1. Eviction proceeding under Tamil Nadu Building (Lease and Rent Control) Act, 1960, following a landlord's repudiation of an agreement to sell the leased premises to the tenant. (Para 2 )
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2000 Supreme(SC) 303
SUPREME COURT OF INDIA
A.P.Misra : N.Santosh Hegde
R.Kanthimathi
Versus
Beatrice Xavier
Case No. : 12923 of 1996
Date of Decision : 2/8/00
Execution of a sale agreement between a landlord and tenant, accompanied by the payment of substantial sale consideration, terminates the landlord-tenant relationship and establishes a new jural relationship as seller and purchaser, which is not automatically restored upon repudiation of the agreement.
Headnote:(A) Building (Lease and Rent Control) Act, 1960 - Sections 10(2)(i) and 10(2)(iii) - Agreement to sell between landlord and tenant - Receipt of substantial sale consideration - Change in jural relationship - Whether the relationship of landlord-tenant ceases upon execution of an agreement to sell and receipt of a substantial portion of the sale consideration - Once the parties enter into an agreement of sale and the seller accepts a substantial sum, the relationship changes from landlord and tenant to purchaser and seller (Para 6) - Such a change in relationship is a positive act by the parties to alter their jural status (Para 6) - Even if the agreement is subsequently repudiated, the status of tenant is not automatically restored (Paras 7 and 8).
Facts of the case:
A landlord filed for eviction of a tenant on grounds of willful default and waste. During the tenancy, the parties entered into an agreement to sell the premises. The tenant paid a substantial portion of the total sale consideration on the date of the agreement, and the agreement noted that possession had been surrendered. The landlord later repudiated the agreement by returning the amount and sought eviction. The lower courts and the High Court ruled in favor of the landlord, holding that the tenant had committed willful default.
Findings of Court:
The court found that the execution of the sale agreement and the acceptance of a major part of the sale consideration indicated a clear intention to change the relationship from landlord-tenant to seller-purchaser. The phrase "already been surrendered" in the agreement confirmed that possession was now held in pursuance of the sale agreement rather than the tenancy.
Issues: Whether on the execution of an agreement to sell by the landlord with the tenant, and the landlord having received a substantial portion of the sale consideration, the relationship of landlord-tenant ceases and fresh rights and obligations flow under the agreement.
Ratio Decidendi: The court held that any jural relationship can be changed through an agreement. By entering into a sale agreement and accepting a substantial sum, the parties positively changed their relationship to that of purchaser and seller. Once this change occurs, the landlord-tenant relationship ceases. This status is not restored even if the agreement is subsequently repudiated. Consequently, the tenant cannot be held liable for willful default in payment of rent as the tenancy had ended.
Result: Appeal allowed.
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Table of Contents
2. Whether an agreement to sell and payment of substantial consideration terminate the landlord-tenant relationship, rendering eviction for wilful default unsustainable. (Para 3 )
3. The agreement's terms regarding possession and acceptance of substantial consideration indicate a conscious intent to change the jural relationship from landlord-tenant to seller-purchaser. (Para 4 , 5 , 6 )
4. Execution of an agreement to sell between landlord and tenant, accompanied by payment of substantial consideration, terminates the landlord-tenant relationship and creates a seller-purchaser relationship. (Para 6 , 7 , 8 )
5. Appeal allowed; eviction orders set aside; parties' rights to pursue other legal remedies preserved. (Para 9 )
6. Does an agreement to sell between a landlord and tenant terminate the tenancy?
Yes, when a landlord and tenant enter into an agreement to sell and the landlord accepts a substantial portion of the sale consideration, the old relationship of landlord and tenant ceases and is replaced by a new relationship of seller and purchaser. (Para 6 , 7 , 8 )
7. Does the repudiation of a sale agreement by the landlord revive the original landlord-tenant relationship?
No, once the landlord-tenant relationship is terminated by a sale agreement, it is not revived even if the landlord subsequently repudiates the agreement or returns the sale consideration. (Para 7 , 8 )
8. Can a person be evicted for wilful default under rent control laws after a sale agreement has terminated the tenancy?
No, if the status of the tenant has changed to that of a purchaser due to a sale agreement, the non-payment of rent cannot be construed as wilful default under rent control legislation. (Para 8 )
(1) HEARD learned counsel for the parties. The question raised in this appeal is an interesting question and of some importance. The question is: "Whether on the execution of agreement to sell, by the landlord with the tenant and landlord having received substantial portion of the sale consideration, the relationship of landlord-tenant inter se between them ceases and fresh rights and obligations flows under this agreement?"
(2) THE present appeal is by the tenant who received decree of eviction against him by the order of trial Court confirmed by the appellate authority and finally affirmed by the High Court. The respondent landlord filed a suit for eviction on the ground of wilful default and also of committing an act of waste under Section 10(2)(i)and 10(2)(iii) of the Tamil Nadu Building (Lease and Rent Control) Act, 1960. Her case is that though that tenant paid rent regularly upto March, 1977, but thereafter did not pay rent regularly. But on request of the tenant-appellants to the landlady she agreed to sell the disputed premises, as a consequence, the agreement of sale was executed on 4-5-1977. According to the landlady, a breach was committed by the appellants, hence she repudiated that agreement by returning the amount she received under it and then she filed a suit for eviction against the tenant. It is not in dispute that in terms of the said agreement, the total sale consideration was a sum of Rs. 25,000/-. Out of this tenant paid Rs. 20,000/- to the landlady on the date of agreement itself. The balance of Rs. 5,000/- remained to be paid on the date of registration of the sale deed.
(3) RELYING on this agreement of sale, the appellants case is that on its execution, the relationship between respondent and the appellant changed. They no more remained as landlord and tenant. Hence the present petition for eviction under the aforesaid Act is not sustainable. In the alternative it is submitted, in any case non-payment of rent for this period cannot be construed to be a .wilful default within the meaning 01 Section 10 of the aforesaid Act. The Rent Controller and the appellate Authority, both rejected this contention of the tenant and held that tenant committed wilful default which was confirmed by the High Court.
(4) AS aforesaid, the question for consideration is, whether the status of tenant as such changes on the execution of an agreement of sale with the landlord. It is relevant at this junction first to examine the terms of the agreement of sale. The relevant portions of the agreement of sale records the following:
"I the aforesaid Mrs. Beatrice Xavier hereby agree out my own free will, to sell, convey and transfer the property to you Mrs. R. Kanthimathi wife of Mr. S. Ramaswami, 43 5 Trichy Road, Coimbatore for a mutually agreed sale consideration of Rs. 25,000/-. I shall be proceeding to Coimbatore and shall execute the sale deed and present the same for admission and registration before the Registering Authority, accepting and acknowledge payment of the balance of consideration of Rs. 5000/- (Rupees five thousand only) at the time of registration and shall complete the transaction of sale and conveyance as the property demised has already been surrendered to your possession. "
(Emphasis supplied)
(5) SUBMISSION for the tenant is after entering into the agreement, the landlady accepted Rs. 20,000/- confirming delivery of possession in this context which clearly constitute clear intend of the landlady of entering into new relationship with the tenant under it. On the other hand, learned counsel for the respondent submits that the words "already been surrendered" therein, only refer to the existing possession of the tenant and nothing more. So far this submission for the respondent we have no hesitation to reject the, same. The reference of the words "already been surrendered" has been incorporated with consciousness. This is to be construed in the background of landlady hav
