On January 15, 2026, the Supreme Court clarified that just because a tenant has been living on a landlady’s property for a long time, it does not automatically mean that the sale agreement signed by the landlady is final or that the ownership of the property has transferred from her to the tenant. The Supreme Court held that long possession of a property is legally relevant only when it flows directly from the sale agreement itself, and not when it exists independently, such as through a tenancy.
Income Tax Guide
Income Tax Union Budget FY 2026-27 LiveIncome Tax Slabs FY 2025-26Income Tax Calculator 2025
In this case, the tenant had been living on the property for almost 50 years, strictly as a tenant, and not due to any sale agreement. Therefore, the tenant’s possession was not legally tied to the sale agreement which was signed much later.
This means that the sale agreement which the tenant claims to have signed and denied by the landlady, couldn’t be treated as a completed sale or “deemed conveyance,” even though money had allegedly changed hands between the landlady and the tenant.
Brief overview on this property and tenant’s subsequent purchase of it
Smt Jagajyothi is the sole owner of this property measuring 955.11 square yards, and is located at Rajahmundry Rural, Andhra Pradesh. Mr Srinivasarao is her tenant and has been so for the past 50 years.
On October 14, 2009, Mr Srinivasarao (the tenant) and landlady (Smt Jagajyothi) entered into an agreement to sell the property, with the tenant agreeing to purchase the property for Rs 9 lakh.
Mr Srinivasarao paid an advance of Rs 6.5 lakh on the date of the agreement to sell the pro[erty and promised to pay the balance of Rs 2.5 lakh when Smt Jagajyothi (the landlady) completed the sale deed for the property.
However, in 2013, the tenant (Mr Srinivasarao) received a court summon related to a tenant eviction case (R.C.C No.4/2013) filed by Smt Jagajyothi (landlady).
(In 2017 the landlady had won this tenant eviction case and the court had ordered Srinivasarao to vacate the property).
Meanwhile, on April 8, 2013, a legal notice was sent by Mr Srinivasarao to Smt Jagajyothi (landlady) offering to pay the remaining Rs 2.5 lakh of the total sale price of Rs 9 lakh and to have the sale deed executed in his favour. Replying to this notice sent by Mr Srinivasarao, Smt Jagajyothi denied the existence of the sale agreement and refused to execute the sale deed.
Feeling aggrieved by the response to his notice, Mr Srinivasarao filed a case (O.S. No.188/2013) before the Court of the V Addl. District Judge. He sought specific performance relief, namely execution of a sale deed or his Rs 6.5 lakh money back with interest from Smt Jagajyothi (tha landlady). He also asked the court to issue a permanent injunction restraining Smt Jagajyothi from alienating (selling) the property until the case was disposed of.
Also read: Tenant staying after lease expiry? When landlords can evict with just 15 days’ notice
Srinivasarao argued that he had made several requests to Smt Jagajyothi and her husband, informing them of his willingness to pay the balance sale price but they didn’t do anything. Thus when the case went on trial, Srinivasarao wanted to present the sale agreement they signed on October 14, 2009 as evidence. However, Smt Jagajyothi objected to the sale agreement being admitted as evidence, arguing that it amounted to a “deemed conveyance” and therefore required full payment of stamp duty along with penalties.
Both the trial court and Andhra Pradesh High Court accepted the landlady’s (Smt Jagajyothi) argument and thus Mr Srinivasarao was prevented from presenting the sale agreement as evidence on the basis of which he allegedly paid Rs 6.5 lakh to her. He appealed to Supreme Court and on January 15, 2026, he won the case for submitting the sale agreement as evidence.
The Supreme Court accepted the sale agreement as evidence but said that possession doesn’t finalise sale without a sale deed, thus the case now goes back to the trial court. The trial court (O.S. No.188/2013) may now consider this additional evidence, namely the sale agreement executed on October 14, 2009 to decide whether this agreement was genuine and what relief, if any , Mr Srinivasarao (tenant) should get.
