Madras High Court
T.S.Karthikeyan vs The Commissioner on 1 February, 2012
Author: K.K.Sasidharan
Bench: K.K.Sasidharan
BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 01/02/2012 CORAM THE HONOURABLE MR.JUSTICE K.K.SASIDHARAN W.P.(MD)No.9035 of 2011 and M.P.(MD)Nos.1 and 2 of 2011 T.S.Karthikeyan ... Petitioner Vs. The Commissioner, Thanjavur Municipality, Thanjavur. ... Respondent Prayer Writ Petition is filed under Article 226 of the Constitution of India praying for the issue of a Writ of Certiorarified Mandamus, to call for the records of the respondent relating to proceedings in Na.Ka.No.11462/2007/A6, dated 02.08.2011 and quash the same and consequently, direct the respondent to renew the lease of community hall at East Gate, Thanjavur in favour of the petitioner for a further period of 3 years by accepting enhanced rate of rent at 15% over and above the existing rent. !For Petitioner ... Mr.G.Sankaran ^For Respondent ... Mr.P.Srinivas ******** :ORDER
****** Whether the permission granted by the Thanjavur Municipality to make use of their Community Hall while retaining legal possession would amount to a lease is the core question that arise for determination in this Writ Petition.
BRIEF FACTS:
THE CASE OF THE PETITIONER:
2. According to the petitioner, Thanjavur Municipality conducted a public auction -cum- tender on 31 July, 2008 for granting lease of their Community Hall. The petitioner quoted a sum of Rs.1,61,000/- and ultimately, he was declared as the successful bidder. The subject was placed before the Municipal Council and accordingly, a resolution was passed on 29 September, 2008, resolving to grant the lease of the Community Hall to him for a period of three years from the date of handing over the premises. Subsequently, agreement was executed for a period of three years subject to the condition that the petitioner should enhance the rent by 5% every year. The entire lease amount of Rs.1,61,000/- was duly paid besides a sum of Rs.5,00,000/- as security deposit.
The petitioner, thereafter, spent considerable amount for the purpose of furnishing the Community Hall and for improving and modernizing the kitchen and dining hall.
3. While the matters stood thus, the Government issued orders in G.O.(2D)No.147, Municipal Administration and Water Supply Department, dated 30 December, 2000, in and by which, permission was granted to the local bodies to grant lease or to renew the lease in favour of the existing lessees by accepting enhanced rent at the rate of 15% over and above the prevailing rent. Subsequently, orders were passed in G.O.Ms.No.92, Municipal Administration and Water Supply Department, dated 03 July, 2007, directing that the period of lease would be automatically extended for every three years by revising the rent on the basis of market value.
4. The lease granted to the petitioner expired by 25 September, 2011. The petitioner made a request to extend the lease by another three years. The petitioner placed reliance on the Government Order in G.O.Ms.No.92, Municipal Administration and Water Supply Department, dated 03 July, 2007 in support of his plea for extension. The said request was turned down by the Municipality. Aggrieved by the said order dated 02 August, 2011, the petitioner is before this Court.
THE CASE OF THE LOCAL BODY:
5. The Commissioner, Thanjavur Municipality in his counter, while denying the claim of the petitioner that he was given a lease, indicated that the transaction in question was a licence and the Municipality has retained the legal possession. The petitioner has accepted the terms and conditions and executed the licence agreement. Therefore, he cannot turn down and claim that he is a lessee. According to the Municipality, the Council, in its Resolution No.365, dated 29 August, 2008, very specifically stated that the licence was for a period of three years from the date of handing over the Community Hall. The Government Orders issued subsequently in respect of leases would not come to the rescue of the petitioner to claim automatic renewal. In short, the respondent maintained that what was given to the petitioner was only a licence and not a lease. Therefore, he has to vacate immediately after the expiry of the period of three years.
SUBMISSIONS IN BRIEF:
6. The learned counsel for the petitioner submitted that the Municipality granted only a lease in favour of the petitioner. The nature of the transaction is evident from the fact that other buildings were given for a period of one year, but however, the subject transaction was for a period of three years. He would contend that the subsequent Government Orders are clearly applicable to the transaction in question and as such, the Municipality was not justified in rejecting the request made by the petitioner for renewal. The petitioner made substantial improvements to the building and he was having a fond hope that the lease would be renewed. According to the learned counsel, the Government have taken a decision to grant extension of such leases, taking into account the investment made by the lessees. The petitioner also should be given the benefit of such Government Orders. The intention of the local body was clearly to grant a lease and not a licence. Therefore, the Municipality was bound to renew the lease in favour of the petitioner for a further period in accordance with the Government Order in G.O.Ms.No.92, Municipal Administration and Water Supply Department, dated 03 July, 2007.
7. The learned counsel for the petitioner placed reliance on a judgment of the Supreme Court in Qudrat Ullah v. Municipal Board reported in 1974(1) SCC 202 in support of his contention that what is relevant is the intention of parties.
