LEASE AND

LICENCE
MEANING OF LEASE; TYPES OF LEASE; RIGHTS AND DUTIES OF LESSOR & LESSEE.
 LEASE HOW MADE – SECTION 107, TPA

A lease of immoveable property from year to year, or for any term exceeding one year or
reserving a yearly rent, can be made only by a registered instrument.
All other leases of immoveable property may be made either by a registered instrument or by
oral agreement accompanied by delivery of possession.
Where a lease of immoveable property is made by a registered instrument, such instrument or,
where there are more instruments than one, each such instrument shall be executed by both the
lessor and the lessee…
 A lease of immoveable 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.
LEASE: SEC 105
Lessor, lessee, premium and rent defined. — 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.
 DECONSTRUCTING SECTION 105, TPA

v Transfer of an interest: Right of Enjoyment

- Right in rem
- Transferability
- Heritability
vParties to the lease – Lessor (i.e., landlord) & lessee (tenant) - Competent to contract
vSubject matter of lease – Immovable property
 DECONSTRUCTING SECTION 105, TPA

vConsideration for lease –

- money / money’s worth / service / anything of value
- Rent + Premium/ Only Rent/ Only Premium
- Lease without consideration – invalid
- Rent must be certain or ascertainable – revision clause
 DIFFERENCE BETWEEN RENT & PREMIUM

Fazl Ali J.,(as he then was in CIT Bihar & Orissa v. Visweshwar Singh referred to the distinction between a
single payment made at the time of the settlement of the demised property and recurring payments made
during the period of its enjoyment by the lessee. This distinction, according to the learned Judge, is clearly
recognised in s. 105 of the Transfer of Property Act which defines-both premium and rent. This is what was
observed at page 545 "It is obvious that if the premium represents the whole or part of the price
of the land it cannot be income. As pointed out by Sir George Lowndes in the Commissioner of
Income tax, Bengal v. Messrs. Shaw Wallace & Company: income in the Indian Income-tax Act 'connotes a
periodical monetary return, coming in 'with some sort of regularity or expected regularity from definite
sources. The premium of salami which is paid once for all 'and is not recurring payment, hardly satisfies this
test. I concede that in some cases' where the rent is ridiculously low and the premium abnormally high, it
may be possible to argue that the premium includes advance rent....... Grover, J in Durga Das Khanna v. CIT.
TYPES OF LEASE

• Classification On the Basis of Lessor’s Interest

- Absolute Lease or Primary Lease
- Derivative Lease or Sub-Lease
• Classification On the Basis of Duration
- Lease for a fixed term
- Periodic Lease
- Lease in Perpetuity/Permanent Lease
ALLIED CONCEPTS

Tenancy at Will
§ Consensual Continuation of possession
§ ‘Occupier’
§ Terminable by either party
§ ‘Contract to the contrary’ – S 106
§ Where a tenant agrees to live as long as the landlord allows him to do so or vacate the
premises when he desires him to do so, it is a tenancy at will and no registration is required. A
tenancy at will terminable at the will of either party is a ‘contract to the contrary’ within the
meaning of sections 106 and 116 of TPA, 1882.
ALLIED CONCEPTS

Tenancy at Sufferance
§ Non consensual continuation of possession
§ Legal fiction created to exclude from counting as trespass
§ A tenancy at sufferance does not create the relationship of landlord and tenant and such
a tenant is not entitled to a notice to quit.
‘Demise’/ ‘Demised Property’ – Usage, English Law, to denote the partial transfer in a lease
SIVAYOGESWARA Facts: 1914: Gurupadappa leased agricultural land to N. J.
COTTON PRESS V. M.
PANCHAKSHARAPPA Gamodia for the purpose of setting up a Ginning and
AIR 1962 SC 413 Pressing Cotton Factory – Gamodia died in 1916 leaving a will
– further assigned to Gamodia factories in 1933 – further to
appellant in 1944 – Lessor died in 1939 – Widows
continued to receive rent - adopted son wanted to
terminate the lease on the basis that the lease had
created a tenancy at will in the events that had happened.
Issue: what is the nature of the lease deed?

