Agreement to sell does not end landlord-tenant relationship unless express or implied surrender is proved, rules Supreme Court

Jainbi Mushtaq Shaikh, predecessor of the respondents, owned a 200 sq. ft. shop in Pune, which was let to the petitioner at a monthly rent of ₹1,500. During the subsistence of the tenancy, the parties executed an agreement to sell dated 21 September 2004 for ₹1,90,000; the petitioner paid ₹40,000 and agreed to pay the balance of ₹1,50,000 within three months.

The sale was not completed because the petitioner allegedly failed to comply with the payment stipulations. He continued in possession of the premises as a tenant.

The landlord thereafter instituted Civil Suit No. 384/2010 for possession on grounds including rent default, change of user, and bona fide requirement. The petitioner contended that the landlord–tenant relationship had ended upon execution of the agreement to sell and that he was in possession as a prospective purchaser.

The Small Causes Court decreed possession in favour of the landlord, holding that the tenancy continued and that the landlord had established bona fide requirement. The First Appellate Court affirmed the decree, and the Bombay High Court dismissed the petitioner’s revision application.

Whether execution of an agreement to sell by a landlord in favour of an existing tenant, accompanied by payment of part consideration, automatically determines the subsisting tenancy and transforms the relationship into one of vendor and vendee?

Whether the agreement to sell and the parties’ conduct amounted to an express or implied surrender of tenancy under Sections 111(e) or 111(f) of the Transfer of Property Act, 1882?

Whether the petitioner could claim protection under Section 53A of the Transfer of Property Act on the basis of continued possession pursuant to the agreement to sell?

Whether the Small Causes Court lacked jurisdiction because the agreement to sell had allegedly substituted the landlord–tenant relationship?

The Court applied Sections 111(e) and 111(f) of the Transfer of Property Act, 1882, under which a lease may be determined by express surrender or implied surrender; implied surrender requires a new relationship or unequivocal conduct inconsistent with continuation of the tenancy.

Relying on Shah Mathuradas Maganlal & Co. v. Nagappa Shankarappa Malage, (1976) 3 SCC 660, and Vayyaeti Srinivasarao v. Gaineedi Jagajyothi, 2026 SCC OnLine SC 84, the Court held that mere agreement for a new relationship is insufficient and that surrender must arise from acceptance of the new relationship or conduct clearly inconsistent with the existing tenancy.

Under Section 54 of the Transfer of Property Act, an agreement to sell does not itself create any title, interest, or charge in immovable property; ownership passes only through a duly executed and registered conveyance, as reaffirmed in Suraj Lamp and Industries (P) Ltd. v. State of Haryana, (2012) 1 SCC 656.

Continued possession by an existing tenant does not constitute possession in part performance under Section 53A unless it is shown to have commenced or become referable to the agreement to sell.

Further, under Section 17(1A) of the Registration Act, 1908, a post-24 September 2001 agreement relied upon for Section 53A protection must be registered; an unregistered agreement has no effect for that purpose.

The Court distinguished R. Kanthimathi v. Beatrice Xavier, (2000) 9 SCC 339, because that agreement contained language evidencing surrender of possession and involved near-complete payment of consideration.

The Court found that the 2004 agreement did not state that the petitioner’s possession thereafter would be under the agreement to sell, did not discontinue his obligation to pay rent, and did not otherwise indicate an intention to terminate the tenancy.

Payment of ₹40,000 out of ₹1,90,000 was insufficient, by itself, to establish surrender. On the contrary, Clause 4 provided that if the petitioner’s loan was not sanctioned, the agreement would stand cancelled and he would return possession “as it was in the previous condition”; this contemplated restoration of the pre-existing arrangement rather than substitution of the tenancy.

The petitioner had entered possession as a tenant and continued occupying the premises without demonstrating that his possession had changed into that of a purchaser, making his Section 53A claim unsustainable.

In any event, the agreement was unregistered and therefore incapable of supporting Section 53A protection under Section 17(1A) of the Registration Act.

The petitioner’s failure to institute a suit for specific performance further weakened his assertion that the parties’ relationship had become one of vendor and vendee.

Consequently, the tenancy continued and the Small Causes Court retained jurisdiction.

No such surrender occurred in the present case; the petitioner remained a tenant and could not invoke Section 53A because his possession was not shown to flow from the agreement and the agreement was unregistered.

The Court upheld the concurrent orders directing the petitioner to vacate and hand over the premises, found no jurisdictional error or other infirmity in the High Court’s judgment, and dismissed the Special Leave Petition.