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Section 105:- 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.
Definition of lease. - A lease of immovable property is a transfer of a right to enjoy
such property made for a certain time or in perpetuity. The expression transfer of a
right to enjoy “stands in contrast with the words” transfer of ownership” occurring in
section 54 in the definition of sale. In a sale, all the rights of ownership, which the
transferor has, passes on to the transferee. In a lease, there is a partial transfer that
is a transfer of a right of enjoyment for a certain time. The person who transfers the
right is called the lessor and the person to whom the right is transferred is lessee. An
absolute owner, who is under no personal incapacity, can grant a lease to any
person who is competent to contract at the date of execution. It should be noted that
while both a sale and a mortgage to a minor are valid, a lease to a minor is void as
the lease imports a covenant by the transferee (lessee), to pay rent and perform
various conditions which may be imposed in a lease. A contract with a minor is void.
The fundamental conception of a lease is that it is the separation of the rights of
possession from ownership.
A lease, in this generic sense, is that form of encumbrance which consists in a right
to the possession and use of property owned by some other person. It is the
outcome of the rightful separation of ownership and possession.
Essential elements of lease: - The essential elements of lease are as under:
1. The parties i.e. transferor and the transferee.
2. The demise i.e. right to enjoy immovable property.
3. The term i.e. the duration
4. The consideration i.e. premium or rent.1
1. The parties:
Both parties, i.e., the lessor and the lessee must be competent to contract. A
lease cannot be created without any express or implied contract between two
parties.
1. These requirements were restated by Supreme Court in B. Arvind Kumar v. Government of India, (2007) 5 SCC
745. Apart from satisfying these requirements, existence of the lease deed must also be proved. Narain Prasad
Aggarwal v.State of M.P., AIR 2007 SC 2349.
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It is clear from Section 105 that for the creation of relationship of landlord and tenant,
it is necessary that there should be contract between the parties regarding transfer of
a right to enjoy the property in consideration of either premium or rent or both. The
existence of such a contract may, however, be implied, i.e., evident from the conduct
of the parties. Whether the relationship of landlord and tenant exists between the
parties, the parties intend to create a tenancy, and intention had to be gathered from
the facts and circumstances.2
2. The demise: Right to enjoy immovable property:
Lease is a transfer of right of enjoyment in an immovable property. It is not a
transfer of ownership; it is transfer of partial interest. Ownership or absolute interest
is aggregate of several interests. In a sale, gift or exchange absolute interest is
transferred. In mortgage only transferred partial or limited interest is transferred for
securing the debts. In a lease too partial or limited interest namely, the right of
enjoyment of immovable property, is transferred. Lease is, therefore, transfer of
limited estate. This limited estate which is ‘right of enjoyment’ of property, is called
demise. In a lease this right of enjoyment or demise is the subject matter of transfer.
The essential characteristic of a lease is that the subject (property) is occupied and
enjoyed and the corpus of which does not, by reason of the user, disappear 3 .The
right of enjoyment of property is technically ‘ leasehold’ estate and is transferred after
being separated from ownership. This right is a right in rem(against whole world).
In a lease, the property must be immovable. Immovable property here means not
only land but everything included in this term as defined in Section 3 of this act.
Thus, the property may be house, minerals, benefits arising out of land such as
fisheries, ferries or right to collect rent from market etc. However, the property being
leased out must be definite and ascertainable.
