Licence and its revocation

Section 52 of the Easements Act, 1882[1] (hereinafter “the Act”) defines the term “licence” as under:

  1. “Licence” defined. —Where one person grants to another, or to a definite number of other persons, a right to do, or continue to do, in or upon the immoveable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an easement or an interest in the property, the right is called a licence.

From the above definition, it may be ascertained that the licence originates in a grant; the licence can be granted only in favour of a definite number of persons; a licensee has no interest in the property, apart from the right to do or continue to do something which would be unlawful in the absence of such right.

The Supreme Court has explained the term licence in its celebrated judgment Associated Hotels of India Ltd. v. R.N. Kapoor[2], while explaining the difference between lease and licence as under:

  1. … Whereas S. 52 of the Easements Act defines a licence thus:

 

Under the aforesaid section, if a document gives only a right to use the property in a particular way or under certain terms while it remains in possession and control of the owner thereof, it will be a licence. The legal possession, therefore, continues to be with the owner of the property, but the licensee is permitted to make use of the premises for a particular purpose. But for the permission, his occupation would be unlawful. It does not create in his favour any estate or interest in the property.

In Pradeep Oil Corpn. v. Municipal Corpn. of Delhi[3], the Supreme Court further explained the essentials of licence as under:

  1. A licence, inter alia, (a) is not assignable; (b) does not entitle the licensee to sue the stranger in his own name; (c) it is revocable; and (d) it is determined when the grantor makes subsequent assignment.

In Yazdani International (P) Ltd. v. Auroglobal Comtrade (P) Ltd.[4], the Supreme Court has clarified the characteristics of a licence as:

  1. As rightly pointed out by Shri Nariman, licence by definition does not create any interest in the property. A licence only gives a right to use the immovable property of the grantor, to the grantee. There is no transfer of any interest in such property in favour of the grantee.

The above principles laid down by Supreme Court have been reiterated by Delhi High Court in Planet M. Retail Ltd. v. Select Infrastructure (P) Ltd.[5], inter alia, stating that: 33. … the licensee is only given the permission to use the property in a particular way and after the termination of the licence, the licensee has no right to continue in the said premises and the possession of the said premises remain with the licensor.

The licence by its very nature does not create interest in the property to which it relates, and is revocable. The Act provides that the said revocation may either be express or implied or even deemed under certain circumstances provided under Sections 61 and 62[6] respectively of the Act. 

However, Section 60[7] of the Act carves out two exceptions when an otherwise revocable licence shall become irrevocable. Section 60 of the Act is reproduced below:

  1. Licence when revocable. — 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 a permanent character and incurred expenses in the execution.

Section 60(a) of the Act provides that if a licence is coupled with a transfer of property and such transfer is in force, it may not be revoked by the grantor. The words “transfer of property” are not used in the limited sense of a transfer as defined in the Transfer of Property Act, 1882[8]. A licence coupled with interest involves two things: a licence to enter the land and grant of an interest. Such a licence is both irrevocable and assignable, but only as an adjunct of the interest with which it is coupled.

As held in Maganlal Parsottamdas Sevniwala v. Chimanlal Dahyabhai Modi[9], the Gujarat High Court held that explained that the creation of a tenancy in respect of an immoveable property always means transfer of interest in immoveable property, as the former itself constitutes immoveable property. Therefore, when a landlord lets out property to a tenant, there is transfer of interest in immoveable property and the terms of Section 60(a) are satisfied.

The Supreme Court in Pradeep Oil Corpn.[10] has explained the principles regarding a licence coupled with interest as follows:

  1. A licence may be created on deal or parole and it would be revocable. However, when it is accompanied with grant it becomes irrevocable. A mere licence does not create interest in the property to which it relates. Licence may be personal or contractual. A licensee without the grant creates a right in the licensor to enter into a land and enjoy it.
  2.  In Halsbury’s Laws of England, 4th edn., Vol. 27 at p. 21 it is stated:
  3. Licence coupled with grant of interest. — A licence coupled with a grant of an interest in property is not revocable. Such a licence is capable of assignment, and covenants may be made to run with it. A right to enter on land and enjoy a profit a prendre or other incorporeal hereditament is a licence coupled with an interest, and is irrevocable. Formerly it was necessary that the grant of the interest should be valid; thus, if the interest was an incorporeal hereditament, such as a right to make and use a watercourse, the grant was not valid unless under seal, and the licence, unless so made, was therefore a mere licence and was revocable; but since 1873 the court has been bound to give effect to equitable doctrines and it will restrain the revocation of a licence coupled with a grant which should be, but is not, under seal.

