Supreme Court Upholds Tenant’s Eviction; Holds Agreement to Sell Does Not End Tenancy Without Express or Implied Surrender and Rejects Section 53A Protection
Tenant Remains Tenant Despite Agreement to Buy Premises Unless Tenancy Is Surrendered: Supreme Court Dismisses Challenge to Pune Shop Eviction
Facts
The dispute concerned a 200 sq. ft. shop at Kondhwa Khurd, Pune, owned by Jainbi Mushtaq Shaikh, predecessor of the respondents. The shop had admittedly been let to the petitioner, Nazim Shaikh Hasan, at a monthly rent of ₹1,500. During the subsistence of the tenancy, the landlord agreed to sell the shop to the tenant through an agreement to sell dated 21 September 2004.
The total sale consideration was ₹1,90,000. The tenant paid ₹40,000, while the remaining ₹1,50,000 was required to be paid within three months. According to the landlord, the tenant failed to fulfil the agreement and consequently continued occupying the premises as a tenant.
The landlord subsequently instituted Civil Suit No. 384/2010 seeking possession on grounds including rent default, change of user and bona fide requirement. The tenant defended the proceedings by asserting that the landlord-tenant relationship had ceased upon execution of the agreement to sell. He claimed to have paid ₹90,000 and expressed willingness to pay the remaining consideration.
The Small Causes Court rejected this defence, held that the tenancy continued notwithstanding the agreement to sell, accepted the landlord’s bona fide requirement and decreed possession on 19 September 2015. The First Appellate Court dismissed the tenant’s appeal on 24 November 2023, and the Bombay High Court dismissed his Civil Revision Application on 1 April 2026.
The tenant thereafter approached the Supreme Court.
Issues
The principal question was whether execution of an agreement to sell by a landlord in favour of an existing tenant, coupled with receipt of part consideration, automatically terminates the landlord-tenant relationship and substitutes a vendor-vendee relationship.
The Court also considered:
- Whether there had been an express or implied surrender of tenancy under Sections 111(e) and 111(f) of the Transfer of Property Act, 1882.
- Whether the tenant’s continued possession after execution of the agreement to sell amounted to part performance under Section 53A of the TP Act.
- Whether an unregistered agreement to sell executed after the 2001 amendment could provide Section 53A protection.
- Whether an agreement to sell itself creates any right, title or interest in immovable property.
- Whether the alleged change from landlord-tenant to vendor-vendee deprived the Small Causes Court of jurisdiction.
Petitioner’s Arguments
The petitioner/tenant argued that once the landlord executed the agreement to sell and accepted consideration, the parties’ original jural relationship changed from landlord-tenant to vendor-vendee.
For this proposition, he principally relied upon R. Kanthimathi v. Beatrice Xavier, where the Supreme Court had recognised that parties could, by agreement and their subsequent conduct, transform their relationship from landlord-tenant to seller-purchaser.
The tenant further contended that his possession after execution of the agreement was that of a prospective purchaser and was protected under Section 53A of the Transfer of Property Act.
He also argued that if the landlord-tenant relationship had ceased, the Small Causes Court lacked jurisdiction to entertain the eviction proceeding.
Lastly, it was submitted that the agreement to sell was insufficiently stamped and unregistered and therefore ought to have been impounded before being considered by the Court. The Supreme Court ultimately rejected both of these latter submissions.
Respondent’s Arguments
The respondents’ case, as accepted by the courts below, was that the agreement to sell never altered the petitioner’s existing status as tenant.
Only ₹40,000 out of ₹1,90,000 had initially been paid. More importantly, nothing in the agreement provided that:
- the tenancy stood surrendered;
- rent would cease to be payable;
- possession thereafter would be held under the agreement to sell rather than the tenancy; or
- the parties had substituted their existing legal relationship with a new one.
The agreement itself contemplated cancellation if the tenant failed to obtain financing and required restoration of possession to its previous condition. The Supreme Court regarded this provision as strongly indicating that the existing tenancy had never been extinguished.
Analysis of the Law
1. Agreement to Sell Does Not Automatically Terminate Tenancy
The Supreme Court crystallised the governing principle: mere execution of an agreement to sell between a landlord and an existing tenant does not ipso facto determine the tenancy.
The tenancy ends only where the agreement’s terms or the parties’ unequivocal conduct demonstrate an express or implied surrender within Section 111(e) or Section 111(f) of the Transfer of Property Act.
This makes the intention manifested through the agreement and conduct of the parties decisive.
2. Express and Implied Surrender
Under Section 111(e), a tenancy may terminate by express surrender; under Section 111(f), it may terminate through implied surrender.
Relying upon Shah Mathuradas Maganlal & Co. v. Nagappa Shankarappa Malage, the Court explained that surrender involves yielding up the lessee’s interest to the lessor. Implied surrender requires circumstances or conduct demonstrating the creation of a new relationship inconsistent with continuation of the earlier tenancy.
In the present case, neither the agreement nor subsequent conduct established such surrender.
The payment of merely ₹40,000 out of ₹1,90,000, coupled with execution of the agreement, was insufficient to determine the tenancy.
3. Continued Possession Is Not Automatically Part Performance
The Court drew an important distinction concerning tenants already occupying property.
Where a person was already in possession as a tenant, his mere continuation in possession after entering into an agreement to purchase the property does not establish that his possession thereafter flows from the sale agreement.
