New Delhi: The Supreme Court has held that stamp duty under the Andhra Pradesh Stamp Act is not payable on an agreement to sell where the purchaser was already in possession of the property as a tenant and continued in such possession without any express or implied surrender of tenancy, ruling that such an agreement cannot be treated as a deemed conveyance.
A Bench comprising Justice B.V. Nagarathna and Justice R. Mahadevan delivered the judgment on January 15, 2026, setting aside the orders of the Trial Court and the High Court which had directed payment of stamp duty and penalty on the agreement to sell.
The Court was dealing with a case where the appellant had been a tenant of the respondent for over fifty years. On October 14, 2009, the parties entered into an agreement to sell the property for ₹9 lakh, out of which ₹6.5 lakh was paid as advance.
When the appellant filed a suit for specific performance and sought to mark the agreement to sell as evidence, the respondent objected on the ground that the document was insufficiently stamped and should be treated as a conveyance deed under Explanation I to Article 47A of the Andhra Pradesh Stamp Act.
The Trial Court sustained the objection and directed the appellant to pay stamp duty and penalty. The High Court upheld the order, placing reliance on B. Ratnamala v. G. Rudramma, wherein it was held that delivery of possession may be contemporaneous with, or even prior to, the agreement if it is intimately connected to it.
The Supreme Court examined the distinction between express and implied surrender of tenancy under Section 111 of the Transfer of Property Act, 1882. Justice Nagarathna observed:
“Express surrender means the lessee yields his interest under the lease to the lessor by mutual agreement between them.”
The Court further noted that implied surrender occurs by operation of law through the creation of a new relationship or relinquishment of possession. Justice Nagarathna stated:
“Implied surrender is by the operation of law and takes place independently of, and in some cases even in spite of, the intention of the parties.”
The Bench emphasised that a mere agreement to sell does not create any interest in immovable property. Relying on Suraj Lamp and Industries Private Limited v. State of Haryana, the Court held:
“Only when there is a transfer, which means conveyance of ownership and entails transfer of title, would there be a requirement of registration of the document.”
The Court also examined Explanation I to Article 47A of the Andhra Pradesh Stamp Act, which provides that an agreement to sell followed by or evidencing delivery of possession shall be chargeable as a sale. The Bench clarified that the provision requires the delivery of possession to be related to the agreement to sell.
A critical distinguishing fact noted by the Court was that the appellant had been a tenant of the property for nearly five decades and that this fact was expressly recorded in the agreement to sell dated 14.10.2009.
The Bench further emphasised that the appellant did not enter into possession as a purchaser under the agreement to sell but continued in possession as a tenant. The Court relied on the fact that an eviction order was passed against the appellant as a tenant on January 3, 2017, by the Rent Controller under the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960, thereby establishing that the tenancy subsisted even after the agreement to sell.
Accordingly, the Court held:
“There is no express or implied surrender of the tenancy by the appellant in favour of the landlord-vendor. The tenancy continued, and the appellant has also suffered an order of eviction as a tenant.”
The Supreme Court distinguished the case from Ramesh Mishrimal Jain v. Avinash Vishwanath Patne, relied upon by the respondent, noting that in that case the Court had invoked Section 53A of the Transfer of Property Act relating to part performance. The Bench clarified that Section 53A had no application to the present case.
The Court observed:
“Section 53A of the Act does not apply as possession was not handed over to the appellant pursuant to the agreement to sell dated 14.10.2009. The appellant was already in possession of the property for nearly fifty years prior thereto.”
Comparing the Andhra Pradesh Stamp Act with the Bombay Stamp Act considered in Ramesh Mishrimal, the Court noted material differences in the statutory language and held:
“The differentiation in the wordings of the two Explanations reveals that they are not identical and that the legislative intent is dissimilar.”
The Bench clarified that under the Andhra Pradesh Stamp Act, delivery of possession must either follow the execution of the agreement to sell or be evidenced therein if made earlier. It observed:
“Where possession has no nexus with the agreement to sell, as in the present case where possession was with the appellant as a tenant for nearly five decades, such possession cannot be related to the agreement to sell.”
Upon examining the recitals in the agreement, the Court concluded:
“It is evident that the appellant has been in possession of the suit schedule property as a tenant for around fifty years, and the landlady-respondent has agreed to sell the property to the appellant-tenant.”
The Bench therefore held that there was no deemed conveyance within the meaning of Explanation I to Article 47A. Justice Nagarathna concluded:
“Consequently, it is held that there is no ‘deemed conveyance’ within the meaning of Explanation I to Article 47A of the A.P. Stamp Act.”
The Supreme Court set aside the orders of the Trial Court and the High Court directing payment of stamp duty and penalty and directed:
“The Trial Court shall mark the agreement to sell dated 14.10.2009 as an exhibit and proceed to dispose of the suit as expeditiously as possible, preferably within six months from the date of the next hearing.”
Case Title: Vayyaeti Srinivasarao v. Gaineedi Jagajyothi
