Introduction

• This is a landmark case law under the Transfer of Property Act, 1882 (TOPA) which deals with the concept of tenancy under lease.

Facts

• The respondent operated a barbershop named Madam James within two rooms of Appellant’s Hotel.
• The dispute arose when they sought rent standardization under the Rent Control Act, 1947 contending that the permission granted by the hotel constituted a lease.
• As they contended that they were paying an exorbitant amount of rent.
• The hotel countered, asserting that it did not fall under the jurisdiction of the Rent Control Act 1947 and highlighting that the agreement between the parties specified a license, not a lease. Consequently, the Rent Controller set the rent at Rs. 94/-.
• However, the District Court rejected this decision upon the hotel's appeal, maintaining that the arrangement was a mere permission, constituting only a license.
• Upon further appeal, the Punjab High Court reinstated the Rent Controller's order, determining that the agreement indeed established a lease, not a license.

Issue Involved

• Whether the document executed by the parties is a Lease or a License?

Observation

• The Supreme Court discussed the meanings of 'hotel' and 'a room in a hotel’.
  • It said that a hotel is a place where strangers or travelers are entertained, providing lodging to guests, and sometimes both lodging and food or other services.
• However, the court disagreed that a room must be exclusively used for lodging. Instead, it concluded that the room in question was a place of business for the appellant-respondent.
• In determining whether a document establishes a license or lease, the court stated that the document's substance should be considered over its form.
• According to the court, based on certain tests, it is not accurate to consider the document as a license.
  • The document does not merely grant a personal privilege to the respondent; rather, it gives exclusive possession of the rooms to the appellant-respondent without being controlled or directed by the appellants.
• The court noted that the covenants in the document are typical of those expected in a lease deed.
• Additionally, the court highlighted that the respondent's right to transfer their interest under the document, even with the appellant's consent, contradicts the concept of a license.

Conclusion

• The SC held that the document resulted in the conveyance of the right to use the two rooms, thus establishing a tenancy in favor of the respondent.
• Hence, the SC dismissed the appeal and upheld the order of HC.

Notes

Section 105 of TOPA: Lease defined—

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.

Lessor, lessee, premium and rent defined—

The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent.