Agreement to Sell Does Not End Tenancy Unless Surrender Is Established, Supreme Court Holds

A Supreme Court bench of Justices Prashant Kumar Mishra and N.V. Anjaria dismisses a tenant's plea, holding that a bare agreement to sell does not extinguish an existing tenancy absent express or implied surrender under Section 111 of the Transfer of Property Act.

A tenant who enters into an agreement to sell with his landlord cannot, by that fact alone, claim that the landlord-tenant relationship has ended. That is the central holding of the Supreme Court in Nazim Shaikh Hasan v. Nasir Mushtaq Shaikh and Others, decided on 13 August 2026. The Court, speaking through Justice Prashant Kumar Mishra, dismissed the special leave petition of a Pune shopkeeper who had resisted an eviction decree by arguing that an agreement to sell executed in 2004 transformed him from tenant to prospective purchaser. The Court held that a tenancy is determined only upon an express or implied surrender within the meaning of Section 111 of the Transfer of Property Act, 1882, and that the terms of the agreement in this case pointed in exactly the opposite direction.

How the Dispute Reached the Supreme Court

The respondents' predecessor, Jainbi Mushtaq Shaikh, owned a 200 sq.ft. ground-floor shop at House No. 3031, S.No. 51, Mitha Nagar, Kondhwa Khurd, Pune. The shop was let to the petitioner, Nazim Shaikh Hasan, at a monthly rent of Rs. 1,500.

While the tenancy subsisted, the landlord agreed to sell the premises to the petitioner. An agreement to sell dated 21 September 2004 was executed. Under its terms, the petitioner paid Rs. 40,000 upfront against a total consideration of Rs. 1,90,000, with the balance of Rs. 1,50,000 to be paid within three months. The balance was never paid. The sale did not go through.

The landlord subsequently filed Civil Suit No. 384/2010 before the Small Causes Court, Pune, alleging rent default, change of use, and bona fide personal need. The petitioner resisted, contending that the landlord-tenant relationship had ceased upon execution of the agreement to sell and that he had actually paid Rs. 90,000 and was ready to pay the remainder.

The Small Causes Court, by its judgment dated 19 September 2015, upheld the landlord's bona fide need and held that the tenancy subsisted even after the agreement to sell. It directed the petitioner to hand over possession. The First Appellate Court affirmed that finding on 24 November 2023. The High Court of Judicature at Bombay, in Civil Revision Application No. 280/2024, dismissed the revision on 1 April 2026. The petitioner then approached the Supreme Court.

The Core Question

The Court framed the question precisely: whether, on the execution of an agreement to sell by a landlord in favour of a sitting tenant — upon receiving part consideration — the landlord-tenant relationship ceases and fresh rights and obligations flow solely from the agreement to sell.

The petitioner relied principally on the Supreme Court's earlier judgment in R. Kanthimathi and Another v. Beatrice Xavier (Mrs.), reported at (2000) 9 SCC 339. In that case, the Court had held that parties to a landlord-tenant relationship could, by agreement, change their jural relationship to that of vendor and vendee, and that once a landlord accepts consideration and the agreement reflects such a change, the tenancy ceases.

Why R. Kanthimathi Did Not Apply

The Court examined R. Kanthimathi carefully and declined to apply it. The critical difference lay in the text of the respective agreements.

In R. Kanthimathi, the agreement contained an express recital that the demised property had “already been surrendered” to the tenant's possession — language the Court found was consciously incorporated to signal a change in the jural relationship. Further, in that case, Rs. 20,000 out of a total consideration of Rs. 25,000 had already been paid, leaving only Rs. 5,000 outstanding at registration. The near-complete payment, combined with the specific language of surrender, made the intent to alter the relationship clear.

The agreement in the present case contained no such recital. The Court set out Clause 4 of the agreement, which provided that if the petitioner's bank loan was not sanctioned within the stipulated period, the agreement would stand cancelled and the petitioner would be required to hand over possession “as it was in the previous condition.” Far from indicating a new relationship, this clause expressly proceeded on the assumption that the petitioner's possession remained referable to the tenancy. The Court held that R. Kanthimathi was decided entirely on its peculiar facts and turned on the specific language of that agreement and the near-complete payment of consideration.

Surrender Under Section 111 of the Transfer of Property Act

The Court then examined whether the tenancy could be treated as having been determined by express or implied surrender under Section 111 of the TP Act.

