Legal Review and Analysis of Vayyaeti Srinivasarao vs Gaineedi Jagajyothi 2026 INSC 59
Synopsis
This Supreme Court judgment, delivered by a Division Bench, revolves around the critical distinction between an agreement to sell and a conveyance deed for the purpose of stamp duty under the Andhra Pradesh Stamp Act, 1922. The core legal question was whether an agreement to sell executed in favor of a long-standing tenant, who was already in possession for decades, would be deemed a "sale" (conveyance) attracting heavy stamp duty, or whether it remains a simple agreement chargeable with nominal duty. The Court meticulously analyzed the legal relationship between the parties, the concept of "surrender of tenancy," and the specific wording of the state's stamp law to conclude that mere continuance of possession as a tenant, without any change in the nature of that possession linked to the agreement, does not convert the agreement into a conveyance.
1. Basic Information of the Judgment
Case Title: Vayyaeti Srinivasarao vs. Gaineedi Jagajyothi
Citation: 2026 INSC 59 | Civil Appeal Nos. of 2026 (Arising out of SLP (C) Nos. 21976-21977 of 2023)
Court: Supreme Court of India
Coram: Justice B.V. Nagarathna and Justice R. Mahadevan (Division Bench)
Date of Judgment: January 15, 2026
Nature of Judgment: Civil Appeal (Appellate Jurisdiction)
Subject Matter: Stamp Act – Whether an agreement to sell in favor of a sitting tenant constitutes a "deemed conveyance" for stamp duty purposes.
2. Legal Framework & Context
This judgment interprets and applies a specialized area of fiscal and property law, focusing on the following statutes and judicial precedents:
A. Primary Legislations:
The Transfer of Property Act, 1882 (TP Act):
Section 54: Defines "sale" as a transfer of ownership. An "agreement to sell" is distinguished as a contract that does not, by itself, create any interest in the property.
Section 53A: Doctrine of part-performance. Protects a transferee in possession who has performed his part of the contract.
Section 111: Modes of determination of a lease, including express and implied surrender.The Stamp (Andhra Pradesh Amendment) Act, 1922 (AP Stamp Act):
Article 47A of Schedule I-A: Prescribes duty for "Sale."
Explanation I to Article 47A: The pivotal provision stating, "An agreement to sell followed by or evidencing delivery of possession of the property agreed to be sold shall be chargeable as a 'sale' under this Article."The Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act, 1960: Governs the landlord-tenant relationship in the case.
B. Key Precedents Discussed and Distinguished:
B. Ratnamala vs. G. Rudramma (1999): A.P. High Court held that delivery of possession "intimately and inextricably connected" to the agreement attracts stamp duty as a sale.
M.A. Gafoor vs. Mohd. Jani (1998): Overruled by Ratnamala. Held that an agreement with a tenant did not attract Explanation I.
Ramesh Mishrimal Jain vs. Avinash Vishwanath Patne (2025) SC: Applied Section 53A of TP Act to hold that a tenant's continued possession under an agreement amounted to part-performance, making it a deemed conveyance under the analogous Bombay Stamp Act.
Suraj Lamp & Industries Pvt. Ltd. vs. State of Haryana (2012) SC: Reiterated that an agreement to sell is not a conveyance and creates no title.
3. Relevant Facts of the Case
The Respondent was the absolute owner, and the Appellant was a tenant for over 50 years in the suit property.
On 14.10.2009, they entered into an Agreement to Sell for ₹9,00,000. An advance of ₹6,50,000 was paid. The agreement acknowledged the Appellant's 50-year possession as a tenant.
The Respondent later refused to execute the sale deed. The Appellant filed a suit for specific performance (O.S. No.188/2013).
In that suit, the Respondent objected to the marking of the Agreement, claiming it was insufficiently stamped as a "conveyance" under Explanation I to Article 47A, AP Stamp Act.
Simultaneously, the Respondent filed and succeeded in an eviction petition (RCC No.4/2013) against the Appellant under the Rent Act, obtaining an order on 03.01.2017.
The Trial Court and the High Court upheld the objection, directing the Appellant to pay deficit stamp duty and penalty. The Appellant appealed to the Supreme Court.
4. Issues Before the Supreme Court
The central legal issue was:
Whether the Agreement to Sell dated 14.10.2009, executed between the landlord and the sitting tenant, falls within the ambit of Explanation I to Article 47A of the AP Stamp Act, thereby making it a "deemed conveyance" chargeable to stamp duty as a "sale"?
5. Ratio Decidendi & Judgment of the Court
The Supreme Court allowed the appeal, setting aside the orders of the High Court and Trial Court. The core reasoning (ratio) is as follows:
No Change in Jural Relationship: The Appellant's possession for 50 years was as a tenant, not as a vendee. The execution of the agreement did not alter this relationship. There was no express or implied surrender of the tenancy under Section 111 of the TP Act.
Eviction Order as Conclusive Proof: The subsequent eviction order (2017) passed against the Appellant on the ground of landlord-tenant relationship irrefutably proved that the tenancy continued even after the 2009 agreement. The Respondent-Landlord herself treated him as a tenant, not a vendee.
Interpretation of Explanation I, AP Stamp Act: The phrases "followed by" or "evidencing delivery of possession" require a direct nexus between the agreement and the delivery of possession. Here, possession was neither given under the agreement nor was it evidenced by the agreement as a consequence of the sale. It was an independent, pre-existing factual possession as a tenant.
