Agreement To Sell With Landlord Doesn't By Itself End Tenancy Or Turn Tenant's Possession Into Part Performance: Allahabad High Court

The Allahabad High Court has held that where a tenant enters into an agreement to purchase the tenanted property from his landlord, the mere execution of the agreement does not bring the tenancy to an end, nor does it make the tenant's possession one in part performance of the agreement under Section 53-A of the Transfer of Property Act, 1882.

It held that the tenant must prove that the tenancy was expressly or impliedly surrendered and that his possession thereafter flowed from the agreement to sell.

Justice Dr. Yogendra Kumar Srivastava held,

“where a person is already in possession of immovable property as a tenant and subsequently enters into an agreement to purchase the property from the landlord, the agreement to sell does not, by its mere execution, determine the existing tenancy or convert the tenant's possession into possession in part performance of the agreement.”

For such a change to be recognised, the Court said, there must be cogent material showing that the possession thereafter became referable to the agreement to sell and that the pre-existing tenancy was expressly or impliedly surrendered or otherwise determined in accordance with law.

"Payment of consideration and mere continuation of physical possession, without more, are insufficient," it added.

Plaintiff-landlord filed a suit before the Small Causes Court, Kanpur Nagar in 2019 seeking eviction of the defendants from a shop on grounds of default in payment of rent from 01.01.2003 to 31.08.2019. It was pleaded that the tenancy had been terminated by notice dated 01.09.2019 and since the monthly rent was Rs. 3,000/-, the tenancy was outside the Uttar Pradesh Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972. During the pendency of the suit, the original plaintiff was substituted by his legal heirs.

Defendants pleaded that an agreement to sell as well as a separate letter recording delivery of possession were executed on 24.12.2002 and they were put in possession of the shop in part performance of the agreement. It was pleaded that the landlord-tenant relationship had therefore come to an end and the eviction suit was not maintainable.

The Small Causes Court decreed the suit on 14.05.2026. Aggrieved, the defendants filed a revision under Section 25 of the Provincial Small Cause Courts Act, 1887.

Counsel for revisionists argued that though they were admittedly tenants before 24.12.2002, the nature of their possession changed after the agreement. It was argued that the agreement, the possession letter and the payment of the entire sale consideration of Rs. 1,10,000/- ought to have been read together, and that the trial court wrongly denied them protection under Section 53-A.

Counsel for respondents submitted that the registered agreement to sell itself recorded that possession had not been given and would be handed over at the time of execution of the sale deed. It was submitted that the possession letter was unregistered and disputed, and none of its attesting witnesses was examined.

The Court observed that since the defendants were already in possession as tenants, their physical possession by itself could not connect them to the agreement.

“Physical possession remained continuous before and after the agreement. What is required to be established is a change in the juridical basis of that possession. Unless such change is proved, the continuance of possession must ordinarily be attributed to the relationship under which possession was originally obtained.”

Relying on the decision of the Supreme Court in Nazim Shaikh Hasan vs. Nasir Mushtaq Shaikh and others, the Court observed that an agreement to sell between a landlord and his tenant does not automatically end the tenancy. It held that tenancy ends only when the terms of the agreement or the clear conduct of the parties show an express or implied surrender under Section 111(e) or Section 111(f) of the Transfer of Property Act.

Applying the same, the Court held that the recital in the registered agreement that possession would be handed over on execution of the sale deed was plainly contrary to the defendants' claim of having received possession on 24.12.2002. It held that the possession letter had not been proved since its attesting witnesses were never examined.

The Court observed that the defendants' own rent deposits from 2016 onwards did not fit with their claim that the tenancy ended in 2002, and the proceedings they had instituted for specific performance showed that they held only a contractual right to get a sale deed executed.

On payment of the full consideration, it held,

“An agreement to sell, even when supported by payment of the entire consideration, does not become a conveyance of the property.”

The Court also rejected the plea that the notice dated 01.09.2019 was invalid since part of the rent demanded in it was time-barred. It held that limitation only bars recovery and does not wipe out the debt, and the notice clearly conveyed the landlord's intention to end the tenancy.

“The objection based on limitation may, therefore, have relevance while determining the quantum of arrears legally recoverable from the revisionists, but it does not, in the facts of the present case, furnish a ground for invalidating the notice dated 01.09.2019 in its entirety.”

Holding that the tenancy had continued despite the agreement to sell and was validly terminated by the notice, the Court dismissed the revision and affirmed the judgment and decree of the Small Causes Court.

Case Title: Rajesh Kumar Chaurasia and 2 others v. Suresh Kapoor and 3 others

Counsel for Revisionists :- Atul Dayal, Senior Advocate assisted by Padmaker Pandey, Prakash Chandra Dwivedi

Counsel for Respondents :- Dipti Tiwari, Kunal Shah, Manas Bhargava, Shivansh Mishra

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