AI Drafter 
TaxTMI 
TaxTMI 
2006 (5) TMI 567
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....nt creditor having obtained a decree dated 31.5.2002 against Respondent No. 1 passed by the High Court of the Hong Kong Special Administrative Region, Court of First Instance, in Action No. 4761 of 2001 in the sum of US $ 618,331.26 with interest. Respondent No. 1 is the judgment debtor. On 26.3.2003 the above Execution Application was taken out by the Appellant for execution of the decree of a sum of Rs.3,48,98,644.84 inter-alia against a flat owned, according to the Appellant, by Respondent No. 1. According to Respondent No. 1, he is the co-owner of Flat No. 201, Silver Arch, Nepan Sea Road, Mumbai alongwith his wife. This is a dispute with which we are not concerned in this Appeal. A warrant of sale of the said flat was issued on 21.5.2004 and a proclamation of a sale thereof has also been issued. On 25.5.2005 the particulars and conditions of sale were finalised by the Sheriff of Mumbai. 3. Respondent No. 2, the Applicant to the above Chamber Summons, is the ING BANK, N.V., a banking company, incorporated under the Laws of Netherlands. Aggrieved by the fact that the particulars and conditions of sale finalised by the Sheriff of Mumbai do not mention their rights in respect o....
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.... to refund the Security Deposit or any part thereof to the Licensee as aforesaid the Licensee shall, until the Licensors refund the entire Security Deposit, be entitled to continue to use and occupy the Licensed Premises without payment to the Licensors of any license fee or compensation and such staying over by the Licensee in the Licensed Premises shall not constitute a default by the Licensee under the Leave and License Agreement and the Licensors shall not be entitled to invoke the Bank Guarantee referred to hereinafter. Without prejudice to the aforesaid and notwithstanding anything herein contained, the Security Deposit shall thereupon from the date of expiry or termination of the licence and from the date on which the Licensee is willing to hand over vacant charge of Licensed Premises, bear and carry interest at the rate of 2% (two per cent) per month or part thereof till repayment or realization of the Security Deposit. 6. Admittedly, the security deposit has not been repaid by Respondent No. 1 to Respondent No. 2 despite the leave and license agreement having expired on 31.7.2003. 7. The issue that arises therefore pertains to the rights of Respondent No. 2 as a resu....
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....agreement permitting use and occupation of the premises for any period of time irrespective of any contract to the contrary. He denied the contention that the agreement created either a mortgage or a charge or a lien in favour of Respondent No. 2. 10. The case therefore falls broadly into two parts : Whether Respondent No. 2 is entitled under the leave and license agreement to continue to use and occupy the licensed premises till the security deposit and interest thereon is refunded by Respondent No. 1. And whether the leave and license agreement creates a mortgage or a charge or security in respect of the licensed premises to secure the repayment of the security deposit and the interest thereon. Whether Respondent No. 2 is entitled under the leave and license agreement to continue to use and occupy the licensed premises till the security deposit and interest thereon is refunded by Respondent No. 1. 11. The first point, which is no longer res-integra, requires a consideration of Sections 59, 60 and 64 of the Indian Easements Act which read as under : 59. Grantor's transferee not bound by license.-When the grantor of the license transfers the property affected ....
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....only on a given condition or in given circumstances. 15. In M.F. De Souza v. Children's Education Uplift Society AIR 1959 Bom 533, affirmed by the Supreme Court, by virtue of a compromise decree passed in a previous litigation, the Defendant occupied a room as a licensee. Under the terms of the compromise, the licence in favour of the Defendants was irrevocable. It was contended on behalf of the Plaintiff that a licence must always be regarded as revocable at the will of the licensor except in the two cases set out under Section 60 of The Indian Easements Act, 1882. It was contended that Section 60 did not mention any third class of cases where a licence would be irrevocable, including an agreement that it shall be irrevocable. Mudholkar, J. rejecting the contention, held as under : It is no doubt true that Section 60 mentions only two classes of cases in which the licence could be regarded as irrevocable. This means that where a case falls in either of these categories the licence is made irrevocable by operation of law, that is the Easements Act. But apart from the Easements Act, there is the law of contract and if parties enter into a contract and arrive at a sol....