In principle, where a licence involves the grant of a right in immoveable property to the licensee, the grantor in general cannot revoke the licence and thus defeat the right in immoveable property which is one of the incidents of the licence. The grantor cannot possess unlimited power to terminate the licence at any time for reasons which are considered sufficient or adequate by him.

Section 60(b) of the Act provides that a licence is irrevocable on the fulfilment of following three conditions:

(i) licensee executed a work of permanent character;

(ii) he did so, acting upon the licence; and

(iii) he incurred expenses in doing so.

The section itself suggests that the onus of proving these facts lies upon the licensee and in the absence of any evidence on these questions, the licence cannot be said to be irrevocable under Section 60(b). It is primarily a question of fact and thus to be specifically pleaded and proved by the licensee, failing which, the licence cannot be treated as irrevocable.  

The words “permanent character” should be understood in contradistinction with the idea conveyed by the expression “work of temporary character”. Further, as held in Jagannath Govind Shetty v. Jayantilal Purshottamdas Patel[11],

11. … The words “of a permanent character” speak of a clear connotation of the words “executing the work” in the context of the execution of work, would mean putting up some permanent structures in the premises… The word “work”, therefore, is to be necessarily interpreted to have connection with the construction on some structure on the land and bringing of some additional moveable assets for the purpose of running a business of hotel, cannot be said to be execution of work of a permanent character”.

However, in Shankar Gopinath Apte v. Gangabai Hariharrao Patwardhan[12], the Supreme Court held that where a person improves the land by executing a work of permanent character in the belief that being a tenant he would become a statutory purchaser of land or that the oral agreement of sale would be implemented, the execution of work would be in his capacity as a tenant or a prospective purchaser and not in his capacity as a licensee. It was thus held that the said work could not be held to a permanent construction.

The Kerala High Court in P.M. Jacob v. Mulanthuruty Panchayat[13], held the construction of a theatre to be a work of permanent character executed by the petitioner at his expense acting on the licence.

The Delhi High Court in Keventer Agro Ltd. v. Kalyan Vyapar (P) Ltd.[14], while explaining the meaning of permanent character, held that merely because flooring work was done by the plaintiff in the property, the same cannot be termed as work of permanent character and hence the plaintiff cannot claim the benefit of Section 60(b) of the Act.

It is therefore manifest that whether a construction is of permanent character or not is primarily a question of fact and any finding can be given only in light of the nature of construction and other circumstances.

The term “acting upon the licence” means carrying out such a licence or doing something in pursuance of the licence. 

The provision is based upon the principle of estoppel by acquiescence. When the licensee acting upon a licence has executed a work of permanent character and incurred expenses in the execution, the licence cannot be revoked by the grantor. If the licence specifically disallows the licensee to execute a work of permanent character and in contravention of such stipulation, the licensee has executed a work of permanent character, then the licensee cannot claim protection under Section 60(b) of the Act.

In Annathu Sarojini v. Mohd. Sainulabdeen[15], the Kerala High Court emphasised that if the licence specifically disallows the licensee to execute a work of permanent character and in contravention of such a stipulation if the licensee has executed a work of a permanent character, he cannot claim protection under Section 60(b) of the Act.

In Thayyil Kanissante Valappil Saraswathi v. Bharatha Textiles[16], the Kerala High Court held that the act of erecting the pump house and installing the pump set was in  pursuance and for the purpose of the using the licence to draw water from the well, and hence the defendant/licensee was said to have acted in pursuance to the licence.

Apart from the conditions of permanent structure and act in pursuance of licence, the extent of costs incurred for such construction is also relevant to be noted.

The Allahabad High Court in Mathuri v. Bhola Nath[17], has emphasised that the extent of costs incurred in construction is irrelevant in order to bring the construction within Section 60 of the Act.

The above principle was reiterated by the Lucknow Bench of the said Court in Narsingh Das v. Mian Safiullah Sha[18], wherein it was held that even though not costly constructions were done by the licensees but merely built a pucca wall to include land as part and parcel of their houses, the same was held to be a work of permanent nature.

