The burning question before us at present, appears to be the distinction between a

lease and a licence. This delicate question has been brought before the Supreme Court
more than once, which fact in itself indicates that we are still wanting a clear-cut
distinction between the two terms, lest we repeat our past errors.
The most recent decision which I have at hand is the one inSohan Lal
Naraindas v. Laxmidas Raghunath Gadit, reported in (1971) 1 SCC 276: (1971) 2
SCJ 583: (1972) Bom LR 144 (SC), where Their Lordships of the Supreme Court held
that the crucial test is the intention of the parties, i.e. whether they intended to create a
lease or a licence, and that the test of exclusive possession, though not decisive is of
significance. Such reasoning was expressed earlier in Ramamurthy
Subudhyv. Gopinath (AIR 1968 SC 919) and in M.N. Clubwala (Mrs) v.Fida
Hussain (AIR 1965 SC 610) and also in Associated Hotels of India
Limited v. R.N. Kapoor (AIR 1959 SC 1262), where Their Lordships held that the
document by itself could not be a deciding factor whether a particular transaction was
a lease or a licence.
THE DISTINCTION

Section 105 of the Transfer of Property Act, reads:

"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 transfree is called the lessee, the price is called
the premium, and the money, share, service or any other thing to be so rendered is
called the rent."
Section 52 of the Easements Act reads:
"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."

If we focus our attention only upon the question of rights in the above two definitions,
we find that in both cases there is a transfer of a right. It may be noted that in a lease
the Right consists in enjoying such property transferred, and so also in a licence the
Right consists in doing something in or upon the immovable property of the Licensor,
though without the creation of an interest in the property.
Although it is not clearly stated that a lease creates an interest in the property,
inasmuch as the opposite is stated in case of a licence, yet by judicial dicta we have
come to believe that a lease creates an interest in the property merely to highlight a
contradistinction between a lease and a licence. We have, therefore, imputed such
creation of a right or interest in the property, not due to the existence of a positive
statement to that effect in the definition of a lease, but merely because of the statement
of its non-creation in case of a licence.
This imputation of the creation of a right in the property in case of lease, is in reality a
high overtone because all that follows from the definition is that the transfer is solely
of 'a right to enjoy' which is equivalent to the 'right to do so, in or upon the
immovable property,' as stated in the definition of a licence.
Considering that the Transfer of Property Act and the Indian Easements Act, were
both passed in the same year, 1882, obviously the concept of a Right would not have
been different. We cannot conceive that a lease gives a right to enjoy the property in
any manner the transferee feels best, as against a licensee who could have his rights
directed in a particular manner as per the terms of the grant. In fact, we are quite
settled on the principle that if a tenant does any alteration/modification/improvement,
etc., he does so at his own risk, since he does not have any property rights over the
subject-matter of the demise, and he would not be allowed to contend that he had
rights in the property due to which he did the alteration/modification. As long as he
keeps on paying the rent, the dichotomy of owner and tenant shall subsist and
consequently his interest in the property is in no way better or, is as precarious as that
of the licensee.
As against this, we find that Section 60(b) of the Easements Act clearly states that a
licence becomes irrevocable when "the licensee, acting upon the licence has executed
a work of permanent character and incurred expenses in the execution", which goes to
show that a licensee can create rights in the property, or, for every practical effect, he

is on a safer position than a tenant, whose tenancy could always be terminated with an
appropriate notice as provided in Section 106 of the Transfer of Property Act.
No doubt, we can still argue that the security in tenure of the licensee arises not by
virtue of the creation of "an interest in the property" but in the creation of a right over
the property, i.e. his rights are purely above the surface of the land, as against the
rights of the owner which lie from the surface to below.
But if we adopt this argument, we reach a paradoxical situation. We conceive that the
interests of the licensee restricts only to the structure above the surface. Then, does the
structure have no foundation? Aren't these foundations embedded in the soil? Is this
not immovable property? Does not this structure with its foundation constitutes an
integral whole? Can we then conceive immovable property as layers of movable
property put together? The obvious answer is "NO". The conclusion is that a licensee
can acquire interest in the property if he, under the licence, puts up a work of
permanent character and incurs expenditure.
The statement, therefore, that a lease alone creates interest in the land and that the
licence does not so create, is definitely a high overtone due to the laying of too great
an emphasis on the words "does not amount to an easement or an interest in the
property" as found in the definition of a licence, as against its absence in the definition
of a lease.
A DEPARTURE