Section 111(e) governs express surrender, while Section 111(f) governs implied surrender. The Court drew on two earlier pronouncements to explain both concepts.

In Shah Mathuradas Maganlal & Co. v. Nagappa Shankarappa Malage and Others, (1976) 3 SCC 660, the Court had explained that surrender involves the lessee yielding up interest to the lessor by mutual agreement, and that implied surrender must be gathered from conduct inconsistent with the continuance of the existing tenancy.

In Vayyaeti Srinivasarao v. Gaineedi Jagajyothi, 2026 SCC OnLine SC 84, the Court had elaborated on the distinction between express and implied surrender, and had held that an agreement to sell which expressly states that the tenant would not be liable to pay rent from a specified date would imply a surrender of tenancy rights. The Court had also held, in that case, that the continuous possession of a tenant after an agreement to sell does not amount to part performance under Section 53A of the TP Act unless possession is shown to be directly referable to the agreement.

Applying these principles, the Court found that neither the terms of the present agreement nor the conduct of the parties disclosed any express or implied surrender. The payment of Rs. 40,000 out of Rs. 1,90,000 — a fraction of the total consideration — could not be treated as determining the tenancy. Clause 4 of the agreement reinforced rather than displaced the tenancy.

The Section 53A Plea Rejected on Two Independent Grounds

The petitioner separately argued that his possession after the agreement to sell was that of a prospective purchaser protected under Section 53A of the TP Act, which shields a transferee in possession against the transferor.

The Court rejected this on two independent grounds.

First, citing D.S. Parvathamma v. A. Srinivasan, (2003) 4 SCC 705, the Court held that a tenant who was already in possession before the agreement to sell cannot claim that his subsequent possession is referable to the agreement unless he specifically establishes that his possession as lessee ceased and commenced afresh as that of a transferee. The petitioner had neither alleged nor proved any such transformation. His continued occupation, without any disavowal of his character as tenant, was inconsistent with a plea of part performance.

Second, and independently, the Court held that the Section 53A plea was foreclosed by Section 17(1A) of the Registration Act, 1908. That sub-section — inserted with effect from 24 September 2001 — requires documents containing contracts to transfer immovable property for the purpose of Section 53A to be registered if executed on or after that date. The agreement to sell here was executed on 21 September 2004, well after the amendment. Being admittedly unregistered, it could have no effect for the purposes of Section 53A. The Court relied on Ameer Minhaj v. Dierdre Elizabeth (Wright) Issar and Others, (2018) 7 SCC 639, which had reaffirmed this position.

Agreement to Sell Does Not Transfer Title

The Court also reiterated, drawing on Suraj Lamp and Industries Private Limited (2) v. State of Haryana and Another, (2012) 1 SCC 656, that an agreement to sell does not by itself create any interest or charge on immovable property. Transfer of immovable property by way of sale can only be effected by a registered deed of conveyance. An unregistered agreement to sell confers no title.

The Court distilled the ratio from all the pronouncements it surveyed into four propositions: the mere execution of an agreement to sell does not ipso facto determine a subsisting tenancy; determination requires either express or implied surrender under Section 111(e) or (f) of the TP Act; continuous possession after an agreement to sell does not amount to part performance under Section 53A unless possession is shown to flow from the agreement; and an unregistered agreement to sell confers no title or interest in property.

Two Further Contentions Rejected

The petitioner raised two additional arguments before the Supreme Court. He contended, first, that once the agreement to sell was executed, the Small Causes Court lost jurisdiction because the dispute had ceased to be one between landlord and tenant. He argued, second, that the agreement to sell should have been impounded on account of insufficient stamp duty and non-registration before being taken into evidence.

The Court rejected both. The jurisdiction argument rested on the premise that the agreement to sell had determined the tenancy — a premise already negated. On the impounding argument, the Court held that even if the agreement were impounded and rendered admissible upon payment of duty and penalty, impounding would not cure the absence of registration or enable the petitioner to invoke Section 53A in view of Section 17(1A) of the Registration Act.

The Court also noted that the petitioner had chosen not to institute any suit for specific performance of the agreement to sell. That conduct, the Court held, militated against the claim that the jural relationship between the parties had transformed from landlord-tenant to vendor-vendee.

Outcome

The Supreme Court found no infirmity in the concurrent judgments of the Small Causes Court, the First Appellate Court, and the High Court. The Special Leave Petition was dismissed as being without merit.