As defined under Section 52 of the Indian Easements Act, 1881, license means when one person grants another, or to a specific number of other people, the authority to do an act in or on the grantor's immovable property that would otherwise be illegal if the right is not granted. So, a document will be considered a license if it grants another the right to enter the land or premises and use them in a way so long as the owner retains custody and control of the land. The possession and ownership of the immovable property will remain with the licensor itself while the licensee will only be entitled to the license.

On the other hand, as defined under Section 105 of the Transfer of Property Act, 1882, lease is a transfer of an immovable property for a certain period of time in exchange of consideration, with the transferee accepting the terms and conditions of the agreement. In this case, only the possession of the property is transferred and the right of ownership remains with the owner itself. Here, the transferor is called the lessor and the transferee is called the lessee. Lease is covered under Section 105 to Section 117 of the Transfer of Property Act of 1882.

Understanding the concept of License under the Indian Easements Act, 1882

What is a license? As per Section 52 of the Indian Easements Act of 1882, "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 immovable property of the grantor, which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a license.[1]"

This definition makes it clear that a license also arises from a grant and that it may only be awarded to a fixed number of people, not to a fluctuating population of people. The term also makes it clear that a licensee has no ownership interest in the property and that his only right is to carry out or continue carrying out activities that would otherwise be unlawful. Since he has no estate or interest in the property, any possession he could have to exercise his rights is just an occupation and not a legal possession.

English writers usually divide licenses into three categories:

1. Bare License: A bare license is one that is not backed by a contract, for example, an invite to enter somebody's house. It is revocable at any time under the condition that the licensee receives reasonable notice before doing so; otherwise, the licensor can be held accountable for damages.
    
2. Contractual License: A contractual license is one that is provided in accordance with the terms of a contract that restricts the right of the licensor to terminate the license, such as one for housing or a ticket to a game. A contractual license (which grants an individual the right to occupy property indefinitely) creates a constructive trust, which prohibits the legal owner from expelling the licensee.
    
3. License coupled with interest: A license with an interest is a license to enter the property and the grant of an interest, such as the right to enter, cut down a tree, and carry it away. Such licenses are irrevocable and transferable, but only in conjunction with the interest to which they are attached.

Who may grant a license? Anyone may grant a license under the conditions, to the extent, and for the purposes to which he may transfer his interests in the property covered by the license.[2]

In order to grant a license, a man need not be its owner. A tenant can also grant a license since his tenancy rights are also immovable property.[3] But a person having life-interest in the property cannot grant any license, whether revocable or irrevocable, so as to last after his death or after the ceasing of his life-interest. Similarly, a co-owner of property who has mortgaged his interest in the property with possession has no right left in him in granting a license. It has also been held that a member of a Joint Hindu Family cannot grant a license to make construction over a sir land belonging to the joint family.[4] In any case it is not open to a licensee to take the plea that the tenant had no right to grant a license in his favour.

The grant of a license may be made expressly or impliedly from the grantor's conduct; and an arrangement that purports to establish an easement but is ineffectual may create a license.[5] It is settled that the law does not require any formalities for creating a license nor registration. So even though there is no direct proof of a license, it can be presumed from the relevant facts and circumstances of the case. But a prerequisite for the inference of an implied grant of license is the knowledge on the part of the grantor. It is not necessary for the purpose of creation of license that there should be an instrument in writing.

When can a license be transferred? "Unless a different intention is expressed or necessarily implied, a license to attend a place of public amusement may be transferred by the licensee; but a license cannot be transferred by the licensee or used by his servants or agents.[6]"

This provision is divided into two parts, and in order to ascertain whether a license falls under the first or the second part and whether it is transferable or not, it is required to consider the intent of the parties as well as the context. So in order to entitle a licensor to take the advantage of s. 56, it is his duty to show that under the terms of the particular license, no transferable right was to be enjoyed by the licensee. The question whether a license is transferable of not is not a pure question of law.