8. The learned counsel for the respondent, while reiterating the contentions raised in the counter-affidavit, submitted that the petitioner was fully aware about the nature of transaction and he took part in the tender process and ultimately, entered into an agreement. The agreement clearly indicates that it was a licence. Therefore, the petitioner was not justified in his contention that he should be given a renewal treating the transaction as one of lease.
DISCUSSION ON MERITS:
9. The Thanjavur Municipality issued a notification calling for tenders to part with the privilege to conduct a Town Hall. The notification contains a clear indication that only the enjoyment of the building alone was intended to be given to the prospective tenderer. The petitioner knowing fully well the contents of the notification and the nature of the transaction submitted his tender. The bid submitted by the petitioner was found to be the highest. The said bid was considered by the Council of the Municipality. The Council found that rate fixed by the Public Works Department was about Rs.7,521/- per day. The Town Hall was constructed for the purpose of giving facilities to the local public to conduct their social functions. Therefore, in all probability, the successful bidder would get only 30 to 40 functions a year. The Municipal Council considering the average bookings opined that the rate quoted by the petitioner was reasonable. Accordingly, a resolution was passed on 29 August, 2008 to accept the bid submitted by the petitioner. This was followed by an agreement dated 25 September, 2008. The petitioner keeping his eyes open signed the said agreement. The agreement was with certain conditions. The agreement clearly indicates that what was given to him was nothing but enjoyment of the premises.
10. A cumulative reading of the following conditions incorporated in the said agreement would make the position very clear that the transaction was nothing but a licence.
CONDITIONS:
(1) The petitioner is permitted to enjoy the building. The Tamil version reads thus:
"ne;efuhl;rpf;Fr; brhe;jkhd g[jpajhf fl;lg;gl;Ls;s rpd;idahgps;is rKjha Tlj;jpid xg;gilf;Fk; ehs; Kjy; Kd;whz;L fhyj;jpw;F mDgtpj;Jf; bfhs;Sk; chpikf;F jpU.o.v!;.fhh;j;jpBfad; vd;gthpd; cah;e;jgl;r xg;ge;jg;g[s;spia ghh;itapy; fz;Ls;s ne;efh; kd;wj;jPh;khdj;jhy; cWjp bra;ag;gl;Ls;sJ."
(2) The petitioner should not commit any kind of encroachment over the Property of the Municipality.
(3) The term is for a period of three years and in case the Municipality wanted the building, the petitioner should vacate without protest.
(4) The petitioner shall not do any construction work. (5) The utensils, chairs and other materials should be purchased by the petitioner. It is the duty of the petitioner to procure the essential articles for the purpose of conducting the Community Hall. (6) The petitioner shall not transfer the right.
(7) The petitioner should not make any partition inside the building and he should not let out either the Hall or part of the building. (8) The petitioner should not use loud speakers after 09.00 p.m. and before 05.00 a.m. (9) The petitioner should not construct any shed by making attachments to the Community Hall.
(10) The petitioner should give preference to the Government, local bodies and other social functions.
(11) In case the petitioner violates any of the conditions, water supply would be disconnected.
(12) In case the premises is not kept under clean condition, the licensee is liable for fine quantified at Rs.250/- per case. (13) The petitioner should deposit the licence amount one month before the expiry of first year, so as to enable him to continue for the second year.
11. The decision taken by the Municipality on 27 May, 2008 to part with the enjoyment of the building, acceptance of the bid submitted by the petitioner by passing Resolution on 29 August, 2008, the agreement dated 19 September, 2008 which contains the resolution, all shows that the transaction was not in the nature of a lease. It was purely a licence and the Municipality retained the legal possession at all point of times.
12. The learned counsel for the petitioner, by placing reliance on a judgment of the Supreme Court in C.M.Beena v. P.N.Ramachandra Rao [2004(3) SCC 595], contended that the user of the terms like 'licence' is not by itself decisive of the nature of the right created by the document and the Court has to consider the totality of the circumstances to arrive at a decision as to whether a particular transaction in fact was a lease or licence.
13. The Supreme Court in C.M.Beena's case cited supra considered the essential features of a licence and observed that in case the owner retains legal possession and the licensee was given only the permission to use the premises, the transaction would amount to licence. The following observation would make the position clear:
"9. A few principles are well settled. User of the terms like 'lease' or 'licence', 'lessor' or 'licensor', 'rent' or 'licence fee' are not by themselves decisive of the nature of the right created by the document. An effort should be made to find out whether the deed confers a right to possess exclusively coupled with transfer of a right to enjoy the property or what has been parted with is merely a right to use the property while the possession is retained by the owner......................."
