Licensee Cannot Retain Possession Post-Termination Without Counterclaim: Gujarat HC

Licensees who fail to vacate premises or pay regular fees after the termination of a leave and license agreement lose all legal rights to retain possession, especially when no statutory protection under rent control laws exists. The High Court of Gujarat has reaffirmed that in suits for recovery from unprotected tenants, the mere establishment of a jural relationship and valid termination is sufficient for a decree of eviction.

In a second appeal challenging the reversal of a trial court decree, Justice Maulik J. Shelat upheld the Appellate Court's decision to evict a licensee who had defaulted on payments and allegedly sublet the premises without authorization.

Key Takeaways

Finality of License Termination

Once a license period expires or is determined by notice, the licensee has no inherent right to remain in possession unless a renewal is legally sought.

Primacy of Appellate Fact-Finding

Findings of fact by the First Appellate Court are final and cannot be disturbed in a Second Appeal under Section 100 of the Code of Civil Procedure, 1908 unless they are proved to be perverse.

Necessity of Counterclaims

Defendants seeking the performance of renewal clauses must file a specific counterclaim; they cannot resist eviction based on unperformed terms without formal legal pursuit.

Jural Relationship Test

For properties not covered by the Bombay Rents, Hotel And Lodging House Rates Control Act, 1947, the landlord only needs to prove the landlord-tenant relationship and valid termination to secure possession.

Court Observations and Directions

The Court noted that the relationship between the parties was clearly defined by a formal agreement and that the defendant had failed to adhere to payment undertakings. The Court observed that the trial court had erred by focusing on isolated terms regarding the agreement's 10-year validity while ignoring the requirement for 11-month renewals.

The Court has following directions:

"In view of the foregoing observation and reasons, I do not find any merit in this appeal. Accordingly, it is dismissed in limine. The impugned judgement and decree passed by the Appellate Court is hereby confirmed. Consequently, Civil Application for stay would not survive and hence, it is disposed of. No order as to costs. The decree shall be drawn accordingly."

The Court, in its reasoning, observed: "In a suit for recovery of possession from a tenant whose tenancy is not protected under the provisions of the Rent Control Act, all that is required to be established by the plaintiff landlord is the existence of the jural relationship of landlord and tenant between the parties and the termination of the tenancy either by lapse of time or by notice served by the landlord... So long as these two aspects are not in dispute the court can pass a decree..." as established in Payal Vision Ltd. Vs. Radhika Choudhary.

Ratio

Under Section 100 of the Code of Civil Procedure, 1908, the High Court cannot interfere with findings of fact arrived at by the First Appellate Court unless such findings are erroneous, contrary to mandatory provisions of law, or based on inadmissible evidence. A licensee whose license has been determined by the owner-licensor has no right to retain the property in the absence of a counterclaim for specific performance or statutory protection.

Background

The dispute originated from a Leave and License Agreement executed on July 3, 2010, for a period of 11 months. The respondent-plaintiff alleged that the defendant No. 1 failed to pay the agreed license fee and illegally sublet the office premises to defendant No. 2. Despite a notice to vacate and pay outstanding dues, the defendants remained in possession.

The Trial Court initially dismissed the suit, doubting the License Agreement's specifics. However, the Additional District Judge, Gandhidham, reversed this, noting that the agreement required renewals every 11 months and that the defendant committed a breach by not paying fees. Relying on Russi Fisheries (P) Ltd. v. Bhavna Seth and Jaichand (Dead) through Lrs and Others v. Sahnulal and Another ( "2024 SCC OnLine SC 3864": 2024 CaseBase(SC) 833), the High Court emphasized that even if a lower court's finding is erroneous, it does not warrant interference in a second appeal unless a substantial question of law is present.

Case Details:
Case No.: R/SECOND APPEAL NO. 427 of 2026
Neutral Citation: 2026:GUJHC:57472
Case Title: ARUN HARICHAND SHARMA & ANR. Versus THE SINDHU RESETTLEMENT CORPORATION LIMITED
Appearances:
For the Petitioner(s): MS SM AHUJA, Advocate
For the Respondent(s): MR. DHAVAL C. DAVE, Senior Counsel; MS LIPEE D DAVE, Advocate

Source: 2026 CaseBase(GUJ) 21512