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IN THE HIGH COURT AT CALCUTTA
Ajoy Nath Ray, J.
Delta International Ltd. - Plaintiff
Versus
Hindustan Petroleum Corpn. & Anr. – Defendants
Suit No. 491 of 1985
Decided On : February 24, 1992
LEASE OR LICENSE - INTERPRETATION OF AGREEMENT - AGREEMENT FOR LICENSE - AGREEMENT NOT A LEASE - GRANT OF EXCLUSIVE POSSESSION - INTENTION OF PARTIES - TERMS OF AGREEMENT - TRANSFER OF PROPERTY - REVOCATION OF LICENSE - BREACH OF AGREEMENT - SETTING UP OF ADVERSE TITLE - RIGHT TO TERMINATE - MESNE PROFITS.
Fact of the Case:
A suit was filed for possession of immovable property against the first defendant. The rights of the parties flowed from a written agreement dated 18th July, 1970 made between Dewar's Garage and Esso Standard. The second defendant was a petrol dealer who had an agreement with the first defendant. The plaintiff and the first defendant did not dispute that their rights flowed from the said written agreement. The main issue was the interpretation of the terms of the agreement. The plaintiff contended that the agreement was an agreement in the nature of grant of lease and licence and the same had been duly revoked. The first defendant contended that upon a true construction of the agreement, the said agreement should in reality be construed as an agreement for lease as between the plaintiff and the first defendant.
Finding of the Court:
The court held that the agreement was not a lease but a license. The court relied on the following factors: * The agreement expressly stated that it was not a tenancy or lease. * The first defendant was granted exclusive possession of the premises, but this was not enough to convert the agreement into a lease. * The agreement contemplated the grant of a sub-lease in the future, which was inconsistent with a lease. * The agreement provided for the sale of the machinery and equipment on the premises to the first defendant at a specified price, which was also inconsistent with a lease. * The first defendant was granted the right to bring in and install its own machinery and fittings, which was also inconsistent with a lease. * The first defendant was granted the right to carry on business in the name of the plaintiff or in its own name, which was also inconsistent with a lease. The court also held that the license was revocable at will or at least after a reasonable lapse of time. The court found that the first defendant had breached the agreement by: * Permitting parking of cars at night. * Not taking out insurance policies. * Not keeping the machinery in good repair. The court also held that the first defendant had set up an adverse title by depositing rent with the Rent Controller. The court held that this was a fundamental breach of the agreement and that it rendered the license revocable.
Issues: 1. Whether the agreement between the plaintiff and the first defendant was a lease or a license? 2. Whether the license was revocable? 3. Whether the first defendant had breached the agreement? 4. Whether the first defendant had set up an adverse title?
Ratio Decidendi: 1. A license is a permission to do something on the land of another without creating an interest in the land itself. A lease is a grant of an interest in land for a fixed period of time. 2. A license is revocable at will or at least after a reasonable lapse of time. 3. A breach of the terms of a license may render the license revocable. 4. Setting up an adverse title is a fundamental breach of a license.
Final Decision: The court decreed the suit in favor of the plaintiff. The first defendant was directed to deliver peaceful possession of the premises to the plaintiff along with all the machinery and fixtures. The first defendant was also directed to pay mesne profits to the plaintiff from the date of the revocation of the license until the date of delivery of possession. The court appointed a Commissioner to inquire into the rate of mesne profits. The court also awarded costs to the plaintiff.
This is a suit mainly for possession of immovable property instituted primarily against the first defendant.
2. The rights of the parties herein flow from a written agreement dated 18th of July, 1970 made between Dewar's Garage and Esso Standard. Dewar’s Garage was the predecessor of the plaintiff and Esso Standard was the predecessor of the first defendant. There are no disputes in this regard and the plaintiff and the first defendant have not disputed before me that their rights flow from the said written agreement, whatever those rights might be.
3. The second defendant is a petrol dealer. The agreement of the second defendant with the first is also exhibited in this proceeding and the same is Exbt. D-2/1 dated 15th of September, 1983.
4. The second defendant himself states in his written statement in the first paragraph that there is no privity of contract between the plaintiff and the second defendant. As such it is quite clear that the original rights of the parties would have to be determined as between the plaintiff and the first defendant.
5. It is principally an interpretation of the terms of the aforesaid, 1970 agreement which has been the subject matter of the dispute in this suit. Accordingly, in my opinion, it is better to set out the entire terms thereof. The same are set out below :
"MEMORANDUM OF AGREEMENT made this Eighteenth day of July, One thousand nine hundred and seventy Between DEWAR'S GARAGE (INDIA) PRIVATE LIMITED an existing Company within the meaning of the Companies Act, 1956 and having its Registered Office at 4, Council House Street, Calcutta (hereinafter referred to as "the LICENSER" which expression shall include its successors and assigns) of the Part and ESSO STANDARD EASTERN INC., a Corporation duly incorporated under the laws of the State Delaware, United State of America and having its Principal Office in the City of New York and carrying on business amongst other places in, India at 27B, Camac Street, Calcutta-16 (hereinafter referred to as “the LICENSEE” which expression shall include it successors and assigns) of the other part.
WHERE AS :
(1) The Licenser has been and is a monthly tenant under Mallika Investment Co. of 10, Old Post Office Street, Calcutta-1 in respect of the vacant land or ground comprised in premises No. 4D, Council House Street, Calcutta, more particularly described in the First Schedule hereunder written.
(2) The Licenser hath with the consent and approval of its landlord erected and built certain structures on the said piece or parcel of vacant land or ground being premises No. 4D, Council House Street and after equipping with requisite plants and machineries has been maintaining and running a petrol Service Station for sale of Esso Petrol Products motor spares and components on the said premises No. 4D, Council House Street, Calcutta.
(3) The Licenser has decided not to continue the said Petrol Service Station and as such it has been agreed between the Licenser and the Licensee that the License would run the Petrol Service Station as its Licensee on the terms and conditions hereinafter contained.
(4) It has also been agreed between the Licenser and the Licensee that the Licenser would grant a sub-lease in respect of the said premises No. 4D, Council House Street, on which the said Petrol Service Station in situated if the Licenser is able to obtain a lease of the said premises from its landlords subject to the condition that the License will have the right to terminate the Sub-lease on giving three calendar months notice in writing and that the sub-lease shall be at least for a period of 10 years with three renewal options of ten years each and that the Licensee will have the right to grant license for the purpose of running the said Petrol Service Station.
(5) It has also been agreed between the parties that the Licenser would endeavour to obtain a lease from its landlords on the terms which would not be inconsistent with the standard terms on which a sub-lease is o
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