The tenant was represented by Advocate M Srinivas R Rao,Advocate Abid Ali Beeran P, Advocate on Record Saswat Adhyapak and Advocate Ms. Namita Kumari in Supreme Court.
Also read: Tenants sold property bought from landlord’s wife on the basis of a Will, son raised disputes against Will; Delhi HC stays property sale till final trial
Summary of the judgement
The Supreme Court said that agreement to sell won’t be deemed as sale as the buyer was occupying the property not as a buyer but as a tenant. The court held that possession is legally relevant only when it flows directly from the sale agreement itself, and not when it exists independently, such as through a tenancy.
The Supreme Court emphasised that an agreement to sell, by its very nature, does not create any right, title, or interest in immovable property. Ownership can pass only through a duly stamped and registered sale deed.
The Supreme Court also acknowledged that stamp duty laws in some cases have been amended to treat sale agreements as “deemed conveyances,” but this applies only where possession is delivered pursuant to the sale agreement or where the sale agreement itself evidences such delivery.
However in this case, the tenant was already in possession of the property as a tenant and thus the possession predated the sale agreement and arose from an unrelated legal relationship that cannot be used to infer a completed sale.
Applying these principles, the Supreme Court noted that the Mr Srinivasarao’S (tenant) possession in the present case was clearly referable to his status as a tenant for nearly five decades. The agreement to sell itself acknowledged this fact.
Moreover, there was no express or implied surrender of tenancy after the agreement, nor any conduct suggesting that the legal relationship between the parties had shifted from landlord–tenant to vendor–vendee.
Significantly, the Supreme Court also pointed out that the landlady (Smt Jagajyothi) had continued to treat Mr Srinivasarao as a tenant and had even obtained an eviction order against him (2017), reinforcing the conclusion that the tenancy had never ended.
The Supreme Court rejected the view that mere continuity of possession could convert an agreement to sell into a sale or deemed conveyance. It held that such an interpretation would blur the clear legal distinction between tenancy and ownership.
Also read: Tenant can’t tell landlord which property to use: Supreme Court restores eviction order
Thus the Supreme Court ruled that since the possession had no nexus with the sale agreement, the sale agreement document could not be subjected to stamp duty applicable to a conveyance deed.
Accordingly, the Supreme court allowed the agreement to sell document to be admitted as evidence without additional stamp duty and directed the trial court to decide the suit for specific performance on its merits. The judgment, however, makes clear that ownership of the property remains undecided and will depend on the final outcome of the trial.
The Supreme Court also said that the existing tenant when it sought to purchase the property there was no express or implied surrender of tenancy so as to bring about determination of the tenancy or lease by the tenant herein.
Sudheer Madamaiah, Partner at Khaitan & Co, says that this judgment from Supreme Court offers a reaffirmation of the distinction between possession as a tenant and possession as a prospective purchaser.
Madamaiah says: “The Court’s reasoning is significant because it prevents application of stamp duty provisions that could otherwise penalize long standing tenants who enter into genuine sale agreements. By holding that possession must be in relation to an agreement to sell for the “deemed conveyance” clause to apply, the Court safeguards both legal clarity and transactional fairness.”
According to Madamaiah, equally important is the Court’s emphasis on jural continuity, a tenant remains a tenant unless there is explicit or implied surrender of that status. The eviction order obtained by the landlady in the present case after the agreement played a decisive role, proving that the relationship of landlord and tenant never transformed into one of vendor and purchaser.
Madamaiah says: “This judgment will likely influence similar disputes across the country, preventing overreach by lower courts and revenue authorities and ensuring that stamp duty laws are applied in a manner consistent with commercial reality.”
Also read: Tenants constructed two extra floors in rented property without consent; landlord wins eviction case in high court due to this reason
Supreme Court observations:
Possession had no nexus to the sale agreement
The buyer (tenant) was already in possession for nearly 50 years as a tenant, long before the agreement to sell was executed. His possession did not arise because of the sale agreement, nor was it given pursuant to it. He was in possession of the property because of his status as a tenant.
