1. These two Regular First Appeals arise out of the common judgment and decrees dated 23-4-1983 passed in O.S.No. 10521/1980 and O.S.No. 10002/1981 by the XAdditional City Civil Judge, Civil Station, Bangalore. R.F.A.No.402/1983 is directed against the decree passed in O.S.No. 10521/1980 preferred by the defendants and R.F.A. No. 403/1983 is against the decree in O.S.No.10002/1981 preferred by the plaintiff.
2. In O.S.No. 10521/1980, K.V. Rajagopal is the plaintiff and Smt. Sundarabai Ammal and her son Ramachandran and grand son Kantharaj are the defendants; whereas in O.S.No. 10002/1981 Smt. Sundarabai is the plaintiff and K.V. Rajagopal is the defendant.
3. I shall refer to the facts of the case as set out in the earlier suit O.S.No. 10521/1980 for the sake of convenience as it would serve the purpose of the other suit O.S.No. 10002/1981 also since the plaint averments in the former suit is the defence in the latter and the defence taken by the defendants in the former suit is the plaint averments in the latter.
4. The facts of the case as set out by the plaintiff in O.S.No. 10521/1980 briefly stated, are as under:
The premises in No. 4/1, Byala Anjaneyaswamy Temple Compound, Old Madras Road, described in the schedule consisting of an office, workshop, rooms and open compound with machines installed therein had been leased out to the plaintiff by the 1st defendant. Originally it was agreed that the lease would be for a period of three years commencing from 1-4-1979 on a monthly rent of Rs.790/- but the lease deed was executed for a period of one year only to save stamp and registration charges. But the understanding between the plaintiff and the 1st defendant was that the said lease would be in force for a period of three years with an option to the plaintiff to renew the same on the same terms for a further period of three years. After the expiry of the first year of the lease, the 1st defendant wanted an enhancement of the rate of rent, The plaintiff represented to the 1st defendant that he has invested large funds, time and energy to improve the workshop but had sustained loss during the first year and that unless the lease terms would be for a longer period, he would not be able to recoup the loss or pay any enhanced rent. Finally, it was agreed between the plaintiff and the 1st defendant that the lease would be for a period of 10 years commencing from 1-4-1980 on a monthly rent of Rs. 900/-. Accordingly, the plaintiff continued in occupation of the leased premises and has been paying the rent regularly. Besides, the plaintiff also paid Rs.5,000/-by way of security deposit which is lying with the 1st defendant. The security amount was agreed to be returned to the plaintiff after the expiry of the lease period. Of late, due to themisunderstandings that have arise between the plaintiff and the 2nd defendant, the latter and some others have wrongly advised the 1st defendant to make a demand for furtherenhancement of the rent from Rs. 900/- to Rs. 1000/-. The plaintiff expressed his inability to agree for any further enhancement of rent. The 1st defendant being enraged at the flat refusal by the plaintiff to pay any further enhanced rent, got a registered notice dated 17-11-1980 issued to the plaintiff demanding to vacate the schedule premises by 31-42-1980. The plaintiff caused a reply notice dated 3-12-1980 to be issued setting out the true facts. The 2nd and 3rd defendants have absolutely no interest in the schedule property. The 1st defendant however has been tethering her cows in a portion of the leased property with the consent of the plaintiff. Defendants 2 and 3 seldom visited the suit schedule property. It is only the servants of the 1stdefendant who were attending to the cows, have been visiting the suit schedule premises. There is a compound wall all around the schedule property with gates which are always locked by theplaintiff and his assistants. Finding that the plaintiff has not voluntarily agreed to the 1st defendant's unjust and illegal demand for enhancement of rent? all the defendants are planning to use force and coercion against the plaintiff to make him submit to their command. Very valuable machinery and stock in trade belonging to the plaintiff has been stored in the open compound and thedefendants are planning to enter the compound with some goon das on the pretext of looking after cows and to cause mischief-by interfering with the possession of the plaintiff anddamaging or destroying his valuable machinery and stock in trade. On these grounds, the plaintiff sued the defendants for a perpetual injunction restraining them from interfering with the possession and enjoyment of the suit schedule property by the plaintiff.
5. The defence taken by the defendants in their written statement is as follows :
The vacant land bearing No. 4/1, Byala Anjaneyaswamy Temple Compound, Old Madras Road, Bangalore, belongs to Byala Anjaneyaswamy Temple Trust. The said Trust leased out the vacant land to the 1st defendant in the year 1969 on a monthly rent of Rs. 35/-. The 1st defendant had put up a factory building in the said vacant land and was running the business in the name and style of'Saravana Industries.' In the year 1979, the 1st defendant executed a hire agreement dated 23-3-1979 in favour of the plaintiff and handed over only the management of the business to him for a period of one year with effect from 1-4-1979 on a monthly hire payment of Rs. 790/-. The 1st defendant executed the said agreement as her grandson the 3rd defendant who was assisting her in the said business had to go to Calcutta in the year 1979 for training for one year and since she could not manage the business by herself due to old age. After the expiry of the hire agreement, the 1st defendant asked the plaintiff to hand over the business to her, but the plaintiff requested her for little more time on the ground that he was left with some pending orders unexecuted. The 1st defendant orally agreed to the request of the plaintiff on the condition that the licence to run the business would be terminated at the pleasure of the 1st defendant and the plaintiff should hand over the machinery etc. and the business as and when demanded by the 1st defendant to do so. The plaintiff voluntarily offered to pay Rs. 900/- per month as hire charges. No written document was entered into between the parties after the expiry of the period mentioned in the original hire agreement. The 1st defendant demanded the plaintiff to re-deliver the business as her grandson had returned from Calcutta after completing the training and that he was with-out any employment, the plaintiff finally agreed to deliver possession of the business on or before 31-12-1980. The 1st defendant terminated the licence granted to the plaintiff to run the business by issuing a notice dated 17-11-1980 and called upon him to deliver possession of the machinery and the business on the expiry of 31-12-1980.
