Merger of banks does not shield tenant from eviction: SC

In a significant verdict, the Supreme Court on Thursday held that the amalgamation of a tenant bank with another does not exempt the transferee bank from eviction under the Delhi Rent Control Act if the landlord’s written consent was not obtained.

Putting an end to nearly a four-decade-long protracted legal battle, a bench comprising Justices Sanjay Karol and K Kotiswar Singh ordered the Punjab National Bank (PNB) to deliver “a peaceful and vacant possession of the tenanted premises” by January 31, 2027, at Connaught Circus here to the owner, the British Motor Car Company Ltd.

It allowed the eviction plea of the British Motor Car Company, which had moved a local court in 1987.

The dispute dates back to 1947, when the landlord, British Motor Car Company Ltd, leased a prime commercial space in Pratap Building, Connaught Circus, to Hindustan Commercial Bank (HCB). Following a Reserve Bank of India-backed scheme, the HCB was amalgamated with the PNB in December 1986. This led to PNB taking over the possession of the premises.

The landlord-initiated eviction proceedings on the ground that the transfer of possession to the PNB amounted to assignment or parting with possession without its written consent, attracting Section 14(1)(b) of the Delhi Rent Control (DRC) Act. The DRC Act provision says that a tenant is liable to be evicted if the tenanted premises are sublet, assigned or otherwise parted with the possession “without obtaining the consent in writing of the landlord”.

The bench dealt with the question whether the amalgamation of HCB with PNB attracted Section 14(1)(b) of the DRC Act or not.

Justice Karol, writing the judgment for the bench, held that even if a merger is “involuntary” or mandated by a government notification, it does not exempt the successor bank from the requirement of obtaining the landlord’s permission under the DRC Act.

“A plain reading of this provision shows that the following ingredients must be satisfied before an order of eviction can be passed under Section 14(1)(b): (1) The tenant has sub-let or assigned or parted with the possession of the whole or any part of the premises; and (2) Such sub-letting, assignment or parting with possession has been done without obtaining the written consent of the landlord,” it said.

The amalgamation scheme framed by the Reserve Bank of India (RBI) cannot be accorded the status of a statutory enactment so as to override the operation of the DRC Act provision, it said.

“We hold that the amalgamation of the original tenant HCB with PNB rendered PNB liable to be evicted from the premises under Section 14(1)(b) of the DRC Act,” it said.

The case saw a series of conflicting judicial opinions over four decades, and in 1995, the additional rent controller dismissed the eviction plea, viewing the merger as a statutory “law” binding on the landlord.

In 2001, the Rent Control Tribunal reversed this decision and decreed eviction, stating that rent laws prevail over banking regulations.

In 2012, the Delhi High Court set aside the eviction, labelling the merger an “involuntary act” over which the tenant had no control and the case then reached the top court which decided the case on Thursday.