Agreement Of Sale Alters Landlord-Tenant Relationship, Parties Cannot Go Back & Seek Relief In Terms Of Such Old Relationship: Calcutta High Court

The Calcutta High Court on Wednesday observed that when an agreement of sale is entered into by a landlord and a tenant, the nature of the existing relationship changes and thus parties cannot go back to their old relationship and seek relief in terms of such relationship. 

Opining that the appellant had consciously surrendered her right as a tenant, a Bench comprising Justice Soumen Sen and Justice Ajoy Kumar Mukherjee observed, 

"The parties who have acted in terms of the agreement for sale and altered their relationship consciously cannot now go back to their old relationship and seek relief in terms of such relationship. There is a clear and conscious act on the part of the appellant to surrender her right as a tenant to acquire a superior right of an owner of the second floor of the suit premises."

Reliance was also placed on the Kerala High Court judgment in Velu v Lekshmi & Ors to observe that two sets of mutually contra relationships cannot co-exist and accordingly it was further underscored, 

"Whenever a certain relationship exists between two parties in respect of a subject-matter and a new relationship arises as regards the identical subject-matter the two sets of mutually contra relationships cannot co-exist as being inconsistent and incompatible, that is to say, if the latter can come into effect only on termination of the earlier that would be deemed to have been terminated in order to enable the latter to operate."

Background 

The instant appeal had been filed against the judgment dated January 31, 2017 passed by the concerned trial Court wherein the appellant's counter claim had been dismissed. The respondent is the landlord of the concerned premises and the appellant was a tenant residing in the second floor of the concerned premises. 

Earlier, the respondent had filed a suit for eviction of the appellant but during the pendency of the suit, the appellant had expressed her willingness to purchase the second floor of the suit premises. Thereafter, pursuant to negotiation, the respondent agreed to sell the said floor for a consideration of Rs.13 lakhs to which the appellant agreed. The parties thereafter executed an agreement for sale on February 15, 2006 which contained the detailed terms and conditions for the sale. Pursuant to the agreement, it was agreed that the entire consideration amount of Rs.13 lakhs shall be paid in installments commencing from December, 2006 and ending with November, 2008. It was further agreed that a sum of Rs.5 lakhs shall be paid within March 2007 as a condition precedent.

The appellant had agreed to pay a sum of Rs 40,000 at the time of execution of the agreement which she paid on December 11, 2006. She had further agreed to pay 'occupancy charges' at the rate of Rs. 2,000 per month on and from January 2007 until the payment of the entire amount of Rs 5 lakhs is completed and thereafter the 'occupancy charges' would get reduced by Rs.150 per lakh. 

The respondent received Rs 40,000 by cheque as the first installment. However, the appellant failed to pay the balance consideration and thus failed to make the payment of Rs.5 lakh within March 2007 as agreed upon between the parties. In view of such a breach the respondent rescinded the said agreement and sued the appellant for recovery of possession.

The concerned trial Court had ruled that by reason of the agreement for sale entered into between the parties, the relationship of landlord and tenant had come to an end and accordingly, the respondent was entitled to sue the defendant for recovery of possession upon establishing his right.

Observations 

The Court at the outset observed that it is undisputed that the parties have consciously entered into the agreement for sale thereby altering their respective status. It was noted further that the agreement for sale was entered into at a point of time when the earlier suit for eviction was pending.

It was further noted that surprisingly, the appellant did not file any suit for specific performance of the agreement for sale although she had alleged in her written statement that she did not commit breach of the terms of the agreement for sale. Opining that the appellant had misled the respondent, the landlord in the instant case, the Court underscored further, 

"She did not make any counter-claim in her written statement seeking specific performance for the agreement of sale. One would have expected that a person who is ready and willing to perform her obligation would make a specific pleading to that effect and claim appropriate reliefs in the suit. The denials are evasive and it seems that the defendant had misled the landlord in entering into an agreement for sale knowing fully well that she would not be able to perform her obligations."

The Court further emphasised that the evidence on record shows that the agreement of sale was acted upon by the parties thereby altering their position on the basis of the said agreement. It was further noted that the agreement of sale had altered the existing landlord-tenant relationship between the parties and accordingly, the Court remarked further, 

"Once the agreement was entered into and acted upon the old relationship of landlord and tenant came to an end. This would be obvious from the fact that in agreement for sale the word rent was omitted and the defendant was asked to pay 'occupancy charges'."

It was further observed that the acceptance of the amount of Rs 40,000 as earnest money by the respondent landlord shows that such acceptance was made in terms of the agreement for sale. 

"When the plaintiff/landlord accepted the sum he actually acted under the agreement for sale. This acceptance was preceded by agreement of sale, changing their relationship and this was what they had actually intended", the Court opined. 

Reliance was also placed on the Supreme Court judgment in R. Kanthimathi and Ors v. Beatrice Xavier wherein the Apex Court had held that execution of an agreement of sale between a landlord and a tenant changes the relationship into that of a purchaser and a seller."

Accordingly, the appeal was dismissed. 

Case Title: Sashi Jain @ Shashi Jain v. Sandip Sarka

Case Citation: 2022 LiveLaw (Cal) 66 

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