It is elementary to state that a definition, in order to conform to the rules of logic,

must be "per genus et diferentium". If we turn to the definition of the licence as per
Section 52 of the Easements Act it surely has a "genus" and a "diferentium";
thegenus is a wider category to which it belongs, viz. the right which is acquired
under the grant and the diferentium is the right which "does not amount to an
easement or an interest in the property". Such diferentium, no doubt, has been used to
distinguish a licence from an easement, considering that an easement, as defined in
Section 4 of the Easements Act clearly indicates that it is a right which creates an
interest over the property of another. The qualification that a licence does not create an
interest in the property therefore, is used in contradistinction or as a diferentium to the
definition of an Easement. When this diferentium or contradistinction is dislodged

from the context of the Easements Act and is used to contradistinguish or differentiate
from a lease, it obviously loses all its sense and causes all the confusion.
With due respect to all the established authority therefore, I beg to submit that the
theory which tries to create a dichotomy between a lease and a licence on the basis
that the former creates an interest in the property and that the latter does not, is surely
untenable. The respective definition of lease and licence have their proper meanings
within the context of their respective acts, viz. the Transfer of Property Act and
Easements Act. But when we try to establish a universality to these definitions and set
one against the other by extricating them from their respective contexts, we find that
we reach paradoxical situations and get into a wild-goose chase.
If this be not so, let us test the orthodox theory once again. When highlighting the
distinction between Lease and Licence, it is noted in Mulla's Commentaries on the
Transfer of Property Act (5th Edn., 1966 at p. 659) that a licence "does not entitle the
Licensee to sue a stranger in his own name" apparently under the orthodox notion that
a licensee has no interest in the property. If this statement be true, does it mean that a
licensee cannot evict a trespasser? Can he not maintain a suit based on his possessory
right? Surely he can. How can we then accept the statement as given in Mulla?
One may still argue that to file a suit based on the possessory right, is a right which a
possessor/licensee has over the property and not in the property. My comment to this
is that such reasoning is a sheer absurdity. I concede that there can be possession of
"incorporeal rights", but considering that in licences, we are dealing only
with tangible property it is obvious that our possessory right is not in the abstract but
over a tangible property. Such possession therefore crystallises upon the
"corpus"/subject-matter, i.e. the property licensed and hence the argument that one
right emanates from over the property and not from in the property, is a sheer
sophistry.
AN ASSESSMENT

In the decision in Sohan Lal Naraindas v. Laxmidas Raghunath Gadit reported in

(1971) 1 SCC 276: (1971) 2 SCJ 583: 1972 Bom LR 144 (SC), Their Lordships of the
Supreme Court write:
"Intention of the parties to an instrument must be gathered from the terms of the
agreement examined in the light of the surrounding circumstances. The description