3. The Term: Duration of lease:
The next element is that the right to enjoy the property must be transferred for a
certain time or in perpetuity. It may commence either in the present or on some date
in future or on the happening of an event which is bound to happen. Where day is
expressed for commencement of the lease, such day must be excluded in computing
the whole period of lease. Section 110 enacts that if the day of commencement is
not stated, the lease begins from the date of execution
2. Technicians Studio Pvt. Ltd. v. Smt. Lila Ghosh, A.I.R 1977 S.C. 2425
3. Girdhari Singh v. Megh Lal Pandey, (1918) 45 Cal 87; 42 IC 651; Johnson Kanadan v. Patel Saw Mill, A.I.R 2008 NOC 842
(Ker)
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If it is expressed to commence from a past day that is only for the purpose of
computation and the interest of the lessee begins from the date of execution. Both
the time when the lease begins and the time when it ends must be fixed. The
certainty need not be ascertained at the time, for if in the fixation of time a day will
arrive which will make it certain, that is sufficient. The time may therefore be fixed
either by express limitation or by reference to some event which will afterwards fix its
exact length. In the first case a certain time is expressed, in the latter it is implied. As
an example the latter is a lease for life or a lease for so long as the lessee pays rent.
Permanent leases: In India, the permanent leases or a lease in perpetuity may be
created either expressly or inferred from the circumstances of a given case. In the
latter case it is said to have been created through a presumed grant. The tenancy of
a permanent nature in the sense that it could not be revoked so long as the plaintiff
paid rent in cash or kind may b inferred from various terms and conditions of a lease.
a) Tenancy-at-will.
A lease which is silent as to duration of term would be void as a lease, but if
the lessee has taken possession, a tenancy-at-will is created. It arises by
implication of law in cases where a person takes possession of the premises
with the consent of the owner. It may also arise by an express agreement to
let for an indefinite period for compensation accruing from day to day. The
tenant in such a case is not a trespasser and his only liability is to pay
compensation for use and occupation. A tenancy-at-will is terminable by
either party. A demand by landlord for possession is sufficient to terminate
his tenancy-at-will.
b) Tenancy by sufferance.
Another type of a tenancy may be noted here. It is called a ‘tenancy by
sufferance’. It also arises by implication of law when a person who has been
in possession under a valid lease continues in possession even after the
expiration of lease without the consent of the lessor. Thus, a tenant holding
over after the expiration of the term is a tenant at sufferance. A tenancy at
sufferance is terminated at any time by landlord entering without notice or
demand.
4. Consideration: Premium or Rent.-
The contract of lease must be supported with some consideration. Consideration in
a lease may be premium or rent. Where the whole amount to be recovered as
consideration from the lessee is paid by him in lump sum, (at one time) the
consideration is called premium. For example, where A executes a lease of his land
to B for one year and takes Rs.1200 from B before transferring the right of
enjoyment to B for the said period, Rs.1200 is the premium. It is to be noted that
apparently this may look like a usufructuary mortgage because B gets possession
(and therefore enjoyment) of land for for repayment of any loan. Premium is to be
distinguished also from advance rent. Where consideration for taking possession of
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land is as Salami, it is a premium. Single non-recurring character and payment prior
to creation of a tenancy are the main characteristics of salami which is treated as
premium.4
Consideration paid periodically is called rent of the lease. Rent need
not be necessarily in the form of money. Under this section, rent may be paid in the
form of services rendered by lessee to the lessor. Rent may be paid also in the
form of a share or crops. However, the rent fixed for the lease must be certain. It
may vary from time to time but it must be reasonably ascertainable. An option to
renew the rate of rents to be paid according to market value of the property from
time to time does not make the rent uncertain.
Section 106- Duration of certain lease in absence of written contract or local
usage.- (1) In the Absence of a contract or local law or usage to the
contrary, a lease of immovable property for agricultural or manufacturing
purpose shall be deemed to be a lease from year to year, terminable, on the
part of either lessor or lessee, by six months notice; and a lease of immovable
property for any other purpose shall be deemed to be a lease from month to
month, terminable, on the part of either lessor or lessee, by fifteen days notice.
(2)Notwithstanding anything contained in any other law for the time being in
force, period mentioned in sub-section (1) shall commence from the date of
receipt of notice.
(3)A notice under sub-section (1) shall not be deemed to be invalid merely
because the period mentioned therein falls short of the period specified under
that sub-section, where a suit or proceeding is filled after the expiry of the
period mentioned in that sub-section.
