Case Note & Summary
The litigation arose from a dispute over a shop premises in Pune. The original plaintiff, predecessor of the respondents, owned a shop and let it to the petitioner/defendant at a monthly rent of Rs.1500. During the tenancy, the original plaintiff agreed to sell the shop to the tenant, leading to an agreement to sell dated 21.09.2004. The total consideration was Rs.1,90,000, of which Rs.40,000 was paid, and the balance Rs.1,50,000 was to be paid within three months. The agreement also stipulated that if the loan was not sanctioned within that period, the agreement would stand cancelled, the seller would refund Rs.40,000, and the purchaser would hand over possession back in its previous condition. The original plaintiff alleged that the tenant failed to comply with the agreement, so the sale did not fructify and the tenant continued as a tenant. Subsequently, the original plaintiff filed Civil Suit No.384/2010 seeking possession on grounds of rent default, change of use, and bona fide need. The tenant resisted, claiming that the landlord-tenant relationship ended upon execution of the agreement to sell and that he had paid Rs.90,000 out of the total consideration and was ready to pay the balance. The Small Causes Court decreed the suit on 19.09.2015, holding that the landlord-tenant relationship subsisted and bona fide need was proved. The First Appellate Court dismissed the tenant's appeal on 24.11.2023. The High Court of Judicature at Bombay dismissed Civil Revision Application No.280/2024 on 01.04.2026, affirming the lower courts. The tenant then filed the present Special Leave Petition before the Supreme Court. The core legal issue was whether the execution of an agreement to sell by a landlord in favour of a tenant, upon receiving part consideration, terminates the inter se landlord-tenant relationship. The petitioner relied on R. Kanthimathi v. Beatrice Xavier, (2000) 9 SCC 339, where the Supreme Court held that such an agreement changed the relationship from landlord-tenant to purchaser-seller because the agreement expressly stated that the property had already been surrendered and a substantial part of consideration was paid. The Supreme Court distinguished R. Kanthimathi on facts, noting that the agreement in that case contained an express stipulation regarding surrender of possession and near-complete payment of consideration. In contrast, the present agreement had no such stipulation; it merely recorded part payment of Rs.40,000 out of Rs.1,90,000, promised balance within three months, and included a clause for cancellation and refund if loan not sanctioned. The Court discussed Section 111(e) and 111(f) of the Transfer of Property Act, 1882, and the law of surrender as laid down in Shah Mathuradas Maganlal & Co. v. Nagappa Shankarappa Malage and Vayyaeti Srinivasarao v. Gaineedi Jagajyothi. The analysis indicated that the present agreement did not evidence an intention to alter the landlord-tenant relationship. However, the provided excerpt does not include the final operative order, so the exact decision of the Supreme Court is not available. The Court's reasoning suggests the Special Leave Petition would be dismissed, but this cannot be confirmed from the extract.
Headnote
A) Transfer of Property - Lease Determination - Express/Implied Surrender - Transfer of Property Act, 1882, Section 111(e) and 111(f) - The question was whether an agreement to sell between landlord and tenant terminated the tenancy upon part payment - Surrender involves yielding up of the lessee's interest by mutual agreement, and implied surrender can be inferred from creation of a new relationship or relinquishment of possession - The Court examined the recitals of the agreement and found no stipulation indicating that possession was transferred pursuant to the sale or that rent obligation ceased; the agreement only recorded part payment of Rs.40,000 out of Rs.1,90,000, with balance payable in three months and a clause for cancellation and refund if loan not sanctioned - Held that the present agreement did not evince an intention to alter the landlord-tenant relationship (Paras 10-17). B) Precedent - Distinguishing Cases - R. Kanthimathi v. Beatrice Xavier, (2000) 9 SCC 339 - In that case, the agreement expressly stated that the property had already been surrendered and nearly full consideration (Rs.20,000 out of Rs.25,000) was paid, which indicated a clear change in jural relationship - The present agreement lacked such express language and only a small part of consideration was paid with a conditional refund clause - Held that R. Kanthimathi was decided on its own peculiar facts and did not apply (Paras 11-12).
Issue of Consideration
Whether the execution of an agreement to sell by a landlord in favour of a tenant, upon receiving part consideration, terminates the inter se landlord-tenant relationship, and whether the agreement in the present case operated as an express or implied surrender under Section 111 of the Transfer of Property Act, 1882.
Law Points
- Execution of an agreement to sell by a landlord in favour of a tenant does not automatically terminate the landlord-tenant relationship
- whether tenancy ceases depends on express or implied surrender under Section 111 of the Transfer of Property Act
- 1882
- surrender requires yielding up of the lessee's interest by mutual agreement or creation of a new relationship
- implied surrender may be inferred from relinquishment of possession or conduct showing earlier relationship cannot subsist
- mere part payment of consideration with a clause for refund and restoration of possession does not evince an intention to alter the subsisting jural relationship.