“The controversy between the parties depends upon the true

construction of the lease dated October 26, 1914, executed
between the predecessors-in-interest of the parties to the
present litigation.”
 TERMS OF THE DEED

Terms:
1st 20 years: Rent Rs. 350; then option to continue at Rs. 400/year for 10 years and post that 500/ year
• You shall always be at full liberty to give up the said land the said road and terminate this lease at any time you may
desire so to do after the 1st October, 1934….But I agree and bind myself not to call upon you at any time to give up
the possession of the said land and the said road as long as you may desire to keep the same for your purposes
observing the terms of this agreement.
• Liberty to construct buildings and tear down existing ones at will.("to erect, as many buildings, godowns,
factories, bungalows and other structures etc.." as also to pull down and re-erect structures or to
make any altera- tions, as desired by him.”)
• Sub-let or re-let at your will.
• Binding on the heirs and successors in interest of the lessor and the lessee.
The task therefore in the present case is to determine what the parties really
intended to do. Where the land is let out for building purposes without a fixed period, the
presumption is that it was intended to create a permanent tenancy. That the lease was not
intended to be for the life only of the grantee is clear not only from the facts already noticed,
namely, that it was meant for building purposes, was heritable and assignable and had not
reserved any right to the lessor to terminate the tenancy, but also from the consideration that
the lessor would not gamble upon the life of his lessee when he was making sure of the term
of at least twenty years. He must have known that if the factory worked for twenty years, it
would go on for ever, according to human calculations.
SIVAYOGESWARA COTTON PRESS V. M.
PANCHAKSHARAPPA
…Though there was liberty reserved for the lessee or his successor to give up the lease-hold at any
time after October 1, 1934, no corresponding right was reserved to the lessor. Thus there is no
room for the controversy which has occupied a large portion of the judgments of the courts below,
that reservation of the right to the lessee to surrender possession at any time, imported a
corresponding right to the lessor to call upon the lessee to give up possession. It was an advantage
specifically reserved to the lessee without any corresponding benefit to the lessor. It is equally
clear that the lease was heritable and assignable. Thus there is no difficulty in holding that
there is no room for the contention, on the terms of the lease, that the parties intended that
after the lapse of the first 20 years of the lease, the tenancy will be merely a tenancy at will.
It was clearly a tenancy for an indefinite period, at the least.
 SIVAYOGESWARA COTTON PRESS V. M.
PANCHAKSHARAPPA [JUDGEMENT]
We are in complete agreement with the following observations of the court made in that case, which in our opinion apply to the facts
and circumstances of the case in hand "The forms in which tenancy rights are created in India are not uniform and they do not
conform to precedents known to conveyancing ; sometimes the words used are not precise and it is not easy to understand from the
said words the intention of the parties in executing the documents. Leases are often executed without legal assistance; and the aid
that the parties obtain from professional scribes does not always contribute to make the terms clear or precise. The nature of the
tenancy created by any document must nevertheless be determined by construing the document as a whole. If the tenancy is for a
building purpose, prima facie it may be arguable that it is intended for the life-time of the lessee or may in certain cases be even a
permanent lease. Prima facie such a lease is not intended to be tenancy at will. But whether it is a tenancy for life or a
permanent…tenancy must ultimately depend upon the terms of the contract itself. And in construing the terms of
'such contracts the courts must look at the substance of the Matter And decide what the parties really intended to
do."
 INTENTION OF THE PARTIES

In this connection, it is pertinent to' re-emphasise the following facts : the lessee with a view to raises a substantial structure by way of factory
premises, residential quarters and other appurtenant buildings, took a lease of extensive land, about 4-1/2 acres in area ; those lands, at the time of the
transaction in question, were being used for agricultural purposes with the permission of the Government who were the ultimate owners. Its character
could be changed with the permission of the Government on payment of certain prescribed fees and charges. The parties could not he certain of
obtaining the necessary Government sanction to the conversion of the tenancy from agricultural to building purposes. Therefore the stipulation was
clearly made that in the event of the Government refusing to sanction the conversion, the lease will be deemed to have come to an end. If the
permission were forthcoming, and if the lessee put up substantial structures, it would be in his interest to continue in possession of the premises
demised by the lease as long as he found it worth his while, but the lessee may have apprehended that circumstances might supervene necessitating his
walking out of the venture. He therefore had to make provision in the lease entitling him to surrender the lease so as to avoid the liability for payment
of future rents. But the lessor on his part would be equally anxious to conserve his rights and therefore 'he 'insisted upon the payment of rent for at
least 20 years irrespective of the consideration whether or not 'the tenant continued to occupy the premises. Thereafter, the lessor stipulated for
enhanced rent of Rs.;. 400/- per annum for the first ton years after the initial period of twenty years aforesaid, and Rs. 500/- thereafter for all times that
the lessee continued to occupy the premises. It could not therefore have been in the contemplation of the parties that the lease should be only for the
life of the grantee or for an indefinite period which could be terminated at the will of the lessor. In order to ensure that the lessor, should not eject the
lessee, at his sweet will, the term was specifically included in the lease that it will not be open to the lessor to do so. It must, therefore, be held that a
stipulation entitling the lessee to surrender possession of the premises at his will is not wholly inconsistent with the tenancy being permanent.
SIVAYOGESWARA COTTON PRESS V. M.
PANCHAKSHARAPPA [JUDGEMENT]
… The presumption in favour of the transaction creating a permanent lease
cannot be held to have been rebutted by a stipulation in favour of the tenant
having the right to surrender the lease at his choice. That being so, it must be
held that the lease deed evidences an intention to create a permanent lease. In
view of this finding, it is not necessary to advert to the other contentions raised
on behalf of the appellants.
DURATION OF LEASE
& NOTICE
 DURATION IN ABSENCE OF WRITTEN CONTRACT
OR LOCAL USAGE – SECTION 106