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.... nature whether the licensor is precluded from revoking the licence because of any contractual engagement into which he has entered. There being an engagement of this kind here, I am of the opinion that the plaintiff cannot claim to itself the right of revocation at its free will and pleasure. To hold otherwise and to decree possession in such circumstances would be nothing else than putting the Seal of approval of the Court to a breach of contract. 16(a). In Dominion of India v. Sohan Lal AIR 1950 P & H 40, also affirmed by the Supreme Court, the Division Bench came to the conclusion that the Railway authorities had granted in favour of the Respondent a licence to sell books and other publications, and for that purpose, to erect book stalls. The agreement was for a period of five years, renewable at the option of the Appellant for a further period of five years on the same terms and conditions and was to terminate on expiry of five years without any formal notice. For the present purpose, it is not necessary to consider certain facts regarding a separate understanding in view of the impending partition of India and the consequential possible division of the North Western Railwa....
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.... of specific performance or injunction. An irrevocable license for a term implies an undertaking on the part of the licensor not to revoke it during its term and even if the license be not specifically enforceable for any reason, a threatened breach of the license may be prevented by enforcing this implied negative covenant by means of an injunction-a remedy which really gives effect to the irrevocability of the license. (c). As we shall shortly indicate it is this ratio that has been affirmed by the Supreme Court in Ram Sarup Gupta (dead) v. Bishun Narain Inter College and Ors. [1987] 2 SCR 805. (d). The Division Bench then, in paragraph 13, noted the argument that if the statute applies, it having prescribed a specific remedy of damages under Section 64, no other remedy is available even if the case is of an irrevocable license. The Division Bench noted the judgments cited in this regard of the Calcutta High Court. Though the Division Bench observed that the argument was not without force, it obviously did not accept the ratio of these judgments. The same is clear not merely from paragraphs 12 and 13 which we have extracted above, but also from what follows thereafter. In p....
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.... categories specified in Section 60 may nonetheless be made irrevocable by agreement between the parties and that a threatened revocation of such a license may be prevented by the grant of an injunction. 17. The Supreme Court in Ram Sarup Gupta v. Bishun Narain Inter College [1987] 2 SCR 805, affirmed the above judgments in M.F. De Souza v. Children's Education Uplift Society's case and the judgment in the case of Dominion of India v. Sohan Lal. 18. It would be useful to preface a consideration of Ram Sarup Gupta's case by referring, at the cost of repetition, to three of Mr.Dada's submissions and the essential features of the judgement qua the same. (a). Mr.Dada submitted that Section 60 of the Indian Easements Act is not subject to a contract to the contrary. He further submitted that in any event in view of Section 59 of the Indian Easements Act even an irrevocable license is not binding on the transferee of the property. Thirdly, Mr.Dada invited us to overrule the judgment of this Court in M.F. De Zouaves case and urged us not to follow the Division Bench judgement in Dominion of India inter-alia on the ground that the judgements were per-incuriam....
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....implied which can be inferred from the conduct of the grantor. Section 60 provides that a licence may be revoked by the grantor unless: (a) it is coupled with a transfer of property and such transfer is in force; (b) the licensee, acting upon the licence, has executed a work of permanent character and incurred expenses in the execution. Revocation of licence may be express or implied. Section 62 enumerates circumstances on the existence of which the licence is deemed to be revoked. One of such conditions contemplates that where licence is granted for a specific purpose and the purpose is attained, or abandoned, or if it becomes impracticable, the licence shall be deemed to be revoked. Sections 63 and 64 deal with licensee's right on revocation of the licence to have a reasonable time to leave the property and remove the goods which he may have placed on the property and the licensee is further entitled to compensation if the licence was granted for consideration and the licence was terminated without any fault of his own. These provisions indicate that a licence is revocable at the will of the grantor and the revocation may be expressed or implied. Section 60 enumerates the con....
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....t, 1882. 21. Mr.Dada relying upon a judgment of the Division Bench of the Gujarat High Court in Bai Hanifa Jusab v. Memon Dadu A. Gani, Sardharia AIR 1964 Guj 44 invited us to overrule Mudholkar J.'s judgment in M. F. De Souza's case. The Division Bench of the Gujarat High Court dissented from the view taken by this Court in M.F. De Souza's case. It was contended before the Gujarat High Court that Section 60 of The Indian Easements Act is not the only section under which a licence can be made irrevocable. It was contended that where a licence is coupled with a condition that it shall enure for a stated period, it is irrevocable during that period. The Division Bench held that even if there was such an agreement, the licence would be revocable at the will of the licensor. Referring to Section 64 of The Indian Easements Act, the Division Bench held that the provisions of Section 64 which entitle a licensee to recover compensation from the licensor for wrongful eviction, indicate that compensation is the only remedy of the aggrieved licensee. The Division Bench held that even if there is such an agreement and the licensor evicts the licensee before the term of the agree....
