Does the mere execution of an agreement to sell by a landlord in favour of a sitting tenant, on payment of part consideration, by itself put an end to the tenancy?

The present Special Leave Petition calls in question the judgment dated 01.04.2026 passed by the High Court of Judicature at Bombay in Civil Revision Application No.280/2024, whereby the High Court dismissed the revision application of the petitioner and upheld the judgment and order of the First Appellate Court which affirmed the order of the Small Causes Court whereby the petitioner was directed to vacate and handover the suit premises to the respondents’ predecessor – Jainbi Mushtaq Shaikh.

For the proper disposal of the Special Leave Petition, the parties are being referred by their position in Civil Suit No.384/2010.

Shorn of unnecessary details, the facts lay thus: the respondents’ predecessor - Jainbi Mushtaq Shaikh owned a shop on the ground floor of the building admeasuring 200 sq.ft bearing House No.3031, S.No.51, Mitha Nagar, in front of Vishwakarma Building, Kondhwa Khurd, Pune[^1]. Admittedly, the suit premises was let to the petitioner/defendant at a monthly rent of Rs.1500/-. While the tenancy was subsisting, the original plaintiff agreed to sell the suit premises to the petitioner/defendant, consequently, this culminated into an agreement to sell dated 21.09.2004. Pursuant to the stipulations laid in the agreement to sell, the petitioner/defendant paid Rs.40,000/- out of the total consideration of Rs.1,90,000/- and the residual consideration of Rs.1,50,000/- was to be paid within three months.

As per the original plaintiff’s assertion, the petitioner/defendant failed to comply with the stipulations inhering from the agreement to sell, leading to non-fruition of the sale. As a corollary, the petitioner/defendant continued as a tenant in the suit premises.

Subsequently, the original plaintiff alleging default of rent by the petitioner/defendant, change in the use of the suit premises, coupled with an express bona fide need, filed a civil suit being Civil Suit No.384/2010 seeking possession of the suit premises. The petitioner/defendant resisted the suit inter alia on the ground that the landlord-tenant relationship ended upon the execution of the agreement to sell. Further, it was pled by the petitioner/defendant that he paid Rs.90,000/- out of the total consideration and was ready to pay the balance consideration to the original plaintiff.

The Small Causes Court after examination of oral and documentary evidence, vide judgment dated 19.09.2015, upheld the bona fide requirement of the original plaintiff and held that the landlord and tenant relation subsisted even after the execution of the agreement to sell. Predicating upon the aforesaid reasoning, the suit was decreed in favour of the original plaintiff, and the petitioner/defendant was directed to handover the possession of the suit premises. The petitioner/defendant’s appeal challenging the Small Causes Court’s decision was also dismissed by the First Appellate Court vide judgment dated 24.11.2023.

Being aggrieved, the petitioner/defendant filed Civil Revision Application No.280/2024 challenging the decisions of the Small Causes Court and the First Appellate Court. The High Court vide the impugned judgement and order dated 01.04.2026 dismissed the revision application preferred by the petitioner/defendant.

Taking exception to the judgement passed by the High Court, the petitioner/defendant is now seeking refuge of this Court in reversing the concurrent findings rendered.

Heard the learned counsel for the petitioner/defendant and perused the material on record.

The question inhering from the present lis is whether on the execution of the agreement to sell by the landlord in favour of the tenant, upon receiving part consideration, the inter se relationship of landlord-tenant ceases and fresh rights and obligations flow from the agreement to sell.

Contending in affirmative to the question posed, the learned counsel for the petitioner/defendant placed reliance on a judgment rendered by this Court in R. Kanthimathi and Another v. Beatrice Xavier (Mrs.)[^2], wherein this Court was dealing with a similar question concerning the inter se rights and jural relationship between the landlord and the tenant after an agreement to sell has been executed and a substantial amount of consideration was paid by the tenant. The germane observations elucidated therein read thus:

On a careful perusal of the above adjudication, it is evident that the agreement to sell executed therein contained an express stipulation that the demised property had already been surrendered to the possession of the tenant, which was consciously incorporated to indicate the willingness of the landlord to effect a change in the jural relationship. The intention of the parties was clearly discernible from the terms of the agreement to sell itself. It is equally significant that such willingness flowed from the fact that a substantial part of the consideration Rs.20,000/- out of Rs.25,000/- had already been paid by the tenant, leaving only a balance of Rs.5,000/- to be paid at the time of registration. The decision in R. Kanthimathi (supra) was thus one rendered entirely on its own peculiar facts, turning on the specific language employed in the agreement to sell and the near-complete payment of consideration thereunder.

However, the instant lis presents us with a materially different stand with respect to the agreement to sell executed herein. The relevant recitals of the agreement to sell read thus :

A plain reading of the aforesaid recitals makes it evident that the agreement to sell executed in the present case contains no stipulation indicating that the possession of the petitioner/defendant thereafter would be referable to the agreement to sell, nor does it provide for cessation of the obligation to pay rent or otherwise evince an intention to alter the subsisting landlord-tenant relationship. The marked distinction between the terms of the present agreement to sell and those considered in R. Kanthimathi (supra) necessitates an examination of whether the tenancy stood determined in law by way of either express or implied surrender under Section 111 of the Transfer of Property Act, 1882[^3].

It is relevant to note that Section 111 of the TP Act contemplates different modes by which a lease may be determined. Section 111(e) deals with express surrender, whereas Section 111(f) deals with implied surrender.

The concept of surrender, as contemplated under Sections 111(e) and 111(f) of the TP Act was succinctly explained by this Court in Shah Mathuradas Maganlal & Co. v. Nagappa Shankarappa Malage and Others[^4], wherein it was observed that surrender involves yielding up of the lessee’s interest to the lessor by mutual agreement. In case of implied surrender, the intention of the parties has to be gathered from the circumstances and conduct which demonstrate that the earlier relationship could no longer subsist. The relevant observation reads as follows:

A similar view on the enunciation of law on surrender as crystallised in Shah Mathuradas Maganlal & Co. (supra) was elaborated by this Court in Vayyaeti Srinivasarao v. Gaineedi Jagajyothi[^5], wherein, while considering an analogous question concerning an agreement to sell executed between a landlord and tenant, this Court undertook a comprehensive examination of the concepts of express surrender, implied surrender and the consequences flowing therefrom under Section 111 of the TP Act. The relevant observations read thus: “5.3. The expression “express surrender” means the lessee yields his interest under the lease to the lessor by mutual agreement between them. In other words, express surrender means giving up of the interest in the premises under the lease to the lessor by mutual agreement between the lessor and the lessee. Express surrender necessitates that the lessee has given up possession of the holding. Surrender need not be in writing nor by a registered deed. However, if there is an abatement of rent, it should be only by a registered instrument for it effects a variation in the contract of tenancy. The effect of surrender under clause (e) of Section 111 of the Act is the determination of the lease. 5.4. Clause (f) of Section 111 of the Act deals with the rule of implied surrender. Implied surrender is by operation of law and it can occur by - i) the creation of a new relationship of lease, or ii) relinquishment of possession i.e., there is yielding of possession by the lessee and taking over of possession by the lessor. It is created by the acceptance of, and not by the mere agreement for a new relation which, in effect, estops the lessee from setting up the old one. Implied surrender of tenancy can be established by the conduct of the parties and from attending circumstances. Implied surrender is by the operation of law and takes place in spite of the intention of the parties. It may come into being in a number of ways, e.g., by acceptance of a new lease, or by unequivocal giving up of possession by the lessee as a lessee, or by re-letting to another person by the landlord, or by accepting of a sub-tenant as his tenant by the landlord. 5.5. Where the agreement to sell entered into by the parties clearly states that from the date mentioned in the agreement, the tenant in possession of the property intended to be sold under the agreement shall not be liable to pay any rent and shall alone be in charge of any damage caused to the property in question, it would imply a surrender of rights as a tenant vide B. Paramashivaiah v. M.K. Shankar Prasad, AIR 2009 Kar 88. 5.6. A surrender by operation of law determines the lease and extinguishes the rights of the lessee in respect of the property surrendered, from the date of the surrender and the estate vests immediately in the lessor. The term “surrender by operation of law” is used to describe all those cases where the law implies a surrender from unequivocal conduct of both the parties which is inconsistent with the continuance of the existing tenancy. 5.7. There is a distinction between an express and implied surrender inasmuch as while express surrender is a matter of intention of the parties, implied surrender is by implication of the law. An implied surrender is the act of the law and takes place independently of and in some cases even in spite of the intention of the parties.” (emphasis supplied)

This Court in Vayyaeti Srinivasarao (supra) further considered the interplay between Section 53A of the TP Act and the continuance of tenancy subsequent to the agreement to sell. It was observed that Section 53A operates as a shield for a transferee who has taken possession pursuant to a contract of transfer, or who continues in possession in part performance thereof and has done some act in furtherance of the contract, thereby debarring the transferor from enforcing any right in respect of such property. Significantly, this Court categorically held that the continuous possession of a tenant in the suit property even after entering into an agreement to sell would not by itself amount to part performance so as to put the tenant in possession pursuant to the agreement to sell. It is only where the tenant is inducted into possession for the first time subsequent to the contract that it would constitute strong evidence of possession changing hands pursuant to the contract.

It is also trite law that an agreement to sell, by itself, does not confer any title or interest in the property in favour of the purchaser, and a beneficial reference in this regard may be made to the judgment of this Court in Suraj Lamp and Industries Private Limited (2) Through Director v. State of Haryana and Another[^6] wherein this Court held as follows :

The ratio flowing from the aforesaid pronouncements, read conjointly, can be distilled to the following propositions:

Applying the aforesaid principles to the lis at hand, neither the terms of the agreement to sell nor the conduct of the parties disclose any express or implied surrender within the meaning of Section 111(e) or (f) of the TP Act. The mere execution of the agreement to sell coupled with payment of Rs.40,000/- out of the agreed consideration of Rs.1,90,000/-, cannot be treated as determining the tenancy.

