Bank Amalgamation Under BR Act Triggers Eviction Liability Under Delhi Rent Control Act, Rules Supreme Court

A Division Bench holds that involuntary transfer of tenancy upon a statutory banking amalgamation satisfies Section 14(1)(b) of the Delhi Rent Control Act, reversing the High Court.

The Supreme Court has allowed a landlord's appeal against Punjab National Bank, holding that the amalgamation of Hindustan Commercial Bank with PNB under Section 45 of the Banking Regulation Act, 1949 constituted a parting with possession of tenanted premises within the meaning of Section 14(1)(b) of the Delhi Rent Control Act, 1958. The Division Bench of Justice Sanjay Karol and Justice Nongmeikapam Kotiswar Singh set aside the Delhi High Court's 2012 order that had quashed an eviction decree, and restored the decree passed by the Additional Rent Control Tribunal. The Court found that whether a transfer of tenancy is voluntary or involuntary is entirely immaterial once the factual ingredients of Section 14(1)(b) are met. Punjab National Bank has been given time until 31 January 2027 to vacate the premises.

The Dispute and Its Journey to the Supreme Court

In 1947, British Motor Car Company (1939) Ltd. let out premises at Pratap Building, N-Block, Connaught Circus, New Delhi — comprising 2,443.75 sq. ft. on the ground floor and 1,150.25 sq. ft. on the mezzanine floor — to Hindustan Commercial Bank at a monthly rent of Rs. 585, for non-residential purposes.

On 18 December 1986, the Government of India issued a Gazette Notification under Section 45(7) of the Banking Regulation Act, sanctioning a scheme prepared by the Reserve Bank of India. The scheme took effect from 19 December 1986. From that date, all rights and liabilities of HCB stood vested in PNB, and HCB ceased to exist as a separate entity. PNB consequently came into possession of the tenanted premises.

The landlord filed Eviction Petition E-161/1987 before the Additional Rent Controller, Delhi, seeking eviction under Section 14(1)(b) read with Section 14(1)(j) of the Delhi Rent Control Act. The core contention was that HCB had parted with possession of the premises to PNB without the landlord's written consent, making PNB an unauthorised sub-tenant liable to eviction.

The Additional Rent Controller dismissed the petition in 1995, holding that the amalgamation scheme was binding on the landlord as a statutory instrument and that PNB was a successor-in-interest, not a sub-tenant. The landlord appealed. The Additional Rent Control Tribunal reversed that finding in 2001 and passed a decree of eviction. PNB then filed a revision petition under Article 227 of the Constitution before the High Court of Delhi, which allowed it in 2012 and set aside the eviction decree by relying on Asha Rohatgi v. Erstwhile New Bank of India through General Manager PNB. The landlord brought the present civil appeal to the Supreme Court.

The Core Legal Question

The Court framed the question narrowly: whether the amalgamation of HCB with PNB, effected pursuant to a scheme under Section 45 of the Banking Regulation Act, attracts Section 14(1)(b) of the Delhi Rent Control Act.

Section 14(1)(b) provides that an order of eviction may be made where “the tenant has sub-let, assigned or otherwise parted with the possession of the whole or any part of the premises without obtaining the consent in writing of the landlord.” The Court noted two ingredients: first, that the tenant has sub-let, assigned, or parted with possession; and second, that this occurred without the landlord's written consent.

Both ingredients were undisputed on the facts. Upon the amalgamation taking effect on 19 December 1986, HCB ceased to exist and all its rights, liabilities, assets and interests — including tenancy rights over the premises — vested in PNB. The transfer occurred without the written consent of the landlord.

Why Voluntary or Involuntary Transfer Makes No Difference

The respondents argued that because the amalgamation was triggered by a Gazette Notification and an RBI scheme rather than by any act of the tenant, the transfer was involuntary and should fall outside Section 14(1)(b). The Court rejected this squarely.

The Court drew on two binding precedents. In Parasram Harnand Rao v. Shanti Parsad Narinder Kumar Jain, a three-judge Bench had held that Section 14(1)(b) “does not exclude even an involuntary sale.” In Singer India Ltd. v. Chander Mohan Chadha, the Court had stated that the applicability of the provision depends on the occurrence of a factual situation — subletting, assignment, or parting with possession — and that “whether it is a voluntary act of the tenant or otherwise and also the reasons for doing so are wholly irrelevant.”

