What is the core test for lease vs licence?

Look at the real intention. If the document creates an interest and grants legal possession, it is a lease. If it only allows use while possession stays with the owner, it is a licence.

Does exclusive possession always mean lease?

Exclusive possession is strong evidence of a lease, but surrounding terms can show a licence if the intention to create a lease is clearly negated.

What did the Supreme Court decide about the hotel rooms?

The arrangement was treated under rent control; the tenant-friendly view prevailed. The appeal failed and the Controller’s jurisdiction returned.

What principle guides document reading?

Substance over form. Labels like “licence” or “lease” are not conclusive; the court reads the whole document and context.

Why is this case important for exams?

It sets the classic four-point checklist: intention, interest in property, exclusive possession, and substance over form.

Associated Hotels of India Ltd. v. R.N. Kapoor

AIR 1959 SC 1262 — Easy English case explainer for students

Supreme Court of India India Property / Rent Control 1959 Lease vs Licence Reading time: ~7 min

Author: Gulzar Hashmi · Published: 01 Nov 2025 · Slug: associated-hotels-of-india-ltd-v-r-n-kapoor

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CASE_TITLE: Associated Hotels of India Ltd. v. R.N. Kapoor PRIMARY_KEYWORDS: lease vs licence; intention test; exclusive possession; substance over form SECONDARY_KEYWORDS: Rent Control; hotel premises; Delhi; document construction PUBLISH_DATE: 2025-11-01 AUTHOR_NAME: Gulzar Hashmi LOCATION: India slug: associated-hotels-of-india-ltd-v-r-n-kapoor

Quick Summary

Hotel Imperial let two cloakroom spaces to a hairdresser, Mr. Kapoor, under a written deed. Was this a lease (tenant rights) or a licence (permission to use)? The answer affects rent control. The Supreme Court said: look at the real intention and the substance of the document. If an interest in property and legal possession pass, it is a lease; if only permission to use while possession stays with the owner, it is a licence. Applying this approach, the tenant-protective outcome stood and the appeal failed.

Issues

Is the deed a lease or a licence?
Do rent control protections apply to these hotel rooms?

Rules

Substance over form: Labels in the deed are not final; the court looks at the whole arrangement.
Intention of parties: Did they mean to create a lease or only a licence?
Interest vs permission: If an interest in property passes → lease; if mere permission to use and legal possession remains with owner → licence.
Exclusive possession: If a party gets exclusive possession, prima facie it suggests a lease, unless other terms negate that intention.

Facts — Timeline

Timeline image for Associated Hotels of India Ltd. v. R.N. Kapoor

1 May 1949: Deed executed; Mr. Kapoor occupies two cloakroom spaces in Hotel Imperial for a hairdressing business; payment initially ₹800/month, later ₹700/month.

26 Sep 1950: Mr. Kapoor moves the Rent Controller alleging excessive rent; seeks fair rent under the 1947 Act.

24 Oct 1950: Rent Controller: Act applies; premises not exempt as residential hotel rooms.

District Judge (Appeal): Treats rooms as “rooms in a hotel” (exempt) and reads the deed as a licence; says Controller lacks jurisdiction.

Punjab High Court (Revision): Reverses; not exempt hotel rooms; deed creates a lease; restores Controller’s order.

Supreme Court: Endorses the approach that focuses on intention and substance; the appeal is dismissed.

Arguments

Appellants: Associated Hotels

Premises are hotel rooms → exempt from rent control.
Deed only permitted use; legal possession stayed with hotel → licence, not lease.
Rent Controller had no jurisdiction to fix fair rent.

Respondent: R.N. Kapoor

Exclusive possession for business use shows lease.
Substance over labels; intention indicates tenancy rights.
Rent control applies; fair rent jurisdiction is valid.

Judgment

Held: The Supreme Court approved the lease-vs-licence test based on intention, interest, and possession, reading the document in substance. The tenant-protective view prevailed; the appellants were not exempt from the Act. Appeal dismissed.

Ratio

To decide lease vs licence, courts prefer substance to form and search for intention. Creation of an interest in property and exclusive possession point to a lease; a mere permission to use with legal possession in the owner points to a licence.

Why It Matters

Foundational precedent for lease vs licence in India.
Guides drafting: labels alone can’t decide legal effect.
Important for rent control, eviction, and possession disputes.

Key Takeaways

Intention first: Read the whole deed and context.
Interest = Lease: Passing an interest and legal possession makes a lease.
Permission = Licence: Only use, owner keeps possession → licence.
Exclusive possession: Strong sign of lease unless clearly negated.

Mnemonic + 3-Step Hook

Mnemonic: “I-E-P: Intention, (property) Interest, Possession.”

Intention: What did parties truly plan?
Interest: Was any property interest transferred?
Possession: Who holds legal possession—user or owner?

IRAC Outline

Issue: Does the deed create a lease or a licence for the hotel rooms?

Rule: Prefer substance over form; intention governs. Interest + exclusive possession → lease. Mere permission with owner’s possession → licence.

Application: Business use, possession features, and deed terms point to tenancy protection rather than a bare licence. Rent control jurisdiction survives.

Conclusion: Lease-oriented reading prevails; appeal dismissed.

Glossary

Lease: Transfer of a right to enjoy property for a term; tenant gets legal possession.
Licence: Permission to do something on the owner’s property; no interest passes; owner keeps possession.
Exclusive Possession: Right to exclude others; usually indicates a lease unless contrary intention is clear.