A Supreme Court bench comprising Justice Prashant Kumar Mishra and Justice N.V. Anjaria has held that the mere execution of an agreement to sell between a landlord and a tenant does not ipso facto bring about a determination of the subsisting tenancy. Dismissing a Special Leave Petition filed by a tenant, the apex court affirmed that a lease is determined only when the terms of the agreement or the unequivocal conduct of the parties demonstrate an express or implied surrender under Section 111 of the Transfer of Property Act, 1882. The Court further held that an unregistered agreement to sell executed after the 2001 amendment to the Registration Act, 1908, cannot grant the tenant protection under Section 53A of the Transfer of Property Act.
Background of the Case
The dispute concerns a shop premises admeasuring 200 sq. ft. located on the ground floor of House No. 3031, S.No. 51, Mitha Nagar, Kondhwa Khurd, Pune. The original landlady, Jainbi Mushtaq Shaikh (predecessor of the respondents), had let out the premises to tenant Nazim Shaikh Hasan (the petitioner) at a monthly rent of Rs. 1,500.
During the subsistence of the tenancy, the landlady agreed to sell the shop to the tenant, resulting in an agreement to sell dated September 21, 2004, for a total consideration of Rs. 1,90,000. The tenant paid Rs. 40,000 as earnest money, while the remaining balance of Rs. 1,50,000 was to be paid within three months upon obtaining a bank loan.
According to the landlady, the tenant failed to fulfill the conditions of the agreement, leading to the non-fruition of the sale, and consequently, the tenant continued in occupation as a tenant. The landlady subsequently filed Civil Suit No. 384/2010 before the Small Causes Court seeking possession on grounds of default in rent payment, change of user, and bona fide requirement.
The tenant resisted the suit, claiming that the landlord-tenant relationship ended upon execution of the agreement to sell, that he had paid Rs. 90,000 in total, and that he was ready to pay the balance amount.
On September 19, 2015, the Small Causes Court decreed the suit in favor of the landlady, holding that the landlord-tenant relationship subsisted and upholding her bona fide requirement. This decision was affirmed by the First Appellate Court on November 24, 2023, and subsequently by the High Court of Judicature at Bombay in Civil Revision Application No. 280/2024 on April 1, 2026. The tenant then approached the Supreme Court.
Arguments of the Parties
The petitioner-tenant argued that entering into the agreement to sell altered the jural relationship between the parties from landlord-tenant to vendor-vendee, thereby ousting the jurisdiction of the Small Causes Court. The tenant relied on the Supreme Court ruling in R. Kanthimathi and Another v. Beatrice Xavier (Mrs.) to contend that his possession converted to that of a transferee under Section 53A of the Transfer of Property Act, 1882. It was also argued that the agreement to sell ought to have been impounded for insufficient stamp duty and non-registration before being considered.
The respondents maintained that the tenancy continued uninterrupted as the sale was never completed and the agreement itself provided for cancellation upon failure to secure a loan.
Court’s Analysis and Legal Precedents
The Supreme Court examined whether the execution of an agreement to sell upon receiving part consideration terminates the landlord-tenant relationship. Distinguishing the judgment in R. Kanthimathi and Another v. Beatrice Xavier (Mrs.), the Court noted that in Kanthimathi, the agreement explicitly recorded that the property had already been surrendered to the possession of the buyer-tenant after payment of a substantial portion of the sale consideration (Rs. 20,000 out of Rs. 25,000).
In contrast, the Court highlighted Clause 4 of the agreement in the present case, which stipulated that if the loan was not sanctioned within three months, the agreement would stand cancelled, and the purchaser would have to hand over possession back “as it was in the previous condition.” The bench observed that this clause contemplated a reversion to the status quo ante and was entirely consistent with the continuation of the tenancy.
The bench examined the concept of surrender of lease under Section 111 of the Transfer of Property Act, 1882, citing Shah Mathuradas Maganlal & Co. v. Nagappa Shankarappa Malage and Others, where the court held:
“A surrender under clauses (e) and (f) of Section 111 of the Transfer of Property Act, is an yielding up of the term of the lessee’s interest to him who has the immediate reversion or the lessor’s interest. It takes effect like a contract by mutual consent on the lessor’s acceptance of the act of the lessee.”
Referring to Vayyaeti Srinivasarao v. Gaineedi Jagajyothi, the bench pointed out:
“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…”
“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.”
The Court also cited Suraj Lamp and Industries Private Limited (2) Through Director v. State of Haryana and Another, reiterating that:
“Section 54 of the TP Act makes it clear that a contract of sale, that is, an agreement of sale does not, of itself, create any interest in or charge on such property.”
“Any contract of sale (agreement to sell) which is not a registered deed of conveyance (deed of sale) 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).”
From these precedents, the Supreme Court distilled four core propositions:
- The mere execution of an agreement to sell between a landlord and tenant does not ipso facto bring about a determination of the subsisting tenancy.
- A lease is determined only when the terms of the agreement or unequivocal conduct show express or implied surrender under Section 111(e) or (f) of the Transfer of Property Act, 1882.
- Continuous possession by a tenant after executing an agreement to sell does not amount to part performance under Section 53A of the Transfer of Property Act, 1882, unless such possession is directly relatable to and flowing from the agreement to sell.
- Any agreement to sell, not being a registered deed of conveyance, does not by itself confer any title or interest in the property.
The Court distinguished Arjunlal Bhatt Mall Gothani and Others v. Girish Chandra Dutta and Another, noting that in that case, eviction proceedings were withdrawn and the agreement exclusively governed the relationship without any rent stipulation, whereas the present agreement expressly provided for cancellation and restoration of original possession.
Addressing the plea of part performance under Section 53A of the Transfer of Property Act, 1882, the bench cited D.S. Parvathamma v. A. Srinivasan, holding that a tenant already in possession cannot claim part performance unless it is established that possession as a lessee ceased and commenced as a transferee under the contract.
Furthermore, the Supreme Court held that the claim under Section 53A was independently barred by Section 17(1A) of the Registration Act, 1908 (enacted on September 24, 2001). Reaffirming the principle in Ameer Minhaj v. Dierdre Elizabeth (Wright) Issar and Others, the bench noted that because the agreement to sell dated September 21, 2004, was admittedly unregistered, it could have no effect for the purpose of Section 53A.
The Court also noted that the tenant had chosen not to institute a suit for specific performance and rejected technical arguments regarding Small Causes Court jurisdiction and impounding for stamp duty.
Decision
Finding no infirmity in the concurrent findings of the lower courts and the High Court, the Supreme Court dismissed the Special Leave Petition for being without merit.
Case Title: Nazim Shaikh Hasan v. Nasir Mushtaq Shaikh and Others
Case No.: Special Leave Petition (Civil) No. 17699 of 2026
Bench: Justice Prashant Kumar Mishra and Justice N.V. Anjaria
Date: August 13, 2026