given by the parties may be evidence of their intentions but is not decisive. Mere use
of the words appropriate to the creation of a lease will not preclude the agreement
operating as a licence. A recital that the agreement does not create a tenancy is also
not decisive. The crucial test in each case is whether the instrument is intended to
create or not to create an interest in the property the subject-matter of the agreement.
If it is in fact intended to create an interest in the property, it is a lease. If it does not it
is a licence. In determining whether an agreement creates a lease or a licence the test
of exclusive possession though not decisive is of significance."
Let us try to study the above passage by splitting up into three parts as follows:
First Part."Intention of the parties to an instrument must be gathered from the
terms of the agreement examined in light of surrounding circumstances. The
description given by the parties may be evidence of their intention but is not decisive.
Mere use of the words appropriate to the creation of the lease will not preclude the
agreement operating as a licence. A recital that the agreement does not create a
tenancy is also not decisive."
It follows from the above that intention overrides the written document; that even
though the document is styled as a lease, yet it may be a licence; that even an
averment that the document is not a lease, is inadequate. In short, the Supreme Court
feels that we should allow the parties to retract from their written commitment by
alleging some intentions, which would suit best their conveniences at the time of
litigation.
And with such rationale as adopted by the Supreme Court, the reader is preplexed as
to what is the fate of Section 92 of the Evidence Act which excludes evidence of any
oral agreement or statement for the purpose of contradicting, varying, adding or
subtracting from the written terms of the contract. Does not the rationale of the
Supreme Court violate the provisions of Section 92 of the Evidence Act? The obvious
answer is 'yes'.
Section 35 of the Stamp Act, clearly states that instruments not duly stamped are
inadmissible in evidence. No doubt, this provision is more in the nature of hindrance
to the plaintiff than to the defendant, because it is the plaintiff who will place reliance
on it, whereas the defendant will be interested only in destroying it. But it is possible
to conceive (as it often happens) that the Plaintiff is interested in trying to class the

document as a lease, notwithstanding that it is written as a licence, and institute

eviction proceedings in the Rent Tribunal so as to pay a lower Court Fee, as the Rent
Tribunals have a fixed Court Fee which is lower than the regular Court Fee prescribed
for recovering possession of immovable properties.
Thus, if the above ratio is to be of a universal application, i.e. both to the plaintiff and
the defendant, we reach the conclusion that its effect is only to leave the doors wide
open for the plaintiff to violate this Section 35 of the Stamp Act.
Similarly, Section 17(1) of the Registration Act makes leases from year to year or
from periods exceeding one year, compulsorily registerable; and Section 49(c) of the
Registration Act, categorically states that a document not registered as per the
requirements of Section 17, shall not be received in evidence.
How, then will a party be allowed to class a document differently when he has clearly
violated the provisions of the Registration Act? How, will then an unregistered
instrument creating a lease (since a licence is not required to be registered) be
accepted in evidence? If the instrument creating a licence is registered, it is all the
worse. How will the party be allowed to retract from his admission made before the
registering authority?
From the above discussion, I beg to submit that the rationale adopted by Their
Lordships of the Supreme Court is far from satisfactory. And with this, I shall pass on
to examine the second part of the passage reproduced above.
Second Part."The crucial test in each case is whether the instrument is intended to
create or not to create an interest in the property the subject-matter of the agreement.
If it is in fact intended to create an interest in the property, it is a lease. If it does not, it
is a licence."
I think that I need not comment at length on this passage as I have already dealt with it
above, under the sub-heading "A DEPARTURE".
To put it shortly, I beg to stress that the attempt in trying to establish a dichotomy on
the basis of the interest created in the property is a monument of misdirected energy.
As I noted above, the fact that the definition of the licence states that it does not create
an interest in the property, has to be understood in its proper context, viz. when put in
contrast to an easement and not when it is put in contrast with a lease. The logical

definition of lease and licence lose all their meaning when withdrawn from their
contexts of their respective Acts.
I, therefore, beg to submit that this passage loses all its force.
Third Part."In determining whether an agreement creates a lease or a licence the
test of exclusive possession though not decisive is of significance."
Let us conceive that I give my rooms on a licence to someone. Does it mean that I can
invade into his privacy? Does it mean that I can treat these rooms as a waiting room in
Railway Station? What then is the good in saying that I still retain possession over
these rooms and that my licensee has no exclusive possession? Will the mere fact of
my keeping some items of furniture (say a bed-cum-sofa, as it is usually done in
Bombay) give me joint possession over the room? I may at the most claim possession
over these items of furniture, but surely it would be absurd to say that my licensee did
not have exclusive possession.
If one is not prepared to accept this reasoning, then I may ask:
What about the electric fittings installed by a landlord in the premises leased by him
to his tenant?
Or think of a lease agreement where the landlord stipulates a clause to enter and
inspect the premises at any time. Does it abridge the exclusive possession of the
tenant? No doubt, the owner, whether lessor or licensor always retains constructive
possession. But what we are concerned, is actual physical possession while
establishing exclusiveness. And we find that exclusive possession exists both in cases
of leases as well as in case of licences.
My submission, therefore, is, that exclusive possession is no test at all.
THE CRUCIAL TEST

