The intention of the parties is the decisive factor in determining whether an agreement creates a lease or a licence, and this intention must be ascertained from a consideration of all the relevant provisions in the agreement.

Headnote:
LEASE OR LICENCE - DISTINCTION - COMPROMISE DECREE - CONSTRUCTION - INTENTION OF PARTIES - RELEVANCE OF WORD "RENT" - PAYMENT OF DEPOSIT - RIGHT TO EVICT ON DEFAULT OF RENT - LENGTH OF PERIOD OF POSSESSION - ORISSA HOUSE-RENT CONTROL ACT (31 OF 1958), SEC. 2(5).
Fact of the Case:

A compromise decree was passed in a suit for ejectment, granting the judgment-debtor possession of the suit house for a period of five years, subject to payment of rent at a specified rate. The judgment-debtor claimed protection against ejectment under the Orissa House-Rent Control Act, 1958, on the ground that the compromise decree created a lease.
Finding of the Court:

The Supreme Court held that the compromise decree did not create a lease, but only a licence, and therefore the judgment-debtor was not a tenant within the meaning of Section 2(5) of the Act and was not entitled to protection against ejectment.
Issues: Whether the compromise decree created a lease or a licence.
Ratio Decidendi: The intention of the parties to the compromise decree was not to create a lease, but only a licence, as evidenced by the following factors: * The decree-holder had brought a suit for ejectment of the judgment-debtor, indicating an intention to terminate the tenancy. * The use of the word "rent" in the compromise decree was not conclusive, as it could also refer to payments made by a licensee for the use and occupation of land or building. * The payment of Rs. 300 as deposit for six months' rent was actually a security for the amounts due under the compromise deed, and not a true rent payment. * The compromise decree included a clause allowing the decree-holder to execute the decree if the judgment-debtor failed to pay rent for any three consecutive months, indicating that the parties did not intend to create a landlord-tenant relationship.
Final Decision: The appeal was allowed, the judgment of the High Court was set aside, and the judgment of the District Judge was restored.

Judgement

SIKRI, J. :- This appeal by special leave is directed against the judgment of the High Court of Orissa allowing the appeal and setting aside the judgment of the District Judge, Ganjam-Boudh, Berhampur, who had had affirmed the order passed by the Munsif, Berhampur, dismissing M. J. C. No. 220/60 of Gopinath Naik, respondent before us, hereinafter referred to as the Judgment Debtor.

2. The facts in this case are not in dispute. One Konchada Ramamurti Subudhi, deceased, now represented by his legal representatives and appellants before us-hereinafter referred to as the decree-holder- and Bhagirathi Naiko, now represented by Gopinath Naik, Judgment debtor, filed a compromising petition under Order 23 R. 3 of the Code of Civil Procedure in the Court of subordinate Judge, Berhampur, in T. A. No. 13 of 1955. In terms of this compromise petition a decree was passed. The decreeholder filed an application for execution of the decree and the judgment-debtor filed the application (M. J. C. No. 220/60) under Section 47, C. P. C., in the Court of Munsif Berhampur, objecting to the execution of the decree. The Munsif dismissed this application of the judgment-debtor and the District Judge affirmed the order. The High Court, however, on appeal, set aside the order of the District Judge.

3. The only point raised before us is whether the compromise decree created a lease or licence. It is common ground that if a leave was created the judgment-debtor would be entitled to protection against being ejected by virtue of the provisions of Orissa House-Rent Control Act (Orissa Act 31 of 1958) - hereinfter referred to as the Act.

4. The terms of the compromise were as follows :-

"I Respectable people have settled the subject matter of this appeal and the suit and so both parties agreed to compromise as follows :-

(a) That the defendant-respondent should vacate the suit house on or before 1st July, 1960 (five years) failing which the appellant plaintiff will he entitled to execute this decree and recover possession of the suit house through court after the date fixed above.

(b) That in respect of all arrears of rent claimed in the suit and the rent due during the pendency of the suit and of this appeal as calculated up to 30th June, 1955, the defendant has paid to the plaintiff the sum of Rs. 1,125 only (Rupees One thousand and one hundred twenty-five only).

(c) That in respect of future rent i. e. with effect from 1st July, 1955 the defendant shall pay to the plaintiff at the rate of Rs. 50 a month by the end of each month until delivery, and a sum of Rs. 300 is paid to plaintiff to be kept as deposit for six months rent to be adjusted towards rent for the period of last six months ending with 1st, July, 1960.

(d) In case the defendant fails to pay the rent for any three consecutive months the plaintiff will be at liberty to adjust the advance towards arrears and also to evict the defendant from the suit house without waiting till 1st July, 1960 by executing the decree and also realise the amount accrues due by then, from the defendant by executing this decree

(e) That the house fell to the share of a minor son of plaintiff-appellant, namely; Konchada Koteswarao for whom the appellant plaintiff is the guardian, and the plaintiff-appellant will be responsible for the due compliance of the terms of this compromise.

2. That each party do bear its own costs in both courts.

3. That a decree may be passed in the above terms."

5. The High Court has held that the compromise decree created a lease and not a licence.

6. The learned counsel for the appellants contends that the intention of the decree holder was only to give accommodation to the judgment debtor, and as he had filed a suit to eject the judgment debtor it could not have been his intention to create a fresh tenancy. He places reliance on the decision in Ramjibhai Virpal Shah v. G. M. Bhagat ILR (1954) Bom 615 where the Bombay High Court has elaborately considered the law bearing on the subject of the in

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1967 Supreme(SC) 358

The intention of the parties is the decisive factor in determining whether an agreement creates a lease or a licence, and this intention must be ascertained from a consideration of all the relevant provisions in the agreement.

Cases Referred (3)