The defendants denied all the allegations made by the plaintiff in the plaint contrary to the case pleaded by them. On these grounds, they prayed for the dismissal of the suit.
6. The plaintiff filed a rejoinder reiterating the case pleaded in the plaint and denying the contra case set up by the defendants in their written statement.
7. As stated earlier, the 1st defendant Sundara Bai filed the suit O.S. No. 10002/1981 against the plaintiff Rajagopal for a mandatory injunction directing the plaintiff to hand over the business described in Schedule 'A' along with themachineries and tools etc. described in Schedule-B to the plaint. The case set out by the 1st defendant (as plaintiff) and the plaintiff (as defendant) in this suit was exactly identical to the case set out by them in the earlier suit.
8. On the basis of the pleadings, the Trial Court raised the following issues;
OS. No. 10521/80 :
(1) Whether the plaintiff proves that he is a tenant of the 1st defendant in respect of the suit schedule property?
(2) Whether first defendant proves that she only handed over the management of business and machineries to the plaintiff on certain hire charges and that plaintiff's stay is only that of a licensee as alleged in para 3 of the written statement?
(3) Whether the notice dated 17-11-80 issued by the 1st defendant demanding him to vacate the suit schedule premises is legal and valid?
(4) To what reliefs the parties are entitled to?
(5) What order or decree?
O.S. No. 10002/2981 :
(1) Whether the plaintiff proves that she handed over the management of business along with machinery to the defendant on certain hire charges and that defendant's stay is only that of a licensee as alleged in paras 3 and 4 of the plaint?
(2) Whether the plaintiff proves that the alleged licence has been duly revoked and she is entitled to immediate possession?
(3) Whether the defendant proves that he is a lessee under the plaintiff?
(4) Whether the suit in the present form for the relief of mere mandatory injunction maintainable?
(5) Whether the suit is bad for nonjoinder of parties ?
(6) Whether the suit is properly valued and the Court fee paid is sufficient?
(7) To what relief the parties arc entitled?
(8) What decree or order?
9. The learned Trial Judge tried both the suits together by the consent of the parties and their Counsel, recording the evidence in O.S. No. 10002/81 and disposed of both the suits by a common judgment as aforesaid decreeing the suit O.S. No. 10521/1980 and granting a permanent injunctionrestraining the defendants from interfering with the plaintiff's possession and enjoyment of the plaint schedule property till he is evicted or dispossessed according to law and dismissed the suit O.S. No. 10002/1981. Hence these two appeals by the unsuccessful party in the aforesaid suits.
10. Since common questions of fact and law arise for consideration in these two appeals, I propose to hear common arguments and dispose of both the appeals by a common judgment.
11. As evidence was recorded in the later suit O.S. No. 10002/1981 and the Trial Court proceeded to refer to the parties as they were arrayed in the said suit, I also propose to refer to the parties in the course of this judgment as they were arrayed in O.S. No. 10002/1981 for the sake ofconvenience and also to avoid any possible confusion.
12. Sri V. Krishnamurthi, Learned Senior Counsel appearing for the plaintiff submitted that the findings of the Trial Court respecting the suit agreement Ex. P. 2 that it is a 'lease' and not a 'licence' is manifestly erroneous. His contention was that the learned Trial Judge has overlooked the important features and the terms of the agreement while reaching the conclusion that the agreement in question is not a 'licence' but it is a 'lease'. Besides, he contended that the very approach made by the Trial Court in construing the terms of the agreement was erroneous. It should haveconsidered the terms and conditions of the document which have no ambiguity or uncertainty and reached its conclusion therefrom. Instead, it discussed and considered the oral evidence adduced by the parties respecting the nature of the transaction entered into between them in the first instance and then proceeded to consider the terms of the agreement against the background of the oral evidence which was impermissible in law. He has further maintained that even otherwise, on the facts and circumstances of the case and also on the terms of the agreement, the defendant had only the permission or accessory licence to go to the factory for making use of the hired machinery and manufacturing the goods and no interest was created in the schedule property in favour of the defendant so as to hold that the suit agreement was a lease. He has further contended that the suit brought by the plaintiff by terminating the licence was valid and maintainable and the suit brought by the defendant on the basis of the alleged lease was wholly unsustainable. On these grounds, he submitted that both the appeals deserve to be allowed and the decrees of the Trial Court are liable to be reversed, decreeing the plaintiff's suit and dismissing the defendant's suit.
13. Sri P. Ramachandra Rao, learned Advocate appearing for the defendant controverted strongly all thesubmissions made on behalf of the plaintiff. He forcefully argued in support of all the findings of the Learned Trial Judge, contending that the construction placed by him on the various terms of the suit agreement is just and reasonable and his finding that it constitutes a 'lease' even though the document in question has been cleverly drafted giving an appearance of a hire agreement in order to camouflage the true nature and intent of the transaction for obvious reasons, is unassailable.