Therefore, it emerges that Section 60 of the Act is not exhaustive. There may be case where the agreement may be entered into making the licence irrevocable, even though none of the two clauses are fulfilled. Similarly, even if the two clauses are fulfilled to render the licence irrevocable, yet the parties may agree to the contrary. In such a situation, the benefit of irrevocability under Section 60 of the Act shall not enure to the licensee.

The Calcutta High Court in Mohd. Ziaul Haque v. Standard Vacuum Oil Co.[19], has dealt with the revocation of licence between the parties depending on the terms of agreement between them, holding that where an agreement between the parties provides for revocation of licence, the same may be revoked, even if the said licence was otherwise irrevocable.

The Madhya Pradesh High Court in State of M.P. v. Abdul Rahim Khan[20], held that a licence is not revocable on the mere will of the grantor, and the same can be revoked only under a power reserved under the licence, even though the licensee has made a permanent construction thereon. However, the said power should be exercised honestly and fairly.

The Supreme Court in landmark judgment of Ram Sarup Gupta v. Bishun Narain Inter College[21], has explained the revocability of licence as under:

  1. 9. … Section 60 enumerates the conditions under which a licence is irrevocable. Firstly, the licence is irrevocable if it is coupled with transfer of property and such right is enforced and secondly, if the licensee acting upon the licence executes work of permanent character and incurs expenses in execution. Section 60 is not exhaustive. There may be a case where the grantor of the licence may enter into agreement with the licensee making the licence irrevocable, even though, neither of the two clauses as specified under Section 60 are fulfilled. Similarly, even if the two clauses of Section 60 are fulfilled to render the licence irrevocable yet it may not be so if the parties agree to the contrary… On the same reasoning there is nothing to prevent the parties agreeing expressly or impliedly that the licence which may not prima facie fall within either of the two categories of licence (as contemplated by Section 60) should nevertheless be irrevocable… The parties may agree expressly or impliedly that a licence which is prima facie revocable not falling within either of the two categories of licence as contemplated by Section 60 of the Act shall be irrevocable. Such agreement may be in writing or otherwise and its terms or conditions may be express or implied. A licence may be oral also in that case, terms, conditions and the nature of the licence, can be gathered from the purpose for which the licence is granted coupled with the conduct of the parties and the circumstances which may have led to the grant of the licence.

The Supreme Court in Mumbai International Airport (P) Ltd. v. Golden Chariot Airport[22], has explained the principle of revocability of licence as:

  1. The very idea of a licence being irrevocable is a bit of a contradiction in terms. From the clauses of the licence referred to above, it is clear that by its terms the licence is revocable. It is well known that a mere licence does not create any estate or interest in the property with which it is concerned. Normally a licence confers legality to an act, which would otherwise be unlawful. A licence can be purely personal, gratuitous or contractual. Whether a contractual licence is revocable or not, would obviously depend on the express terms of the contract. A contractual licence is normally revocable, except in certain circumstances that are expressly provided for in the Easements Act, 1882[23].

Advocate and a qualified Chartered Accountant, presently practising at Supreme Court and Delhi High Court.

[1] <http://www.scconline.com/DocumentLink/9Io3PkiL>.

[2] (1960) 1 SCR 368

[3] (2011) 5 SCC 270, 280

[4] (2014) 2 SCC 657, 676.

[5] 2014 SCC OnLine Del 4869.

[6] <http://www.scconline.com/DocumentLink/Bn71Kq3P>.

[7] <http://www.scconline.com/DocumentLink/Dxwts5FR>.

[8] <http://www.scconline.com/DocumentLink/wafSf6F7>.

[9] 1979 SCC OnLine Guj 35

[10] (2011) 5 SCC 270, 278

[11] 1979 SCC OnLine Guj 49

[12]  (1976) 4 SCC 112.

[13] 1981 SCC OnLine Ker 78 

[14]  2015 SCC OnLine Del 13790.

[15] 1990 SCC OnLine Ker 52

[16] 1991 SCC OnLine Ker 145

[17] 1934 SCC OnLine All 50

[18] 1954 SCC OnLine All 147

[19] 1950 SCC OnLine Cal 209

[20]  1974 MP LJ 776.

[21] (1987) 2 SCC 555, 566

[22] (2010) 10 SCC 422, 434.

[23] <http://www.scconline.com/DocumentLink/Bn71Kq3P>.

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