Distinction from Ramesh Mishrimal (SC): The Court crucially distinguished this precedent on two grounds:
Textual Difference in Law: Explanation I under the Bombay Stamp Act uses the phrase "possession...is transferred or agreed to be transferred to the purchaser...". In contrast, the AP Stamp Act uses "followed by or evidencing delivery of possession...". The latter requires a tighter, more causal connection.
Non-Applicability of Section 53A, TP Act: In Ramesh Mishrimal, the Court invoked Section 53A (Part-Performance) to find a conveyance. In the present case, Section 53A was held inapplicable because the Appellant's possession was not taken or continued "in part performance of the contract" but was an antecedent, independent tenancy. The agreement did not convert his possession into that of a transferee under the contract.Agreement is Not a Conveyance: Relying on Suraj Lamp, the Court reaffirmed that an agreement to sell per se creates no interest in property. In the absence of any change in the nature of possession or surrender of old rights, it cannot be deemed a conveyance.
6. Legal Principles Established/Clarified
This judgment establishes and clarifies several key legal principles:
Continuation of Tenancy: An agreement to sell between a landlord and a sitting tenant does not, by default, terminate the tenancy or change the nature of possession. Clear evidence of surrender (express or implied) is required.
Nexus Test for Stamp Duty: For an agreement to sell to be deemed a conveyance under Explanation I to Article 47A, AP Stamp Act, the delivery of possession must be intimately and causally connected to the agreement itself, not merely be a coincidental, pre-existing fact recorded in it.
Primacy of Factual Relationship: The subsequent conduct of parties (like pursuing eviction under rent laws) is a decisive factor in determining the true nature of their relationship and the instrument.
Distinguishing Precedents Based on Statutory Language: Judgments interpreting stamp laws of other states must be applied with caution, as minute differences in statutory wording (e.g., "transferred" vs. "followed by") can lead to different outcomes.
7. Court's Examination & Analytical Concepts
The Court engaged in a layered analysis:
Conceptual Analysis of 'Surrender': It dissected Section 111(e) & (f) of the TP Act to explain that neither had occurred. The tenant never yielded his interest back to the landlord. The landlord never accepted a surrender. The tenancy remained determinable only under the Rent Act.
Doctrinal Analysis of 'Part-Performance': It analyzed Section 53A and held it inapplicable because the animus behind the Appellant's possession never shifted from being a tenant to being a prospective purchaser in part-performance. Paying rent even after the agreement negated this.
Comparative Statutory Interpretation: The Court performed a side-by-side analysis of the key explanations in the AP Stamp Act and the Bombay Stamp Act, highlighting the legislative intent behind the different phrasing to justify a narrower application in the present case.
Fact-Contextualization of Precedents: It distinguished Gafoor and Ramesh Mishrimal not just on law but on their specific factual matrices—particularly the presence of clauses in those agreements that altered the rental obligations or treated possession as part of the sale, which were absent here.
8. Critical Analysis & Final Outcome
Critical Analysis: The judgment is a fine example of substance-over-form adjudication. It prevents revenue authorities and vendors from using stamp duty provisions as a technical weapon to frustrate genuine suits for specific performance by tenants. By insisting on a real nexus between possession and agreement, it protects the distinct legal identity of a tenancy. The distinction from Ramesh Mishrimal is logically sound, rooted in textual differences between state laws, and preserves the doctrine of part-performance for cases where possession actually changes hands pursuant to the contract.
Final Outcome:
The impugned orders of the High Court and Trial Court were set aside.
The Agreement to Sell dated 14.10.2009 is not a conveyance and is not liable to be stamped as a sale under Article 47A of the AP Stamp Act.
The Appellant is not required to pay deficit stamp duty and penalty.
The Trial Court was directed to mark the agreement as an exhibit and proceed with the specific performance suit expeditiously.
(MCQs)
1. Under Explanation I to Article 47A of the AP Stamp Act, when does an agreement to sell become chargeable as a 'sale'?
a) When it is written on non-judicial stamp paper.
b) When it is followed by or evidence delivery of possession connected to the agreement.
c) Whenever it involves immovable property worth more than ₹10 lakhs.
d) When it is registered with the Sub-Registrar.
2. Why did the Supreme Court hold that Section 53A of the Transfer of Property Act was not applicable in this case?
a) Because the agreement was unregistered.
b) Because the appellant was not willing to perform his part of the contract.
c) Because the appellant's possession was as a pre-existing tenant, not taken in part-performance of the sale agreement.
d) Because the respondent was not the true owner.
3. Which factual element was considered conclusive proof that the jural relationship of landlord-tenant subsisted after the agreement to sell?
a) The payment of advance money.
b) The filing of a suit for specific performance by the appellant.
c) The eviction order obtained by the respondent against the appellant under the Rent Act.
d) The respondent's reply to the legal notice denying the agreement.
4. The Supreme Court distinguished its earlier judgment in Ramesh Mishrimal primarily on which ground?
a) The value of the property involved was significantly different.
b) The agreement in Ramesh Mishrimal was unregistered.
c) The statutory language in the Bombay Stamp Act was different from the AP Stamp Act, and Section 53A TP Act was invoked there.
d) The tenant in Ramesh Mishrimal was not in long-standing possession.