Delhi High Court
Municipal Corporation Of Delhi vs Pradip Oil Corporation And Anr. on 17 September, 2001
Equivalent citations: 100(2002)DLT442, 2002(65)DRJ586
Bench: D.K. Jain, Manmohan Sarin
JUDGMENT S.B. Sinha, C.J.
1. Whether an agreement for erection of oil storage tank together with pump house, chowkidar cabins, switch room, residential rooms and verandah for storing oil decanted from the railway tankers, which bring petroleum products to the site at which they are decanted, would amount to lease or license, is the question which falls for consideration in this batch of Letters Patent Appeals, which arise out of various judgments and orders passed by learned Single Judges of this Court.
2. The said question arose in view of the orders passed by the Additional District Judge, Delhi in various house tax appeals filed under Section 169 of the Delhi Municipal Corporation Act, (in short the Act) against the orders passed by the Assessing Officers in terms whereof rateable value of the properties in question were enhanced on the ground that the said constructions do not come within the definition of "building" attracting house tax under the said Act.
3. Before adverting to the question involved we may notice the basic fact of the matter.
The respondent herein had been granted separate and distinct licenses by the President of India acting through Superintendent of Northern Railway, Delhi for the purpose of maintaining depot for storage of petroleum products at a yearly license fee of Rs. 20,640/- and Rs. 31,000/- per annum respectively.
4. The properties in question were assessed at a rateable value which were sought to be increased. Objections thereto were filed by the respondents. A contention was raised that the storage tanks would not come within the purview of the definition of 'building' as contained in Section 2(3) of the Act and thus no tax would be leviable as provided under Section 114 of the said Act. In the said appeal the following questions were raised:
(a) Whether such steel structures are buildings within the meaning of Delhi Municipal Corporation Act or not?
(b) Whether such structures can be termed as a land within the meaning of Delhi Municipal Corporation Act or not?
Relying on or on the basis of a judgment of Bombay High Court titled Indian Oil Corporation v. Municipal Corporation of Greater Bombay, 77 (1974) Bombay Law Reporter 314, (decided by Justice Bhola and Makki, JJ.) dated 27/28th March, 1974, it was held that such structures are not building within the meaning of the said Act.
It was held by the Bombay High Court:
"It is difficult to comprehend that anything which is resting by its own weight can ever be said to be attached to earth at all. It would not be correct to say that a light article would not be said to be attached to earth but a heavy article would be. I am unable to agree that the size and weight can determine the question attached to the earth or not. Attachment is a physical characteristic. It is the mode of manner of annexation or attachment that would be decisive. If some how it becomes a part or parcel of land then it is attached to the earth but not otherwise. We, therefore, hold that the six oil-storage tanks with which we are concerned cannot be described as "land" for the purpose of their rateability under the relevant provisions of the Bombay Municipal Corporation."
5. The learned Additional District Judge also came to the conclusion that the respondent is not a person primarily responsible for payment of property tax within the meaning of Section 120 of the DMC Act, and thus the order of assessment impugned before him were held to be not sustainable.
6. The appeals preferred by the respondent herein were therefore allowed by the learned Judge.
7. Questioning the said orders writ petitions were filed by the appellant herein.
8. Before adverting to the question involved in these appeals, we may notice the relevant provisions of the MCD Act.
"2(3). "building" means a house, out-house, stable, latrine, urinal, shed, hut wall (other than a boundary wall) or any other structure, whether of masonry, bricks, wood, mud, metal or other material but does not include any portable shelter".
"2(24). "land" includes benefits to arise out of land, things attached to the each or permanently fastened to anything attached to the earth and rights created by law over any street:
119. Taxation of Union properties.--(1) Notwithstanding anything contained in the foregoing provisions of this chapter, lands and buildings being properties of the union shall be exempt from the property taxes specified in Section 114:
Provided that nothing in this sub-section shall prevent the Corporation from levying any of the said taxes on such landsand buildings to which immediately before the 26th January, 1950 they were liable or treated as liable so long as that tax continues to be levied by the Corporation on other lands and buildings.
120(2). If any land has been let for a term exceeding one year to a tenant and such tenant has built upon the land, the property taxes assessed in respect of that land and the building erected thereon shall be primarily leviable upon the said tenant, whether the land and building are in the occupation of such tenant or a sub- tenant of such tenant.
123. Property taxes a first charge on premises on which they are assessed.--Property taxes due under this Act in respect of any land or building shall, subject to the prior payment of the land revenue if any, due to the Government thereon be a first charge-
(a) in the case of any land or building held immediately from the Government, upon the interest in such land or building of the person liable for such taxes and upon the goods and other movable properties if any found within or upon such land or building and belonging to such person; and
(b) in the case of any other land or building upon such land or building and upon the goods and other movable properties/ if any, found within or upon such land or building and belonging to the person liable for such taxes."
9. By reason of the impugned judgment, Mahinder Narain, J. (as the learned Judge then was), held that the oil storage tank would not be a building within the meaning of "building" under the DMC Act. Learned Judge further held that as the instrument had been executed on behalf of the President of India, which is termed to be a license. Section 120(1)(c) of the Delhi Municipal Corporation Act would not be attracted in relation thereto.
