month; and the lease had been determined by a valid notice to quit.
The respondent resisted, claiming entitlement to benefits under the Madras City Tenants Protection Act and stating he had applied under Section 9 of that Act (I.A. 2553 of 1962) seeking purchase of the site. The appellant opposed the Section 9 application on grounds including that the transaction was a licence and not a lease, that the site was appurtenant to a residential building and therefore not purchasable by the respondent, and that the rent being paid (Rs. 15) was far below fair rent (allegedly Rs. 118).
At trial the court held the arrangement was a licence and dismissed the respondent's Section 9 application while decreeing the appellant's suit for possession. The respondent appealed; the lower appellate court reversed the trial court, held the transaction to be a lease (not a licence), concluded the respondent was entitled to the option to purchase under Section 9 of the Madras City Tenants Protection Act, and remanded both I.A. 2553 of 1962 and the suit for fresh disposal to determine the minimum extent of land necessary for convenient enjoyment as required under S.9(1)(b).
The present appeal challenges the decision of the learned City Civil Judge in A.S. No. 324 of 1964. The judgment before us agrees with the lower appellate court and dismisses the appellant's appeal; the connected revision (C.R.P. 1887 of 1965 arising out of the S.9 application) is also dismissed. There is no order as to costs in either instance.
Legal Issues Presented
- Whether the transaction between the appellant and the respondent (occupation of a 48 ft. × 60 ft. portion of the premises) was a lease or merely a licence.
- If the transaction is a lease, whether the respondent is entitled to the benefits available under Section 9 of the Madras City Tenants Protection Act (including the option to purchase) and consequent procedural steps (such as determination of minimum extent under S.9(1)(b)).
- Whether the trial court's finding (that the relationship was a licence) should be sustained or reversed in light of the evidence of exclusive possession and the parties' conduct and pleadings.
Arguments of the Parties
Appellant's Arguments
- The transaction between the parties was a licence, not a lease, and therefore the respondent was not entitled to the protections of the Madras City Tenants Protection Act.
- The appellant contended that although words such as "lease" and "rent" were used in notices, the plaint and evidence, those words are not conclusive; the true nature should be determined by the substance (i.e., the actual intention and circumstances).
- The appellant pointed to his having applied for building permission for the whole plot and suggested he would not have intended to lease the front portion abutting the road in a way that would prejudicially affect the occupants of the residential building behind.
- The appellant argued the suit had been structured on the basis that the respondent was not a tenant entitled to statutory protection (trial court applied this view in decreeing possession).
Respondent's Arguments
- The respondent asserted entitlement to the benefits of the Madras City Tenants Protection Act and had applied under Section 9 to purchase the site (I.A. 2553 of 1962).
- The respondent maintained that he had exclusive possession of the suit site, had been paying rent (Rs. 15 per month), and had used the site continuously (firewood depot), supporting a finding of tenancy.