Singer India Ltd. had additionally addressed amalgamations effected under Sections 391 and 394 of the Companies Act, where leases and tenancy rights vest in the transferee company pursuant to a court-sanctioned scheme. Even in those cases, the Court held that the applicability of Section 14(1)(b) was not displaced. The present Court found no principled reason to treat an amalgamation under Section 45 of the Banking Regulation Act differently in so far as the factual consequences for the tenanted premises were concerned.

The Court also cited Bhairon Sahai v. Bishamber Dayal, which held that parting with possession without the landlord's consent was sufficient for eviction without any need to examine subletting or assignment separately.

The Scheme Under Section 45 of the Banking Regulation Act Is Administrative, Not Legislative

The respondents pressed a second argument: that the RBI scheme under Section 45 of the Banking Regulation Act is legislative in character, and that a transfer effected by legislative operation cannot amount to assignment or parting with possession under Section 14(1)(b).

The Court held this contention to be misconceived. It relied on K.I. Shephard v. Union of India, where the Supreme Court had categorically decided that the scheme-making process under Section 45 of the Banking Regulation Act is administrative and not legislative. The fact that a scheme under Section 45 is required to be sanctioned by the Central Government and placed before both Houses of Parliament does not make the process legislative. The Court in K.I. Shephard applied the test that a legislative act is the creation of a general rule of conduct without reference to particular cases, while an administrative act involves the application of a general rule to a particular case. Framing an amalgamation scheme for a specific banking company falls within the latter category.

Accordingly, the scheme of amalgamation framed by the Reserve Bank of India under Section 45(4) of the Banking Regulation Act cannot be accorded the status of a statutory enactment so as to override Section 14(1)(b) of the Delhi Rent Control Act.

The High Court's Reliance on Asha Rohatgi Was Misplaced

The High Court had set aside the eviction decree by relying on Asha Rohatgi v. Erstwhile New Bank of India, a Delhi High Court decision which had treated the merger as involuntary and held that the ground of subletting was not available to the landlord. The Supreme Court found this reliance to be an error.

Asha Rohatgi arose in the context of an amalgamation effected under Section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, not under Section 45 of the Banking Regulation Act. The distinction is material. In New Bank of India Employees' Union v. Union of India, the Supreme Court had drawn a clear line between the two provisions. Under Section 9 of the Acquisition Act, a scheme framed by the Central Government must be laid before each House of Parliament for a total period of 30 days, and Parliament retains the power to modify or reject it; the scheme becomes effective only after Parliament acts upon it. Under Section 45 of the Banking Regulation Act, by contrast, the scheme merely has to be placed before both Houses and nothing further is required. This difference in parliamentary involvement was held to make Section 9 schemes legislative and Section 45 schemes administrative.

Since Asha Rohatgi was decided in the context of a legislative scheme under the Acquisition Act, its ratio had no application to an amalgamation under Section 45 of the Banking Regulation Act. The High Court, in relying on it, fell into error.

Two Other Arguments Disposed Of

The respondents also relied on G. Sridharamurti v. Hindustan Petroleum Corpn. Ltd. and Hindustan Petroleum Corpn. Ltd. v. Shyam Coop. Housing Society for the proposition that a transfer by statutory operation does not amount to voluntary assignment. The Court distinguished both decisions. They arose under the Esso (Acquisition of Undertakings in India) Act, 1974, which is a legislative enactment expressly providing for the vesting of tenancy rights in the Central Government by operation of Sections 5 and 7 of that Act. Since the scheme under Section 45 of the Banking Regulation Act is not a legislative enactment, those decisions do not assist the respondents.

The respondents further cited Ganesh Bank of Kurundwad Ltd. v. Union of India to argue that the RBI scheme was made in public interest. The Court declined to examine this, holding that once both ingredients of Section 14(1)(b) are satisfied, no other factor — including public interest — falls for consideration.

Order

The Supreme Court allowed Civil Appeal No. 5714 of 2012. The impugned judgment and order dated 12 March 2012 passed by the High Court of Delhi in CM (M) No. 485 of 2001 is set aside. The judgment and order dated 21 May 2001 passed by the Additional Rent Control Tribunal in RCA No. 22/2000, decreeing eviction, is restored.

Taking into account that the respondents have been in possession for a long time, the Court granted time until 31 January 2027 to deliver peaceful and vacant possession of the tenanted premises to the appellant. The respondents are required to furnish an undertaking before the Court to this effect within four weeks from the date of the judgment. Until delivery of possession, the respondents shall continue to pay rent on contractual terms or as fixed by the courts below. If the respondents fail to comply, the appellant will be at liberty to proceed for taking possession in accordance with law. Pending applications, if any, stand disposed of.