What happens to a tenancy when the landlord agrees to sell the premises to the tenant and the sale never goes through? Does the tenant become a purchaser in possession, beyond the reach of eviction proceedings? In Nazim Shaikh Hasan v. Nasir Mushtaq Shaikh & Ors., arising from SLP (C) No. 17699/2026 and reported as 2026 INSC 853, decided on 13 August 2026, a Bench of Justices Prashant Kumar Mishra and N.V. Anjaria answered with a firm no: the tenancy continues unless the parties can be shown to have surrendered it, expressly or by conduct, within the meaning of Section 111 of the Transfer of Property Act, 1882.
A shop in Pune, a bargain of 2004
The petitioner held a 200 square-foot shop in Pune as a tenant at ₹1,500 per month. On 21 September 2004, the landlord agreed to sell him the premises for ₹1,90,000; the tenant paid ₹40,000 and was to pay the balance of ₹1,50,000 within three months. He never did. When the landlord sued for eviction in 2010 — pleading default in rent and change of user — the tenant’s defence was that the agreement to sell had transformed the relationship from landlord and tenant into vendor and vendee, taking the dispute outside the Small Causes Court altogether.
The Small Causes Court decreed eviction in 2015. The first appellate court affirmed in 2023, and the High Court dismissed the writ petition on 1 April 2026. The Supreme Court has now declined to interfere, dismissing the petition and directing restoration of possession.
The four propositions
The value of the judgment lies in paragraph 20, where the Court distilled the law into four working propositions.
1. No automatic determination
The mere execution of an agreement to sell between landlord and tenant does not ipso facto bring about a determination of the subsisting tenancy.
2. Surrender must be shown
The tenancy ends only where the terms of the agreement, or the unequivocal conduct of the parties, establish an express or implied surrender within Section 111(e) or (f) of the TP Act.
3. Possession must change character
Continuous possession after the agreement is not part performance under Section 53A unless it is directly relatable to, and flows from, the agreement to sell.
4. No title without conveyance
An agreement to sell, not being a registered deed of conveyance, confers by itself no title or interest in the property.
Why the tenant’s own document defeated him
Two features of the record proved decisive. First, clause 4 of the agreement itself contemplated that if the sale fell through, possession would stand restored “as it was in the previous condition” — the parties, in other words, had themselves envisaged the tenancy continuing beneath the agreement rather than being extinguished by it. A document pressed into service as proof of surrender in fact proved the opposite.
Second, the agreement was unregistered and executed after 24 September 2001. By Section 17(1A) of the Registration Act, 1908, an unregistered agreement to sell accompanied by delivery of possession cannot be relied upon for the purposes of Section 53A of the TP Act. The statutory door to part performance was therefore closed before the factual inquiry even began — and on the facts, the tenant’s possession had never changed character in any event. He occupied the shop after 2004 exactly as he had before it.
| Defence raised | What the Court held |
|---|---|
| The agreement to sell ended the tenancy | No determination without express or implied surrender under Section 111(e)/(f), TP Act |
| Possession was protected as part performance | Section 53A unavailable — possession not traceable to the agreement, and the document unregistered (Section 17(1A), Registration Act) |
| The Small Causes Court lacked jurisdiction | The relationship of landlord and tenant subsisted, so the eviction suit was properly laid |
The practical lessons
For landlords, the decision confirms that an aborted sale to a sitting tenant does not cost them the tenancy or the forum of the rent court. For tenants, it is a caution against treating an agreement to sell as a change of legal status. Until a registered conveyance is executed, the occupant remains a tenant, with a tenant’s obligations — including rent. A tenant who believes the landlord is wrongly resiling from the bargain has a remedy, but it is a timely suit for specific performance, not a unilateral declaration that the tenancy has ended.
Before relying on an agreement to sell in possession-related litigation, three questions decide the matter: Is the document registered? Do its terms record a surrender of the existing tenancy? Can the possession be shown to flow from the agreement rather than the pre-existing lease? If any answer is no, the part-performance defence is fragile.
The petition was dismissed with the concurrent findings of three courts undisturbed, and the tenant was directed to restore possession to the landlord.
Frequently Asked Questions
Does signing an agreement to sell end the landlord-tenant relationship?
No. The Supreme Court has held that the mere execution of an agreement to sell between a landlord and tenant does not ipso facto determine the subsisting tenancy. The relationship changes only if the terms of the agreement or the unequivocal conduct of the parties establish an express or implied surrender of the lease under Section 111(e) or (f) of the Transfer of Property Act.
Can a tenant claim protection under Section 53A of the Transfer of Property Act?
Only if the tenant proves that his possession is directly relatable to and flows from the agreement to sell — that is, that he holds the property as an intending purchaser rather than as a tenant. Continued possession on the same footing as before, with nothing marking the change of character, does not amount to part performance.
Does an unregistered agreement to sell confer any title?
No. An agreement to sell is not a conveyance. After the 2001 amendment to the Registration Act, 1908, Section 17(1A) additionally provides that an unregistered agreement accompanied by possession cannot be used for the purpose of Section 53A at all, so an unregistered document offers no part-performance shield for agreements executed after 24 September 2001.
What should a tenant who has agreed to purchase the premises do?
The safest course is to complete the transaction by a registered sale deed, or, where the vendor resiles, to sue for specific performance within limitation while continuing to comply with the obligations of the tenancy. Withholding rent on the strength of the agreement alone risks an eviction decree for default, as the concurrent findings in this case illustrate.