- The respondent opposed the grant of possession and sought protection/remedies available to a lessee under the relevant Act.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Associated Hotels of India Ltd v. R.N. Kapoor (Supreme Court) | (As set out in the opinion) The propositions: (1) substance of the document must be preferred to its form; (2) the real test is the intention of the parties; (3) if a document creates an interest in the property it is a lease, whereas if it only permits use while legal possession remains with the owner it is a licence. | The court applied these propositions to examine whether the transaction conferred exclusive possession or an interest; finding exclusive possession and no factors negativing intention to create a tenancy, the court treated the arrangement as a lease. |
| Mrs. M. N. Clubwala v. Fida Hussain Sahib (Supreme Court) | The Supreme Court view that the intention of the parties is the decisive consideration; intention is to be ascertained by considering relevant provisions and, in absence of a formal document, from circumstances and conduct. | The court relied on this principle to infer the parties' intention from the pleadings, conduct and exclusive possession, finding no circumstances to negative a tenancy. |
| Ramamuthi Subudhi v. Gopinath (Supreme Court) | Reiterates the distinction: substance over form; the intention of parties is the real test; exclusive possession ordinarily indicates tenancy unless circumstances establish a contrary intention. | The court followed these principles and held that exclusive possession by the respondent supported classification as a lease. |
| Chinna v. Govindaswami (per Ramapraseda Rao, J.) | The criterion for determining whether a person is a lessee or licensee depends on the parties' intention; written form is not the sole guide; exclusive right of possession and creation of an interest indicate lease. | The court cited this authority to support the proposition that exclusive possession and an interest point to a lease, reinforcing the court's conclusion. |
| Errington v. Errington (Lord Denning) | Although exclusive possession is prima facie indicative of tenancy, a person in exclusive possession will not be a tenant if surrounding circumstances negate any intention to create a tenancy. | The court acknowledged this principle but found no circumstances in the present case that negated an intention to create a tenancy; therefore Errington did not lead to a contrary result. |
Court's Reasoning and Analysis
The court proceeded by examining the pleadings, evidence and legal principles as follows:
- Pleadings and valuation: The plaint was valued under S.43(2) of the Madras Court Fees Act, 1955 (applicable to suits for possession between landlord and tenant), and the appellant's evidence (P.W.1) described the defendant as "a tenant occupying a portion" paying Rs. 15 per month and holding on a month-to-month tenancy. The court treated these as material indicia supporting a tenancy characterisation.
- Substance over form and intention: The court accepted the established legal principle that substance of the transaction and parties' intention govern the lease/licence classification rather than mere use of the words "lease" or "rent." It noted that while use of such words is not conclusive, there were no circumstances in the record inconsistent with a lease.
- Exclusive possession: The evidence showed the respondent was in exclusive possession of the suit site and used it for a trade (firewood depot). The court held that allowing the appellant to pluck coconuts within the site did not negate exclusive possession.
- Appellant's asserted contrary circumstance: The appellant's contention that seeking building permission for the entire plot indicated he would not have intended to lease the front portion was considered but rejected as insufficient to establish a contrary intention or to negate tenancy—such inconvenience would exist even if the transaction were treated as a licence.
- Reliance on precedent: The court reviewed and applied authorities which establish that the decisive test is intention (ascertained from the document's substance and the parties' conduct) and that exclusive possession typically indicates tenancy unless clear circumstances negate such intention. Applying those principles to the admitted facts, the court concluded that the relationship was in fact a lease.
- Outcome of analysis: Because the court found a lease (and found no factors negativing the intention to create a tenancy), it agreed with the lower appellate court's conclusion that the respondent was entitled to pursue remedies under Section 9 of the Madras City Tenants Protection Act; accordingly, the appeal was dismissed and the connected revision arising from the S.9 application was also dismissed.
Holding and Implications
Holding: The appeal (A.S. No. 324 of 1964) is dismissed; the court agreed with the lower appellate court that the relationship between the parties was a lease rather than a licence. The connected revision (C.R.P. 1887 of 1965 arising out of the S.9 application) is also dismissed. There is no order as to costs in either matter.
Implications:
- Direct effect on the parties: The trial court's decree in favour of the appellant (which treated the transaction as a licence and granted possession) is not sustained; the appellate conclusion that the respondent occupied under a lease stands, enabling the respondent to pursue statutory relief under Section 9 of the Madras City Tenants Protection Act (including the procedural consequences previously directed by the lower appellate court, such as determination of minimum extent under S.9(1)(b) on remand).
- Broader precedent: The opinion applies established principles from higher courts about the lease/licence distinction (substance over form; intention of the parties; exclusive possession indicating tenancy). The judgment applies those authorities to the facts but does not purport to lay down new principles; the decision follows and applies existing case law rather than creating new legal precedent.
No information beyond the contents of the provided opinion has been added. Sections include only material expressly contained in the judgment.