The sale agreement itself acknowledged old tenancy
The agreement recorded that the tenant was already enjoying the property for decades. This showed that possession was independent of the sale deal, not evidence of delivery under it.
No surrender of tenancy (express or implied)
For Explanation I to apply, there must be a shift from tenant to buyer, typically shown by surrender of tenancy. The Supreme Court observed that no such surrender. The legal relationship never changed from landlord–tenant to vendor–vendee.
2017 Eviction order confirmed tenancy continued
After the sale agreement was executed, the landlady successfully obtained an eviction order in 2017, which conclusively proved that the tenant was still treated as tenant and also held as a tenant, not a buyer in possession of the property.
Supreme Court full analysis and discussion
The Supreme Court decided this judgement on January 15, 2026.
Possession was derived from tenancy
The Supreme Court analysed the agreement to sale and observed that it is evident that – (i) the tenant has been in possession of the suit schedule property as a tenant for around fifty years, and
(ii) the landlord herein has agreed to sell the suit schedule property to the appellant-tenant.
The Supreme Court said: “The fact that the appellant (tenant) has been in possession of the property for the last fifty years as noted in the said agreement to sell dated 14.10.2009 is significant and a critical fact in the instant case. It means that the appellant/tenant was not given possession of the suit property in the backdrop of the agreement to sell, either prior thereto or subsequently.”
Moreover, an eviction order was passed on January 3, 2017 subsequent to the agreement to sell which is dated October 14, 2009.
Jural Relationship (legal connection) between the tenant and landlady
The Supreme Court said that in this case, Mr Srinivasarao was a tenant of Smt Jagajyothi as on the date of execution of the agreement to sell on October 14, 2009, and the jural relationship between the parties was that of lessor and lessee/landlady and tenant and the tenancy was within the scope and ambit of the A.P. Rent Act, 1960 for about fifty years.
The Supreme Court said the question is whether the jural relationship converted to one of vendor and vendee upon the execution of the agreement to sell.
The Supreme Court said: “In other words, whether the possession of the schedule property by the appellant herein continued in the capacity of a tenant or as a vendee on the execution of the agreement to sell.”
The Supreme Court said that if the possession of the suit schedule property continued to be held by the 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 Supreme Court said that on the other hand, if the relationship in relation to the agreement to sell became that of a vendor and vendee, then the aforesaid Explanation I would apply and it would be in the nature of a deemed conveyance.
In order to ascertain this aspect of the matter, it is necessary to discuss the relevant provisions of the Transfer of Property Act, 1882.
Section 105 of the Transfer of Property Act, 1882 defines a lease and the relationship of a lessor and lessee is the relationship which exists between the parties to a lease. The rate of rent, duration of lease, purpose of lease, etc. are all governed by the terms of the contract entered into between the parties.
The Supreme Court said: “Thus, a lease is the transfer of a right to enjoy immovable property for a certain period of time. The said relationship is also of a landlord and a tenant i.e., a tenancy where lease of a premises is recognised under a statute. “
The Supreme Court said that if a tenancy is covered under a statute, the eviction of a tenant is under the particular statute.
Irrespective of the same, Section 111 of the Act speaks of determination of lease. There are eight ways in which a lease can be determined i.e. when it comes to an end and there is no order of eviction of a tenant under a statute. Clauses (e) and (f) deal with express surrender and implied surrender.
The expression “express surrender” means the lessee yields his interest under the lease to the lessor by mutual agreement between them.
The Supreme Court said: “In other words, express surrender means giving up of the interest in the premises under the lease to the lessor by mutual agreement between the lessor and the lessee.”
The Supreme Court said that express surrender necessitates that the lessee has given up possession of the holding. Surrender need not be in writing nor by a registered deed.