If a licensee transfers the property in violation of the license to a third party, this section makes the transferee, who is not having possession, a trespasser as against his transferor and a rank trespasser as against the original grantor. The grantor will immediately have the right to eject the transferee. But, where a license is given for purposes of business, the fact that the licensee enters into partnership with others in respect of the business, does not necessarily involve a transfer or sub-letting of license.

Revocation of licenses: Section 60 states that, "A license 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 license has executed a work of a permanent character and incurred expenses in the execution.[7]"

Section 62 postulates nine situations in which a license will be deemed to be revoked. These are specified in clause (a) to (i) of the section.
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1. As per Section 62(a), the license is deemed to be revoked whenever the grantor loses any interest in the property governed by the license due to an incident that occurred before the license was granted. In the case of Kapoorchand vs. Lalchand and Others[8], it was decided that even though a license was declared irrevocable under the terms of Section 60, it would still be considered revoked if the grantor lost the ownership of the property as a result of a circumstance that occurred before the license was granted. Therefore, this clause is not restricted by or governed by Section 60 of the Act.}
    
2. Section 62(b) stipulates that a license is presumed to be revoked when the licensee gives it, explicitly or implicitly, to the grantor or his agent. In Indian Molasses Co. Ltd. vs. Kerala State Civil Supplies[9], it was decided that strong proof is necessary to demonstrate the licensee's release of the license. The elements of Section 62(b) must be established by proving the abandonment of the license by the licensee.
   
   A license is presumed to be revoked in accordance with Section 62(c) of the Act where it has been issued for a brief period of time or obtained on a condition that it would terminate upon the performance or non-performance of a specific act. This elucidates that the license is regarded to be revoked at the end of the said time period for which it has been granted or upon the fulfilment or non-performance of a certain condition or task. According to the ruling in Anandakrishnan v. The Commissioner[10], licenses shall be revoked if the time period for which they were granted ends.
    
3. A license is declared revoked under Section 62(d) if the property it affects is permanently damaged or destroyed by a stronger force to the extent that the licensee is unable to exercise his right.
    
4. In accordance with Section 62(e)[11], when the licensee has complete control over the property protected by the license, the license is declared revoked. This ownership must be whole and in no manner partial. As a result, if the licensee acquires ownership of the property for which he has a license under the Act, the license is assumed to have been revoked.
    
5. In accordance with Section 62(f), the license is presumed to be revoked when the objective for which it was issued has been accomplished, abandoned, or made impossible.[12] According to the ruling in Unknown v. Chennai Metro Rail Limited[13], the completion or its unlikeliness, thereof will result in the license being deemed revoked.
    
6. According to Section 62(g), a license is assumed to be revoked if the licensee was awarded the license for holding a certain office, employment, or character and that office, employment, or character ceases to exist.[14] In the case of Kunjamma alias P.J. Aliamma v. R. Sankara Subramanian Thevar, it was determined that if a licensee is terminated from their job or voluntarily resigns, or if the position that was the basis for the license becomes insignificant, then the license granted on that basis would be considered as revoked.
    
7. According to Section 62(h), a license is regarded to be revoked if it is completely ceased from being utilized as such for an uninterrupted period of twenty years and the cessation of use is not due to a contract between the grantor and the licensee.[15] According to the decision in Bhaga and ors. vs. Girwar and ors[16], a license is not considered revoked until it has been dormant for a continuous period of 20 years. The failure to use the license cannot be attributed to a contract between the grantor and the licensee.

Differences between License and Lease

Section 105 of the Transfer of Property Act, 1882 defines Lease. It states that, "A lease for immovable property is a transfer of the right to use the property for a certain amount of time, either explicitly or implicitly, or indefinitely, in exchange for a price paid or promised, or for money, a share of crops, a service, or any other valuable thing that the transferee accepts the transfer on.[1]" The lessee acquires the right to hold and enjoy the property, which he gains via the lease transfer. This acquired interest is a transferable interest that the lessee may further transfer. If there is no transfer of interest, there is no lease.