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....irrevocable is impermissible being contrary to the provisions of Section 60. If it were so the legislature would not have entitled a licensee even to claim damages for being prevented from fully enjoying a license granted to him for consideration. Thus the only question which can really arise is as to the nature of relief for wrongful interference with the licensee's rights. (ii) If the answer to the first question is in the affirmative, whether a transferee of the property is bound by such an agreement. 27. Mr.Dada then submitted that in any event, upon the right of the licensor as the owner of the property, coming to an end, the new owner will not be bound by the provisions of the licence. Mr.Dada, relied upon the judgment of a learned Single Judge of this Court in HSBC's case. The judgment does support Mr.Dada. Unfortunately, as we have already observed, the attention of the learned Judge was not invited to the judgments in M.F. De Souza v. Children's Education Uplift Society AIR 1959 Bom 533 and Ram Sarup Gupta (dead) v. Bishun Narain Inter College and Ors. [1987] 2 SCR 805. It is in these circumstances, that the judgment was delivered. 28. We were in....
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....and when rights of the Licensor comes to an end he ceases to be the owner when the property is put to sale pursuant to the above decree then, in that event, the Licensee cannot claim to retain possession under the Leave and Licence Agreement or under the Security Deposit Agreement. In any event, if the Applicants were claiming a lien under the Security Deposit Agreement then, as stated hereinabove, the registration under Section 17(1)(b) of the Registration Act was required and in the absence of such a document being registered, the Applicants were not entitled to claim a right to retain the possession under the alleged lien." 11. The reasoning given by this Court earlier hereinabove is also supported by the provisions of Section 52 read with Section 59 of the Indian Easement Act, 1882. Under Section 52 of the Indian Easement Act, it is provided that where one person grants to Anr. right to do or continue to do in or upon the immovable property of the grant or something which would, in the absence of such right, be unlawful, and such right does not amount an easement or interest in the property then the right is called a licence. In this case if one goes through the Leave ....
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....s Act, or in view of a contractual stipulation making a licence irrevocable or revocable only in certain circumstances, the rights of the licensee would stand extinguished merely by a transfer by the licensor of the ownership of the property. The submission is not only contrary to established law, but would leave the doors to fraud being played on licensees wide open by the simple expedient of a licensor, transferring his interest in the property to Anr., after accepting the entire consideration paid for the purpose of making the licence irrevocable. 34. Mr.Dada submitted that a view contrary to his would render the provision of Section 59 otiose. He submitted that the words "as such" in Section 59 indicate that a transferee is not bound by the terms of the license between the original owner as licensor and the licensee. 35. This submission too is not well founded. We are supported in this view by a series of judgements of which we shall refer to only four. 36. In Ras Behari Lal v. Akhai Kunwar and Ors. AIR 1915 All 56, the Division Bench held as under at page 57 : The plaintiff admits that on the facts found the case is clearly covered by Section 60 of the Act, b....
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....t appellant who purchased the village only in 1930 could not eject him or his heirs from the land which formed the site of the house. Reliance was placed by the learned counsel for the appellant on Section 59, Easements Act. This section, as pointed out by Katiar in the Law of Easements and Licences in British India, page 355, has been enacted solely in order to avoid an inference that the right of revocation is confined to the grantor personally .... But if the licence is for some reasons irrevocable by the grantor himself this section does not authorise the transferee to revoke it and the provisions of this section are in this respect subject to the provisions of Section 60. 39. In Manoolal Balchand v. Kaluram Gulabchand AIR 1958 MP 343, the learned Single Judge held as under : (17). All the relevant cases have been cited by the author in foot-note 6. The reasoning in those cases has been that if the grantor of a license could not himself revoke a license, how could his transferee revoke it ? In other words, the reason given is that the transferee does not get any better rights than those possessed by the transferor. It was on this footing that the late Justi....
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.... use and occupation during the original period of the license. 44. Secondly, Mr.Dada submitted that the first sentence in Clause 28 makes it clear that the licensee is entitled to continue to use and occupy the licensed premises in the event of the licensor failing to refund "the entire security deposit". In other words, he submitted, the first sentence does not include interest on the security deposit stipulated in the next sentence. 45. The submission is not well founded. It is clear to us that the expression "the entire security deposit" in the first sentence includes within its ambit, interest thereon, referred to in the next sentence of Clause 28. The term security deposit is not defined in the agreement. It is important however to read Clause 26 alongwith Clause 28. Clause 26 provides that the security deposit during the original license period "shall not carry any interest". The second sentence in Clause 28 provides that upon default in repayment of the security deposit, the security deposit shall "bare and carry" interest at the rate of 2% per month. It is important to note that the clause does not merely state that interest shall be payable on the security deposit. T....
