Case Note & Summary
The case involved an appeal against an order of a Single Judge who had allowed a Chamber Summons filed by Respondent No.2, ING Bank N.V., a licensee under a leave and license agreement, seeking amendment of the sale conditions of a flat in execution proceedings to recognize its rights. The appellant, Sumikin Bussan (Hong Kong) International Limited, a judgment creditor, had obtained a decree from the Hong Kong High Court against the judgment debtor, Respondent No.1 Manharlal Trikamdas Mody. In execution of that decree, a flat owned by Respondent No.1 was sought to be sold. The Sheriff had finalised the terms and conditions of the sale without mentioning the rights of Respondent No.2, who had entered into a leave and license agreement with Respondent No.1 on 8.10.2001. Under that agreement, Respondent No.2 had deposited Rs.3,25,00,000 as security. The license period expired on 31.7.2003, but the security deposit was not refunded. Clause 28 of the agreement provided that until the security deposit is refunded, the licensee shall be entitled to continue to use and occupy the premises without payment of license fee. Respondent No.2 filed a Chamber Summons seeking to amend the sale conditions to reflect this right and also sought a declaration that it had a lien and charge over the flat.
The learned Single Judge allowed the Chamber Summons. On appeal, the appellant contended that the agreement created only a bare license which came to an end on expiry of the period, that a license is always revocable at the will of the grantor except in the two cases under Section 60 of the Indian Easements Act, 1882, and that a transferee would not be bound by such license. Respondent No.2 argued that the parties had by contract agreed that the license would be irrevocable until the deposit was refunded, and that such a contract was valid under the law of contract.
The Division Bench examined Sections 59, 60 and 64 of the Indian Easements Act, 1882, and held that Section 60 is not exhaustive. Relying on the Supreme Court decision in Ram Sarup Gupta v. Bishun Narain Inter College and the Bombay High Court decision in M.F. De Souza v. Children's Education Uplift Society, the Court held that parties can by agreement make a license irrevocable or revocable only on a given condition or in given circumstances. The provisions of the Easements Act do not override the general law of contract. Consequently, the licensee was entitled to continue in possession until the security deposit was refunded. The Court also held that the expression 'security deposit' in the agreement included interest payable under the clause. The appeal was dismissed and the order of the Single Judge amending the sale conditions to recognise Respondent No.2's rights was upheld.
Headnote
A) Indian Easements Act, 1882 - License - Irrevocability by Contract - Sections 59, 60 - The High Court held that parties can by agreement make a license irrevocable or revocable only on a given condition; Section 60 of the Indian Easements Act is not exhaustive and does not preclude enforcement of a contractual term providing for irrevocability of a license. (Paras 11-15)
Issue of Consideration
Whether a licensee under a leave and license agreement can claim a right to continue in possession until refund of security deposit and whether such agreement creates a charge or lien on the property.
Final Decision
Appeal dismissed. The order of the learned Single Judge allowing the Chamber Summons and directing amendment of the terms and conditions of sale to recognise Respondent No.2's rights under the leave and license agreement was upheld.
Law Points
- A license can be made irrevocable by contract
- Section 60 of Indian Easements Act not exhaustive
- Clause 28 of leave and license agreement gives right to continue occupation till refund of security deposit
Case Details
2006 LawText (BOM) (05) 22
APPEAL NO.1130 OF 2005 WITH CHAMBER SUMMONS NO.550 OF 2005 IN EXECUTION APPLICATION NO.18 OF 2004 IN HONG KONG ACTION NO.4761 OF 2001
Dr. S. Radhakrishnan, S.J. Vazifdar
Mr. R. Dada, Mr. Pratik Sekseria, Mr. Aditya Khonna, Ms. Trishna Thapliyal, Mr. H. Toor, Mr. Jaydeep Raut, Mr. P. K. Samdani, Mr. B. Saraf, Ms. Raksha Kothari, Mr. Nirav Shah, Mr. Munef Verjee
Sumikin Bussan (Hong Kong) International Limited
Manharlal Trikamdas Mody and ING Bank, N.V.
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Nature of Litigation
Execution of a foreign decree and a chamber summons by a licensee seeking to amend sale conditions to recognize its rights under a leave and license agreement.
Remedy Sought
Appellant (judgment creditor) sought to set aside the order amending sale conditions; Respondent No.2 (licensee) sought to amend the sale conditions to reflect its right to possession until refund of security deposit with interest and to declare a charge/lien over the flat.
Filing Reason
The Sheriff's proclamation of sale did not mention the licensee's rights under the leave and license agreement dated 8.10.2001; Respondent No.2 filed Chamber Summons No.550 of 2005 to protect its interest.
Previous Decisions
The learned Single Judge allowed the Chamber Summons and directed amendment of the terms and conditions of sale to recognize Respondent No.2's rights.
Issues
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.
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 parties can by agreement make a license irrevocable or revocable only on a given condition or in given circumstances.
Whether a transferee of the property is bound by such an agreement.
Whether the expression 'security deposit' in clause 28 of the agreement includes interest payable under the said clause.
Submissions/Arguments
Appellant argued that the agreement created a bare licence which ended on 31.7.2003, that a licence is revocable at will except under Section 60 of the Indian Easements Act, and that a transferee would not be bound by the licence.
Respondent No.2 contended that the licence was made irrevocable by contract until refund of the security deposit, that Section 60 is not exhaustive, and that the agreement created a charge and possessory lien over the flat.
Ratio Decidendi
Section 60 of the Indian Easements Act, 1882, is not exhaustive and does not preclude parties from contractually providing that a license shall be irrevocable or revocable only upon fulfillment of a specified condition. Such a contractual term is enforceable under the general law of contract. Hence, a licensee is entitled to continue in possession until the licensor fulfills the condition, such as refund of the security deposit.
Judgment Excerpts
Clause 19: In the event of the Licensors desiring to sell or dispose of the Licensed Premises during the period of the licence, the Licensors shall be entitled to do so without affecting the rights of the Licensee hereunder and such sale or disposal shall be subject to the rights of the Licensee under this Agreement.
Clause 28: In the event of failure on the part of the Licensors 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...
It is no doubt true that S. 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 solemn agreement to the effect that the licence shall be irrevocable...
Procedural History
Decree dated 31.5.2002 by High Court of Hong Kong. Execution Application No.18 of 2004 filed on 26.3.2003. Warrant of sale of flat issued on 21.5.2004. Proclamation of sale. Terms and conditions of sale finalised on 25.5.2005. Respondent No.2 filed Chamber Summons No.550 of 2005 in Execution Application No.18 of 2004. Single Judge allowed the Chamber Summons. Appellant filed Appeal No.1130 of 2005.
Acts & Sections
- Indian Easements Act, 1882: Section 59, Section 60, Section 64