10. A Division Bench of this Court in terms of its order dated 12th February, 2000 noticed the difference in opinion in some judgments of the learned Judge of this Court and observed as under:
"These are nine Letters Patent Appeals directed against the judgment of learned Single Judges of this Court. LPAs 52 to 58/87 (MCD v. Pradeep Oil Mills) are directed against the judgment of Mahinder Narain, J. dated 5.8.1996 while LPAs 227 to 228/96 (Bharat Petroleum Corporation Ltd. v. MCD) are directed against the judgment of Mohd. Shamim, J. dated 11.9.1996. It has been brought to our notice that the judgment in Pradeep Oil Mills' case has been affirmed by a Division Bench of this Court in Gas Authority of India Ltd. v. MCD, 1999(2) AD 371. The other judgment of this Court in the case of Bharat Petroleum Corporation Limited has been affirmed by another Division Bench of this Court in MCD v. Batra Brothers, 1997 (4) AD317. One of the issues involved in all these cases is as to whether the document whereby interest in land is purported to have been created is a lease or license. The appellants are challenging the findings of the learned Single Judges in the respective cases. In our view the appellants are entitled to challenge the findings contained in judgments under appeal and cannot be denied this right for the reason that Division Benches of the Court in some matters between other parties have affirmed the findings of the learned Single Judges.
In the event of this Court agreeing with the appellants, the observations of the two Division Benches of this Court by which both the judgments under appeal have already been approved may lead to an anomalous situation. Therefore, we deem it appropriate that these appeals be heard and decided by a larger Bench."
11. Mr. Nandrajog, learned Counsel appearing for the appellant would submit that the question as to whether such an oil storage tank would be building or not is no longer res integra in view of judgment of the Supreme Court Municipal Corporation of Greater Bombay v. Indian Oil Corporation, .
12. Counsel, however, submitted that the question as to whether the indentures in question constitute lease or license so as to attract the provisions of Section 120 of the Act would depend upon the construction thereof. It was urged that having regard to the nature of the interest conveyed, the learned Single Judge committed a manifest error in construing the same to be a license. According to the learned Counsel the land having been used for the purpose of construction of a building, the object thereof being clear, it could not have been construed to be a license and must be construed to be a lease. Learned Counsel submitted that it is not a case where it could be said that no interest in the land had been created by reason of the instruments in question.
13. Learned Counsel for the respondent however submitted that the indentures in question are licenses and not leases.
Distinction between a lease and license is well known.
14. We may at this juncture notice the definition of 'lease' and 'license' as envisaged under Section 105 of the Transfer of Property Act and Section 52 of the Indian Easements Act.
Section 105 of Transfer of Property Act reads thus:
"105. Lease Defined.--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."
Section 52 of the Easements Act, 1882 reads thus:
"License, defined.--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 license."
15. A license may be created on deal or parole and it would be revocable. However, when it is accompanied with grant it becomes irrevocable. A mere license does not create interest in the property to which it relates. license may be personal or contractual. A licensee without the grant creates a right in the licensor to enter into a land and enjoy it. In Halsbury's Laws of England, Fourth Edn., Vol. 27 at page 21 it is stated:
"license coupled with grant of interest, A license coupled with a grant of an interest in property is not revocable. Such a license is capable of assignment, and covenants may be made to run with it. A right to enter on land and enjoy a profit a prendre or other incorporeal hereditament is a license coupled with an interest and is irrevocable. Formerly it was necessary that the grant of the interest should be valid; thus, if the interest was an incorporeal hereditament, such as a right to make and use a watercourse, the grant was not valid unless tinder seal, and the license, unless so made, was therefore a mere license and was revocable but since 1873 the Court has been bound to give effect to equitable doctrines and it will restrain the revocation of alicense coupled with a grant which should be, but is not, under seal."
16. Lease on the other hand, would amount to transfer of property.
In Associated Hotels of India Ltd. v. R.N. Kapoor, , the following proposition has been held to be well established for ascertaining whether a transaction amounts to lease or license.
"27. There is a marked distinction between a lease and a license. Section 105 of the Transfer of Property Act defines a lease of immovable property as a transfer of a right to enjoy such property made for a certain time in consideration for a price paid or promised. Under Section 108 of the said Act, the lessee is entitled to be put in possession of the property. A lease is therefore a transfer of an interest in land. The interest transferred is called the leasehold interest. The Lesser parts with his right to enjoy the property during the term of the lease, and it follows from it that the lessee gets that right to the exclusion of the Lesser. Whereas Section 52 of the Indian Easement Act defines a license.
Under the aforesaid section, if a document gives only a right to use the property in a particular way or under certain terms while it remains in possession and control of the owner thereof, it will be a license. The legal possession, therefore, continues to be with the owner of the property, but the licensee is permitted to make use of the premises for a particular purpose. But for the permission his occupation would be unlawful. It does not create in his favor any estate or interest in the property. There is, therefore, clear distinction between the two concepts. The dividing line is dear through sometimes it becomes very thin or even blurred. Alone time it was thought that the test of exclusive possession was infallible and if a person was given exclusive possession of a premises, it would conclusively establish that he was a lessee. But there was a change and the recent trend of judicial option is reflected in Errington v. Errington, 1952(1) All ER 149, wherein Lord Denning reviewing the case law on the subject summarises the result of his discussion thus at p. 155:
"The result of all these cases is that, although a person who is let into exclusive possession is, prima facie to be considered to be tenant, nevertheless he will not be held to be so if the circumstances negative any intention to create a tenancy."
See also Corporation of Calicut v. K. Sreemnivasan, .
17. Distinction between lease and license is marked by the last clause of Section 52 of the Easement Act as by reason of a license, no estate or interest in the property is created.
18. A license, inter alia, (a) is not assignable; (b) does not entitle the licensee to sue the stranger in his own name; (c) it is revocable and (d) it is determined when the grantor makes subsequent assignment. Rights and obligations of the Lesser as contained in the Transfer of Property Act/1882 are also subject to the contract to the contrary. Even the right of assignment of leasehold property may be curtailed by an agreement.
