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By Legal Bureau

With the passage of the time the system of giving properties on leave and license basis in Maharashtra is taking roots, but still a good number of the property owners are apprehensive; because they are not sure that they would get back the possession of the properties on the expiry of the term.  However, in view of the latest judicial pronouncements, such fear seems unfounded, provided legal requirements are complied with.

One Shri Mohd. Hussain,  Furniturewalla, (Licensor) as the owner of Flat No.51 in Victoria Apartments, St. Alexius Road, Bandra, Mumbai, (the license4d premises) gave his premises on leave and license basis, as per the Agreement dated 25.03.2003, for a period of 22 months to Ms Parineeta Choudhary on a monthly license fee of Rs.18,000/-.  In addition, an additional agreement was also executed between both the parties for the payment of the charges @ Rs.10,000/- per month in relation to the furniture and fixtures in the said premises.  The term of the license expired in January 2005 and still the licensee continued to occupy the said premises and licensor accepted the monthly license fee and the additional charges.  Only on 10th December 2005, he moved a petition before the Competent Authority, who, besides ordering eviction of the licensee, further directed her to pay the damages @ Rs.56,000/- per month from 16th January 2005 till handing over the possession.  This decision was challenged by way of a revision u/s 44 of the Maharashtra Rent Control Act by the licensee but the same was dismissed and the order of the Competent Authority was upheld.

Aggrieved by this order the licensee filed a Writ Petition No.2276 of 2008 before the Hon’able Bombay High Court under Article 227 of the Constitution of India.  The matter came up for disposal before Hon’able Mr.Justice A.M.Khanwilkar on the 9th September 2008, when the licensee pleaded that by not issuing legal notice to her and continuing to accept the monthly license fee, was indicative of the fact that the licensee has become the tenant in respect of the licensed premises.  But this argument was not accepted by the Hon’able High Court which observed the fact of the acceptance of the monthly compensation by itself would not be sufficient to positively hold that the relation of the parties that of licensor and licensee was converted to one of land lord and tenant and the fact that licensee instituted the proceedings before the Competent Authority, almost after 11 months from expiry of the license period, would again not by itself indicate that he has waived his statutory right of eviction of the petitioner from the suit premises; because there is legal presumption u/s 24 of the said Act about conclusiveness of the contents of the leave and license agreement.  It would, merely, indicate that the licensor allowed the licensee to overstay the license period and nothing more and the relationship would still remain of licensor and licensee.  The Hon’able High Court has, therefore, held that the arrangement between the parties was purely one of the leave and license and the relationship created between them on account of the said transaction was that of the licensor and licensee and in view of the legal presumption u/s 24 of the said Act5, it would, necessarily, follow that the licensee has obliged to vacate the premises on the expiry of the license period in January, 2005.

On the question of payment of damages @ Rs.56000/- per month from 16th January 2005, the Hon’able High Court did not agree with the order of the Competent Authority, as upheld in the revision.  The Hon’able High Court observed that the licensor did not call upon the licensee to vacate the suit premises nor informed her that she would be liable to pay damages for continuing possession and he filed the eviction proceedings only on 16th December 2005 and, therefore, the licensor would be entitled for the damages from the licensee at double the rate of license fee fixed in the Agreement of License only from 16th December 2005, when he initiated the proceedings.

As regards the quantum of the damages, agains the Hon’able High Court did not agree with the order of the Competent Authority, as upheld in revision  and observed that the license agreement provided for the monthly license fee @ Rs.18,000/- only and the additional agreement to pay charges @ Rs.10,000/- in relation to furniture and fixtures cannot be reckoned for the purposes of computing damages u/s 24(2) of the said Act.  Therefore, the Hon’able High Court held that licensee would be liable to pay license feed @ 18000 from 15.01.2005 to 15.12.2005 and damages @ Rs.36,000/- per month from 16.12.2005 till handing over the possession to the suit premises.

In another case relating to a flat at Carmichaell Road in Bhagawati Bhavan at Mumbai given on leave and license by the owner Manju Singh to Janki Ammanraj, Hon’able Mr.Justice Anoop Mohta held in January, 2009 that when the licensee, inspite of expiry of the leave and license agreement in November 2006 and notice did not deliver possession of the premises to the land-lord and continued to be in possession of the licensed premises, the licensee should pay damages at double the rate of license fee with all the arrears till the time the flat is vacated.

Thus the overstayed by a licensee in the licensed premises and the acceptance of the monthly license fee by the licensor would not mean that the relationship of licensor and licensee has been converted into that of land lord and tenant and the licensee would be liable to pay the damages at double the rate of the license fee fixed in the agreement, till it is vacated.  It has been observed that in a good number of cases leave and license agreements are not adequately, stamped and registered and two agreements are drawn one towards the license fee for the premises and another towards furniture, fixtures and services etc. as a matter of temptation to save expenses and taxes.  But it needs to be kept in view that where a document is required to be, necessarily, registered (section 55 of the said Act) and if it is not registered, it cannot be taken as an evidence and such a situation may create the problem inasmuch as the relationship may be construed as of land-lord and the tenant and splitting of the agreement may not entitle the licensor to recover the damages at double the rate of the charges fixed in both agreements.

It would, therefore, be advisable that the leave and license agreement should be, adequately, stamped and registered as per the provisions of law and a notice should be served by the licensor to the licensee in advance before the expiry of the agreement to vacate the premises, mentioning therein that in case of failure, besides eviction, the licensee would be liable for the damages at double the rate of monthly compensation fixed in the agreement.  A land-lord should also have the police verification of the licensee and obtain NOC from the Society before giving the final shape to this arrangement.  If all these legal requirements are taken care of, there need not be any apprehension in mind to give the flats on leave and license basis, if not required for self-occupation.

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