14. The short points that arise for consideration in the light of the arguments canvassed on either side are :
(1) Whether suit agreement Ex. P'. 2 dated 23-3-1979 is a 'licence' or 'lease' ?
(2) Whether the suit agreement was validly terminated '?
15. I shall proceed to consider the points in the order in which they are formulated.
POINT NO.1 :
16. The answer to this question will depend upon the true construction of the terms of the agreement Ex. P. 2 entered into between the plaintiff and the defendant. Before 1 advert to the terms of the agreement, 1 shall refer to the principles of law that distinguish a 'lease' and a 'licence' Which is indeed a vexed question.
17. 'Lease' is defined under Section 105 of the Transfer of Property Act, 1882 thus :
'A lease of immoveable 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.''
'Licence' is defined under Section 52 of the Indian Easements Act, 1882 thus :
'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 immoveable properly 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 licence.'
In Halsbury's Laws of England, Third Edition, Volume 23, the principles for determining whether an agreement creates 'lease' or 'licence' have been set down which may serve as guidelines, at pages 427, 428 and 429 :
'1022: Principles for determining whether agreement creates lease or licence :
In determining whether an agreement creates between the parties the relationship of landlord and tenant or merely that of licensor and licensee, the decisive consideration is the intention of the parties. The parties to an agreement cannot, however, turn a lease into a licence merely by stating that the document is to be deemed a licence or describing it as such; the relationship of the parties is determined by law on a consideration of all relevant provisions of the agreement; nor will the employment of words appropriate to a lease prevent the agreement from conferring a licence only if from the whole document it appears that it was intended merely to confer a licence. In the absence of any formal document the intention of the parties must be inferred from the circumstances and the conduct of the parties.
1023 : Nature of grant of exclusive possession : The fact that the agreement grants a right of exclusive possession is not in itself conclusive evidence of the existence of a tenancy, but it is a consideration of the first importance.
In deciding whether a grantee is entitled to exclusive possession regard must be had to the substance of the agreement. To give exclusive possession there need not be express words to that effect; it is sufficient if the nature of the acts to be done by the grantee requires that he should have exclusive possession.
The grant of an exclusive right to a benefit can, however, be inferred only from language which is clear and explicit. If an exclusive right of possession is subject to certain reservations or to a restriction of the purposes for which the premises may be used, the reservations or restriction will not necessarily prevent the grant of operating as a lease.
1024 : When grant conferring exclusive possession operates merely as licence :
A grant which confers the right to exclusive possession may operate as a licence in the following circumstances which negative the intention to create a lease.
1025 : Instance 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........'
In Associated Hotels of India v. R.N. Kapoor : 1SCR368 the Supreme Court had an occasion to consider the distinction between 'lease' and 'licence'. Speaking about it in para 27 of the Judgment, His Lordship Subba Rao, J. as he then was observed :
'27. There is a marked distinction between a lease and a licence. S. 105 of the Transfer of Property Act defines a lease of immoveable 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 S. 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 lessor 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 lessor. Whereas S. 52 of the Indian Easements Act defines a licence thus :
'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 immoveable 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 licence.'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 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 dividing line is clear though sometimes it becomes very thin or even blurred. At one 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 opinion is reflected in Errington vs. Errington 1952 All E.R. 149, wherein Lord Denning reviewing the case law on the subject summarizes 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.'The Court of Appeal again in COBB vs. LANE, 1952-1 All ER 1199, considered the legal position and laid down that the intention of the parties was the real test for ascertaining the character of a document. At P. 1201, Somervell LJ. stated :
'.....the solution that would seem to have been found is as one would expect, that it must depend on the intention of the parties.''Denning L.J. said much to the same effect at P.1202 :
'The question in all these cases is one of intention; Did the circumstances and the conduct of the parties show that all that was intended was that the occupier should have a personal privilege with no interest in the land?'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 maybe established which negative the intention to create a lease...........'
In M.N. Clubwala v. Fida Hussain Saheb, : 6SCR642 the Supreme Court dealing with the question whether an agreement creates a lease or licence, observed :
'Whether an agreement creates between the parties the relationship of landlord and tenant or merely that of a licensor and licensee, the decisive consideration is the intention of the parties. This intention has to be ascertained on a consideration of all the relevant provisions in the agreement. In the absence, however, of a formal document the intention of the parties must be inferred from the circumstances and conduct of the parties.'
Again in Qudrat Ullah v. Bareilly Municipality : 2SCR530 dealing with the features that distinguish a 'lease' from a 'licence' the Supreme Court observed :
'There is no simple litmus test to distinguish a lease as defined in Section 105, Transfer of Property Act from a licence as defined in Section 52 Easements Act, but the character of the transactions turns on the operative intent of the parties. To put it pithily, if an interest in immoveable property entitling the transferors (sic) to enjoyment is created, it is a lease; if permission to use land without right to exclusive possession is alone granted, a licence is the legal result.'
18. Bearing these principles of law in mind, I would presently read Ex- P. 2 the suit agreement.
The first party to the document is the plaintiff and the second party is the defendant. The preamble to the document reads :
'Whereas the First Party is the owner and proprietress of the Industry running under the name and style of 'Saravana Industries' situate at No. 4/1, Old Madras Road, Byela Anjaneyaswamy Temple Compound, Ulsoor, Bangalore-8,
Whereas the First Party has been doing business of manufacture and sale of steel furniture, grills, gates, steel windows, Industrial works and fabrications, pipe and electrical accessories etc. in the said industry.