JUDGMENT
This appeal is directed against the decision of the learned City Civil Judge in A.S No. 324 of 1964. The facts that gave rise to this appeal may be briefly stated: The appellant herein filed a suit, O.S No. 1382 of 1962 for recovery of possession of the suit property and for arrears of rent. The suit property measured 48 ft. × 60 ft. and it is a portion of door No. 12 Doraiswami Road, T‘Nagar, Madras. The appellant filed the said suit on the basis that the suit property was given on lease to the respondent in December 1948, subject to certain conditions, that the respondent put up a shed for running a fuel shop in 1949, that subsequently he had up up a bank in 1952, that he was paying a rent of Rs. 15 per month, that the lease had been duly determined by a valid notice to quit and that he is entitled to get recovery of the suit property as well as the arrears of rent due from the defendant-respondent.
The respondent resisted the suit contending that he was entitled to the benefits of the City Tenants Protection Act, that he in willing to purchase the appellant's right in the suit property and that he had applied under S. 9 of the said Act for purchase of the property in I.A 2553 of 1962, The appellant contested the application filed by the respondent under S. 9 on the ground that the transaction between him and the respondent was not a lease but only a licence, that in any event, in as much as the suit site sought to be purchased was appurtenant to the residential building the respondent was not entitled to purchase the said site, and that the respondent had been paying only a low rental of Rs. 15 per month while the suit site can easily fetch a fair rent of Rs. 118 a month.
The trial court dismissed the application filed by the respondent under S. 9 and decreed the appellant's suit for possession on the ground that the transaction between the appellant and the respondent was one of licence and not a lease, and as such, the respondent was not entitled to claim the benefits of the City Tenants Protection Act. The matter was taken in appeal by the respondent and the lower appellate court reversed the decision of the trial court disagreeing with the findings rendered by the trial court. The lower appellate court took the view that the transaction between the parties by which the respondent came to occupy the suit site was a lease and not a licence, and that as such the respondent is entitled to the option of purchasing the same under S. 9 of the Madras City Tenants Protection Act, and remanded both I.A 2553 of 1902 and the suit for fresh disposal after finding out the minimum extent of land which may be necessary for the convenient enjoyment by the respondent as required under S. 9(1)(b) of the Act.
From the evidence adduced in the case by either of the parties, it is seen that the entire door No. 12 Doraiswami Road, T. Nagar, Madras, was purchased by the appellant in the year 1944.
[The discussion of facts is omitted—Ed.]
A reading of the entire plaint gives me the impression that the appellant instituted the suit only on the basis that the respondent was his lessee. As a matter of fact, the suit itself has been valued under S. 43(2) of the Madras Court fees Act, 1955, which applies only to suits for possession between landlord and tenant. Even in his chief-examination the appellant as P.W 1 his, stated;
“The defendant is a tenant occupying a portion of the compound of the suit premises. He is paying Rs. 15 as rent. The area demised is 48 ft. × 60 ft. Tenancy was from month to month.”
In the face of the several notices issued by the appellant and the averments in his plaint and his evidence before the court it is difficult to accept the contention advanced on his behalf that the transaction entered into in 1948 between him and the respondent was a licence and not a lease.
