The Supreme Court on Thursday (August 13) held that a subsisting tenancy would not cease to operate upon a mere agreement to sell with a landlord-seller. According to the Court, the determination of a tenancy post-agreement to sell would be dependent upon the terms of the agreement to sell or the unequivocal conduct of the parties.

A bench of Justice Prashant Kumar Mishra and Justice NV Anjaria laid down the guiding principles which may be useful in adjudication of pleas concerning the determination of tenancy post-execution of an agreement to sell between the landlord and tenant.

"(i) 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;

(ii) it is only when the terms of the agreement or the unequivocal conduct of the parties, inconsistent with the continuance of the existing tenancy, disclose either an express or implied surrender within the meaning of Section 111(e) or (f) of the TP Act, that the lease can be said to have been determined;

(iii) the continuous possession of a tenant even after the execution of an agreement to sell does not amount to part performance under Section 53A of the TP Act unless such possession is shown to be directly relatable to and flowing from the agreement to sell; and

(iv) any agreement to sell, not being a registered deed of conveyance, does not by itself confer any title or interest in the property."

The bench was hearing an appeal filed by the tenant, who was aggrieved by the Bombay High Court's decision to uphold the First Appellate Court and trial court's decision to order the Petitioner-tenant to hand over the possession to the Respondent-landlord, upon his failure to pay the residual consideration of Rs.1,50,000/- out of a total of Rs. 1,90,000/- within a three month to complete the sale.

The Petitioner-tenant resisted the Respondent's suit on the ground that the landlord-tenant relationship ended upon the execution of the agreement to sell. Rejecting the Petitioner's contention, the judgment authored by Justice Mishra noted that no express or implied reference could be drawn either from the recitals of the agreement to sell or from the unequivocal conduct of the tenant that the tenant surrendered the tenancy.

“…the agreement to sell executed in the present case contains no stipulation indicating that the possession of the petitioner/defendant thereafter would be referable to the agreement to sell, nor does it provide for cessation of the obligation to pay rent or otherwise evince an intention to alter the subsisting landlord-tenant relationship.”, the Court said.

Interplay between Section 53A of Transfer of Property Act and continuance of tenancy subsequent to the agreement to sell

An argument was made by the Petitioner-tenant that his continuous possession over the subject property post-agreement to sell, would be qualified as a part-performance of the contract under Section 53A of the TPA, thereby protecting his possession from the landlord.

To recap, Section 53A operates “as a shield for a transferee who has taken possession pursuant to a contract of transfer, or who continues in possession in part performance thereof and has done some act in furtherance of the contract, thereby debarring the transferor from enforcing any right in respect of such property.”

Rejecting the Petitioner-tenant's argument, the Court held that “the continuous possession of a tenant in the suit property even after entering into an agreement to sell would not by itself amount to part performance so as to put the tenant in possession pursuant to the agreement to sell. It is only where the tenant is inducted into possession for the first time subsequent to the contract that it would constitute strong evidence of possession changing hands pursuant to the contract.”

“Applying the aforesaid principles to the lis at hand, neither the terms of the agreement to sell nor the conduct of the parties disclose any express or implied surrender within the meaning of Section 111(e) or (f) of the TP Act. The mere execution of the agreement to sell coupled with payment of Rs.40,000/- out of the agreed consideration of Rs.1,90,000/-, cannot be treated as determining the tenancy.”, the Court held, pointing out that the possession of the Petitioner was not shown to be directly relatable to and flowing from the agreement to sell.

Plea of prospective purchaser also rejected

Also, an argument was made by the petitioner-tenant that his possession subsequent to the agreement to sell was that of a prospective purchaser under Section 53A of the TP Act.

Before examining the Petitioner-tenant argument, the Court referring to D.S. Parvathamma v. A. Srinivasan, (2003) 4 SCC 705 explained that “when a person already in possession of the property in some other capacity enters into a contract to purchase the property, to confer the benefit of protecting possession under the plea of part performance, his act effective from that day must be consistent with the contract alleged and cannot be referred to the preceding title, and that having entered into possession as a tenant and having continued to remain in possession in that capacity, a tenant cannot be heard to say that by reason of the agreement to sell his possession was no longer that of a tenant.”

Rejecting this argument also, the Court, applying the law laid down in DS Parvathamma (supra), observed:

“…the petitioner/defendant having been in possession as a tenant prior to the execution of the agreement to sell and having neither alleged nor established that his possession as lessee ceased, and commenced as that of a transferee under the agreement to sell, his conduct throughout including continued occupation without any disavowal of his character as a tenant is wholly inconsistent with the plea of part performance.”

In terms of the aforesaid, the petition was dismissed. The impugned order upholding the order to handover the possession of the subject premise to the Respondent was upheld.

Cause Title: NAZIM SHAIKH HASAN VERSUS NASIR MUSHTAQ SHAIKH AND OTHERS

Citation : 2026 LiveLaw (SC) 803

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Appearance:

For Petitioner(s) :Mr. Abhay Anil Anturkar, Adv. (through VC) Mr. Dhruv Tank, Adv. Mr. Sarthak Mehrotra, Adv. Ms. Surbhi Kapoor, AOR Ms. Subhi Pastor, Adv. Mr. Uday Gautam, Adv. Ms. Aradhya Srivastava, Adv.

For Respondent(s) : None