The Supreme Court said: “However, if there is an abatement of rent, it should be only by a registered instrument for it effects a variation in the contract of tenancy. The effect of surrender under clause (e) of Section 111 of the Act is the determination of the lease.”
Clause (f) of Section 111 deals with the rule of implied surrender. Implied surrender is by operation of law and it can occur by –
- i) the creation of a new relationship of lease, or
- ii) relinquishment of possession i.e., there is yielding of possession by the lessee and taking over of possession by the lessor.
The Supreme Court said: “It is created by the acceptance of, and not by the mere agreement for a new relation which, in effect, estops the lessee from setting up the old one.”
The Supreme Court said that implied surrender of tenancy can be established by the conduct of the parties and from attending circumstances. Implied surrender is by the operation of law and takes place in spite of the intention of the parties.
The Supreme Court said: “It may come into being in a number of ways, e.g., by acceptance of a new lease, or by unequivocal giving up of possession by the lessee as a lessee, or by re-letting to another person by the landlord, or by accepting of a sub-tenant as his tenant by the landlord.”
Tenant does not need to pay rent if the agreement to sale mentions as such
The Supreme Court said that where the agreement to sell entered into by the parties clearly states that from the date mentioned in the agreement, the tenant in possession of the property intended to be sold under the agreement shall not be liable to pay any rent and shall alone be in charge of any damage caused to the property in question, it would imply a surrender of rights as a tenant vide B. Paramashivaiah vs. M.K. Shankar Prasad, AIR 2009 Kar 88.
The Supreme Court said: “A surrender by operation of law determines the lease and extinguishes the rights of the lessee in respect of the property surrendered, from the date of the surrender and the estate vests immediately in the lessor.”
The Supreme Court also said that the term “surrender by operation of law” is used to describe all those cases where the law implies a surrender from unequivocal conduct of both the parties which is inconsistent with the continuance of the existing tenancy.
The Supreme Court said there is a distinction between an express and implied surrender inasmuch as while express surrender is a matter of intention of the parties, implied surrender is by implication of the law.
The Supreme Court said: “An implied surrender is the act of the law and takes place independent of and in some cases even in spite of the intention of the parties.”
Agreement to sell confers no title and is not a transfer of any rights in an property
The Supreme Court said that Section 54 of the Transfer of Property Act, 1882 defines sale of immovable property as a transfer of ownership in exchange for a price paid or promised or part paid or part promised.
The Supreme Court said: “A contract for sale or an agreement to sell of immovable property is a contract that sale of such property shall take place on terms settled between the parties. It does not, of itself, create any interest in or charge on such property.”
The Supreme Court said that by virtue of Section 47 of the Registration Act, 1908, the mere agreement to sell immovable property, which creates only a right to obtain another document conveying property, is not compulsorily registrable under Section 17 of the Registration Act, 1908.
Agreement to sell per se cannot be construed as a “conveyance”
The Supreme Court said that an averment of the existence of a contract for sale, whether with or without an averment of possession following upon the contract by itself, is not a relevant defence to an action for ejectment.
The Supreme Court said: “The reason is that a mere agreement for sale does not create any interest in immovable property. If an agreement to sell or an agreement for sale does not create any interest in it, there can be no transfer of interest in the property by such a mere contract for sale.”
A contract for sale gives only a right to compel the other party to execute a sale deed in respect of the property.
The Supreme Court said: “An agreement to sell confers no title and is not a transfer of any rights in an immovable property. Therefore, an agreement to sell per se cannot be construed as a “conveyance”, which is restricted to delivery of possession or execution of a sale deed.”
Case law cited: Suraj Lamp and Industries Private Limited (2) vs. State of Haryana, (2012) 1 SCC 656
Therefore, the Supreme Court held that a contract for sale (agreement to sell) would not confer any title nor transfer any interest in an immovable property (except to the limited right granted under Section 53A).