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....least, created a right of lien in favour of Respondent No. 2. The learned Judge however found that the agreement had not been duly stamped as it had not been adequately stamped. In view of the conclusion reached by the learned Judge that the agreement constituted an anomalous mortgage, he ordered the original document to be impounded and sent to the Registrar for taking steps in accordance with law. The learned Judge accordingly allowed the Chamber Summons by directing amendment of the terms and conditions of sale so as to recognise the right of the Applicant/Respondent No. 2 to remain in the possession of the flat till the repayment of the security deposit. The learned Judge however stated that he expressed no opinion with regard to the claim of Respondent No. 2 in respect of interest. Finally, the learned Judge permitted the sale of the flat on the basis of the amended proclamation and terms and conditions of sale in terms of the order unaffected by the adjudication proceedings under the Stamp Act in relation to the leave and licence agreement dated 8.10.2001. 51. The submissions omit to take into consideration the most crucial aspect. It is true that the nature of the documen....
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....f the agreement are to the contrary. The surrounding circumstances establish the contrary. There was not even an attempt on the second Respondent's part to establish such an intention till the hearing before the learned Judge. 53. There are several factors which according to us militate against the case of there being a mortgage, charge or security as contended by Mr.Samdani. 54. The agreement is titled : "LEAVE AND LICENCE AGREEMENT". Respondent No. 1 and his wife are referred to as the licensors and Respondent No. 2 is referred to as a licensee throughout the agreement. Further the flat and the parking spaces throughout the agreement are referred to as the "Licensed Premises". Almost every clauses in the agreement refers to the agreement as being one of "leave and license". A Division Bench of this Court in Kalabhai Bapuji Chudasama and Ors. v. The Secretary of State for India in Council ILR (1905) (Bom) 19 observed at page 28 as follows : It is true that, generally speaking, the name given by parties to a document is not conclusive as to its nature, but the designation given by the parties themselves to it cannot be lost sight of where the document is ambig....
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.... words "... or any other similar right, title or interest ..." in Clause 8 must be read ejusdem generis with the preceding terms viz. "easements, tenancy, sub-tenancy. Even assuming that to be so, the very same sentence further provides "... or as transferring any interest therein in favour of the licensee other than the permissible right of use hereby granted". These words are of the broadest amplitude and made it clear beyond doubt that the agreement only creates a leave and license in favour of Respondent No. 2 and nothing more. 58. If the intention of the parties was as contended by Mr.Samdani, the language of Clauses 7 and 8 and 19 and 28 would have been entirely different. Firstly according to us if such was the intention, the agreement would have specifically spelt out an agreement to create a mortgage or charge. 59. The doubt, if any, is further set at rest by Clause 10 which reads as under : 10. The Licensee agrees that this Agreement is an agreement of leave and licence in respect of the Licensed Premises as contemplated by Section 24 of the Maharashtra Rent Control Act, 1999 and the provisions of the said Section 24 shall apply to the licence created under....
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....Section 55 of the Maharashtra Rent Control Act, 1999. The Licensors and the Licensee shall each retain one of the other two counterparts. All stamp duty and registration charges payable on or in connection with this Agreement, shall be borne and paid entirely by the Licensee alone. Section 55(1) of the Maharashtra Rent Control Act, 1999 pertains exclusively to agreements for leave and license or letting of any premises entered into between the landlord and the tenant or licensee. The entire agreement was made and considered by the parties to be one under the provisions of the Maharashtra Rent Control Act, 1999. The parties registered the agreement under and in accordance with the provisions of Section 55 of the Maharashtra Rent Control Act, 1999. The stamp duty was also paid on the basis of the agreement being a leave and license agreement. It is not the case of Respondent No. 2 that the document was executed in the present form and that Respondent No. 2 thereafter proceeded to take steps in respect thereof such as in respect of registration and computing and paying the stamp duty under a mistaken belief. 62. There is thus nothing in the leave and license agreement which even....
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.... If it was the second Respondent's case that it was a mortgagee or had a charge over the premises, it would have sought reliefs also to prevent the Appellant/decree holder from withdrawing the proceeds realized upon the sale of the licensed premises in execution of the decree. 67. Mr.Samdani submitted that Clause 23 of the agreement indicated the existence of the mortgage. Clause 23 reads as under : 23. Notwithstanding anything herein contained, on the Licensee regularly paying the licence fee or compensation hereunder and observing and fulfilling the terms and conditions of this Agreement, the Licensee shall be entitled to the use and occupation of the Licensed Premises without any let or hindrance from the Licensors. The mere fact that Clause 23 entitles the licensee to occupy the premises without let or hindrance upon the licensee regularly paying the license fee would not detract from the fact that the agreement is one of leave and license only. Indeed as we have held above the licensee is entitled to continue to use the licensed premises during the subsistence of the license period. That the licensee is entitled to do so without let or hindrance would not co....