With due respect to all the authorities, I beg to submit that if we are to follow the law
strictly, we would not be allowed to look beyond the document. We shall have to take
the document, either as a lease or a licence, on its face value and that would be in
consonance with Section 92 of the Evidence Act and Section 35 of the Stamp Act and
Section 49(c) of the Registration Act. Besides, it would be in consonance with the

principle of 'Estoppel by Deed' as envisaged in Section 115 of the Evidence Act,

which principle rests upon a fundamental rule that "No man shall be allowed to
dispute his own solemn Deed", as rightly expressed by Lord Mansfield.
How would the Court feel if a person who executes a sale deed, on finding that the
price of the property sold, has shot up, all of a sudden turns the corner and affirms that
he really intended to execute a mortgage by conditional sale?
In a very recent decision from Bombay, viz. Belapur Company
Limited v. Maharashtra State Farming Corporation, reported in 1972 Bom LR 246,
His Lordship Justice Vimadalal, has considered very extensively the ambit of proviso
(6) to Section 92 of the Evidence Act.
Justice Vimadalal, after analysing a catena of authorities and reported decisions,
mostly of the Supreme Court, expounded a very sound principle of law, that the
fundamental rule of construction of a document is to ascertain the intention of the
parties to it from the words used in the document which is considered to be the written
declaration of their minds. If the words are clear of the intentions expressed and the
language applies to existing facts, extrinsic evidence is inadmissible for construing the
deed or for ascertaining the real intention. Extrinsic evidence is admissible only to
explain doubtful words. The subsequent conduct of the parties is not relevant or
admissible for the purpose of construing a written document and consequently
whatever transpired subsequent to the written contract is not admissible for
ascertaining the terms.
In the above cited decision, reliance has also been placed on the decision in Kamla
Devi v. Tkakatmal reported in AIR 1964 SC 859. The relevant passage at p. 863 reads:
". . . . when a court is asked to interpret a document, it looks at its language. If the
language is clear and unambiguous and applies accurately to existing facts, it shall
accept the ordinary meaning, for the duty of the Court is not to delve deep into the
intricacies of the human mind to ascertain one's undisclosed intention, but only to take
the meaning of the words used by him, that is to say, his expressed intentions.
Sometimes, when it is said that a court should look into all the circumstances to find
the author's intention, it is only for the purpose of finding out whether the words apply
accurately to existing facts. But if the words are clear in the context of the surrounding