19. However, we may notice that in the present case grant has been made by the President of India in terms of Section 2 of the Government Grants Act, 1895 and the Transfer of Property Act, 1882 thus, may not in the instant case.
20. In terms of the provisions of Government Grants Act, the rights and obligations of the parties would be governed by the provisions of the said Act in terms where of which the Government is entitled to impose limitations and restrictions upon the grants and other transfer made by it or under its authority. Provisions of Government Grants Act therefore are not of much relevance for determination of the question at hand.
21. Having the aforesaid legal principles in mind we have to consider the grant in question.
22. By reason of the said grant, grantee has been described as licensee but the same is not determinative. In terms of Clause (1) of the said indenture the licensee was to have the use of a piece of land for maintaining a depot for petroleum goods received through railways but thereby his rights to deal with the property and the goods brought thereon had not been taken away. An embargo has been placed as regards the user of the construction made thereon to the extent that the same would be used solely for the storage of petroleum products but such restriction by itself can also be imposed in a case of lease. Constructions are to be made as per specifications approved by the Chief Inspector of Explosives which condition was also otherwise governed by the provisions of Explosives Act.
Pipelines are required to be laid at railway levels or demised in favor of the grantee, wherefor expenses are to be paid by it. Pipelines are to be laid underground in such a manner that vehicles can pass over that.
The licensee in terms of Clause 7 is required to pay the sum specified therein which has been described as 'rent'. He is also required to pay all taxes payable in respect of the said land for the time being found to be payable and proportionately and all cesses, and taxes in respect of the premises applicable to the land, tanks, works and conveniences if the same be not separately assessed in respect thereof. The licensee shall not be entitled to assign, mortgage, sub-let or otherwise transfer the privileges without previously obtaining the consent in writing of the Administration. The licensee shall not use the said land or any part thereof or permit the same to be used for worship, or religious or educational purposes or for any other purpose not specified in Clause 1 thereof but such a claim is not determinative. Clause (9) of the said indenture stipulates that either party would be entitled to terminate the license without assigning any reasons by giving to the other party at any time three calendar months' notice in writing. Even under Section 106 of the Transfer of Property Act no reason is required to be assigned for determining the lease.
Clause 11 of the indenture provides that nothing contained herein be construed to create a tenancy in favor of the licensee of the said land but again the description of the grant is not decisive Administration has been given power tinder Clause 12 to re-enter upon and retake and absolutely retain the possession of the said land but the same could be permissible in law only upon determination of grant which would require 3 months' prior notice. Clause 12 further provides that the licensee shall at all times keep the Administration indemnified against and shall reimburse it towards all claims, demands, suits, losses, damages, costs etc. which it may sustain or incur by reason of inconsequence of any injury to any person or to any property resulting from any explosion or leakage of any petroleum kept or placed by the licensee upon the said land. Again the said claim does not have much relevance in the interpretation of a grant.
Further the licensee was not entitled to any claim from the administration in respect of any damage which he might sustain on account of fire or other cause which claim is of not much importance.
Clause 14 of the indenture provides that the licensee shall follow all petroleum rules and regulations applicable to the construction, maintenance of petrol pump or stores and for public safety. All taxes in respect of the said patrol pump, stores, buildings under the control of the licensee shall be paid by the licensee.
The rights of the parties on determination of the grant have been specified.
23. The learned Counsel appearing for the appellant would contend that even by reason of the said grant a bundle of rights have been conferred upon the grantee. Legal possession was to be with the grantee and even for the purpose of determining the agreement three months' notice is necessary.
24. A deed as is well known must be read in its entirety and reasonably. The intention of the parties must also as far as possible be gathered from the expression used in the document.
25. In Union Bank of India v. Chandrakant Gordhandas Shah, , an instrument was held to be a deed of lease as the lessee was conferred right to exclusive possession wherefor various terms of the indenture which were taken into consideration for finding out whether the same was lease or a license.
26. In Vayallakath Muhammedkutty v. Illikkal Moosakutty, 1996 (6) JT 665, where the defendant was given exclusive possession of the disputed premises for running a hotel but was not given the permission to sub-lease the property, the document was held to be a license.
"9. .... this Court has indicated that for a consideration as to whether a document creates a license or lease, the substance of the document must be preferred to the form. It is not correct to say that exclusive possession of a party is irrelevant but at the same it is also not conclusive. The other tests, namely, intention of the parties and whether the document creates any interest in the property or not are important considerations."
27. In Om Parkash v. Dr. Ravinder Kumar Sharma, 1995 (Suppl.) 4 SCC 115, a deal was held to be a license where the keys of the premises was to be taken in the morning and returned in the evening and a portion thereof was occupied by the mother of the licensor.
28. In Lilawati H. Hiranandani v. Usha Tandon, 1995 (Suppl.) 4 SCC 158, an assignment made to the effect that the owner permitted the licensee to occupy a portion with no right or interest created in his favor and also undertaken to vacant the premises within one month, was held to be a case of license.
In Swarm Singh v. Madan Singh, , it was held:
"3. On a careful consideration of the above arguments, we feel that there is no substance in any one of them. To our mind it is very clear that the right granted under the above document is nothing but a license. Our reasons are as under:
(1) the nomenclature of the document is license. Of course, we hasten to add that nomenclautre is not always conclusive;
(2) the document in question in no unambiguous terms says that the possession and control shall remain with the owner. This is a clear indication of the fact that no interest in immovable property has been conferred on the grantee. If it were to be a case of lease under Section 105 of the Transfer of Property Act, there must be an interest in the immovable property. On the contrary, if it were to be a license under Section 52 of the Easements Act, no such interest in immovable property is created. The case on hand is one of such.
