Define lease. How does a lease differ from a licence and a mortgage?

Question: Define lease. How does a lease differ from a licence and a mortgage? [BJS 2018]

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Answer

A lease is defined under Section 105 of the Transfer of Property Act, 1882 (India) as:

“A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.”

• The transferor is called the lessor, and
• The transferee is called the lessee.

Delta International Ltd. v. Shyam Sunder Ganeriwalla & Anr., AIR 1999 SC 2607:

The Supreme Court in this case addressed whether an agreement executed in 1970 between Delta International Ltd. (through its predecessor Dewar’s Garage) and ESSO was a lease or merely a licence. While the Calcutta High Court’s Division Bench held it to be a lease owing to the grant of exclusive possession, the apex court reversed that finding. It ruled that the agreement constituted a licence, as the true intention of the parties, reflected in Clause 12 and other terms, clearly indicated no interest in the property was transferred.

The Court emphasized that exclusive possession is not conclusive, especially when the licensor lacked authority to create a sublease without the landlord’s consent, which was never obtained. Thus, the Court upheld the original decision of the Single Judge, treating the document as a valid licence, not a lease.

Associated Hotels of India Ltd. v. R.N. Kapoor, AIR 1959 SC 1262:

In this landmark judgment, the Supreme Court addressed whether a hairdresser occupying two rooms in Hotel Imperial, New Delhi, was a tenant entitled to seek fixation of standard rent under the Delhi and Ajmer-Merwara Rent Control Act, 1947. The respondent argued he was a tenant, but the hotel contended he was merely a licensee and that the rooms fell outside the Act’s purview as “rooms in a hotel.”

The majority (S.K. Das and Sarkar, JJ.) held that the rooms, though used for a private business, were part of the hotel premises and thus excluded under Section 2(b) of the Act. However, Subba Rao, J., dissented, holding that the agreement was a lease, not a licence, and the tenant's use was independent of hotel functions. Ultimately, the appeal was allowed, upholding the hotel’s position.