Mere Recital of Tenant’s Possession Does Not Trigger Stamp Duty as Sale Under A.P. Stamp Act: Supreme Court

“No Transfer, No Tax” , In a significant decision impacting landlord–tenant disputes and property transactions across Andhra Pradesh, the Supreme Court on 15 January 2026 held that an agreement to sell property in favour of a longstanding tenant does not amount to a 'sale' or 'deemed conveyance' under the Andhra Pradesh Stamp Act unless the possession of the property is delivered in relation to such agreement.

Delivering judgment in the case of Vayyaeti Srinivasarao v. Gaineedi Jagajyothi, Civil Appeal Nos. ___ of 2026, a Bench of Justice B.V. Nagarathna and Justice R. Mahadevan reversed concurrent findings of the Trial Court and High Court that treated an agreement to sell as a sale deed solely because the tenant-purchaser was already in possession of the property.

The Court unequivocally clarified: "Possession must follow from or be referable to the agreement to sell. Possession independent of the agreement cannot trigger stamp duty as a sale."

Agreement to Sell With Tenant Not a Deemed Sale Absent Surrender of Tenancy

On the factual matrix, the appellant, Vayyaeti Srinivasarao, had been a tenant in the suit property for almost fifty years when, in 2009, he entered into an agreement to purchase the property from the landlady, Gaineedi Jagajyothi, for ₹9,00,000, of which ₹6,50,000 was paid upfront. However, the landlady refused to execute a sale deed, leading to a suit for specific performance by the tenant in 2013.

When the tenant sought to mark the agreement to sell dated 14.10.2009 as evidence in trial proceedings, the landlady objected, contending that the document amounted to a conveyance deed under Explanation I to Article 47A of the A.P. Stamp Act. The Trial Court agreed and demanded stamp duty and penalty, holding the agreement inadmissible until such payment. The High Court upheld the ruling, relying heavily on its prior decision in B. Ratnamala v. G. Rudramma.

However, the Supreme Court has now overruled both lower court decisions, holding that no stamp duty is payable beyond what has already been paid on the agreement to sell, and the agreement must be admitted as evidence.

“Jural Relationship Continued to Be of Landlord and Tenant”: Eviction Order Post Agreement Confirmed Status

A critical factor influencing the Court’s conclusion was that the landlord–tenant relationship was never terminated despite the agreement to sell. In fact, in a parallel rent control case, the landlady succeeded in obtaining an eviction order against the appellant in 2017, which the Supreme Court viewed as clinching proof that the tenancy had never been surrendered.

"The jural relationship between the parties remained that of landlord and tenant," the Court observed, adding that there was no 'express or implied surrender' of tenancy as required under Section 111(e) or (f) of the Transfer of Property Act. Mere execution of the agreement to sell, without change in the nature of possession or payment cessation of rent, did not extinguish the tenancy.

The Bench emphasized:

“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. But in the present case, no such inference arises."

"Possession Must Be in Part Performance": Court Rules Out Applicability of Section 53A TPA

The Court also addressed arguments based on Section 53A of the Transfer of Property Act (TPA), which provides protection to vendees in possession in part performance of an agreement to sell. It was unequivocal that this provision was not applicable:

“Section 53A is not attracted where tenancy subsists and possession pre-exists the agreement.”

Thus, since the tenant was already in possession independent of the agreement to sell, there was no delivery of possession in part performance, and no statutory trigger for treating the agreement as a conveyance.

Differentiating Bombay and Andhra Pradesh Stamp Acts: Statutory Language Matters

Significantly, the Court distinguished its earlier ruling in Ramesh Mishrimal Jain v. Avinash Vishwanath Patne (2025), where a similar agreement was held to be a sale. The Bench underscored that the language of Explanation I to Article 25 of the Bombay Stamp Act was materially broader and distinct from that under the A.P. Stamp Act.

While the Bombay provision applies even where possession is merely “agreed to be transferred,” the Andhra Pradesh version strictly requires that possession be delivered pursuant to or evidenced by the agreement to sell itself.

As the Court succinctly put it:

"The differentiation in the wordings of the two Explanations reveal that they are not identical and the intention of the respective legislations are dissimilar."

Ratnamala Clarified, Gafoor Overruled: No Deemed Conveyance Without Transformation of Possession

In clarifying the precedents of the Andhra Pradesh High Court, the Supreme Court approved the reasoning in Ratnamala while disapproving the earlier judgment in M.A. Gafoor v. Mohd. Jani, where a change in jural relationship was implied due to terms permitting the tenant to sub-let and cease rent payments.

Unlike Gafoor, the Court held, there was no transformation in the appellant’s possession in the present case. No clause in the agreement referred to any cessation of rent or change in capacity. In fact, the tenant continued to deposit rent even after execution of the agreement.

"There was no change in the status of the appellant herein inasmuch as he continued to be a tenant and did not acquire possession under the agreement to sell."

Stamp Duty Based on Nature of Possession, Not Presumed Transfer

Referring to Suraj Lamp Industries v. State of Haryana, the Court reiterated the settled legal position that an agreement to sell does not create any title or interest in immovable property, unless followed by a registered conveyance.

The essence of the ruling is that stamp duty consequences must be determined based on actual facts of possession and not presumptions based on mere agreement language. As such, no deemed conveyance arises without possession changing character from tenant to vendee.

Suit for Specific Performance Revived: Trial Court to Proceed Within Six Months

Allowing the appeal, the Court directed the Trial Court to mark the agreement dated 14.10.2009 as an exhibit and proceed to adjudicate the pending suit for specific performance within six months.

“The Trial Court failed to notice that there was no deemed conveyance or delivery of possession under the agreement. The High Court misdirected itself in assuming otherwise,” the Court held.

Date of Decision: 15 January 2026