Distinction between Lease and License

1. A license is only a permit granted without any transfer of an interest, but a lease is the transfer of an interest in an immovable property.
2. In contrast to a license, a lease creates an interest in favour of the lessee with regard to the property.
3. In contrast to a license, which is neither transferable nor inheritable, a lease can be sublet by the tenant, and upon the tenant's death, his legal heirs can take over the tenancy.
4. Because a license is a personal contract, it expires with the death of either the grantor or the grantee, but a lease does not expire upon the death of either the grantor or the grantee.
5. While a grantor may revoke a license at any time, a lease may only be terminated in accordance with the terms and conditions outlined in the tenancy agreement.
6. The selling of the property to a third party has no bearing on the lease. It continues, and the buyer must wait until the tenancy ends before taking possession, whereas a license ceases instantly if the property is transferred to a 3rd person.
7. A lessee has a statutory right to protect the property on his own behalf. A lessee may go to court and file a lawsuit in his name if trespassers threaten to take possession of his land. A licensee lacks any ownership rights in the property, thus he cannot defend his possession in his own name. The possession would be protected by the owner of the property.
8. A lessee who is in possession of the property is allowed to make changes or additions to the property, but a licensee does have the same right.

Landmark Judgements:
In Sohanlal Naraindas v Laxmidas Raghunath,[2] the Supreme Court observed: "Intention of the parties to an instrument must be gathered from the terms of the agreement examined in the light of the surrounding circumstances. The description given by the parties may be evidence of the intention but is not decisive.

Mere use of the words appropriate to the creation of the lease will not preclude the agreement operating as license. A recital that the agreement does not create a tenancy is also not decisive. The crucial test in each case is whether the instrument is intended to create or not to create an interest in the property. If it does, it is a lease, if it does not, it is a license. In determining whether the agreement creates a lease or license the test of exclusive possession though not decisive is of significance."

In Associated Hotels of India v RN Kapoor,[3] the question was whether using hotel rooms to operate a barbershop resulted in a license or a lease. The case was related to the Imperial Hotel, and A operated a hair dresser there. He asked for the standard rent to be determined, and the court had to decide if this occupancy was authorized by a lease or a license. If it were a lease, the application for standard rent fixation may be considered in accordance with the terms of the applicable rent statute; but, if it were a license, standard rent fixation would not be an issue. A document referred to as a "license deed" was used to secure the possession. The court held, while elucidating the difference between lease and license:

"If a document gives only a right to use the property in a certain way or under certain terms while it remains in possession of the owner, it will be a license. Therefore, the legal possession remains with the owner of the property, but the licensee is permitted to make use of the property 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.

Therefore, there is a clear distinction between the two concepts. The dividing line is clear however sometimes it becomes very thin or even blurred. At one time it was thought that the test of exclusive possession was infallible and if a person was given exclusive possession of the property, it would conclusively establish that he was a lessee."

To define whether a document forms a lease or a license, the court established four parameters. They are:

1. The substance of the document must take precedence over its form.
2. The true test is the "intention of the parties." Whether they meant to create a license or a lease.
3. If the agreement creates an interest in the property, it is a lease; a license, on the other hand, just provides for the use of the property while its owner retains legal ownership.
4. If a party has sole possession of the property as a result of the agreement, he is originally considered a tenant. However, circumstances may arise that render the intention to lease null and void.

In the case of Delta International Ltd v Shyam Sunder Ganeriwalla,[4] a person A formed a lease in favour of B. B then drafted an agreement with C that was framed as a lease and license for operating a petrol pump, a service centre, and for the sale of motor spare parts. The agreement stated that B was not permitted, without the landlord's permission, to sublet his stake in the property.

It was expressly stated in the deed that the license is to be provided for the purposes of using, enjoying, operating, and working the gas station, and B was given the authority to cancel the license in the case that any condition was breached. As per the agreement, the Supreme Court stated that the document created not a lease but a license.