(4) No doubt there is a statement in the document that "I shall not sublet it to further anybody else. This is nothing more than an affirmation of the requirement that the licensee must use the property. No doubt under Section 52 of the Easements Act, license is personal but where an affirmation is made that such an affirmation cannot alter the relationship of the parties as Lesser and lessee. In this view factually the case Capt. BVD' Douza v. Antonio Fausto Fernandes, Quoted from the judgment and order dated 3.5.1993 of Andhra Pradesh Admn. Tribunal at Hyderabad in OA No. 47322/91 and 5668/92, is distinguishable."
29. In Delta International Ltd. v. Shyam Sundar Ganeriwala, . It has been held that where the parties have been advised by the lawyers and document has been termed to be a license it should ordinarily be held to be a license. Reference in this connection may also be made to ICICI v. State of Maharashtra, .
30. We may further notice a learned Single Judge of this Court in Bharat Petroleum in 46 (1996) DLT 237, has taken a similar view wherein he differed with the views of Mahinder Narain, J. The aforementioned decision of the learned Single Judge is in question in LPA 225-227 of 1996.
Bharat Petroleum's case has been affirmed by a Division Bench comprising of Y.K. Sabharwal and O.K. Jain, JJ. in MCD v. Batra Brothers, 1997 (4) AD 317.
31. On the other hand, in Gas Authority v. MCD, a Division Bench comprising of Devinder Gupta and Rama Moorthy, JJ. have affirmed the decision of Mahinder Narain, J. in Pradip Oil Corporation, reported in 1986(2)Municipalities and Corporation Cases 127.
32. What in the aforementioned premises is required to be considered and determined as to whether the agreement should be interpreted as lease or license having regard to the object sought to be achieved by the provisions of Delhi Municipal Corporation Act.
33. By reason of the provisions of the DMC Act, the Corporation is required to render several services as specified therein for the purpose whereof, tax is required to be imposed both on land as also on building.
34. Definition of 'land' and 'building' as noticed hereinbefore as provided for therein must be given its hill effect.
35. As noticed hereinbefore in the case of Municipal Corporation of Greater Bombay (supra), even an oil tanker has been held to be building which having regard to the statutory interpretation in other statutes it might not have been so held.
36. Tax is imposed upon the holders of land and building by Delhi Municipal Corporation which is compensatory in nature. The word 'letting out' in the context of the grant therefore must receive the purposive meaning. The indenture may have to be construed in the light of Section 105 Transfer of Property Act or Section 52 of the Easement Act but object of the said Act has also same role to play. A question may arise as to whether such impost would be tax or fee. The expression quid pro quo may not necessarily be interpreted in a narrow or stricter sense (See Corporation of Calcutta v. Liberty Cinema, .
37. Whether a document will constitute lease or license would inter alia depend upon certain interpreted criteria which are:
(a) to ascertain whether a document creates a license or lease, the substance of the document must be preferred to the form;
(b) that real test is the intention of the parties -- whether they intended to create a lease or a license;
(c) 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; and
(d) 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."
38. Whether any indenture constitutes lease, or license the nomenclature of the document may not be decisive, as it is necessary to consider the substance of the transaction and not its mere form. Particular words and phrases may be used in a document but such usage may be for various purposes. The document having regard to the purport and object of the Act, must thus be construed having regard to the principal object and purport thereof. For the said purpose even the doctrine of purposive construction may be taken recourse to. But once the Court is in a position to ascertain the substance thereof so as to enable it to arrive at a finding as to whether thereby an interest in the land is created or not the same would subserve the purpose.
39. The grantor in the case is the Union of India. Grantee was a company. The grantor was described as a licensor whereas the grantee has been described as a licensee. By reason of such grant the appellant herein have been granted exclusive right to use a piece of the Railway land for the purposes mentioned therein, viz., constructing and maintaining thereon tanks, buildings and other conveniences and for receiving and storing therein the petroleum in bulk. Such constructions are not temporary in nature. They are also not to be reserved for user for a very short period. Such constructions are admittedly to be raised so as to enable the grantee the right of extensive user for a long time. Such constructions ad storage would be subject to the provisions of the Petroleum Act, 1934 and other laws. The Railway Administration of course has the right of entry in the land and the building and also a right to direct pull down, rebuild or repair the whole area and/or any part of the works and conveniences which according to the administration have been improperly constructed or contains defective designs, constructions or materials or in want of repair. Such alterations and repairs however, would not infringe the requirement of the Petroleum Rules, 1937. The appellant was to pay rent @ Rs. 30,656/- per annum from October, 1954. Such payment was to be made on a specific date. The appellant was also in terms of the said document as indicated hereinbefore were to pay all cesses, rates and taxes payable in respect of such land, tanks, buildings, works and conveniences situated thereupon and proportionate cesses, rates and taxes imposed in respect of the premises tanks, buildings, works and conveniences, By reason of the said grant, the appellant was not altogether prohibited from transferring the rights obtained there under but therefore only prior approval was required to be taken. User of such premises has been prohibited only in respect of worship or religious or educational purposes or for the purposes specified in Clause (1). Thereof Clause 10 provides that either party would be at liberty to determine and put to an end the grant by giving to the other party three calendar months' notice in writing and only upon expiry where of such privileges may be so determined by the administration, without any claim for compensation whatsoever on the part of the appellant. The deed postulates that buildings and other conveniences may be taken over by the administration on mutually agreed terms. However, the appellant on such determination of the grant would be entitled to pull down and remove from the site the materials at its own expense within two months upon determination thereof.
