Mere agreement to sell the leased property to tenant would not terminate landlord-tenant relationship.

Mere execution of agreement to sell of the leased property with a tenant would not terminate the landlord-tenant relationship. The Supreme Court observed, If the parties really intended to surrender their tenancy rights as contemplated in clauses (e) or (f) of Section 111 of the TP Act while entering into an agreement to sell the suit property, it would have made necessary provision to that effect by providing a specific clause in the agreement.

The above observation was laid down by the Supreme Court in the matter of Dr. H.K Sharma v. Sh. Ram Lal (Civil Appeal 1237-1238 of 2019) decided on 28.01.2019.

Challenges

The respondent (applicant) is the owner of the house and has let out a portion of his house to the appellant in 1985. In 2008, the respondent filed an application under Section 21(1) (a) of the U.P. Urban Buildings (Regulation of Letting Rent and Eviction) Act, 1972 against the appellant (opposite party) before the Prescribed Authority, seeking his eviction from the suit house. The eviction was sought on the ground of respondent’s bona fide need for his residence and also the members of his family.

The appellant (opposite party) contested the application by denying the ground of bona fide need. It was contended that the appellant has entered into an agreement on 13.05.1993 with the respondent for purchase of the suit house and pursuant thereto he has also paid huge amount to the respondent. It was also contended that since the parties have already entered into an agreement of sale/purchase of the suit house, the relationship of landlord/tenant between them has ceased to exist and now it no longer subsists and has come to an end.
The Prescribed Authority dismissed the respondent’s application and decided the matter in the appellant’s favor. The respondent felt aggrieved and filed an appeal before the Appellate Court.  The Appellate Court dismissed the appeal and affirmed the order of the Prescribed Authority. The respondent (applicant) then filed the writ petition under Article 227 of the Constitution of India before the High Court of Uttarakhand. The High Court held that mere agreement to sell the suit house would not result in termination of landlord­tenant relationship between the parties unless there is a stipulation in the agreement itself to that effect. It was also held that since the agreement in question relied on by the appellant is not a registered agreement, he is not entitled to raise the plea of part performance based on Section 53­A of the Transfer of Property Act, 1882.

The order of the High Court was challenged before the Supreme Court.

Held

The bench, upholding the high court judgment, observed that the landlord is entitled to file an application against the appellant (lessee) under Section 21 (1) (a) of the UP Act and seek the appellant’s eviction from the suit house after determining the tenancy in question.

Referring to the agreement for sale between landlord and the tenant, the Court said that, none of the conditions provided as to what would be the fate of the tenancy. It said that none of the conditions set out in the agreement could be construed for holding that the parties intended to surrender the tenancy rights. In other words, if the parties really intended to surrender their tenancy rights as contemplated in clauses (e) or (f) of Section 111 of the TP Act while entering into an agreement to sell the suit house, it would have made necessary provision to that effect by providing a specific clause in the agreement. It was, however, not done.