(4) Every notice under sub-section (1) must be in writing, signed by or on
behalf of the person giving it, and either be sent by post to the party who is
intended to be bound by it or be tendered or delivered personally to such
party, or to one of his family or servants at his residence, or (if such tender or
delivery is not practicable) affixed to a conspicuous part of the property.
Applicability of transitory provisions. - The provision of section 106 of the
principle act, have been made applicable to-
a) All notice in pursuance of which any suit or proceeding is pending at the
commencement of this Act; and
b) All notice which have been issued before the commencement of this act but
where no suit or proceeding has been filed before such commencement. 5
Implied duration- This section enacts a rule for duration of leases in cases not
governed by local law, contract or usage. The section lays down a rule of
construction and applies to a case where no period is agreed between the parties.
Telegraphic notice sent for terminating tenancy is not valid as the same is not
signed.6
4. Commr. Of Income tax v. Pranbari Tea Co. Ltd., A.I.R 1965 S.C. 1871.
5. Vide Section 3 of the Transfer of Property (Amendment) Act, 2002 (3 of 2003).
6. Maduri Satyanarayan v. Jingasetti Veerabhadra Swamy, AIR 1990 A.P. 169
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The presumption under this section is that the lease is from year to year, month to
month according to the nature of the property, and is terminable by six months’
notice or fifteen days notice, as the case may be. A stipulation that the rent would be
payable monthly would raise a presumption that the tenancy was from month to
month. Where a lease is executed for agricultural or manufacturing purposes, it is
deemed to be a lease from year to year. In case of lease for agricultural purposes, in
absence of a specific agreement or special local law or custom, it is taken to be
yearly. Although, the section refers to agricultural leases yet complete, should have
different nature and should be put to a different use.
In Bachulal Shah v. M/s. Gita Timber Co.7, the lease of the land in suit was obtained
in connection with running of saw mill to be set up on adjacent land. Land was used
for stacking timbers. This kind of operation carried on was not a manufacturing
process. Accordingly it was held that the lease was not for manufacturing purpose.
Manufacturing purpose. - If in lease-deed different purposes are mentioned, the
difficulty may arise as to whether it is for manufacturing purpose. In these cases,
dominant purpose is seen. If the dominant purpose is manufacturing, the lease
would be a transaction covered by section 106. But if the lease is for multiple
purposes, the mere fact that the lessee concentrates on one purpose alone cannot
itself justify the conclusion that it is not for manufacturing purpose. It is open to the
lessee to concentrate on one purpose at a time without giving up his option to use
the demised premises for other purposes as and when it suits him to do so.
The expression ‘manufacturing purpose’ has not been defined in the Act, but the
Supreme court has considered the question and has laid down the principles and
tests for determination of what can be said to be manufacturing purpose” within the
meaning of the act. In the case of P.C.Cheriyan v. Mst. Barfidevi8, the Supreme
Court has held that “the broad test for determining whether a process is a
manufacturing process is whether it brings out a complete transformation for the old
components so as to produce a commercially different article or commodity.” In the
said case it has been held that retreading of old tyres does not involve manufacturing
process inasmuch as it does not bring into being a commercially distinct or distinct
entity.
In the case of Idandas v. Anantram9, the Supreme Court laid down the following
tests for determining whether a lease is for purpose of “manufacturing process”
within the meaning of section 106 of the Act. The tests are:
i. That it must be proved that a certain commodity was produced;
ii.That the process of production must involve either labour or machinery;
iii.That the end product which comes into existence after the manufacturing
process is complete, should have different name and should be put to a
different use.
Form and construction of notice to quit. - The section differs from the English law
in that it requires the notice to be in writing and signed. The notice must extend to al
the premises and the landlord cannot break up the tenure. The rule has been mark
lame and inaccurate notices sensible where the recipient cannot have mislead as to
the intention of the giver. A liberal construction is therefore, put upon a notice to quit,
in order that it should not be defeated by inaccuracies either in description of the
premises, or the name of the tenant, or the date of expiry of the notice.