40. Clause 11 of the said indenture whereupon Mr. Sethi placed strong reliance, reads thus:
"11. Nothing herein contained shall be construed to create a tenancy in favor of the Licensee (s) of the said premises and the Administration may for their mere motion upon the determination of this license re-enter upon and retake and absolutely retain possession of the said land."
41. However, such a covenant cannot be conclusive as regards determination of the rights of the parties under a covenant.
42. The respondents are in possession of the buildings in question since 1958. They have been permitted to raise huge constructions. The nature of construction is of wide range. An administration block Along with tanks for storing petroleum had been constructed. A boundary wall around installations and administrative block had also been constructed. Indisputably the grantee are in exclusive possession over the lands in question Along with construction thereon without any let or hindrance from the administration. Since 1962 they had been continuously carrying on their business without any interference from any quarter whatsoever.
43. Wherein exclusive possession has been granted, as noticed hereinbefore, a tenancy will be presumed. It is for the grantor to show that despite the right to possess the demised premises exclusive; a right or interest in the property has not been created. The burden therefore would be on the grantor to prove contra.
44. In Street v. Mountford, reported in 1985 Appeal Cases 809, it is stated that when exclusive possession is granted in lieu of only rent payable therefore, the presumption that the instrument is that of a lease becomes stronger. In this case the administration has also option to revise the rent. Had it been a case of mere right to use the property, such provision would not have been there. The manner in which the rent is to be paid is also significant. It is to be paid annually in a case of a license pure and simple, the indenture would not normally contain a claim that rent would be paid annually.
45. In Delta International Ltd. v. Shyam Sundar Ganeriwalla and Anr. (supra), whereupon strong reliance has been placed by the learned Counsel for the grantee, it is stated:
"25. Hence for determining whether the phrase "demised premises" should be construed as a lease or a license as expressly stated in the agreement, the phrase or the words is to be construed in the context in which it is used. In the present case the said phrase is used in Clause 18 three times Along with the term "license fee" which was to be paid by the licensee and the manner of this payment. It provides that "license fee" for the demised premises was Rs. 3,950/- per month and the license fee was payable for the said demised premises as proved therein, that is to say Rs. 23,700/- for six months in advance and that the said license fee is to be adjusted in respect of the demised premises per month. The phrase "demised premises" is used for recovering the license fee. If the intention of the parties was to create a lease, then the word "rent" would have been easily used at all the places. "Demised premises", in the present case, includes not only the premises, but fittings, fixtures and the petrol service station also. license was granted specifically to run the petrol service station on the terms and conditions specified therein. There are a number of other terms and conditions in the document which indicate that it was a license deed. Firstly, the license was for the purpose of running the petrol service station which was set up by the licensor. The possible grant of sub-lease was reserved for the future in the event of Delta obtaining consent from its landlord Malika Investments Company. The licensee was not obliged to pay any part of the outgoings in respect of the premises which indicates that the charges attendant upon occupation of the premises were to be paid and borne by the licensor. He was also required to keep the plant and machinery at the said premises in good repair and was required to obtain necessary insurance policies for the business. A further clause to the effect that the licensee was permitted to carry on business in the name of the licensor indicates that the premises were not let out otherwise there was no question of permitting the use of the licensor's name. It is true that there are certain other clauses which may indicate a different intention if they are construed in isolation such as a term to the effect that the licensee was entitled to grant a sub-license to operate the petrol station or that they were entitled to install other machinery. But, at the same time, the clauses are to be read in the context of the fact that the licensor had decided not to run the business of petrol service station and that by the impugned deed, right to run the said business Along with the premises was given to the licensee. Further, Clause 9 specifically provides that the licensor shall be at liberty to withdraw and/or revoke the leave and license in case there is any default of the terms mentioned in the documents. Clause 16 provides that if the sub-lease is granted then the license was required to purchase the equipments, fittings and fixtures as mentioned in the Second Schedule at a price of Rs. 2,50,000/- within a period of one year from the date thereof. Admittedly, sublease is not granted and the amount of Rs. 2,50,000/- as agreed is also not paid by anyone."
46. We may having regard to the aforementioned discussion safely presume that for the purpose of carrying on business the grantee must have taken electric and telephone connection in relation whereto no bar had been created under the grant. The administration may have kept reserved unto itself a right to enter the premises but thereby the right of exclusive possession of the grantee has not been taken away. The right of possession of the grantee is to the exclusion of the Lesser. The possession of the grantee is not for a limited hour in a day. The administration in terms of the grant cannot possess the premises in exclusion of the grantee or Along with it.
"In Megarry's Manual of the Law of Read Property, 7th edition at page 309 the learned Author states:
"What must be considered is what the parties have in fact done, and not what they intended, or pretended to do. Their intention is important, however, in deciding whether or not they intended to enter into legal relations, or whether the transaction was a mere family arrangement or act of friendship generosity."
Exclusive possession would entitle the tenant to exclude all others from the premises during the term. However, as regards pretences or shams the learned Author states:
"In determining whether or not a tenancy has been granted, the Court will ignore any provisions in the agreement which are mere pretences or shams seeking to negative a tenancy."
A necessary feature of a lease is that the lessee shall acquire a right of possession to the exclusion of the Lesser.
47. In Fachhini v. Bryson, reported in (1952) 1 TLR 1386 : 214 LT 192, Denning, L.J. stated:
"In all the cases where an occupier has been held to be a licensee there has been something in the circumstances, such a family arrangement, an act of friendship or generosity or such like, to negative any intention to create a tenancy."
Interestingly it may be noticed that in Facchini (supra), also there existed a clause "nothing in this agreement shall be construed to create a tenancy."
48. In Capt. B. V. D'Souza v. Antonio Fausto Fernandes, , the Apex Court while construing an agreement which was labelled as leave and license held:
"However, this cannot answer the disputed issue as it creates a license or lease, the substance of the document must be referred to the form, As was observed by this Court in Associated Hotels of India Ltd. v. R.N. Kapoor, , the real test is the intention of the parties -- whether they intended to create a lease or license. If an interest in the property is created by the deed it is a lease but if the document only permits another person to make use of the property "of which the legal possession continues with the owner" it is a license. If the party in whose favor the document is executed gets exclusive possession of the property prima facie he must be considered to be a tenant: although this factor by itself will not be decisive. Judged in this light, there does not appear to be any scope for interpreting Ex. 20 as an agreement of leave and license."
49. In that case the Apex Court noted the observations of Lord Denning MR in Shell-Mex and B.P. Ltd. v. Manchester Garages Ltd., reported in (1971) 1 All ER 841, wherein it is stated:
"I turn, therefore, to the point: was this transaction a license or a tenancy? This does not depend on the label which is put on it. It depends on the nature of the transaction itself: see Addisombe Garden Estates Ltd. v. Grabbe. Broadly speaking, we have to see whether it is a personal privilege given to a person, in which case it is a license or whether it grants an interest in land, in which case it is a tenancy. At one time it used to be thought that exclusive possession was a decisive factor, but that is not so."
50. Reference, in this connection, may be made to Smt. Rajbir Kaur and Anr. v. S. Chokosiri and Co., ; Vallabh Das v. Dr. Madanlal and Ors., , and Roop Chand v. Gopi Chand Thelia, .
The Apex Court in the said discussion in no uncertain terms stated that exclusive possession of a property would prima facie constitute a tenancy subject to intention of the parties which has to be gathered not only from reading the contents of the agreement as a whole, and the circumstances attending thereto but also the conduct of the parties. In some cases even the conduct of the parties contrary to the terms of the agreement had been taken into consideration for the purpose of arriving at the real intention of the parties. It may be true that the document has been described as a license and the grantor has to be labeled as licensor but such labelling is not decisive.
51. In Inderjeet Singh Sial and Anr. v. Karam Chand Thapar and Ors., , the Apex Court observed:
"11. It is manifest that four reasons have been advanced by the High Court to upset the judgment and decree of the Trial Court. These are, (i) that deed Ex. D5 was drafted as a formal document apparently by some lawyer and parties thereto were persons quite conversant with mining lease; and consequently with the meaning of the "consideration" and "royalty"; (ii) the word "royalty" used in the document must be understood the way it is used and understood by the persons in the mining business; (iii) the consideration money was Rs. 30,000/- only as the endorsement of registration on the deed indicates and that was the total consideration; and (iv) in the plaint distinction has been kept between the word "consideration" and "royalty" and so royalty could not be part of the consideration.
12. With respect we do not agree with any of those reasons. It may be true that that document Ex. D5 written in English language, may have been prepared by a lawyer and was entered into between persons conversant with the vocabulary employed in mining leases. Yet these factors per se cannot conclude the matter that the word "royalty" used in the document was meant to be royalty as such. If intelligence and responsibility is to be attributed to the draftsman and the contracting parties for using the word "royalty" in that technical sense, then it cannot be imagined that they would have over-looked the status of the contracting parties inter se. We cannot thus assume that they were well versed in one aspect and not in the other. Strictly speaking, had the draftsman and the signatories to the deed meant "royalty" as such, then they could not have omitted to identity who had the sovereign prerogative or the State part to play. The word "royalty" thus, in the deed was used in a loose sense so as to convey liability to make periodic payment to the assignor for the period during which the lease would subsist; payment dependent on the coal gotten and extracted in quantities or on dispatch. We have therefore to construe document Ex. D5 on its own terms and not barely on the label or description given to the stipulated payments. Conceivably this arrangement could well have been given a shape by using another word. The word "royalty" was perhaps more handy for the authors to be employed for an arrangement like this, so as to ensure periodic payments. In no event could the parties be put to blame for using the word "royalty" as if arrogating to themselves the royal or sovereign right of the State and then make redundant the right and obligations created by the deed.
13. The commodity goes by its value; not by the wrapper in which it is packed. A man is known for his worth; not for the clothes he wears. Royal robes worn by a beggar would not make him a King. The document is weighed by its content, not the title.
One needs to look to the value, not the glitter. All the same, we do not wish to minimize the importance of the right words to be used in documents. What we mean to express is that if the thought is clear, its translation in words, spoken or written, may, more often than not tend to be faulty. More so in a language which is not, the mother tongue. Those faulted words cannot bounce back to alter the thought. Thus in sum and substance when the contracting parties and the draftsman are assumed to have known that the word "royalty" is meant to be employed to secure for the State something out of what the State conveys, their employment of that word for private ensuring was not intended to confer on the assignor the status of the sovereign or the State, and on that basis have the document voided. Therefore, we are of the view that the word "royalty" was used in the deed misdescriptively and was really meant to cover an important item of the consideration due for future payments."
52. It may be that certain restrictions have been imposed with regard to the construction of the building storage tank, etc., but such restrictions are not decisive for the purpose of determining as to whether a document is a lease or license as such restrictions could also be imposed in case of a lease. In Glenwood Lumber Co. Ltd. v. Philips, reported in 1904-1907 All ER (Reprint) 203, it was held:
"In the so-called license itself it is called indifferently a license and a demise, but in the Act it is spoken of as a lease, and the holder of it is described as the lessee. It is not, however, a question of words, but of substance. If the effect of the instrument is to give the holder an exclusive right of occupation of the land though subject to certain reservations or to a restriction of the purposes for which it may be used, it is in law a demise of the land itself."