Additionally, the court approved and summarized the tests to determine the nature of the document as follows:

1. The document's structure would be determined by its content rather than the labels that the parties may add to it.
2. The primary test is determining 'the intent of the parties'.[5]
3. Although exclusive ownership of the premises being given is an important condition, the court may nonetheless rule that the agreement is in reality a license.
4. Even though exclusive possession is granted, only a license is formed if the grantor lacks the capacity to grant a lease.
5. When the main objective is to utilize the premises with furnishings and fixtures for the purpose of conducting a business, it is not a lease of immovable property.

Comparative Analysis- Comparing the Law of India with that of the USA

While there are certain similarities between the leave and license agreements in India and the USA, there are also substantial differences. A Leave and License agreement in India is a short-term arrangement between the owner (the licensor) and the licensee (the person who is given permission to use the property). The terms and conditions for using the property are often outlined in the agreement, along with the rent, the period of the agreement, and any limitations on the use of property. To be enforceable, the agreement has to be registered with the local government.

A leasing agreement is a similar idea to a leave and license agreement in the USA. An agreement known as a lease between a landlord and a tenant gives the tenant the right to occupy the estate for a certain period of time, often one year. The terms and conditions for using the property, such as the rent, the length of the lease, and any limitations on use, are often outlined in the lease agreement. Contrary to India, a leasing agreement is enforceable without being registered with the local authorities.

Differences between the Indian Law and the American Law

1. Firstly, a Leave and License agreement in India is a short-term arrangement between the property's owner (the licensor) and the person who is given permission to use the property (the licensee). During the period of the agreement, the licensor retains ownership of the property, and the licensee merely has the right to use it. Without the licensor's consent, the licensee is not allowed to alter the property's structure or function. Contrarily, a lease agreement in the USA is a contract between a landlord and a tenant that allows the tenant to occupy the property for a predetermined amount of time, often one year. In contrast to India, the tenant has more authority over the property during the period of the lease. Subject to any limitations outlined in the lease agreement, the tenant has the right to make adequate modifications to the property.
    
2. Secondly, the length of the agreement also differs between India and the USA. A Leave and License agreement in India is often only valid for a maximum of 11 months. The agreement may then be extended or a new one may be negotiated. In comparison, a lease in the US is often for a longer duration, like a year, with the option to renew at the conclusion of the term.
    
3. Finally, the registration procedure is different. In order to be enforceable in India, a Leave and License agreement has to be filed with the local authorities. Legal issues for both the licensor and the licensee may arise if this is not done. However, leasing agreements are not required to be registered in the USA.

References:

1. Transfer of Property Act 1882, s. 105
2. (1971) MahLJ 04 at 607; (1971) 1 SCC 276
3. AIR 1959 SC 1262
4. AIR 1999 SC 2607, (1999) 4 SCC 545.
5. AIR 1999 SC 2607, (1999) 4 SCC 545.

End-Notes:

1. The Easements Act, 1882, s. 52
2. The Indian Easements Act, 1882, s. 53
3. Jagannath v Jayantilal AIR 1980 Guj 41 (42)
4. Pheku v Harish Chandra AIR 1953 All 406 (408)
5. The Indian Easements Act, 1882, s. 54
6. The Indian Easements Act 1882, s. 56
7. The Indian Easements Act 1882, s. 60
8. Kapoorchand vs Lalchand and Ors. AIR 1975 Raj 178
9. Indian Molasses Co. Ltd. vs Kerala State Civil Supplies, AIR 2001 KER 383.
10. Anandakrishnan vs The Commissioner, Second Appeal (MD) No.1250 of 2008 and M.P.(MD) No.2 of 2008 (HC Madras).
11. The Indian Easements Act, 1882, S. 62 (e).
12. The Indian Easements Act, 1882, S. 62 (f).
13. Unknown vs Chennai Metro Rail Limited, W.P.Nos.10415 of 2019 (HC Madras).
14. The Indian Easements Act, 1882, S. 62 (g)
15. The Indian Easements Act, 1882, S. 62 (h)
16. Bhaga and Ors. vs Girwar and Ors., AIR 1953 All 439