7. AIR 1996 Ori 3.
8. AIR 1980 S.C. 86
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Notice to Terminate Lease. - This section provides for the requirement of notice by
lessor or lessee whosoever wants its termination. For termination of yearly tenancy
six months notice and for monthly tenancy fifteen days notice is necessary. The
requirement as to notice has been provided to enable the tenant to gather up the
fruits of his labour or make necessary arrangements before quitting. Notice to quit is
therefore necessary preclude to legal determination of tenancy. Formerly notice was
required to have the effect of terminating the lease at expiry of six months with the
end of the year or at expiry of fifteen days with the end of a month. But now section
106 has been amended version of this section words, “expiring with the end of a year
of tenancy” and “expiring with the end of a month of tenancy” have been omitted.
The result is that now the tenancies may be terminated at any time after giving
notice. The new section now expressly provides that such notice shall not be
deemed to be invalid merely because the period mentioned therein falls short of the
period specified in this section, where suit or proceeding is filed after expiry of the
period as mentioned in sub-section (1). It is also to be noted that the period
mentioned in sub-section (1) shall commence from the date of receipt of notice.10
The mere fact that a notice did not mention any time or exact date for determining
the tenancy does not invalidate the notice provided that the suit is filed after expiry of
the notice period from the date of receipt provided under the act.11
A lease of immovable property exceeding one year can only be made by a registered
instrument. The tenant in this case failed to draw a registered instrument after expiry
of five year term of lease. He also did not file a suit for specific enforcement of
renewal. He merely continued to pay rent. It was held that he became reduced to the
status of tenant by holding over. The tenancy was therefore deemed to be month to
month tenancy. It could be terminated by notice under section106. 12
The notice has to be formal declaration of the lesser’s intention to put an end to the
lease. It is not necessary that the tenant should not have defaulted in the payment of
rent nor any other ground for eviction has to be stated.13The notice making out a
larger case that when the plaintiff pursued was held not to render it vague or
indeterminate.14
Notice for terminating a tenancy is not required to be served on sub-tenants. The
court said that sub-tenants are at best proper parties to eviction proceeding. 15.
9. AIR 1982 SC 127
10. Pannalal Sagarmal v. Central Bank of India, AIR 2008 Cal 285; Virender Kumar v. Cogent EMR Solution ,AIR 2009
NOC 3017(Del).
11. Renu Gupta v. Kanti Devi, AIR 2013 All 26. Ajay Kumar v. Dasa AIR 2013 Cal 125, 30 days notice required under the
agreement but only 15 days agreement was given; suit was filed after expiry of 30 days, held competent. Lakshmi Narayan v.
Secy, Khadi Gramodyog Vihar Manddal, AIR 2014 Utr. 14 unregistered document required 3 months notice, not binding 30
days notice given was proper.
12. S.Rajiv Singh v. Punchip Associates P. Ltd., AIR 2008 Del 56.
13. Syed Mustajab Husian v. A.D.J, Agra AIR 2012 NOC 344 All.
14. EIC holdings Ltd v. Calcutta Dock Labour Borad, AIR 2008 NOC 1413 (Cal); Pannalal Sagarmal v. Central Bank of India
AIR 2008 Cal 285 notice did indicate the intention to terminate the lease, not good. But court could give a fresh notice.
15. S.Rajdev Singh v. Punchip Associates P Ltd. AIR 2008 Del 56.
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Service of Notice. - The notice to terminate a tenancy must be duly served on the
party intended to be bound by it. Notice may be served by any of the modes given in
the section. The section provides that the notice may be sent by the post to the party
who is intended to be bound by it or may be delivered to him personally. Such notice
may also be given to his family members or servants and, ultimately, if nothing is
possible, the notice may be affixed to a conspicuous part of the leased property. In
Kulkarni Patterns Pvt. Ltd v. Vasant Baburao Ashtekar.16 it was held by Supreme
Court that in case of a company , notice, as required by section 106 of the act, could
be sent by registered post in the name of the company. Any objection to the validity
of notice to terminate tenancy under section 106 should be raised specifically and at
its earliest. In Parwati Bai v. Radhika17, the receipt by the defendant was admitted in
the written statement but did not raise any specific objection as to the validity of the
notice. The Supreme Court held that any objection to the validity of the quit-notice
should be raised specifically and at earliest, otherwise the objection would be
deemed to be waived.”