The learned counsel for the appellant however wants to get over all the above circumstances by saying that the mere use of the words “lease” and “rent” in the notices, plaint and in the appellant's evidence cannot be taken as conclusive and that the true nature of the transaction should be looked into and considcred for finding out whether the transaction is a lease or a licence. As pointed out by the lower appellate court from the mere use of the word “lease” or “rent” the transaction which may otherwise be a licence would not became a lease. But there are no other circumstances in this case which are inconsistent with the transaction being a lease. The only fast that is relied on by the appellant is that even at the time when the respondent occupied the suit site on a monthly payment of R. 15 he had applied for a building licence and he would not have intended to lease out the front portion abutting the road much to the detriment and inconvenience of the occupants of the reaidential building constructed in the back portion. But this fact alone may not be sufficient to establish that the appellant had no intention to lease out the suit property. As stated in the plaint he might have let out the suit site to the respondent purely as a temporary measure. Merely because the site was let out as a temporary measure, it will not make the transaction a licence in my view, the appellant would not have thought about the difference between a licence and a lease in 1948 when the respondent occupied the suit site for, at that time, the Madras City Tenants Protection Act can apply to any lessee of a vacant site before 1922 and it is only after the amending Act of 1955 leases of vacant sites after 1922 came to be attracted by the Act. The evidence in this case discloses that the respondent was in exclusive possession of the property in his occupation and the mere fact that the appellant was allowed to pluck the coconuts in the trees situate within the suit site cannot in taken to establish the fact that the respondent was not in exclusive possession of the suit site. In the facts and circumstances of this case I am not in a position to say that the transaction between the appellant and the respondent was in the nature of a licence and not a lease.
The distinction between a lease and a licence has been pointed out by the Supreme Court in Associated Hotels Of India Ltd v. R.N Kapoor(1) wherein the following propositions were laid down as well established:
1. To ascertain whether a document creates a licence or lease, the substance of the document must be preferred to the form;
2. The real test is the intention of the parties whether they intended to create a lease or a licence;
3. If the document creates an interest in the property, it is a lease; but, if it only permits another to make use of the property, of which the legal possession continues with the owner, it is a licence.
In Mrs. M.N Clubwala v. Fida Hussain Sahib(2) the Supreme Court expressed the view that intention of the parties in the decisive consideration for finding out whether the agreement between the parties creased a relationship of landlord and tenant or merely that of a licensor and licensee, that the intention of the parties has to be ascertained on a consideration of all the relevant provisions in the agreement and that in the absence of a formal document the intention must be inferred from the circumstances and conduct of the parties. Again in Ramamuthi Subudhi v. Gopinath(3) the distinction between a lease and licence has been pointed out. According to the learned Judges of the Supreme Court to ascertain whether a document creates a lease or licence, the substance, of the document must be preferred to the form. The real test in the intention of the parties—whether they intended to create a lease or licence, that if the document creates an interest in the property, it is a lease; but if it only permits another to make use of the property, of which the legal possession continues with the owner, it is a licence and that if under the document a party gets exclusive possession of the property, prima face, he is considered to be a tenant, unless circumstances established the negative intention. Ramapraseda Rao, J. in Chinna v. Govindaswami(4) expressed that the criterion to determine whether a particular person is a lessee of a licencee mainly depends upon the intention of the parties and if such relationship is reduced to writing it is not by itself the sole guide and that if, however, one party has the exclusive right of possession over the property and if an interest in the property is created, it ought to be construed as a lease.
Following the principles laid down in the above decisions, if the facts established in this case are analysed, it clearly establishes that the respondent was in exclusive possession of the suit site on payment of a monthly rent of Rs. 15 for running his firewood depot and from the user to which the suit site has been put by the respondent it has to be taken that he was in exclusive possession of the property. It is true that as pointed out by Lord Denning in Errington v. Errington although a person who is let into exclusive possession is, prima facie, considered to be a tenant, nevertheless he will not be held to be so if the circumstances negative any intention to create a tenancy. In this case I am not in a position to see any circumstances which negative any intention to create a tenancy. The only circumstance pointed out by the appellants that he had appled for construction of a building in the entire plot and has enclosed the same by a compound wall with two gates and that it cannot be presumed that he intruded to let out the properties putting himself to considerable inconvenience. Even if the transactions treated as a licence still, the inconvenience will be there. Hence that circumstance alone will not disprove the intention to lease the property.
In the rasuit I agree with the conclusion arrived at by the lower appellate court and dismiss the appeal. There will, however, be no order as to costs. The connected revision, C.R.P 1887 of 1965 arising out of S. 9 application is also dismissed. No costs.
V.C.S
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