Whereas the First Party is the lessee of the premises in which the industry is being run under the Byela Anjaneya Temple Trust and is paying a monthly rental of Rs. 35/- for the premises to the Trust;
'Whereas the First Party due to her old age is unable to manage the industry more effectively and hence is desirous of hiring out the business with the machinery and tools etc to the Second Party for one year from 1-4-1979 for which the Second Party has also agreed under the following terms and conditions.'Then follows the various Clauses of the agreement consisting of 18 Clauses and 4 Schedules, The Clauses that are very material for our purpose are these :
(1) The First Party shall hand over actual possession of only the business 'Saravana Industries' with the machinery, tools, office fittings and furniture, licences and other documents more fully described in the Schedule 'A', 'B', 'C' and 'D' annexed along with the agreement and signed by both the parties, which will form the part and parcel of this agreement.
(2) The Second Party shall take actual possession of the property described in the different schedules hercundcr on 1-4-1979 and shall run and manage the business for a period of 1 year from 1-4-1979.
(3) The Second Party has paid a sum of Rs. 3,000/- (Rs. Three Thousand only) on this day to the First Party and has agreed to to pay another sum of Rs. 2,000/- (Rs. Two Thousand only) to the First Party on 5-9-1979 towards Security Deposit. This Security Deposit of Rs- 5,000/- is to be refunded by the First Party to the Second Party when the Second re-delivers. 'possession of the business' and other properties taken on hire by him. If any shortage or breakage happens the same is liable to be adjusted in the Security Deposit and the balance will be refunded to the Second Party.
(4) The Second Party shall run the same business in the name and and style of 'Sri Saravana Industries' and shall not run any unlawful business or trade in the business place.
(5) The Second Party shall pay a sum of Rs. 790/- per month to the First Party towards hire charges on or before 5th of every month and obtain proper . receipt. The first month's hire charges shall be paid by the Second Party on or before 5th of May 1979.
(6) The First Party shall take immediate action to inform the change of name of the Industry from Saravana Industries to Sri Saravana Industries in the records of Sales Tax Department.
(12) After the expiry of the hire period, the Second Party shall re-deliver possession of the business and other properties as per schedule to the First Party in the same condition under which they are delivered to him subject to usual wear and tear.
(16) The Second Party shall allow the First Party to tie and rear the cows in a portion of the business premises (shed) as is being carried on all these days. But the First Party shall also keep the said place clean and tidy. The Second Party shall allow the milkman or the First Party or her agent or watch-man to attend to the cows or to have access to the watchman's house.
(17) The Second Party shall allow the First Party or her agent to have inspection of the business premises for checking the availability of all the hired articles at all reasonable time.'
19. It is well-known that to ascertain the true intent and import of a document, the document should be read as a whole. In this background, I shall next consider the material part of the document and its clauses.
20. The terms and conditions of the agreement set out in the deed Ex.P.2 are preceded by a fairly long preamble consisting of four paragraphs. The proper function of the preamble is to explain certain facts which are necessary to be explained before the enacting part of the statute can be un-'dcrstood. This would equally apply to a deed or a document. The preamble to the suit agreement would show that the plaintiff is the owner and the proprieties of the industry called the 'Saravana Industries,' that she has been doing business of manufacture and sale of steel furniture, grills, gates, steel windows, industrial works and fabrications, pipe and electrical accessories etc. in the said industry and in the last para of the preamble, it is stated that the plaintiff unable to manage the industry more effectively due to her old age and therefore, she is desirous of hiring out the business with the machinery and tools etc, to the defendant. It is there-fore clear that the plaintiff was unable to look after or run the factory due to old age and hence desirous of making it over to the defendant to carry on the industry although it is stated that she was desirous of hiring out the business with the machinery and tools etc. The mere fact that the word 'factory' is not introduced but only the words 'hiring out the business with the machinery and tools etc.' are used, does not make the transaction any the less of making over the factory with all the machineries and the tools etc. for carrying on the business subject to the terms and conditions of the agreement that were to follow in the deed. Hiring out the business with the machinery and tools without the entire buildingincluding the factory would not carry out the purpose and intention of the parties that the defendant were to carry on the industry which was being carried on by the plaintiff and which she was unable to carry on due to her old age. This aspect is further made clear by the terms and conditions of the agreement.
Clause 1 of Ex. P. 2 shows that the First Party shall hand over actual possession of only the business 'Saravana Indus-tries' with the machinery, tools, office fittings and furniture. licences and other documents more fully described in the Schedule 'A', 'B', 'C' and 'D' annexed to the agreement. Would this mean that the plaintiff did not give possession of the whole factory to the defendant to run the business? If the possession of the whole factory is not given to the-defendant to run the business, how could he run the business-of manufacturing the articles in the factory? There is nothing in the document to show that the plaintiff retained thepossession of the factory or that she wanted to come and stay in the factory premises and allow the defendant only tomanufacture the articles by using the machinery, tools etc.
Clause 2 further emphasizes that the defendant shall take actual possession of the property described in the different schedules and shall run and manage the business for a period of one year. Clause 3 refers to the security deposit of Rs. 5,000/- paid by the defendant to the plaintiff to be returned to the defendant when the defendant delivers possession of the business and other properties to the plain-tiff. Clause 4 provides that the defendant should run the same business in the factory in the name and style of 'Sri Saravana Industries' although the old name of the industry run by the plaintiff was 'Saravana Industries.' Clause 5 provides that the defendant shall pay a sum of Rs. 790/- per month to the plaintiff towards hire charges. Clause 6 provides that the plaintiff shall take immediate action to inform the change of name of the industry from 'Saravana Industries' to 'Sri Saravana Industries' in the records of the Sales Tax Department. Clause 12 provides that after the expiry of the hire period, the defendant shall re-deliver possession of the business and other properties to the plaintiff in the same condition under which they were delivered to the defendant subject to the usual wear and tear.