Where the notice of eviction is sent by registered post with acknowledgement due
and acknowledgement is received back with recipient’s signature, there is a
presumption that the addressee has received the letter in the course of business and
the notice is seems to be served.18 Publication of a notice in newspaper or
telephonic notice is no notice under section 106 of the act.
Section 107:- Lease how made: A lease of immovable property from year to
year, or for any term exceeding one year, or reserving a yearly rent, can be
made only by a registered instrument.
All other leases of immovable property may be made either by a registered
instrument or by oral agreement accompanied by delivery of possession
Where a lease of immovable property is made by a registered instrument, such
instrument or where there are more instruments than one, each such
instrument shall be executed by both the lessor and the lessee:
Provided that the State Government may, from time to time, by notification in
the official gazette, direct that leases of immovable property, other than leases
from year to year, or for any term exceeding one year, or reserving a yearly
rent, or any class of such leases, may be made by unregistered instrument or
by oral agreement without delivery of possession.
16. AIR 1992 SC 1097.
17. AIR 2003 SC 5995.
18. Gren View Radio Service v. Laxmibai Ramji, AIR 1990 SC 2156.
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MODES OF CREATING LEASE.
Section 107 provides for the modes of making leases. Like other transfers certain
formalities are necessary also for completing a lease. This Section provides for two
modes of creation of leases:
A. Leases which can be made only by registration-
a) Leases from year to year.
b) Leases for term exceeding one year.
c) Leases reserving a yearly rent.
d) Permanent leases.
B. Leases in which registration is optional:
a) Leases from month to month.
b) Leases for a term of one year.
c) Leases for a term of less than one year.
The Indian Registration Act 1908 also makes similar provisions regarding the
registration of leases. Under Section 17, the leases mentioned in group (A) are
compulsory registerable. The leases grouped in (B) may be made either by
registered instrument or by delivery of possession.
Leases from year to year. - Where the lessor has no right to determine (terminate)
a lease at the end of a year without giving notice, the lease is from year to year. That
is to say, a lease from year to year is continuing lease. Unless terminated by a notice
to quit, the lease from year to year may last indefinitely. Such leases arise by
operation of law whenever a person is in possession of an immovable property with
the permission of landlord and such person pays the rent yearly. Year to year leases
must be made through a registered document.
Leases for a term exceeding one year. - In cases where the term of a lease has
been fixed exceeding one year, registration is compulsory. A lease of fishery, i.e.,
right to catch fish is a lease of an immovable property; therefore if such lease is
made for a term exceeding one year, it must be registered. Lease of a house for an
indefinite period for carrying out some business at a rent to be settled on the basis of
percentage of the income accumulated after fifteen months was held as a leases
exceeding one year which is compulsorily registerable.19
19. Delhi Motor Co. v Basruki U.P. AIR 1968 SC 794
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A lease made for a life of lessee is a lease for a term exceeding one year and must
be registered. In Rajendra Pratap Singh v. Rameshwar Prasad,20 the Supreme court
held that a lease for term exceeding one year must be through a registered
instrument. But signing of instrument by both lessee and lessor is not sine qua non
for its validity. What is essential is its joint execution.
Lease reserving yearly rent. - Where the rent of a lease is reserved for the whole
year, there is presumption that it is from year to year lease.
