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IN THE HIGH COURT OF ALLAHABAD
S. D. AGARWALA, R. B. MEHROTRA
UDAI PRATAP SINGH - Appellant
Versus
COLLECTOR, VARANASI - Respondents
Civil Misc. Writ Petition 7348 Of 1979
Decided On : 08/28/1990
LEASE OR LICENCE - U. P. STAMP ACT - INTERPRETATION - AGREEMENT BETWEEN PETITIONERS AND U. P. STATE ROAD TRANSPORT CORPORATION - TERMS AND CONDITIONS - INTENTION OF PARTIES - DISTINCTION BETWEEN LEASE AND LICENCE - PRINCIPLES FOR DETERMINING - APPLICATION TO FACTS - HELD, AGREEMENT IS A LICENCE - RECOVERY CERTIFICATES ISSUED AGAINST PETITIONERS QUASHED.
Fact of the Case:
Petitioners executed agreements with U. P. State Road Transport Corporation (Corporation) to run refreshment stalls in the Corporation's bus stations. The agreements were executed on a stamp paper of Rs. 5.00, which is the requirement for execution of a license under the Stamp Act. The agreements were termed as licenses and contained various terms and conditions, including the payment of a monthly license fee, the duration of the license, and the right of the Corporation to terminate the license in case of unsatisfactory service. The petitioners stopped running the refreshment stalls after some time and were issued recovery certificates for the balance of the stamp duty on the basis that the agreements were leases and not licenses.
Finding of the Court:
The court held that the agreements between the petitioners and the Corporation were licenses and not leases. The court considered the terms and conditions of the agreements, the intention of the parties, and the principles laid down by the Supreme Court in earlier decisions for determining whether a document is a lease or a license. The court found that the agreements did not create an interest in the property in favor of the petitioners, but only permitted them to use the property for a specific purpose and under specific conditions. The court also found that the Corporation retained control over the refreshment stalls and had the right to terminate the licenses in case of unsatisfactory service.
Issues: Whether the agreements between the petitioners and the Corporation were leases or licenses.
Ratio Decidendi: The court held that the agreements were licenses and not leases based on the following principles: 1. 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 license. 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 license. 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.
Final Decision: The court issued a writ of certiorari quashing the recovery certificates issued against the petitioners and directed the respondents not to recover the disputed amounts from the petitioners.
( 1 ) IN these two writ petitions filed under Art. 226 of the Constitution of India, a common question of law and fact arises for decision as to whether the agreement executed between the petitioners and the U. P. State Road Transport Corporation can be termed as a lease or the said agreement can be treated only as a licence. Petitioners in both the cases are aggrieved by the orders of the Collectors of their respective district issuing recovery certificates for recovery of the balance of the stamp duty on the basis that the agreement executed between the petitioners and U. P. State Road Transport Corporation is a lease and the petitioners are liable to pay the stamp duty required to be paid for executing the lease deed. Petitioners challenged the recovery certificates mainly on the ground that the agreement executed between the petitioners and the U. P. State Road Transport Corporation is only a licence on which no stamp duty is required to be paid. Petitioners had executed the licence on a stamped paper of Rs. 5. 00- which is the requirement for execution of licence under the Stamp Act.
( 2 ) BRIEF facts in respect of both the aforesaid writ petitions are being stated for appreciating the controversy involved in these cases. In Writ Petition No. 7348 of 1979, petitioner Udai Pratap Singh participated in an auction for running a refreshment stall inside U. P. State Road Transport Corporation, Varanasi Depot. Petitioners bid stood highest at Rs. 1,10,000. 00. Petitioner executed an agreement termed as licence on 28-11-1977 on a stamped paper of Rs. 5. 00 for a period of three years. The said agreement was signed between the petitioner and the authorities of the U. P. State Road Transport Corporation, Varanasi (hereinafter referred to as the Corporation ). The terms of the agreement as annexed in the writ petition are being reproduced hereinbelow :-"this agreement made on the 28/11/1977 between the U. P. S. R. T. C. through Assistant Regional Manager hereinafter called the Corporation on the one part and Sri Udai Pratap Singh, son of Sri Babu Nandan Singh, resident of village Gaur, Pargana Kaswar district Varanasi, hereinafter called the caterer which expression shall include his heirs, personal representative and permitted assignment of the other part. WHEREAS the Regional Manager, U. P. S. R. T. C. Varanasi Region has on behalf of Corporation accepted the bid of the caterer for opening a Refreshment Stall at U. P. S. R. T. C. Bus station, Varanasi from the 2-12-1977 on three yearly licence fee of Rupees 1,10,000/- (Rupees one lakh ten thousand only) on the terms and conditions hereinafter appearing. Now these presents witness as follows (sic)1. That the contract shall commence from the 2-12-77 and shall remain in force for a period of three years subject to the condition that it shall be terminable by the corporation at its option in one months notice should the service by the Caterer is (sic) found unsatisfactory, the decision in this behalf of the Regional Manager aforesaid shall be final and binding. 2. That the caterer shall provide good and wholesome vegetarian and non-vegetarian meals in Indian style in the shedule hereto. For members of the corporation on staff the said rates shall be subject to a discount of 121/2%, for articles for which the rates were not prescribed hereunder, the caterer shall have to get the same fixed by the said Regional Manager whose decision shall be final and binding on the caterer.
( 3 ) THAT the caterer shall funish the betel refreshment stall shop with necessary furniture, provide attractive show case and make arrangement to sell the goods, under hygenic condition at his own cost and subject to the approval of the Regional Manager, the caterer shall take all reasonable precaution that the servants and all other persons employed by him to do any work in the betel refreshment stall shop shall be courteous, civil, sober and honest and free from contagious diseases. Such ser
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