The Supreme Court said: “Thus, an agreement to sell or a contract for sale with or without possession is not a conveyance deed. Therefore, a sale of immovable property can only be made by a registered instrument and that an agreement of sale does not create any interest or charge on its subject matter.”
Section 53A applies to a person who contracts to transfer immovable property in writing
The Supreme Court said that if the proposed transferee in the agreement has taken possession of the property or he continues in possession thereof being already in possession in part performance of the contract and has done some act in furtherance of the contract and transferee has performed or is willing to perform his part of the contract, the transferor shall be debarred from enforcing any right in respect of the property.
Case law cited: Shashi Kapila vs. RP Ashwin, (2002) 1 SCC 583
Tenancy period possession cannot be counted
The Supreme Court said that in a case where a person claims benefit of part performance, evidence that he was inducted into possession for the first time subsequent to the contract, would be a strong piece of evidence regarding the contract and of possession changing hands pursuant to the contract.
The Supreme Court said: “Continuous possession of a tenant in the suit property even after entering into the sale agreements would not by itself amount to a part-performance, putting the tenant in possession of the suit properties pursuant to the sale agreements.
Case law cited: Chinnaraj vs. Sheik Davood Nachair, AIR 2003 Mad 89
However in this case, Section 53A is not applicable.
Where pursuant to an agreement to sell, possession is handed over to the vendee, then the protection under Section 53A of the Transfer of Property Act would apply and the possession of the vendee would be protected subject to the conditions mentioned in the said provision including registration of the instrument and therefore, the necessity to pay the requisite stamp duty.
The Supreme Court said: “However, in the present case, Section 53A of the Act does not apply as the possession was not handed over to the appellant (tenant) herein in relation to the agreement to sell dated 14.10.2009. In fact, the appellant was in possession of the subject property for almost fifty years prior to the said agreement to sell. This is in fact recorded in the agreement to sell.”
Many states have amended their stamp duty act
The Supreme Court said that in many states, amendments were made to the A.P. Stamp Act whereby agreements to sell acknowledging delivery of possession or power of attorneys authorising the attorney “to sell any immovable property” along with delivery of possession were charged with the same duty as leviable on a conveyance deed.
Explanation I to Article 47A of Schedule I-A of the A.P. Stamp Act is not applicable to this case
Explanation I to Article 47A (of Andhra Pradesh Stamp Duty Act) is relevant to the instant case.
The Supreme Court said that the said explanation states that if an agreement to sell is followed by or evidences delivery of possession of the property agreed to be sold, then the same shall be chargeable as “sale” under the said Article.
The Supreme Court said: “The proviso states that where, subsequently a sale deed is executed in pursuance of an agreement of sale, the stamp duty if any already paid or recovered on the agreement of sale shall be adjusted towards the total duty leviable on the sale deed.”
Therefore, it is necessary to interpret the agreement to sell in the instant case in light of the aforesaid Explanation I to Article 47A of Schedule I-A of the A.P. Stamp Act.
The Supreme Court of India examined whether this condition was satisfied here and held that it was not.
The Supreme Court said that under the A.P. Stamp Act, the delivery of possession of the property must follow the execution of the agreement to sell or if delivery of property has been made prior to the agreement to sell then it should be evidenced in the agreement to sell by a recital to that effect.
However, if the possession of the property by the vendee does not have any nexus to the agreement to sell, as in the present case where the possession of the property was with Mr Srinivasarao as a tenant for nearly five decades and the landlady has decided to sell the same to the tenant then, the said possession is not relatable to the agreement to sell.
The Supreme Court said: “In such a case, neither is the sale within the meaning of Explanation I to Article 47A of Schedule I-A to the A.P. Stamp Act nor is it a case of deemed conveyance.”
No surrender of tenancy (express or implied)
The Supreme Court said that on a conspectus reading of the recital in the agreement to sell dated October 14, 2009 with the tenant eviction order dated January 3, 2017 passed in RCC No.4 of 2013, it becomes clear that the appellant (tenant) herein was a tenant and as a tenant, he entered into an agreement to buy the schedule property from the landlord.
