Agreement to Sell by Long‑time Tenant Is Not a Deemed Conveyance Under A.P. Stamp Act, Supreme Court Holds

A bench of Justices B.V. Nagarathna and R. Mahadevan heard appeals challenging High Court and trial court orders that had directed impounding of an agreement to sell and recovery of deficit stamp duty on the ground that the document amounted to a deemed conveyance under Explanation I to Article 47A of Schedule I‑A of the Andhra Pradesh Stamp Act.

The Court allowed the appeals, set aside the orders of the trial court and High Court, and directed that the agreement to sell dated 14.10.2009 should be marked as an exhibit in the pending suit for specific performance and the suit be disposed of expeditiously. The Court clarified that Explanation I applied only where possession was related to the agreement — i.e., possession must “follow” the agreement or be evidenced by it — and that mere pre‑existing possession as a tenant did not convert an agreement to sell into a deemed conveyance. The Court emphasised that Section 53A of the Transfer of Property Act would apply where possession was taken in part‑performance pursuant to the contract, but that Section 53A was not attracted on the facts of the present case. The Court, in its reasoning, observed: “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 possession 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 the appellant as a tenant for nearly five decades and the respondent vendor has decided to sell the same to the appellant vendee then, the said possession is not relatable to the agreement to sell. 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.”

Background

The respondent was the absolute owner of a property in Dowlaiswaram village; the appellant had occupied the property as a tenant for about fifty years. On 14.10.2009 the parties executed an agreement to sell for Rs.9,00,000, with an advance of Rs.6,50,000 allegedly paid. In 2013 the respondent sued for eviction under the A.P. Rent Act and obtained an eviction order dated 03.01.2017. The appellant filed O.S. No.188/2013 for specific performance and sought to mark the agreement as evidence; the respondent objected that the agreement was in reality a conveyance attracting higher stamp duty under Explanation I to Article 47A. The trial court ordered payment of stamp duty and penalty and refused marking; the Andhra Pradesh High Court, relying on precedents including Ratnamala, sustained that view and dismissed the appellant’s revision and review applications.

Before the Supreme Court, the appellant argued that he remained a tenant both before and after the agreement and that the possession was not obtained in relation to the agreement; counsel relied on the text of Explanation I and Section 53A of the Transfer of Property Act. The respondent relied on this Court’s recent authority in Ramesh Mishrimal Jain and earlier High Court rulings treating similar agreements as deemed conveyances when possession was recorded.

The Supreme Court examined the statutory language of Explanation I to Article 47A and contrasted it with the Bombay Stamp Act. It held that the Andhra Pradesh provision required a nexus between possession and the agreement — possession must follow the agreement or be evidenced by it — and that where possession pre‑existed as tenancy and the tenancy continued (as shown by the subsequent eviction order), Explanation I did not apply. The Court distinguished Ramesh Mishrimal on the ground that that decision proceeded on facts invoking Section 53A (possession under the contract) and confined that precedent to its facts. Concluding that there was no express or implied surrender of tenancy and no deemed conveyance, the Court set aside the impugned orders, directed the trial court to mark the agreement as an exhibit and to dispose the specific performance suit preferably within six months, and ordered no costs.

Case Details: Case No.: 2026 INSC 59 (Civil Appeal Nos. of 2026; arising out of SLP (C) Nos. 21976‑21977 of 2023) Case Title: Vayyaeti Srinivasarao v. Gaineedi Jagajyothi Appearances: For the Appellant(s): [Advocate names not indicated in the judgment] For the Respondent(s): [Advocate names not indicated in the judgment]