circumstances, the Court cannot rely on them to attribute to the author an intention
contrary to the plain meaning of the words used in the document."
After considering various other decisions, Justice Vimadalal relies on the standard
work of Odgers on the Construction of Deeds and Statutes and the relevant passage
cited by His Lordship is found at p. 43 of the 5th Edn. (1967), which reads thus:
"Rule V.When is extrinsic evidence admissible to translate the language.It is to
be noticed that extrinsic evidence here does not mean evidence of the writer's
intention but evidence to enable the Court to interpret the language used. It is only
admissible as so often with the subject of construction, when there is some doubt as to
what the words mean or how they are to be applied to the circumstances of the writer."
To this I would like to add the passage found at page 44 (op. cit.), which clearly
repeats the saying of our Supreme Court in the decision reported in AIR 1964 SC 859
and referred to above. The said passage in Odgers reads:
"However, evidence is not admissible to contradict the plain and unambiguous terms
of a document by attempting to show that the intentions of the parties were to give a
meaning of the provisions contrary to the words which the document plainly
contains."
Justice Vimadalal also places reliance on a passage from Chitty on Contracts, which
passage is found at paragraph 661 in the 23rd Edn. and reads as follows:
"Extrinsic evidence of this sort does not usurp the authority of the written instrument.
It is the instrument which operates. The extrinsic evidence does no more than assist its
operation, by assigning a definite meaning to terms capable of such explanation or by
pointing or connecting them with the proper subject-matter."
Without boring my reader with any further questions, I would like to ask a simple
question. Do we expect the Court to impose a contract between the parties? And that
too in violation of the rules of evidence, the stamp and the registration requirements?
The inevitable answer is "NO".
If we turn to Field's commentaries on the Evidence Act (10th Edn., 1972, Vol. V at p.
4972), we find the following:

"When both parties are equally conversant with the true state of facts, it is absurd to
refer to the doctrine of Estoppel."
How does this synchronise with the statement of Their Lordships of our Supreme
Court which says: "A recital that the agreement does not create a Tenancy is also not
decisive"?
I was myself in the habit of inserting such clauses whenever I had to draft a lease
agreement for my clients. But as soon as I saw this statement of the Supreme Court, in
the decision cited above, I had no other alternative but to add another clause which
went to say that the Licensee was signing the agreement only after obtaining
independent legal advice from his own advocate, who signed with him below in token
of his perfect understanding of each and every clause of the licence agreement. And
on one occasion when I saw some doubts on the face of my client, I advised him to
secure an Affidavit from his prospective licensee to annexe it to the licence agreement
and have it all registered, lest his licensee got some super ideas at a future date. What
better can we advocates do in putting down the facts as told to us by our clients?
The rulings of Supreme Court are undoubtedly opening the doors to the unscrupulous.
It would be preferable if Their Lordships were to leave the parties to stand by their
commitments and accept the consequences of their own deeds. In fact, if such ruling
were to be pronounced, all the parties would have been more cautious when signing
an agreement whether of lease or a licence. If our legislators felt that there was
evasion of their strict laws regarding tenancies, it is open for them to insert a simple
clause to the effect that all the sections of the various Rent Control Acts, extended also
to licence agreements.
It is said that the law is the protector of interests. But with the present rationale
adopted by the Supreme Court, it is far from it. The licensor does not know if his
licensee is going to give a "volte de face" and brand himself as a tenant and invoke
protection under the Rent Control Acts. So also a lessee is unsafe because he does not
know if his lessor will call himself a licensor and circumvent all the Rent Control Acts
and put him on the streets if he refuses to succumb to his extortions of an abrupt
increase in rent or for like reasons. We are definitely in the midst of a whirlpool.
If the distinction between lease and licence was made clear by our Supreme Court,
how do we find that this issue is appearing frequently before our High Courts? One of

the recent reported cases is the one of Eswari Amma v. M.K. Korah, reported in (1972)
1 MLJ 218. The very fact that the same issue has come up before the Supreme Court
more than once is a clear indication that something is wanting.
I submit that if our Lordships were to state that the parties are to stand by their written
commitments, it would only enhance the cause of justice; the parties would know
exactly where they stand in relation to each other; they would be more careful while
signing agreements and would be in position to take their respective stands, instead of
being left at the whims of the other party or the startling interpretations which the
Court would attribute to their writings; they would know that the Courts would not
upset the certainty of their agreements.
If the parties feel that the agreement which they executed did not express their real
intentions, they would have the remedy of filing a suit for rectification of their
agreements by invoking Section 26 of the Specific Relief Act, no sooner the
agreements are executed. But it would be highly inequitable and a sheer injustice if
they are allowed to carry on with their agreements over years and all of a sudden try
to get smart. The line of reasoning as adopted by our Supreme Court makes the
contracting parties feel as fence-sitters.