Permanent Leases. - Permanent leases are too compulsorily registerable. Whether
a lease is permanent or not, depends on terms laid down in the deed and the object
and the circumstances under which the lease was created. Normally, following two
circumstances may arise presumption of a permanent lease ;(i) that no term is fixed
in the lease and, (ii) that the instrument of lease contains a provision for exercise of
certain rights by legal heirs of lessor and lessee after their death.21
Other leases. - Leases other than the above mentioned are leases for a term of one
year or for term less than one year and, the leases from month to month. Second
paragraph of this section provides that such other leases may be effected either by
registered instrument or by oral agreement followed by delivery of possession. Thus,
registration of these leases is optional. Writing too is not necessary and oral
agreement accompanied by delivery of possession is sufficient to affect the lease.
Execution by Lessor and Lessee. - Lease is an agreement between two
competent parties under which the owner of a land transfers the right of enjoyment in
immovable property to another person for certain duration. Therefore, where the
lease is required to be made through a registered deed, the deed must be executed
by both, the lessor and the lessee. A written and registerable lease is invalid if it is
not executed by both the parties. But, execution by lessor and lessee both is
necessary only where the lease of immovable property is made by a registered deed
20. AIR 1999 SC 37.
21. Commr. of Income Tax v. Viseshwar Singh AIR 1940 Pat 24.
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Effects of Non- Registration. – Where a lease is compulsorily registerable but has
not been registered, the lease is invalid. If the registration of a lease is necessary
under section 107, the provision for its renewal shall not affect the requirement of the
registration when a registered lease is further renewed. In other words, a covenant
for renewal contained in a lease does not ipso facto extend the tenure of the lease. If
to the renewed lease, the requirements of registration are compulsory, no valid lease
would come into existence unless registration is made.22Such unregistered lease
becomes a monthly tenancy and terminable as such.23 A lease deed which was not
registered and was also not adequately stamped was tendered in evidence. The
court held that it could be used as evidence for collateral purposes. 24
However, a person holding possession under an unregistered lease (which is invalid)
is not a trespasser; he is treated as tenant-at-will. The lessor is entitled by receive
rents or compensation from such tenant. Such rent is recoverable by means of legal
action.25 An unregistered lease, though invalid, is sufficient basis for a suit for the
specific performance under Section 27-A of the Specific Relief Act. Further, a lessee
holding possession under an unregistered lease may defend his possession under
Section 53-A (part-performance) of this act.
22. Hindustan Petroleum Corp. Ltd. v. Vummidi Kannan, AIR 1992 Mad.190 ; Bandhu Machinery P. Ltd. v. Om Prakash
Sikka, AIR 2009 Del 33 (DB), an extension of lease not made by registered instrument, it is for the lessee to establish the
purported oral lease.
23. Kempahanumaih v. Allied Motors Services Station, AIR 2012 Kar 100
24. Omprakash Thakur v. Niranjanlal, AIR 2012 M.P. 112
25. Ahmedsaheb v. Sayed Ismail, AIR 2012 S.C. 3320
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DIFFERENCE BETWEEN LEASE AND LISENCE.
The term ‘lease’ and ‘license’ are defined under Section 105 of the Transfer of
Property Act and Section 52 of the Indian Easements Act respectively.
Section 105 of Transfer of Property Act:
“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:
“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.”
Points for Lease:-
Some apparent features which can be derived out while reading the provisions
relation the concept of “Lease” under Transfer of Property Act, 1882 would be as
follows.
1. Transfer of an interest to the transferee. The person who is transferring an interest
must possess that interest. Problem in this regard usually arises when a lessee sub-
lease the property.
2. Parties to the lease. It would be very interesting to note here that parties are
entering into a contract, which means they must comply with the provision mentioned
under Indian Contract Act, 1872 to know the competency of the parties. It prohibits
certain person to enter into a contract e.g. a minor, a person with unsound mind.
3. Subject matter of the lease. Being the most important element in order to form a
lease deed, its existence becomes necessary at the time of making a lease deed. It
can be any immovable property irrespective of the fact whether they are enclosed or
not. It can be a land; it can be a house and similar immovable property. But, it would
be also important here to note that it is interest which a person holds in this property
which is transferred.