The terms of the agreement to sell itself lend further reinforcement to this conclusion. Clause 4 of the agreement to sell expressly stipulates that in the event the loan of the petitioner/defendant is not sanctioned within the stipulated period, the agreement would stand cancelled and the petitioner/defendant would be required to hand over possession of the shop back "as it was in the previous condition." This recital is wholly consistent with the continuance of the tenancy and, in fact, proceeds on the clear premise that the existing possession of the petitioner/defendant was referable to the tenancy and not to the agreement to sell. Far from evidencing a change in the jural relationship, this demonstrates that the parties themselves contemplated a reversion to the status quo ante upon the failure of the sale.

Also, the reliance placed by the petitioner/defendant on Arjunlal Bhatt Mall Gothani and Others v. Girish Chandra Dutta and Another[^7] is equally misplaced. In that case, upon execution of the agreement to sell, the earlier eviction proceedings were withdrawn and the agreement itself exclusively governed the parties’ rights and obligations, there being no stipulation for payment of rent or interest during the subsistence of the agreement. The present agreement to sell contains no comparable indication that the tenancy stood substituted by a new jural relationship. On the contrary, Clause 4 of the agreement to sell provides for cancellation of the agreement and restoration of possession in accordance with the existing arrangement.

At this juncture, it is also apposite to turn to the contention of the petitioner/defendant, that his possession subsequent to the agreement to sell was that of a prospective purchaser under Section 53A of the TP Act. This submission, however, is sans merit. This Court in D.S. Parvathamma v. A. Srinivasan[^8] laid down the foundational principle governing such a situation, holding that when a person already in possession of the property in some other capacity enters into a contract to purchase the property, to confer the benefit of protecting possession under the plea of part performance, his act effective from that day must be consistent with the contract alleged and cannot be referred to the preceding title, and that having entered into possession as a tenant and having continued to remain in possession in that capacity, a tenant cannot be heard to say that by reason of the agreement to sell his possession was no longer that of a tenant. Tested on the touchstone of the aforesaid principle, the petitioner/defendant having been in possession as a tenant prior to the execution of the agreement to sell and having neither alleged nor established that his possession as lessee ceased, and commenced as that of a transferee under the agreement to sell, his conduct throughout including continued occupation without any disavowal of his character as a tenant is wholly inconsistent with the plea of part performance.

Even assuming arguendo that the factual requirements for invoking Section 53A stood satisfied, the petitioner/defendant's plea is independently foreclosed by the statutory mandate contained in Section 17(1A) of the Registration Act, 1908[^9]. Section 17 of the Registration Act was amended with effect from 24.09.2001 by the introduction of sub-section (1A) therein, which provides that documents containing contracts to transfer for consideration any immovable property for the purpose of Section 53A of the TP Act shall be registered if they have been executed on or after the commencement of the Registration and Other Related Laws (Amendment) Act, 2001, and if such documents are not so registered, they shall have no effect for the purposes of Section 53A. The agreement to sell in the present case was executed on 21.09.2004, i.e., well after the coming into force of the said amendment. The agreement to sell, being admittedly unregistered, can have no effect for the purposes of Section 53A by virtue of the express mandate of Section 17(1A) of the Registration Act, as reaffirmed by this Court in Ameer Minhaj v. Dierdre Elizabeth (Wright) Issar and Others[^10]. The petitioner/defendant is, therefore, disentitled from claiming the protection of Section 53A on this ground as well. The High Court was thus entirely correct in holding that the benefit of Section 53A is unavailable to the petitioner/defendant.

We also can’t be oblivious of the fact that the petitioner/defendant has chosen not to institute a suit for specific performance. This conduct on the part of the petitioner/defendant further militates against the plea that the jural relationship between the parties had transformed from that of landlord-tenant to vendor-vendee upon the execution of the agreement to sell.

Lastly, the learned counsel for the petitioner/defendant advanced two submissions before this Court. First, it was contended that upon execution of the agreement to sell, the jural relationship between the parties stood altered from that of landlord and tenant to that of vendor and vendee, thereby excluding the jurisdiction of the Small Causes Court. Secondly, it was urged that the agreement to sell ought to have been impounded on account of insufficient stamp duty and non-registration before being considered by the Court. In our opinion, neither submission merits acceptance. The first contention proceeds on an erroneous assumption that the mere execution of the agreement to sell determined the tenancy, a contention which already stands negatived as discussed in the preceding paragraphs hereinabove. Equally, the second contention is of no avail since even assuming that the agreement to sell were to be impounded and rendered admissible in evidence upon payment of the requisite duty and penalty, such exercise would not cure the absence of registration nor enable the petitioner/defendant to invoke Section 53A of the TP Act in view of Section 17(1A) of the Registration Act.

In view of the foregoing, we find no infirmity in the impugned judgments of the Courts below warranting interference.

The present Special Leave Petition is sans merit and, accordingly, the same stands dismissed. …………………..........................J. (PRASHANT KUMAR MISHRA) .………………............................J. (N.V. ANJARIA) NEW DELHI; AUGUST 13, 2026.