The Supreme Court said that 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.
In fact, long prior to that agreement to sell (around fifty years), the appellant came into possession of the suit schedule property as a tenant.
The Supreme Court said: “Therefore, this is not a case where pursuant to the agreement to sell dated October 14, 2009 or in relation to it, or prior to the agreement to sell possession of the suit schedule property has been handed over to the appellant herein as a vendee. Thus, there is no express or implied surrender of the tenancy by the appellant in favour of the landlord vendor.
The Supreme Court said that the tenancy in fact continued and the appellant (tenant) has also suffered an order of eviction as a tenant vide order dated January 3, 2017.
Consequently, the Supreme Court held that there is no “deemed conveyance” within the meaning of Explanation I to Article 47A of the A.P. Stamp Act, as the agreement to sell in the instant case does not come within the scope and ambit of the Explanation thereto.
The Supreme Court said: “Therefore, neither there being transfer of title in the suit schedule property nor there being any deemed conveyance from the respondent to the appellant herein, the stamp duty payable on the nature of the transaction being an agreement to sell simplicitor is just and proper”
Supreme Court judgement
The Supreme Court said that in the judgement (Gafoor) can be compared to the present case, as it was rightly overruled by the Division Bench of the Andhra Pradesh High Court in Ratnamala judgement, as the findings in the said case were incorrect wherein, it had been expressly mentioned in the agreement to sell that the possession of the schedule property was with the appellant therein as a tenant.
Therefore, the appellant (tenant) therein also did not come into possession of the property in relation to the agreement to sell but was already in possession of the property as a tenant. But, there was surrender within the meaning of Section 111 so as to determine the lease or tenancy.
The Supreme Court said that on the other hand, pursuant to the agreement to sell in the present case, there was no change in the status of the appellant (tenant) herein inasmuch as he continued to be a tenant and did not acquire possession under the agreement to sell.
The appellant (tenant) herein also suffered an eviction order as a tenant of the property.
The Supreme Court said: “Therefore, the appellant did not acquire possession of the property prior to the agreement to sell dated 14.10.2009 in relation thereto or at the time of its execution or subsequent thereto.”
The Supreme Court explained that in other words, the possession of the property by the appellant (tenant) 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.
The Supreme Court said: “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.”
However, in the instant case, the agreement to sell dated 14.10.2009 expressly states that the appellant was in possession of the property as a tenant for fifty years and in fact an order of eviction was also passed against the appellant.
The Supreme Court said: “Therefore, the appellant did not come into possession of the property in relation to the execution of the agreement to sell dated 14.10.2009 but almost fifty years prior thereto as a tenant and not as a vendee.”
In fact, the existing tenant sought to purchase the property but there was no express or implied surrender of tenancy so as to bring about determination of the tenancy or lease by the appellant herein.
The Supreme Court said: “Hence, the judgment of this Court in Ramesh Mishrimal is not applicable to the facts of the present case.”
The Supreme Court said that the Trial Court failed to notice this aspect of the matter and simply directed the appellant (tenant) herein to pay the stamp duty as if it were a conveyance or sale and there was a transfer of title from the respondent (landlady) to the appellant (tenant) herein.
The Supreme Court said that the High Court in fact misdirected itself in assuming that there was in fact a deemed conveyance between the respondent and the appellant herein.
The Supreme Court said: The appellant (tenant) 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.
Judgement:
- Hence, we (Supreme Court) find that the High Court was not right in sustaining the order of the Trial Court. Consequently, both the impugned orders of the High Court as well as the order of the Trial Court are set aside. The appeals are allowed in the aforesaid terms.
- The Trial Court shall mark the agreement to sell dated 14.10.2009 as an Exhibit and proceed to dispose the suit as expeditiously as possible and preferably within a period of six months from the date of the next hearing before the Trial Court.
- No costs.
aniltikotekar4sme.com 