4. Another important point which has to be kept in mind in a lease deed is the form of
the lease. It can be absolute, or it can be derivative. A lease which is in derivate form
can be further sub-leased to another person or to a “sub-lessee”, but that doesn’t
mean that lessee has been absolved from his liabilities. He still remains responsible
to the head-lessor. On the other hand, a lease in absolute form cannot be sub-
leased to another person. Whether the lease is derivate or absolute is a question of
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fact, and can only be determined from the condition and clauses mentioned under a
lease deed.
5. Duration of lease is another important factor which has to be kept in mind while
dealing this matter. Fixed time period is not mandatory in a lease deed, but the
duration for which it has been leased out becomes very important for the purpose of
a valid lease.
6. Consideration provided by the person, who is receiving the interest in the property
become another important condition to be complied with. It is not a mandatory
condition that consideration should be in the form of money, it can be any another
manner suitable for the said purpose or which has been prescribed by law. It can be
any form of service of some monetary value.
Points for License:-
Following are some of the features which can be attributed to a licence agreement.
1. Unlike Lease, in licence there is no transfer of interest which a transferor owns in
a property. It is a mere permission to enter into the property without any transfer of
interest. Some examples would be very interesting to note here such as a person
who is allowed to conduct his song performance during specific hours of a day,
permission to use a specific portion in a land for setting up a movable shop etc.
2. The heritable nature of lease is not present in a licence i.e., a licence is neither
heritable nor transferable. It can only be used by the person with whom licence
agreement has been made. In other words, it can be concluded that licence is a
personal contract between the parties.
3. A person who grants the licence can terminate at any point of time. It would not be
necessary to wait until the time period is elapsed for the termination of a licence. The
same cannot be done in a lease agreement. Also, if the property is sold to a third
party, licence agreement comes to an end with immediate effect.
4. A licensee cannot alter the nature of the property which has been provided to him.
He would not be able to make any modification whatsoever be the nature of it. It
would be the exclusive right of the owner to do so. Moreover, a licensee doesn’t hold
any possessory right over the licensed property; instead possessory right is with the
owner of the property.
Case list:-
Associated Hotels of India Ltd. vs. R.N. Kapoor, [1960] 1 SCR 368 (Supreme
Court, 1959)
A lease is 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 the lessee gets that right
to the exclusion of the Lesser.
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In case of license, the legal possession 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.
Rajbir Kaur and Anr. vs. S. Chokesiri and Co. AIR 1988 SC 1845
The question whether a transaction is a lease or licence “turns on the
operative intention of the parties and there is no single, simple litmus
test to distinguish one from the other.”
The grant only for the right to use the premises without being entitled to
the exclusive possession thereof operates merely as a licence.
Exclusive possession itself is not decisive in favour of a lease and
against a mere licence, for, even the grant of exclusive possession
might turn out to be only a licence and not a lease where the grantor
himself has no power to grant the lease.
Delta International Limited vs. Shyam Sundar Ganeriwalla & Another, AIR
1999 SC 2607
To find out whether the document creates lease or license real test is
to find out ‘the intention of the parties'; keeping in mind that in cases
where exclusive possession is given, the line between lease and
licence is very thin.
Madhu Behal and Anr. vs. Rishi Kumar and Anr., (2009) 3 PLR 628 (Punjab &
Haryana High Court, 2009)
It is never a nomenclature in the document that governs the decision
as to whether a document as a ‘lease’ or a ‘licence’.
The essential feature that distinguishes a lease from licence is always
a transfer of interest in the demised property in a transaction of lease
while a licensee does not involve any such transfer of interest.
The lease is heritable while license is personal to the grantee.
The legal possession of the property is inevitably transferred to a
tenant under lease while in a transaction of license the legal
possession continues with the licensee and the licensee has a mere
right of user of the premises in a particular fashion mentioned under
the document.
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