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....was legal ingenuity at the hearing of the matter and not a matter of contractual commitment. 71. Mr.Samdani submitted that the agreement in any event created a lien and as such a security for repayment of the security deposit. We are unable to agree. For the reasons already mentioned there is nothing to indicate that the licensed premises constituted security for repayment of the security deposit in any manner whatsoever. 72. Mr.Samdani's reliance upon a judgment of the Supreme Court in Triveni Shankar Saxena v. State of U.P. and Ors. (1992) IILLJ 23 SC is not well founded. The Supreme Court was dealing with a service matter. The Appellant claimed a lien on his original post. In paragraphs 16 and 17, the Supreme Court dealt with the concept of a lien. The Supreme Court referring to Halsbury's Laws of England, (4th Edition, Volume 28) observed that a lien is a right to retain the possession of a property belonging to Anr. until the claims are satisfied. The Supreme Court also referred to the Stroud's Judicial Dictionary which says that : Lien. (1) A lien -(without effecting a transference of the property in a thing). -is the right to retain possession of a....
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.... case of Thakur Prasad v. Raghubir Prasad AIR 1952 Pat 469. The Division Bench held that "the ownership of a property connotes a bundle of right in respect of that property and in a transaction of mortgage, the owner of that bundle of rights transfers some of those rights to the mortgagee and the remainder of that bundle of rights remains with him and can be transferred. (b). It must be noted that the judgment proceeds on the basis that there was a mortgage. The judgment does not hold that an intention to create the mortgage is unnecessary. The judgement is therefore of no assistance to Mr.Samdani. 75. It is not necessary for us to deal with the judgments which Mr.Samdani cited only to illustrate the various instances which constitute the existence of an anomalous mortgage.(Madhao Rao v. Gulam Mohiuddin AIR 1990 PC 121 ; Kanna Kurup v. Sankara Varma Rajah ILR (1920) 344 and Hathika v. Puthiyapurayil Padmanabhan AIR 1994 Ker 141.) We proceed on the basis that if in the present case it can be gathered that the licensors/owners of the flat intended to create a security over the said flat for repayment of the security deposit it must be held that the agreement created an anomalou....
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....at it partakes of the nature of a mortgage with possession and a lease. The judgment is of assistance to Respondent No. 2 only to the extent that it holds that a particular document may contain within it and create both a mortgage and a lease. We however, did not hear either Mr.Dada or Mr.Toor contend to the contrary. The Full Bench mentioned various elements/incidents to be annexed to a kanom by the custom of the country and recognized by decisions of the Court. One of such elements is that the kanomdar is a mortgagee, the kanom amount and interest thereon being secured by the land and its usufruct. The existence of such incidents was held to constitute an anomalous mortgage. The judgement therefore is of no assistance to Respondent No. 2. The leave and license agreement is not a kanom and must therefore be construed on its own terms. 79. To sum up, for the purpose of this judgment we proceed on the basis that the right to use, occupy and enjoy property is a species of property and that it is one of the component elements in the bundle of full ownership rights and is capable of being mortgaged as such. We further proceed on the presumption that if the alienation by the judgm....
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....he Maharashtra Co-operative Societies Act read with Bye-Laws 39 and 45 of the Model Bye-Laws. Nor is it necessary therefore for us to consider Mr.Toor's submission that the leave and license agreement is void as it has been witnessed by only one person. This contention was not even raised before the learned single Judge. Further this being the second Respondent's Chamber Summons, it is not necessary for us to consider Mr.Toor's submission on behalf of Respondent No. 1 that this Court has no jurisdiction to execute the decree on the ground that Hong Kong is not notified under Section 44A of the Code of Civil Procedure to be a reciprocating territory. Further this point was not even raised before the learned single Judge. 83. Mr.Toor supported Mr.Dada's contention that Respondent No. 2 does not have the right to continue to use and occupy the said licensed premises for the reason of not refund of the security deposit in view of the provisions of the Indian Easements Act. Apart from the fact that we have already rejected this contention, it must be noted that before the learned single Judge, Respondent No. 1 conceded and expressly recognized the right of Respondent ....