(1) In the absence of a contract or local law or usage to the contrary, a lease of immovable property
for agricultural or manufacturing purposes shall be deemed to be a lease from year to year,
terminable, on the part of either lessor or lessee, by six months' notice; and a lease of immovable
property for any other purpose shall be deemed to be a lease from month to month, terminable,
on the part of either lessor or lessee, by fifteen days' notice.
(2) Notwithstanding anything contained in any other law for the time being in force, the period
mentioned in sub-section (1) shall commence from the date of receipt of notice.
 DEED SILENT ON NO RULE OF
DECONSTRUCTING DURATION AND TIME
PERIOD OF NOTICE
CONTRACT/LOCAL
LAW/USAGE TO
CONSTRUCTION

SECTION 106 CONTRARY

PURPOSE TO BE
ASCERTAINED WITH
REFERENCE TO TIME OF
ORIGIN
DHANPAL CHETTIAR V YESODAI AMMAL
(SC 1979)
• Respondent (Lessor) filed application of eviction against Appellant (lessee) – personal
necessity (S 10, TN RCA, 1960)
• Rent Controller – no genuine requirement, HC – Requirement, but notice u/S 106 missing,
DB – reversed
• SC – Issue: The question as to whether in order to get a decree or order for eviction against
a tenant under any State Rent Control Act it is necessary to give a notice under Section
106 of the Transfer of Property Act. Is there a dual requirement to serve notices? First
under the state act and then under the TP Act? Whether such a notice was at all
necessary to be given?
 OVERVIEW OF RENT CONTROL ACTS

“It is well-known that after the second world war to give protection to a tenant against unnecessary, undue or
unreasonable eviction and in the matter of being exploited for payment of exorbitant rent all States in India at
one time or the other passed Building and Rent Control Acts. The Rent Act is intended to restrict the rights
which the landlord possessed either for charging excessive rents or for evicting tenants. Amendments in them
were brought about from time to time. The language and the scheme of the Acts varied and differed from State
to State…But in all social legislations meant for the protection of the needy, not necessarily the so-called
weaker section of the society as is commonly and popularly called, there is appreciable inroad on the freedom
of contract and a person becomes a tenant of a landlord even against his wishes on the allotment of a
particular premises to him by the authority concerned…
 DHANPAL CHETTIAR V YESODAI AMMAL

Notice
If the State Rent Act requires the giving of a particular type of notice in order to get a
particular kind of relief, such a notice will have to be given. Or, it may be, that a landlord will
be well advised by way of abundant precaution and in order to lend additional support to his
case, to give a notice to his tenant intimating that he intended to file a suit against him for his
eviction on the ground mentioned in the notice. But that is not to say that such a notice is
compulsory or obligatory or that it must fulfil all the technical requirements of section 106 of
the Transfer of Property Act.
NOTICE IN RENT CONTROL ACTS & SECTION 106

… Over and above the protection under the Thika Tenancy Act clause 7 of the lease deed
gave an extra protection of getting six months notice to quit and vacate the premises. In
that event one can say that such a clause being not unlawful and giving an extra protection
to the tenant against eviction must also be adhered to. But it is not correct to say
that section 106 of the Transfer of Property Act merely providing for termination of a lease
either by the lessor or the lessee by giving the requisite notice is an extra protection against
eviction. The purpose of this provision is merely to terminate the contract which the
overriding Rent Acts do not permit to be terminated…For the reasons stated above we hold
that the High Court was right in its view that no notice to quit was necessary under section 106 of
the Transfer of Property Act in order to enable the landlady-respondent to get an order of eviction
against the tenant-appellant.
SHANTI DEVI V AMAL KUMAR BANERJEE

