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Tenancy Dispute Held as a Sale of Business With License, Rent Act Not Applicable: Supreme Court

Contents of this Page

Issue of the case

Whether the instant case deals with renting the Appellant’s premises or the sale of a business?

The fact of the case

The Appellant’s husband used to run a stationery shop, which was later run by the Appellant herself after the sudden demise of her husband. Later, when the defendant approached her for running the business, she agreed in handing over the Respondent to run the shop and for the same, the royalty she used to take as mentioned in the agreement is 90 Rupees per month. However, the agreement was initially made between the two for two years, but the contract was extended again and again. On 20.12.1980 the Appellant issued a notice stating that she desires to start her husband’s business again and accordingly the Respondent must vacate the suit premises by 31.01.1981. The Respondent’s reply to the notice was that it was not a sale of a business rather it was a rent agreement stricto sensu. Then the Appellant filed a civil suit in the Joint Civil Judge Court in Pune, and the Trial Court ordered the Respondent to hand over the suit property to the Appellant, including everything present on the premises. Accordingly, the Respondent filed a second appeal to the Bombay High Court where the Trial Court’s judgment was set aside and the Court decided that the Respondent entered a license agreement that is covered under Section 15A Bombay Rent Act. By the virtue of the inclusion of Section 15 (A), all the licensees have become tenants. So, being aggrieved by the judgment of the Bombay High Court, the Appellant filed this present appeal.

Appellant’s challenge

The Appellant did not mention “premises of the shop” in the agreement rather she very carefully used the word “shop” in the contract to refer to business only. The deceased plaintiff’s sole intention was to only hand over the running business of the suit shop to the defendant. Moreover, there was no mention of rent in the agreement rather than the recital of imposing the royalty on the defendant. The defendant alleged and falsely contradicted the nature of royalty to produce that the word “rent” has been shown in such a way. The plaintiff had never recovered any rent. In the Bombay Rent Act, the word license always refers to premises, and the word is not mentioned in the agreement. However, the Appellant never intended to create a leave and licence in respect of the suit premises, and also the defendant failed to prove that the shop premises were given to him on a license basis.

Defendant’s challenge

Defendant contends that the Appellant never had the stationery shop and only the grocery shop and also that the plaintiff gave him the shop on a license basis. After the demise of the deceased plaintiff’s husband’s death, the business was closed for years and it was handed over to the Respondent when he approached the plaintiff and thus the business was run again. The defendant has alleged that he is the tenant of the shop. Although the premises were given to him on a license basis initially, by the Amendment to the Bombay Rent Act and the insertion of Section 15 (A) all such licensees are tenants. A learned advocate of the defendant also relies on the case law reported in A.I.R. 1987 Supreme Court page 117.

Court’s observations

It is clear from the contract that the parties intended to transfer business from Appellant to Respondent for the contractual period, and the extension was also for the same purpose and on the same terms and conditions. The defendant’s contention was solely regarding the language used in the document. However, in Section 95 of the Indian Evidence Act, the contract should be read with all the extinct evidence produced in the case, and the evidence points that the license was only created for continuation of the existing business rather than lease or license of the shop premises. The rent receipt produced by the counsel for the Respondent cannot be considered in the eyes of law. It is mentioned in the contract and is evident that it was mandated to pay royalties of 90 rupees per month for the continuation of the business in the name of ‘Karandikar Brothers’. However, there is no lease or license created and hence Bombay Rent Act does not cover such arrangements. So, it was not the Bombay High Court’s jurisdiction to decide on the case. Accordingly, the trial Court’s jurisdiction in this matter is sustained.

Court’s decision

The Bombay High Court’s Order that the Respondent is the tenant of the shop premises is not sustained and accordingly set aside. The decree provided by the trial Court is restored and the current appeal is allowed.

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