Furthermore in this case the parties have agreed that for the purpose of determination of the agreement three calendar months' notice had to be given. Such a covenant must be held to have a great role to play in the matter of construction of document.
53. If the parties intended that by reason of such agreement merely a license would be created such a term could not have been inserted. A license can be revoked at any time at the pleasure of the licensor. Even filing of a suit has been held to be expression of an intention on the part of the licensor to revoke the license.
54. Unless the parties had an intention to enter into a deed of lease the administration would not have agreed to demise the premises on payment of rent in lieu of grant of exclusive possession of the demised land and further stipulated service of three months' notice calling upon either party to terminate the agreement.
55. Submission of Mr. Sethi that a stipulation having been made in the agreement itself that by reasons thereof the grantee shall not be a tenant and thus the deed must be construed to be a license cannot be accepted. Such a clause may at best be one of the factors for construction of the document but the same by itself is not decisive.
56. The question which must be posed and answered is to what was the necessity of inserting such a clause in the agreement. Admittedly, the grant has been made in terms of the provisions of Government Grants Act. The provisions of the Transfer of Property Act do not have any application in relation to Government Grant Act. Yet again the provisions of Delhi Rent Control Act would not apply to the Government land. If by reason of such grant the terms and conditions of the agreement had to be determined in the light of the provisions of the Government Grants Act such a clause was wholly redundant was thereby the grantee could not have claimed any right as a tenant and even otherwise, he would not have been benefited under the provisions of any statute. There cannot be any doubt that a grant under the Government Grants Act would include license as has been held in Hajee S.V.M. Mohamed Jamaludeen Bros, and Co. v. Government of T.N., . The very fact that by reason of the grant a statutory construction comes into being which will have an overriding effect over any other statute and as thereby the terms thereof would stand tentacles of any statutory law such a clause, in our opinion, was wholly redundant as is stated therein:
"10. The combined effect of the above two sections of the Grants Act is that terms of any grant or terms of any transfer of land made by a Government would stand insulated from the tentacles of any statutory law. Section 3 places the terms of such grant beyond the reach of any restrictive provision contained in any enacted law or even the equitable principles of justice, equity and good conscience adumbrated by common law if such principles are inconsistent with such terms. The two provisions are so framed as to confer unfettered discretion on the Government to enforce any condition or limitation or restriction in all types of grants made by the Government to any person. In other words, the rights, privileges and obligations of any grantee of the Government would be completely regulated by the terms of the grant, even if such terms are inconsistent with the provisions of any other law."
57. Scope and object of the provisions of the Government Grants Act has been stated by the Apex Court in The State of U.P. v. Zahoor Ahmad and Anr., , in the following terms:
"15. In the present case the High Court correctly found on the facts that the respondent after the determination of the lease held over. Even if the Government Grants Act applied Section 116 of the Transfer of Property Act was not rendered inapplicable. The effect of Section 2 of the Government Grants Act is that in the construction of an instrument governed by the Government Grants Act the Court shall construe such grants irrespective of the provisions of the Transfer of Property Act. It does not mean that all the provisions of the Transfer of Property Act are inapplicable. To illustrate, in the case of grant under the Government Grants Act Section 14 of the Transfer of Property Act will not apply because Section 14 which provides what is known as the rule against perpetuity will not apply by reason of the provisions in the Government Grants Act. The grant shall be construed to take effect as if the Transfer of Property Act does not apply.
16. Section 3 of the Government Grants Act declares the unfettered discretion of the Government to impose such conditions and limitations as it thinks fit, no matter what the general law of the land be. The meaning of Sections 2 and 3 of the Government Grants Act is that the scope of that Act is not limited to affecting the provisions of the Transfer of Property Act only. The Government has unfettered discretion to impose any conditions, limitations, or restrictions in its grants, and the right, privileges and obligations of the grantee would be regulated according to the terms of the grant, notwithstanding any provisions of any statutory or common law."
58. There is another aspect of the matter which must also be borne in mind by the Court.
59. Having regard to Article 285 of the Constitution of India and Section 119 of the DMC Act, the Central Government is exempted from payment of any property tax on any land or building held by it. Why despite such knowledge and why despite legal advice obtained by the parties being in possession of, one of them being a Government, the liability of payment of any tax on land and building had been thrown on the grantee. From the said provision as well the intention of the parties is clear inasmuch the parties must be held to be aware of the position, that, in the event, having regard to the terms and conditions of the agreement the same is construed to be a lease, property tax would be payable.
60. Can it not be inferred from the above conduct of the parties as reflected in one of the terms of the agreement that they were aware that the lessee may have to pay the property tax? The answer to question must be rendered in the affirmative.
61. Why the document has been termed as a license despite the fact that thereby a right in property is created, is not for the Court to answer, particularly, when the deed is an old one. The owner of the property, be it the Central Government or otherwise, would always be keen to see that it is not involved in unnecessary litigation. The common knowledge is that the owner of the property is always a stronger side. The grantee at the relevant point of time was merely a company incorporated under the Companies Act. It had not become a Public Sector Undertaking. It was interested in obtaining a grant for long time so as to facilitate storage of all petroleum products. For the purpose of transportation of petroleum product from the wagons to its storage tank, lands other than belonging to Railway Administration was not available. Company dealing in petroleum products would not have any option other than to succumb to the diktats of the officers of the Railway Administration. If irrespective of the labelling of the documents its purpose is served, so far as the interest of the company is concerned, the same would not matter to it. It has been seen from the conduct of the parties that the arrangement between them was not to be a short term one but a long term one. The structures still exist and the grantees having been allowed to carry on business without any hindrance since 1958, which clearly point out the intention of the parties that the transaction involved transfer of right in a property. The question may also have to be considered from another angle. So far as a third party like DMC is concerned, it had no say in the matter. It entered into the agreement between the administration and the grantee. It could realize the property tax which is compensatory in nature, only in the event the agreement is construed to be a lease and not otherwise. For the purpose of gathering the intention of the parties we must also apply our mind from this angle.
