The Supreme Court has held that an agreement to sell executed between a landlord and a tenant, who is already in possession of the property, does not amount to a “deemed conveyance” or “sale” for the purpose of stamp duty unless the possession is handed over in part performance of the agreement or there is a surrender of tenancy.
The Bench of Justice B.V. Nagarathna and Justice R. Mahadevan, in the case of Vayyaeti Srinivasarao vs. Gaineedi Jagajyothi, set aside the orders of the Andhra Pradesh High Court and the Trial Court which had impounded an agreement to sell on the ground that it was a “conveyance deed” liable for stamp duty and penalty.
Background of the Case
The Appellant, Vayyaeti Srinivasarao, had been a tenant of the Respondent, Gaineedi Jagajyothi, in respect of a property in Dowlaiswaram Village, Andhra Pradesh, for over fifty years. On October 14, 2009, the parties entered into an agreement to sell the property for a total consideration of Rs. 9,00,000, out of which Rs. 6,50,000 was paid as an advance.
When the Respondent allegedly refused to execute the sale deed, the Appellant filed a suit (O.S. No. 188/2013) for specific performance. During the trial, the Appellant sought to mark the agreement to sell as an exhibit. The Respondent objected, contending that the agreement was, in fact, a “conveyance deed” under the Stamp (Andhra Pradesh Amendment) Act, 1922, and thus required payment of stamp duty and penalty.
The Trial Court, on December 21, 2016, held that the Appellant was liable to pay stamp duty and penalty as the document was a “conveyance deed.” The High Court of Andhra Pradesh affirmed this view in 2022, relying on the judgment in B. Ratnamala vs. G. Rudramma, holding that the agreement evidenced delivery of possession and was thus chargeable as a sale.
Crucially, simultaneous to these proceedings, the Respondent-landlady had successfully sought eviction of the Appellant from the property under the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960, via an order dated January 3, 2017.
Arguments of the Parties
The counsel for the Appellant argued that the Appellant had been in possession as a tenant for decades and did not enter into possession as a vendee under the agreement to sell. It was submitted that the tenancy never came to an end, proven by the fact that an eviction decree was subsequently passed against him. Therefore, the agreement could not be construed as facilitating a “sale” within the meaning of Explanation I to Article 47A of Schedule I-A of the A.P. Stamp Act.
The Respondent contended that the agreement to sell was effectively a sale deed. Reliance was placed on the Supreme Court’s recent judgment in Ramesh Mishrimal Jain vs. Avinash Vishwanath Patne (2025), which held that an agreement to sell could be treated as a deemed conveyance where possession is transferred or agreed to be transferred.
Court’s Analysis
The Supreme Court analyzed Explanation I to Article 47A of Schedule I-A of the A.P. Stamp Act, which states: “An agreement to sell followed by or evidencing delivery of possession of the property agreed to be sold shall be chargeable as a ‘sale’ under this Article.”
The Court distinguished the present case from Ramesh Mishrimal Jain, noting that in the latter, the Court had invoked Section 53A of the Transfer of Property Act (Part Performance) because the tenant had acquired possessory rights as a vendee.
However, in the present case, the Bench observed that the tenancy continued even after the execution of the agreement. The Court noted:
“In this case, the appellant was a tenant of the respondent-landlady on the date of execution of the agreement to sell dated 14.10.2009… The question is whether the said jural relationship was converted to one of vendor and vendee upon the execution of the agreement to sell. If the possession of the suit schedule property continued to be held by the appellant as a tenant even upon the execution of the agreement to sell, there would be no conveyance/sale within the meaning of the Explanation I to Article 47A of Schedule I-A of the A.P. Stamp Act.”
The Court highlighted that there was no “express surrender” or “implied surrender” of the lease as per Section 111 of the Transfer of Property Act. The fact that the landlady obtained an eviction order against the Appellant after the agreement to sell was executed was a critical factor proving the relationship remained that of landlord and tenant.
The judgment stated:
“The respondent-landlord did not treat the possession of the suit schedule property by the appellant-tenant pursuant to the agreement to sell dated 14.10.2009 as a vendee… Thus, there is no express or implied surrender of the tenancy by the appellant in favour of the landlord vendor.”
The Court further clarified the application of the A.P. Stamp Act:
“In other words, the possession of the schedule property by the appellant herein was not following the agreement to sell nor was delivery of possession pursuant to the execution of agreement to sell as stipulated under the A.P. Stamp Act. It is only when the possession is acquired in relation to the execution of the agreement to sell, that it would be a deemed conveyance and stamp duty has to be levied as conveyance.”
Decision
The Supreme Court allowed the appeals and set aside the orders of the High Court and the Trial Court.
The Court concluded:
“The appellant herein is not liable to pay any additional duty and penalty on the said instrument and neither is the said instrument liable to be impounded for the purpose of payment of duty and penalty.”
The Trial Court was directed to mark the agreement to sell as an Exhibit and dispose of the suit preferably within six months.
Case Details:
- Case Name: Vayyaeti Srinivasarao vs. Gaineedi Jagajyothi
- Coram: Justice B.V. Nagarathna and Justice R. Mahadevan
- Appeal Nos: Civil Appeal Nos. of 2026 (Arising out of SLP (C) Nos. 21976-21977 of 2023)
