Exclusive Possession Decides Fate – Licensee, Not Lessee, Holds the Grounds: Kerala High Court

In a groundbreaking decision, the High Court of Kerala, Ernakulam, rendered a verdict on O.P.(RC) No. 119 of 2023, presenting a critical distinction between a licensee and a lessee, centering on the right to exclusive possession. Justices Anil K. Narendran and P.G. Ajithkumar presided over the case, which revolved around a dispute between Premlal, the landlord, and Ashok Harry Pothan, the occupant.

The subject matter of the judgment was to determine whether the document in question, a License Agreement dated 15^th July 2015, established a jural relationship of lease or license. The plaintiff, Premlal, sought to evict the defendant, Ashok Harry Pothan, under Section 11(2)(b) and 11(3) of the Kerala Buildings (Lease and Rent Control) Act, 1965, for allegedly defaulting on rent payments.

Justice P.G. Ajithkumar, in the ruling, emphasized the significance of exclusive possession, stating, “Only a right to use the property in a particular way or under certain terms given to the occupant while the owner retains the control or possession over the premises results in a license being created.” The court analyzed the clauses in the License Agreement and clarified that the absence of exclusive possession pointed towards the creation of a license rather than a lease.

The defendant contended that the document was a mere license, as he was given permission to use the premises specifically for running a car showroom and related operations. On the other hand, the plaintiff argued that certain clauses in the agreement, such as the stipulated monthly license fee/rent and the right to uninterrupted peaceful and quiet enjoyment of the premises, indicated a lease arrangement.

Citing previous rulings in Associated Hotels of India Ltd. V. R.N. Kapoor and B.M. Lall v. M/s Dunlop Rubber Co. (India) Ltd. & another, the High Court reiterated that the true nature of the document must be ascertained by the intention of the parties. The court noted that the parties were not illiterate and were well aware of the distinction between a lease and a license. The unregistered document, lasting for a period of 10 years, indicated their intention to create a licensee relationship.

Justice P.G. Ajithkumar pronounced, “The jural relationship created by virtue of Ext.P1 is that of a license and not a lease. In that view of the matter, the finding of the Rent Control Court that the transaction is a lease cannot be sustained.”

As a result, the High Court allowed the Original Petition and set aside the order of the Rent Control Court dated 13^th April 2023 in I.A.No.1 of 2022 in R.C.P.No.35 of 2022. The decision sets a precedent for future cases involving the determination of lease and license agreements based on the possession and usage rights granted to the parties.

Date of Decision: 14th July 2023

ASHOK HARRY POTHEN vs PREMLAL,