14. The Supreme Court in Qudrat Ullah v. Municipal Board [1974(1) SCC 202] observed that there is no simple litmus test to distinguish a lease from a licence. The Supreme Court further observed that the character of the transaction turns on the operative intent of the parties. The Supreme Court opined that if an interest in immovable property, entitling the transferee to enjoyment, is created, it is a lease. On the other hand, if permission to use land without right to exclusive possession is alone granted, a licence is the legal result. The Supreme Court by quoting extensively from Volume 23 of Halsbury's Laws of England indicated the instances of agreements creating licences, which reads thus:
"1025. INSTANCES OF AGREEMENTS CREATING LICENCES. A licence is normally created where a person is granted the right to use premises without becoming entitled to exclusive possession thereof, or the circumstances and conduct of the parties show that all that was intended was that the grantee should be granted a personal privilege with no interest in the land. If the agreement is merely for the use of the property in a certain way and on certain terms while the property remains in the possession and control of the owner, the agreement will operate as a licence, even though the agreement may employ words appropriate to a lease."
15. The Supreme Court in Associated Hotels of India v. R.N.Kapoor [AIR 1959 SC 1262] indicated the marked distinction between a lease and licence. The Supreme Court observed that in case a person is permitted to make use of the premises for a particular purpose while the legal possession continues to be with the owner, the transaction would only be a licence. The Supreme Court said:
"27.................................................. 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 licence. 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 favour any estate or interest in the property. There is, therefore, clear distinction between the two concepts......................................................
............................................
The following propositions may, therefore, be taken as well-established: (1) To ascertain whether a document creates a licence or lease, 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 licence; (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 licence; and (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......................."
16. In Vayallakath Muhammedkutty v. Illikkal Moosakutty [1996(9) SCC 382], the Supreme Court found that the defendant was given exclusive possession of the disputed premises for running a hotel. However, he was not given the permission to sub-lease the property. The Supreme Court ultimately held that the arrangement was only a licence.
17. The Supreme Court in Pradeep Oil Corporation v. Municipal Corporation of Delhi [2011(5) SCC 270], after scanning the earlier judgments relating to lease and licence, summarised the legal position thus:
"32. In view of the aforesaid well-settled legal position, whether a particular document will constitute "lease" or "licence" would inter alia depend upon certain factors which can be summarised as follows:
(a) whether a document creates a licence or lease, the substance of the document must be preferred to the form;
(b) the real test is the intention of the parties - whether they intended to create a lease or a licence;
(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 licence; 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."
18. The notification issued by the Municipality calling for tenders clearly indicates that only the right to enjoy the property alone was intended to be given to the prospective tenderer. The Municipality wanted to retain the legal possession. The resolution adopted by the Municipality to grant the privilege to the petitioner also contains a clear indication that only the right to enjoy the Community Hall alone was given to the petitioner. The conditions incorporated in the agreement executed between the Municipality and the petitioner, including the conditions regarding prohibition of sub-lease, repair and renovation, the right of the Municipality to occupy the premises before the expiry of the agreed period, the restriction with regard to the use of loud speaker, etc., gives a very clear indication that at no point of time, the Municipality has taken a decision to grant a lease. In fact, the Municipality has given a clear indication about the mode of enjoyment of the property. The resolution shows that even the privilege amount was calculated in terms of PWD rate and taking into account the probable bookings per year. The petitioner was given privilege for a period of three years. However, he was given only one year licence at one span and he was given liberty to renew the licence one month before the expiry of the original term of one year.
19. While considering a transaction like this, the Court should take into account the intention of parties. The creation of interest in the property is the primary test. The petitioner was not given any interest in the property. The Municipality in all the documents specified that only the right to enjoyment alone was given. Therefore, the transaction can never be considered as a lease giving right to the petitioner to make a demand for extension on the basis of the subsequent Government Orders.
20. The Municipality was perfectly justified in rejecting the request made by the petitioner for renewal. In case it was the intention of the Municipality to give a lease of the premises, there would have been many others with better offers. The fact that the petitioner has procured utensils and chairs would not convert licence into one of lease. The agreement contains a provision that the petitioner has to procure necessary articles. It was only the lack of facilities which made the Municipality to accept the offer given by the petitioner. The petitioner, who was a party to the agreement, cannot later contend that in spite of such an agreement, he was made to believe that the arrangement would be continued. Therefore, I do not find any merit in the contentions raised by the petitioner.
21. The property in question belongs to a local body. The Municipality should get maximum returns. The Municipality acted only in accordance with the agreement. The petitioner has agreed to vacate and surrender the premises after the expiry of the total period of three years. The Municipality has not flouted the terms of agreement. The attempt of the petitioner was to retain possession of the Community Hall by placing reliance on the subsequent Government Orders, which has nothing to do with a transaction, in the nature of licence.
22. The licence granted to the petitioner expired on 25.09.2011. The petitioner has no right to occupy the premises thereafter.
23. In the upshot, I dismiss the Writ Petition. Consequently, the connected miscellaneous petitions are also dismissed. No costs.
SML To The Commissioner, Thanjavur Municipality, Thanjavur.