The main legal point established in the judgment is that the distinction between a lease and a licence depends on the substance and effect of the agreement, and exclusive possession coupled with an interest in immovable property is the key factor in distinguishing a lease from a licence.

The coffee stall of the Kerala Health Research and Welfare Society in the payward attached to the District Hospital, Manjeri is intended to cater food solely to in-patients, by-standers and members of staff through contractors. Appellant (plaintiff) was the contractor for three years from 10-3-1976. The document is Ext.82. It is styled as a lease and the rent fixed is Rs. 125/- per month. Sub-letting is prohibited. Catering had to be in conformity with the standards fixed by the Government, under the supervision and control of the Superintendent of the District Hospital regarding sanitation, quality of food, etc. Right to cancel the licence and close the stall, at any time, was also reserved with him. When the term was about to expire, the appellant was served with notice to vacate. Then he filed the suit for injunction against eviction except in accordance with the provisions of the Buildings (Lease and Rent Control) Act. He claims to be a lessee. Contention is that he is only a licensee.

2. Both the courts below found that he is only a licensee. The suit was dismissed and the decision was confirmed in appeal. The only question for consideration is whether Ext.B2 evidences a lease or licence. The present suit helped the appellant to continue for more than eleven years after the term was over.

3. The nomenclature of Ext.B2 as a lease deed, provision for payment of rent, prohibition against subletting and exclusive possession claimed under Ext.B2 are the factors alleged in support of the plea that the transaction is a lease coming under the provisions of the rent control legislation. But, in raising that contention, the appellant overlooked certain facts probably in his anxiety to cling on to the profitable arrangement at any cost. He was not given the stall on rent. What was given was only the right to run the coffee stall for three years. What is termed as rent is the licence fee for the permission. He could use the stall only for preparing and catering food to the specified class of persons and that too only according to specifications regarding the items of food, their quality and sanitation. That is also subject to the control, by periodical inspection, by the Superintendent, who was given the liberty to cancel the arrangement at any time and close the stall. Whatever be the wordings in Ext.B2, it is clear from the provisions that it was intended only as a permission to use the stall for preparing and catering food for the limited period to specified class of persons under the control of the person, who gave the permission.

4. Lease of immovable property is a transfer of the right to enjoy such property in consideration of price paid or promised. Licence is only a right to do or continue to do in or upon immovable property something which would, in the absence of such right, be unlawful. So also, such rights should not amount to an easement or interest in the property. Licence does not create any estate or interest in the property. It is true that there cannot be any litmus test to distinguish a lease from a licence. The operative intention of the parties, evident from the document and attendant circumstances, must solve the issue. If interest in immovable propety is created entitling enjoyment, it is a lease. If permission to use the land without any exclusive possession alone is given, it is only a licence. Creation of right in immovable property coupled with the right to exclusive possession is the main factor that distinguishes a lease from a licence. The substance and effect of the agreement, as distinguished from its form, is the deciding factor. The document has to be considered as a whole fairly and reasonably. Licence is only a personal privilege as distinguished from the interest in property created under a lease coupled with exclusive possession.

5. The decisions in Board of Revenue v. A. M. Ansari (AIR 1976 SC 1813), Kunka Kurup v. Lakshmikutty Amma (1984 KLJ 786), Moideenkutty Haji v. Muhammedali (1987