Facts:
1956: ‘Shanti House’ – lease – 4 years + 2 renewals of 3 years each
Condition – Commencement upon License (obtained in 1960)
1970: Suit for ejectment
Lower Courts: Notice served u/S 106; HC: Notice not served
Question: Applicability of S 106
 SHANTI DEVI V AMAL KUMAR BANERJEE

There can be no doubt that the High Court and the courts below have without applying
their mind as to the question whether Section 106 of the Transfer of Property Act was
applicable or not, proceeded to deal with the question as to the validity of the notice, on the
assumption that the lease was a lease from month to month. They have completely
overlooked the fact that the lease was for a term of four years with a covenant for
renewal for two terms of three years each, i.e., a lease for a definite duration of ten
years.
 SHANTI DEVI V AMAL KUMAR BANERJEE

• Clause (g) of the first part which deals with the lessee's covenants, provides that the lessee
shall at the expiration of the said term or at the expiration of the renewed term, if any,
peaceably and quietly deliver possession of the cinema theatre to the lessor
• The lease was a lease for a definite term and, therefore, expired by efflux of time by
reason of Section 111(a) of the Transfer of Property Act. That being so, the service of
a notice under Section 106 of the Transfer of Property Act was not necessary.
RIGHTS AND DUTIES – S 108

v Section 108 Duties of Lessor

• Disclosure: material defect not discoverable with ordinary care (108 A (a))
• Possession - (108 A (b))
• Covenant against interruption of enjoyment of lease - (108 A (c))
v Rights of Lessee
• Right to enjoy accretions to the property - (108 B (d))
• Right to Revoke Lease in the Event of Destruction of Property by fire, etc. - (108 B (e))
• Right to Repair Property and Claim Costs in the Event of Lessor’s Neglect - (108 B (f))
• Right to Make Payments Obligatory on Lessor - (108 B (g))
• Right to Remove Fixtures - (108 B (h))
• Right to the benefit of crops grown by him - (108 B (i))
• Right to Assign the Lease - (108 B (j))
v Liabilities of Lessee
• Duty of Disclosure
• Obligation to Pay Rent
• Duty of Maintaining the Property
• Duty to give notice of any encroachment on the Property
LEASE VS LICENCE
 LICENCE

v Definition: Section 52, Indian Easements Act, 1882

Where one person grants to another, or to a definite number of other
persons, a right to do, or continue to do, in or upon the immovable
property of the grantor, something which would, in the absence of
such right, be unlawful, and such right does not amount to an
easement or an interest in the property, the right is called a licence.
 WHAT IS THE DIFFERENCE?

• Application of Section 106 TPA or Section 52 of Easements Act?

• Property Interest? In favor of who?
• Transferable & Heritability?
• Termination
• Withdrawal
• 3rd Party
• Effect of Encorachment
• Improvements
vNo Litmus Test
vDependent Upon Intention
vFactors To Be Considered: (See previous slide)
• Exclusive Possession
• Transferability and Heritability
• Consequence upon death of either party
• Ending the relationship
• Consequence upon sale of underlying property
• Rights against a trespasser
ASSOCIATED HOTELS OF INDIA LTD. V.
R.N. KAPOOR AIR 1959 SC 1262

vR.N. Kapoor – Hairdresser – cloakrooms in AHI – document

described as a ‘license’ – Rs 800/month and later Rs. 700/month
- wanted standardization of rent under Delhi and Ajmere-
Merwara Rent Control Act, 1947
vWhy was it relevant for the Court to decide whether the
agreement amounted to a lease or license?
vRent Controller – Rs. 94 pm, Distt Court – Set aside Controller’s
order, HC - Reversed