There must be something demonstrating that the character of possession itself changed from that of tenant to that of transferee under the agreement.
The Supreme Court held that continued possession after execution of an agreement to sell does not constitute part performance under Section 53A unless the possession is directly relatable to and flows from the agreement to sell.
4. Agreement to Sell Does Not Transfer Ownership
Relying upon Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana, the Court reiterated that an agreement to sell does not by itself create any right, title or interest in immovable property.
Ownership passes through a legally valid conveyance. An agreement to sell, whether accompanied by possession or otherwise, is not itself a conveyance.
The Court ultimately distilled the governing principles into four propositions:
- An agreement to sell between landlord and tenant does not automatically terminate the tenancy.
- Tenancy ends only upon express or implied surrender established from the agreement or unequivocal conduct.
- Continued possession after an agreement to sell does not itself constitute Section 53A part performance.
- An agreement to sell that is not a registered conveyance does not itself confer title or interest in the property.
Precedent Analysis
R. Kanthimathi v. Beatrice Xavier
This was the petitioner’s principal authority, but the Supreme Court distinguished it on facts.
In R. Kanthimathi, the agreement expressly indicated that possession had been surrendered/referable to the sale transaction, and ₹20,000 out of ₹25,000 — a substantial majority of the consideration — had already been paid. Those facts demonstrated an intention to change the parties’ jural relationship.
Here, by contrast, only ₹40,000 out of ₹1,90,000 had initially been paid, and the agreement contained no provision terminating rent, changing the character of possession or ending the tenancy.
Shah Mathuradas Maganlal & Co. v. Nagappa Shankarappa Malage
This authority was relied upon to explain express and implied surrender under Section 111. Implied surrender requires the creation of a new relationship or conduct inconsistent with continuation of the existing tenancy.
Vayyaeti Srinivasarao v. Gaineedi Jagajyothi
The Supreme Court relied significantly upon this recent authority to explain that implied surrender may be established through unequivocal conduct but does not arise merely because parties execute an agreement contemplating a new relationship.
It also supported the proposition that a tenant’s continued possession after an agreement to sell does not by itself become possession in part performance under Section 53A.
Suraj Lamp & Industries Pvt. Ltd. v. State of Haryana
The Court reiterated the settled rule under Section 54 of the TP Act that an agreement to sell does not itself create any interest or charge in the property and ownership is transferred only through a valid conveyance.
D.S. Parvathamma v. A. Srinivasan
The Court applied this decision to reject the Section 53A defence. Where possession originated under a tenancy, the person claiming part performance must demonstrate acts showing that possession thereafter became referable to the sale contract rather than the preceding tenancy.
Ameer Minhaj v. Dierdre Elizabeth (Wright) Issar
This authority reinforced the effect of Section 17(1A) of the Registration Act: an agreement executed after the 2001 amendment must be registered if it is to be relied upon for Section 53A protection. The petitioner’s 2004 agreement was admittedly unregistered and therefore incapable of supporting his Section 53A defence.
Court’s Reasoning
The Supreme Court found no evidence that the parties intended to extinguish their existing landlord-tenant relationship.
The agreement did not state that rent would cease. It did not provide that the tenant’s existing possession would thereafter be treated as possession of a purchaser. It contained no express surrender of tenancy.
More significantly, Clause 4 contemplated cancellation of the agreement if the tenant’s loan was not sanctioned and restoration of possession to its previous condition. The Court considered this inconsistent with the contention that the tenancy had already permanently ceased.
The Court also rejected the tenant’s Section 53A defence on two independent grounds.
First, he had entered possession as a tenant and never established that his possession subsequently changed character and became possession under the agreement to sell.
Second, the agreement dated 21 September 2004 was admittedly unregistered. Section 17(1A) of the Registration Act, applicable after 24 September 2001, expressly prevents such an unregistered agreement from having effect for purposes of Section 53A.
The Court additionally considered significant the tenant’s failure to institute a suit for specific performance, observing that this conduct further undermined his assertion that the relationship had genuinely transformed into one of vendor and vendee.
Finally, even impounding the agreement and paying deficient stamp duty and penalty would not cure the absence of registration or permit invocation of Section 53A.
Conclusion
The Supreme Court held that an agreement to sell between a landlord and an existing tenant does not, merely by its execution or payment of part consideration, terminate the tenancy.
Termination requires an express or implied surrender under Section 111(e) or (f) of the Transfer of Property Act, demonstrated through the agreement’s terms or unequivocal conduct inconsistent with continuation of the tenancy.
The petitioner remained a tenant because no such surrender was established. His continued possession could not automatically become possession in part performance, and his unregistered 2004 agreement was independently incapable of attracting Section 53A protection because of Section 17(1A) of the Registration Act.
Finding no infirmity in the concurrent judgments of the Small Causes Court, First Appellate Court and Bombay High Court, the Supreme Court dismissed the Special Leave Petition.
Case Details
Case: Nazim Shaikh Hasan v. Nasir Mushtaq Shaikh & Ors.
Court: Supreme Court of India
Case Number: Special Leave Petition (Civil) No. 17699 of 2026; 2026 INSC 853
Judge: Justice Prashant Kumar Mishra and Justice N.V. Anjaria
Date: 13 August 2026
Result: SLP dismissed; eviction decree upheld. Agreement to sell did not terminate the tenancy, and the tenant was not entitled to protection under Section 53A of the Transfer of Property Act.