Then follows the two important Clauses 16 and 17. Clause 16 stipulates that the defendant shall allow the plaintiff to tie and rear the cows in a portion of the businesspremises (shed) as is being carried on all these days and he shall allow the milkman or the plaintiff or her agent or watchman to attend to the cows or to have access to the watchman's house. A condition was imposed on the plaintiff that she should keep the place where she was allowed to tie and rear the cowsclean and tidy. Clause 17 further provides that the defendant shall allow the plaintiff or her agent to haveinspection of the business premises for checking the availability of all the hired articles at all reasonable time.
21. It is clear from the preamble and relevant clauses of the suit agreement referred above, that the plaintiff, who was carrying on the industry of manufacturing steel articles in the suit factory, was unable to manage the industry more effectively due to her old age and so she was desirous of making over the business with the machinery and tools etc. to the defendant. Even though it was stated that she was desirous of hiring out the business with machinery and tools etc., the real intention of the parties was that the plaintiff was to make over the entire building including the factory to the defendant to carry on the industry. The mere fact that the word 'business' was introduced and the word 'factory' was omitted to be introduced, it does not make any significant difference. What was intended to be hired out to the defendant by theplaintiff was the entire factory with all the accessories to run the business of manufacturing the articles which were being manufactured by the plaintiff previously. This was the intention of the parties that could be ascertained from reading the deed as a whole. It is provided under Clause 1 that the plaintiff shall hand over actual possession, though emphasis was added only the business 'Saravana Industries' with machinery, tools, office fittings and furniture, licences and other documents described in Schedules A, B, C, & D, which would mean possession of the entire factory. Clause 2 provides that the defendant, shall take actual possession of the property described in the different schedules and shall run and manage the business for a period of one year. To run and manage business for a period of one year would shownothing else than to manufacture the steel articles in the Factory and carry on the business and does not mean only to manage the. business that was being carried on by the plaintiff It would show that the whole responsibility is that of the defendant to do all the things necessary to carry on the business ofmanufacturing steel articles in the factory. Clause 3 refers to the security deposit of Rs. 5000/- paid by the defendant and to be refunded to him when he gives back possession of the business i.e., the factory and other properties referred to in the earlier clauses. Clause 4 provides for change of the name and style of the business from 'Saravana Industries' under which name and style the business was being carried on by the plaintiff to 'Sri Saravana Industries', a new name and style under which thedefendant would carry on the industry. The plaintiff was obliged to take immediate action to inform the change of name of the industry from 'Saravana Industries' to 'Sri Saravana Industries' in the records of the Sales Tax Department as stipulated under Clause 6. This would show that the industry to be carried on by the defendant was under a different name and style than that of the one being carried on by the plaintiff. Clause 5 provides for payment of Rs. 790/- per month to the plaintiff by way of hire charges by thedefendant. Although it is stated that what was to be paid by the defendant is a sum of Rs. 790/- per month was hire charges, it really represents the rent in respect of the factory and the machinery, tools etc., which were given to the possession of the defendant. Clause 12 stipulates that after the expiry of the period of the agreement, the defendant shall re-deliver possession of the business and other properties as per the schedule, to the plaintiff in the same condition in which they were delivered to the defendant. Clause 16 and 17 serve as the key to discern the intention of the parties and the true import of the agreement. These clauses clearly show that possession of the building where the factory was being run with all the machineries, tools etc. was handed over to the defendant as per the terms and conditions of the agreement. If the possession of the building was not given to the defendant as tried to be made out by the plaintiff, there was no necessity to include Clauses 16 and 17 in the document. Clause 16 clearly indicates that the possession of the business premises (shed) was given to the defendant; if not why he should allow the plaintiff to tether her cattle in a portion of premises. This piece of the material proclaims contrary to the plaintiff's case of retention of the possession of factory premises with her. A limited right of entry into the factory premises was given to the plaintiff and her milkman, agent or watchman, only to attend to the cows or to have access to the watchman's house and nothing more. Now turning to Clause 17, a similar right of entry to thefactory premises was given to the plaintiff or her agent to have inspection of the business premises only for checking the availability of all the hired articles at all reasonable time. These Clauses unmistakably point out that possession of the factory premises was handed over to the defendant and the plaintiff was given certain concessions as provided therein.
22. Reading the suit agreement as a whole, it seems to me that there remains no doubt that it is a lease of the factory along with the tools, machineries, furniture etc. and not merely hiring of the business with the machinery and tools etc. Although the word 'factory' was not introduced in thedocument and the document was cleverly and artistically drafted with words and phrases giving it an appearance of hireagreement or licence, the same cannot camouflage the real intention of the parties as cautioned by the Supreme Court in the aforesaid decisions. It is the prime function of the Court to spell out the true nature of the transaction by close andcareful analysis and scrutiny of the various provisions in the document and not to be guided and carried away by the mere form of the document. The subject matter of the suitagreement is not a matter like a shandy place where people are allowed to vend their articles by paying market fees or a cycle stand where a party may keep his bicycle for few hoursagainst payment of certain charges, without having any actual possession of the place or any interest being created in the land on which they transact their business or keep theirbicycle. In the instant case, the subject matter of the transaction between the plaintiff and the defendant is an industrial unit, manufacturing steel article of various kinds and unless the defendant had exclusive possession of the factory premises, the defendant could not carry on the industry ofmanufacturing various kinds of steel articles he was expected to manufacture. Considering the suit agreement as a whole, I have no doubt in my mind that it is a 'lease' and not a 'licence'.
