Mere Execution Of Agreement To Sell Between Landlord And Tenant Does Not Determine Subsisting Tenancy Unless Express Or Implied Surrender Is Established: Supreme Court

"Any contract of sale which is not a registered deed of conveyance would fall short of the requirements of Sections 54 and 55 of the TP Act and will not confer any title nor transfer any interest in an immovable property, except to the limited right granted under Section 53-A of the TP Act." Supreme Court, in a significant ruling dated August 13, 2026, held that the mere execution of an agreement to sell between a landlord and a tenant does not ipso facto determine the subsisting tenancy or alter the jural relationship unless the terms or conduct disclose an express or implied surrender under Section 111 of the Transfer of Property Act, 1882.

A bench of Justices Prashant Kumar Mishra and N.V. Anjaria observed that continuous possession by a tenant after executing an agreement to sell cannot be shielded under Section 53A of the TP Act unless directly relatable to the agreement and validated by the mandatory registration requirements under Section 17(1A) of the Registration Act, 1908.

The respondents' predecessor owned a shop in Pune that was let out to the petitioner at a monthly rent of Rs. 1,500. During the subsistence of the tenancy, the landlord entered into an agreement to sell the premises for Rs. 1,90,000, receiving Rs. 40,000 as part payment. As the sale could not fructify due to non-payment of the balance consideration, the landlord filed a civil suit seeking eviction on grounds of default, change of user, and bona fide need, which was decreed by the Small Causes Court and affirmed by the First Appellate Court and the Bombay High Court.

The primary question before the court was whether the execution of an agreement to sell upon receiving part consideration ceases the inter se relationship of landlord and tenant and gives rise to fresh rights and obligations. The court was also called upon to determine whether a tenant can claim protection under Section 53A of the TP Act based on an unregistered agreement to sell executed subsequent to the 2001 statutory amendments.

Tenancy Does Not Terminate Automatically Upon Agreement To Sell - Mere Execution Of Agreement Does Not Determine Tenancy

The bench examined the core contention of the tenant that the execution of the agreement to sell extinguished the landlord-tenant relationship and converted his status into that of a purchaser. Rejecting this proposition, the court held that the mere execution of an agreement to sell coupled with part payment does not bring about a determination of the subsisting lease.

Statutory Modes Of Surrender Must Be Satisfied - Surrender Requires Express Or Implied Intent Under Section 111 TP Act

Referring to Sections 111(e) and 111(f) of the TP Act, the court reiterated that determination of a lease by surrender requires clear evidence of yielding up the lessee's interest by mutual agreement or unequivocal conduct inconsistent with the continuance of tenancy. The court distinguished precedents like R. Kanthimathi v. Beatrice Xavier, noting that those rulings turned on specific recitals where possession was expressly acknowledged as surrendered.

Recitals Consistent With Subsisting Tenancy - Clause 4 Contemplated Reversion To Status Quo Ante Upon Failure Of Sale

Analyzing the specific clauses of the agreement in question, the bench highlighted Clause 4, which stipulated that if the bank loan was not sanctioned, the agreement stood cancelled and the tenant was bound to hand over possession back to the owner as it was in the previous condition. The court observed that this recital demonstrated that the parties contemplated a reversion to the status quo ante upon the failure of the sale, confirming that the existing possession remained referable to the tenancy.

Section 53A Shield Unavailable Without Registration - Unregistered Agreement Barred By Section 17(1A) Registration Act

The court further addressed the plea of part performance under Section 53A of the TP Act, holding that a person already in possession as a tenant cannot alter their character without clear disavowal and independent establishment of possession under the new contract. Moreover, the bench ruled that by virtue of Section 17(1A) of the Registration Act, 1908, introduced vide the 2001 amendment, an unregistered agreement to sell executed after the amendment has no effect for the purposes of Section 53A.

"Any contract of sale which is not a registered deed of conveyance does not by itself confer any title or interest in the property."

Concluding that neither the terms of the agreement nor the conduct of the parties disclosed any surrender under Section 111 of the TP Act, and noting that the tenant had even failed to institute a suit for specific performance, the Supreme Court found no infirmity in the concurrent findings of the courts below. The Special Leave Petition was accordingly dismissed as being completely sans merit.

Date of Decision: 13 August 2026