The MCD renders services. The benefits of such services are being taken by all concerned, viz., the owner of the land or building. Even a person who is in possession of a land or building, whether legal or illegal, takes benefits of such services rendered by the MCD. The MCD for the purpose of realization of tax is not concerned with the relationship of the parties. It is concerned only with imposition and recovery of tax in accordance with law.
62. Tax is payable on all lands and buildings. The exceptions thereof have been enumerated in the Act itself, Section 119 of the Act is one of such provisions. Such an exemption clause, as is well known, must be construed strictly. Section 119 would apply if the lands and buildings are the properties of Union of India. The Corporation has the right to levy the property tax in terms of Section 114 of the Act in the manner as specified therein.
63. By reason of the agreement in question the buildings do not belong to the administration. They belong to the grantees. Oil tanks are buildings within the meaning of the said Act as has been held by the Apex Court. Section 119 of the said Act therefore would not apply to the building in question. The grantees are, therefore, liable to pay tax although the ownership of the land may belong to the administration, Section 115 provides that the general tax shall be payable in respect of lands and buildings. Such lands and buildings may be in lawful occupation of the owner. The occupation of the said building may be lawful or unlawful. Even in a case where apartments are constructed on the land may belong to the Government or a statutory body but the occupier of the apartment are liable to pay tax. If a person encroaches upon somebody's lands and constructs buildings thereupon, he would also be liable to pay tax. Once it is held that the grantees were liable to pay tax, the possibility that the term 'license' has been used so as to avoid the payment of tax, also cannot be ruled out.
64. A contention has been raised by Mr. Sethi to the effect that as the agreement is an unregistered one, having regard to the provisions contained in Section 117 of the Transfer of Property Act and Section 17 of the Registration Act, Sub-section (1) of Section 120 would not be attracted. Having regard to the fact that the grantee is the owner of the building, the property tax in terms of Clause C to Sub-section 2 of Section 120 must not be construed in a pre-emptive manner. The words "let for a term exceeding one year to a tenant" would not mean the right of the parties to do so in terms of the provisions of the Transfer of Property Act or the Registration Act. By reason of the said provision merely Sub-section 2 of the Section 120 of the Act must not be construed to mean that where by reason of an agreement the tenant is allowed to occupy or possess the demised premises for a term exceeding one year. It, for the purpose of taxability, has nothing to do with the fulfillment of requirement of other statutes, viz., Transfer of Property Act or Registration Act. A tenant, in view of the explanation appended to Sub-section 2 of Section 120 of the Act would include not only a person who was -- but also may be a person who has derived interest in the building erected thereupon. Even a transfer for the said purpose would attract the provisions of Sub-section (2) of Section 120. Even in case of Government grant there can be a term of lease exceeding one year. Despite non-registration, in the instant case, the term of the lease indisputably has exceeded on year. Indisputably the grantee erected several buildings. In the instant case even the rent was to be paid annually. In that view of the matter, the submission of Mr. Sethi having regard to the purport and object of levy of property tax by DMC Act cannot be accepted.
65. In Delhi Motor Co. and Ors. v. U.A. Basrurkar (dead) bys his LRs. and Ors., , the Apex Court explaining its earlier decision in Ram Kumar Das v. Jagdish Chandra, :
"8.......though under the Kabuliyat the land was leased out for a period of ten years, the lease in fact must be presumed to be from month to month under Section 106 of that Act. The facts of that case were, however, quite different. In that case the terms of the lease were not ascertained from the Kabuliyat in which the period of lease was fixed at 10 years. The terms of the lease were ascertained from other documents, including receipts for rent paid by the lessee to the Lesser, and on the basis of that evidence it was found that a lease had come into existence under which rent was being paid monthly. No such circumstances appear in the case before us. In fact, it was at no stage pleaded and no evidence was led to show that independently of three documents Exts. P1, P2 and P3, there was material from which it could be inferred that a lease from month to month had come into existence between the firm and the company. No such point was urged either in the Trial Court or before the High Court and no such finding of fact exists. In these circumstances, Section 106 of the Transfer of Property Act would clearly be inapplicable, and the lease has to be held to be for a period exceeding one year for the reasons given by us above."
66. Mr. Jain has relied upon decision of the Apex Court in National and Grindlays Bank Ltd. v. Municipal Corporation for Greater Bombay, . In that case the Apex Court was considering a different fact situation as regards the preliminary liability of the lessee.
67. For the reasons afore-mentioned we are of the opinion that the document in question constitutes lease in favor of the respondent-grantee and the reference is answered accordingly. Consequently, LPAs 52 to 58 of 1987 and 227 of 1996 are allowed.
However, LPA 228/96 is required to be dealt with separately.
68. In this case the tenure of the document is absolutely different. The grantee is merely to pay occupation fee and not the rent. There also does not exist any clause as regards requirement to serve three months' notice for termination of tenancy. As by reasons of such an agreement neither any rent is payable nor any notice is required to be served for the purpose of determination of the tenancy, in our opinion, the grant in favor of the grantee is only a license. We answer the reference accordingly.
These Letters Patent Appeals are accordingly disposed of. No order as to costs.