23. As submitted by Sri P. Ramachandra Rao, learned Advocate for the defendant, there may be some ambiguity in the terms of Ex. P. 2 whether the factory premises was also included in the agreement and the possession of which was given to the defendant. In such a situation, Courts are not precluded from taking into consideration the surrounding circumstances to find out the intention of the parties entering into the transaction and in this regard the parties are entitled to adduce evidence respecting the circumstances under which the transaction evidenced under the deed had been entered into by the parties and Section 92 of the Evidence Act would not come in the way of adducing oral evidence.
In Panditchunchun Jha v. Sheikh Ebadat Ali and Another : 1SCR174 the Supreme Court dealing with the principles of interpretation of a document held :
Each case must be decided on its own facts. The numerous decisions of the High Court on the point are of no help because two documents are seldom express any identical terms.
24. The intention of the parties is the determining factor but the intention must be gathered from the document itself which has to be construed to find out the legal effect of the words used by the parties-If the words are express and clear, effect must be given to them and any 4. : 1SCR174 extraneous enquiry into what was thought or intended is ruled out. If, however, there is ambiguity in the language employed, then it is permissible to look to the surrounding circumstances to determine what was intended. (as paraphrased in paras 2 and 3 of the Head Note).
In Janaki Bai v. Subba Rao, 1962 Mys. L.J. Supplement 534 a Division Bench of this Court held :
'By virtue of Section 92 Evidence Act, oral evidence for the purpose of ascertaining the intention of the parties to the deeds is not admissible and the issue between the parties on the said subject has to be decided on a consideration of the documents themselves with only such intrinsic evidence of circumstances as might be required to show in what manner any of the document is related to existing fact.
What is ultimately decided in all cases is the intention of the parties. In ascertaining that intention, the court and the parties are limited primarily to the terms of the documents themselves. If the terms are clear and unambiguous, the only question would be what is the legal effect of the words used in those documents. It is only in cases of ambiguity that it is possible to adduce and rely upon oral evidence within the limits prescribed by proviso 6 to Section 92 of the Evidence Act with a view to ascertain how the language is related to existing facts.......'
(As paraphrased in the Head Note).
In Baijanath v. Vally Mohammed A.I.R. 1925 P.C. 73 the Privy Council observed:
The preamble to the Evidence Act recites that 'it is expedient to consolidate define and amend the law of evidence' and Section 92 merely prescribes a rule of evidence ; it does not fetter the court's power to arrive at the true meaning and effect of a transaction in the light of all the surrounding circumstances.'
25. Thus it is seen from the above rulings that primarily the intention of the parties is the determining factor to decide the true scope of a transaction entered into by the parties and such intention must be gathered from the document itself which has to be construed to find out the legal effect of the words used by the parties. If the words are express and clear, effect must be given to them and any extraneous enquiry into what was thought or intended is ruled out. However, if there is ambiguity in the language employed, then the Courts are not precluded from looking into the surrounding circum-stances to determine what was intended. On this question the parties are entitled to adduce and rely upon oral evidence, of course, within the limits prescribed by proviso 6 to Section 92 of the Evidence Act with a view to ascertain how the language employed is related to existing facts.
26. Now 1 shall refer to the oral evidence adduced by the parties in respect of the language used in the deed relating to the factory premises whether the factory premises was also included in the transaction and the possession of which was also handed over to the defendant along with the moveables and the documents etc., specifically referred to in the schedule appended to the deed.
27. P.W.I Ramachandran is the son and power of attorney holder of the plaintiff. He was examined on behalf of the plaintiff. His evidence is that the defendant was allowed to run the industry for one year and a document was executed as per Ex.P.2 by hiring the machineries, on a hire charge of Rs.79O/e The defendant was allowed to change the name of the industry as 'Sri Saravana Industries' for the purpose of sales tax. He asserts that the possession of the land and the building was retained with them. They are tethering 5 cows in the building. He appointed a watchman to look after the building and the machinery. They have also kept some semi-finished goods in the factory. However in the course of the cross-examination he admits that the factory premises consists of an office room, two rooms for the machineries etc, that the factory building is a permanent structure with brick walls on all the three sides and stone slab on one side and the defendant cannot take the machineries outside the factory but he has to use the machinery inside the factory itself, that the defendant can also bring any other extra machineries and use them inside the factory, that after the date of the agreement, the plaintiff is not liable to pay Sales Tax, that she is not concerned with the business of the factory and about the profit and loss and everything is the concern of the defendant, that the defendant has taken Sales Tax registration in his name, that the defendant is not running the business in the factory as the agent of the plaintiff, that the defendant is running the business in his own right, that the use of the word 'delivered' in Ex.P.2 pertains to the machinery alone, that one of the clauses provides that the defendant should allow the plaintiff to tether the cattle in a portion of the factory premises, that on the date of the execution of the deed, the factory was not working and there was no workman in the factory and that the defendant him-self has engaged new workmen and is running the factory.
