Sect. 111 TP Act | Agreement to Sell Does Not End Tenancy Without Express or Implied Surrender:  Supreme Court

"Execution of Agreement Does Not Automatically Terminate Lease Unless Surrender Is Explicit or Inferred by Conduct", In a landmark clarification on property and tenancy laws, the Supreme Court of India on January 15, 2026, held that an agreement to sell executed in favour of a tenant does not result in automatic termination of tenancy unless there is either an express or implied surrender under Section 111 of the Transfer of Property Act, 1882.

Deciding in Vayyaeti Srinivasarao v. Gaineedi Jagajyothi, the Bench of Justice B.V. Nagarathna and Justice R. Mahadevan extensively analyzed the concept of lease determination and ruled that mere execution of an agreement to sell does not change the nature of possession unless accompanied by conduct or language that evidences the surrender of tenancy rights.

The Court observed:

“There is no express or implied surrender of the tenancy by the appellant in favour of the landlord-vendor. The tenancy in fact continued and the appellant has also suffered an order of eviction as a tenant.”

Surrender of Lease: Law Demands More Than an Agreement to Sell

Addressing the legal implication of the agreement to sell between the landlord and the tenant, the Court focused on whether the jural relationship between the parties had shifted from landlord–tenant to vendor–vendee, thereby terminating the lease by surrender under Section 111(e) or 111(f) of the Transfer of Property Act.

The Court clarified that express surrender under Section 111(e) requires mutual agreement and clear intention of the tenant to give up possession. Conversely, implied surrender under Section 111(f) can be inferred from the parties' conduct, but only where such conduct is “inconsistent with the continuance of the tenancy.”

“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,” the Bench noted.

In the present case, no such conduct or change of status was found. The appellant continued to remain in possession as a tenant, rent was still being paid (albeit deposited), and eventually, the landlady initiated and succeeded in eviction proceedings under the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960.

Eviction Decree Establishes Continued Tenancy

The Court laid significant emphasis on the order of eviction passed on 03.01.2017 in RCC No.4/2013 by the Rent Controller against the appellant, noting that the same was clear evidence that the tenancy was still in effect even after the agreement to sell was executed in 2009.

“The eviction decree proves that the respondent-landlady never treated the appellant as a vendee in possession. The lease had not been surrendered – either expressly or impliedly,” the Court held.

Thus, it held that no transformation in the nature of possession occurred. The appellant’s continued stay in the property was under the original lease, not as a purchaser.

Distinguishing Ratnamala and Gafoor: When Surrender Is Inferred

In distinguishing prior precedents, the Court endorsed the view taken in Ratnamala, which had overruled M.A. Gafoor v. Mohd. Jani. In Gafoor, there was a clear intention to treat the tenant as a vendee, such as ceasing rent, allowing subletting, and treating possession as under the agreement to sell. These were held to amount to implied surrender.

But in Vayyaeti Srinivasarao, none of these factors were present. Instead, the Court observed:

“The appellant herein did not acquire possession under the agreement to sell. He continued to be in possession as a tenant, and the same was judicially affirmed by the eviction order.”

Agreement to Sell Is Not a Substitute for Lease Termination

The judgment now serves as a clear precedent that an agreement to sell, even if executed between a landlord and tenant, does not ipso facto terminate the tenancy. Without an explicit clause, ceasing of rent, or conduct inconsistent with continued tenancy, the lease remains intact.

Thus, landlords cannot avoid following proper eviction procedures merely by entering into agreements to sell. Similarly, tenants cannot claim ownership or part-performance unless their possession derives from the agreement, not prior tenancy.

Direction to Proceed with Specific Performance Suit

Having held that the agreement was not a conveyance and did not extinguish the tenancy, the Supreme Court set aside the orders of the Trial Court and the High Court that had refused to admit the agreement into evidence without further stamp duty. The Trial Court has now been directed to mark the agreement to sell as an Exhibit and dispose of the pending specific performance suit within six months.

“The appellant is not liable to pay any additional duty or penalty on the agreement to sell. It is not a conveyance, and there was no surrender of tenancy,” the Court concluded.

Date of Decision: 15 January 2026