This Photo by Unknown Author is licensed under CC BY-SA

TERMS

The following are its terms and conditions:1. In pursuance of the said agreement, the Licensor hereby grants to the
Licensee, Leave and License to use and occupy the said premises to carry on their business of Hair Dressers from 1st May,
1949 to 30th April, 1950. 2. That the charges of such use and occupation shall be Rs. 9,600 a year payable in four quarterly
installments i.e., 1st immediately on signing the contract, 2nd on the 1st of August, 1949, 3rd on the 1st November, 1949
and the 4th on the 1st February, 1950, whether the Licensee occupy the premises and carry on the business or not. 3.
That in the first instance the Licensor shall allow to the Licensee leave and license to use and occupy the said premises for
a period of one year only. 4. That the licensee shall have the opportunity of further extension of the period of license after
the expiry of one year at the option of the licensor on the same terms and conditions but in any case the licensee shall
intimate their desire for an extension at least three months prior to the expiry of one year from the date of the
execution of this DEED. 5. The licensee shall use the premises as at present fitted and keep the same in good condition.
The licensor shall not supply any fitting or fixture more then what exists in the premises for the present. The licensee will
have their power and light meters and will pay for electric charges. 6. That the licensee shall not make any alterations in
the premises without the prior consent in writing from the licensor.
ASSOCIATED HOTELS OF INDIA LTD.V. R.N.
KAPOOR
Quoting Denning LJ (in Errington v Errington) : The following propositions may, therefore, be taken 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;
and
(4) if under the document a party gets exclusive possession of the property, prima facie, he is
considered to be a tenant; but circumstances may be established which negative the intention to
create a lease.
ASSOCIATED HOTELS OF INDIA LTD.V. R.N.
KAPOOR
Lease or License (Subba Rao, J)
Judged by the said tests, it is not possible to hold that the document is one of license. Certainly it
does not confer only a bare personal privilege on the respondent to make use of the rooms. It puts
him in exclusive possession of them, untrammelled by the control and free from the directions of
the appellants. The covenants are those that are usually found or expected to be included in a lease
deed. The right of the respondent to transfer his interest under the document, although with the
consent of the appellants, is destructive of any theory of licence. The intention of the parties is
clearly manifest, and the clever phraseology used or the ingenuity of the document-writer hardly
conceals the real intent. I, therefore, hold that under the document there was transfer of a right to
enjoy the two rooms, and, therefore, it created a tenancy in favour of the respondent.
ASSOCIATED HOTELS OF INDIA LTD.V. R.N.
KAPOOR
(Outcome: Rent Control Act not applicable due to an exception clause for ‘hotel rooms’ –
Appeal allowed)
 ILLUSTRATION (DELTA INTERNATIONAL LTD V SHYAM
SUNDER GANERIWALLA )
Ananya had created a lease in favour of Bumrah. Bumrah in turn created an agreement with
Chaturvedi styled as a lease and licence for running a petrol pump, a service station and for
sale of a motor spare parts. Bumrah was not empowered under the agreement to create a
sub-tenancy of the interest that he had in the property without the consent of the landlord.
In the deed it was specifically mentioned that the licence is granted for the purposes of use,
occupy, enjoy, run and work the petrol station and that Bumrah was empowered to revoke
the licence in the event of a breach of any condition.
 SOLUTION

• What is the pith and substance of the document?

• What is the intention of the parties?
• Type of Possession?
• Purpose of the possession
 ILLUSTRATION

If the exclusive possession of an apartment or a flat or a shop is delivered by the owner for a
monthly consideration without retaining any manner of control, it will be a lease irrespective
of whether the arrangement is called by the owner as a `lease', or `licence'. As far as the person
who is let into exclusive possession, the quality and nature of his rights in respect of the
premises will be that of a lessee or a tenant and not that of a licensee. Obviously such a
‘licensee’ cannot be ‘evicted’ or ‘dispossessed’ or prevented from using the premises without
initiating legal action in accordance with law.
 ILLUSTRATION

In a shopping complex or in a mall the owner gives a licence to a person to use

a counter to sell his goods in consideration of a fee. The access is controlled by
the licensor and there is no exclusive use of any specific space by the licensee.
At the end of the day, the licensee can close the counter. The space around the
counter is visited and used by customers to the mall and not exclusively by the
customers of the licensee.
 ILLUSTRATION

A much narrower version of a licence is where an exhibitor of cinematograph films, or a

theatre owner permits a `customer' or `guest' to visit an entertainment hall to view and enjoy a
movie or a show for the price of a ticket. The licensee is permitted to occupy a seat in the
theatre exclusively for the period of the show. Or a cloakroom with toilet facilities in a public
building permits a visitor to use the toilet/closet facilities on payment of a fee. The licensee is
permitted to use the toilet/closet exclusively to relieve himself. In such cases, the license is for a
specific purpose and for a specific period. The licensee has no other right to enter the premises,
nor the right to continue to occupy the seat in the theatre or use the toilet/closet continuously.
Such a licensee can be forcibly removed by the licensor if the licensee overstays or continues to
occupy the seat beyond the show. It is not necessary for the licensor to sue the licensee.