28. The next witness is P.W.3 Govindappa, who is said to be the watchman. His evidence is that daily he locks the main gate and also the gate at the back side of the factory, that he sleeps in the factory that his house is behind thefactory shed, and that the plaintiff's cows are tethered in the rear portion of the factory. In his cross-examination he clearly admits that the defendant locks the office room and another room inside the factory. He further says that out of the two main gates, one is locked by him and the other is locked by the defendant, that all the manufactured goods are kept in the factory hall and that he goes everyday for stone dressing work in the morning and returns in the evening. He denied a suggestion that he was not a watchman for the factory shed but only for the cattle of the plaintiff kept in the factory premises.
29. The only other two witnesses whose evidence requires reference are P.W. 4 Shamanna and P.W.5 Channarayappa. It is seen from the evidence of P.W.4 that the defendant had requested him (witness) to intimate the plaintiff for extension of time after the expiry of the period stipulated in Ex.P.2 as P.W. 1 had asked him to vacate the factory premises. The evidence of P.W.5 is also more or less to the same effect that the defendant had approached him (witness) about 1 1/2 years back (from the date of the examination of the witness) and requested him to tell P.W.1 to grant the defendant three months time to vacate the workshop.
30. In addition to the evidence of these witnesses, there is the evidence of the defendant as D.W.1. He has reiterated his case put forward in the written statement respecting the document Ex.P.2 that it is a lease transaction, that though the agreed period of the lease was three years, when the document was written subsequently, the period of the lease was mentioned as one year and that it was agreed that the defendant should run the factory in the new name as 'Sri Saravana Industries.' He has explained the circumstances under which the document was styled differently from a normal lease deed. He has also stated that Ex. P.2 was a nominal document and the transaction that was agreed upon by the parties was a lease subject to the terms and conditions stipulated therein.
31. On a close analysis of the above oral evidence, it is evident that the factory was not working as on the date of Ex.P.2 and it had been closed. The factory was given to the defendant for manufacturing purposes, with all themachineries, furniture, etc. kept in the factory premises. In other words, the defendant was given a furnished and equipped factory which was earlier being run by the plaintiff, to carry on the business of manufacturing steel articles under the terms and conditions stated in Ex.P.2. The defendant was allowed to change the name of the industry and to have his own sales tax registrations, etc. The defendant admittedly is not an agent of the plaintiff and not managing the plaintiff's business. On the other hand, the business that is being run is that of the defendant and independent of the plaintiff. The defendant is running the business by putting his own investment and he is solely responsible for the profit and loss. The defendant is attending to the manufacturingactivities in the factory premises and the work in the factory is being carried out in obedience to his orders and directions and not that of the plaintiff. The entire control andmanagement of the factory premises is with the defendant. He is locking the office room, the store room and one of the main gates as admitted by P.W.3. The other part of the evidence of P.W.3 that he was locking one of the main gates and that he was sleeping in the factory is unbelievable. It may be that his house was behind the factory shed. A close reading of the evidence of P.W.3 would show that he was admittedly a watchman under the plaintiff in respect of her cattle tethered in the factory premises. Naturally he is an interested witness in the sense that he was admittedly an employee under the plaintiff. His evidence shows that the defendant locks the office room and another room inside the factory and also one of the main gates. When this is the situation, it looks highly improbable that the defendant would allow P.W.3 to lock the other main gate. Admittedly large manufactured goods are kept in the factory hall and when P.W.3 is not an employee under the defendant and is not responsible to him, it is highly improbable that the defendant would allow P.W. 3 to lock the factory gate, more so as admitted by P.W. 1 that the defendant is not an agent of the plaintiff but on the other hand, he is doing business in his own right. Admittedly the plaintiff has no right in the business run by the defendant and she is not supplying any raw-materials. She is not concerned with the profit and loss of the business carried on by the defendant inmanufacturing the articles in the factory. In these circumstances, would defendant allow P.W.3 to lock the main gate when his manufactured goods are kept in the factory premises. All these, as rightly pointed out by the Court below, would go to show that P. W. 3 is a highly interested witness and his evidence is artificial. Therefore, the evidence would.disclose that the defendant has been in full control, possession and management of the entire factory premises and has been manufacturing steel articles and selling them, using his discretion without being controlled or restrained by the plaintiff in any manner, of course, subject to therestrictions and conditions stipulated in Ex.P. 2, Though the document has been drafted by using the expression 'hire agreement or charges', that the term 'business' and not 'factory' is mentioned; that only moveables are listed in the schedules to the document and a superficial appearance of a licence is drawn by employing suitable terms and phrases, the same cannot camouflage the real nature of the transaction as there is intrinsic material in the terms and clauses of the deed itself and the oral evidence adduced in the case would further explain the terms and phrases employed in the deed that they were all intended to bring about a lease transaction creating an interest in favour of the defendant in the factory premises and the possession of it was also handed over to the defendant. Clauses 16 and 17 referred to earlier in un-mistakable terms indicate that physical possession of the entire factory and its premises was also given to the defendanton 'the date of Ex. P.2 subject to the stipulation that the defendant should allow the plaintiff to tether her cattle in a particular portion of the factory premises and her watch-man and servants could look after the cattle and further either she or her agent can inspect the premises to check the moveables kept in the factory and entrusted to the custody and possession of the defendant to see whether they are available.
32. From the above discussion and also the conclusion I reached, I have no hesitation to hold that the suit transaction Ex. P. 2 is a 'lease' and not a 'licence' as sought to be made, out by the plaintiff.
POINT No 2:
33. The next question that requires to be considered is whether the suit agreement was validly terminated. The finding on this point will have a bearing on issue No. 2 in O.S. No. 10002/1981 reads:
'Whether the plaintiff proves that the alleged licence has been duly revoked and she is entitled to immediate possession?'
and Issue No. 3 in O.S. No. 10521/1980 reads :
'Whether the notice dated 17-11-1980 issued by the 1st defendant demanding him to vacate the suit schedule premises is legal and valid.'
34. Sri V. Krishnamurthi, Learned Senior Counsel appearing for the plaintiff proceeded to argue on this question on the foundation that Ex. P. 2 is a licence granted to the defendant to manufacture steel articles by making use of the hired machineries in the factory premises and such being the case, a permission to occupy the factory premises can be implied in law under Section 55 of the Easements Act which is called the Accessory Licence and when the main licence itself is terminated or destroyed by issue of a notice to the defendant, the accessory licence to occupy the factory also would come to an end along with the main licence. On this basis he argued that it must be held that the plaintiff has, since revoked the main licence by causing a notice issued to the defendant and with it accessory licence to occupy the factory premises also came to an end and thus the plaintiff is entitled to the relief sought for in her suit O.S. No. 10002/1981 and the suit brought by the defendant in O.S. No. 10521/1980 is liable to be dismissed. In support of this submission he placed reliance upon Section 55 of the Easements Act and also a decision of the Kerala High Court in Subramonian v. Kochu Khadecja, 1970 Kerala Law Times 286.
Section 55 of the Easements Act lays down what are accessory licences annexed by law, reads :
'All licences necessary for the enjoyment of any interest or the exercise of any right are implied in the constitution of such interest or right.'
The principle adumbrated in the Section is where an interest or right is created by granting permission or licence, all licences necessary for the enjoyment of such interest or the exercise of such right are implied in the very constitution of such interest or right.
The legal implication of the accessory licence as adumbrated under Section 55 of the Easements Act came up for consideration before the Kerala High Court in Subramonian's case. The facts of that case are these :
The appellant took on rent a hut on 9-3-1950. The hut was destroyed and in its place a building with increasedperimeter came into existence before 11-4-1957 when Ordinance No. 1/1957 came into force. The suit was originally filed for recovery of the building with arrears of rent and for an injunction against reconstruction but later it was amended to include a prayer for recovery of possession of the site after removal of the reconstructed building. The contention of the appellant that he is a 'Kudikidappukaran' was disallowed by the Courts below. The High Court dealing on this question held:
'From the historical survey of the legislation it appears that the legislature erected a wall of protection around the concept of the term 'Kudikidappukaran' as crystallised by the definition of Ordinance 1 of 1957 which came into force on 11-4-1957 and as expanded by Act 30 of 1958, Act 1 of 1964 etc. If on that crucial date, viz., 11-4-1957, a person cannot qualify for the definition of 'Kudikidappukaran' as contained in the said Ordinance, exhypothesi, the statutory protection becomes unavailable. Assuming that permission to occupy the site of the hut or building is necessarily implied in, or is necessarily appurtenant to, a permission to occupy the hut or building itself, it can only be as an accessory licence, which cannot survive the cancellation or revocation of the main licence itself, by the destruction of its subject matter. So that when the hut ceased to exist in 1956, the accessory licence to occupy the site also ceased along with it. In this view of the matter also the defendant had ceased to be 'Kudikidappukaran' on 11-4-1957. It follows that in order to claim the benefits of a 'Kudikidappukaran' under Act 1 of 1964, a person must be shown to satisfy the definition of a 'Kudikidappukaran' on 11-4-1957. The defendant in the present case did not satisfy this requirement. He is therefore not entitled to protection as a 'Kudikidappukaran' under Act 1 of 1964.'
35. The ratio of the decision is that where a permission is granted to occupy a hut or building permission to occupy the site of the hut or building is necessarily implied in or is necessarily appurtenant to the permission granted to the former which is called an accessory licence and which cannot survive the cancellation or revocation of the main licence itself by the destruction of its subject matter. On the basis of this principle, it was contended that the main licence granted to the defendant under Ex. P.2 was a permission to manufacture steel articles in the factory premises by making use of the machineries and other moveables described in the schedule to the document which, together with the business was hired out to the defendant and when the main licence is set at naught or destroyed by the effective termination of the same by causing a notice served upon the defendant, the permission granted to him to manufacture the steel articles in the factory premises which is in the nature of an accessory licence would not survive. Hence the question of dealing with the validity or otherwise of the suit notice in relation to a lease deed as formulated under issue No. 3 in O.S. No. 10521/1980 does not arise for consideration.
36. In view of my finding under Point No. 1 that the suit agreement Ex. P.2 is a lease and not a licence, the decision in Subramonian' s case does not apply to the facts of the case and also does not help the plaintiff's case as put-forward by Sri V. Krishnamurthi.
37. Now considering the question whether the suit notice dated 17-11-1980 validly terminated the lease deed envisaged under the suit agreement Ex. P-2 the plaintiff did not bring her suit O.S. No. 10002/1981 nor resisted the suit brought by the defendant in O.S. No. 10521/1980 on the basis of the termination of the lease deed. The plaintiff has to terminate the lease evidenced by the suit agreement Ex. P-2 according to law before taking necessary steps to evict the defendant from the demised property. However, it cannot be said that the suit agreement Ex. P-2 has been validly terminated by the notice dated 17-11-1980. This point is answered accordingly.
38. In the result, for the reasons stated above, both the appeals fail and they are dismissed with costs.