RBI's Bank Amalgamation Scheme Doesn't Override Landlord's Rights Under Delhi Rent Control Act: Supreme Court

The Supreme Court on Thursday held that a banking amalgamation carried out under a Reserve Bank of India scheme does not take away a landlord's right to seek eviction under the Delhi Rent Control Act where tenancy rights vest in another entity without the landlord's written consent.

A bench of Justices Sanjay Karol and Nongmeikapam Kotiswar Singh held that the amalgamation of Hindustan Commercial Bank with Punjab National Bank did not prevent eviction after the tenancy rights vested in Punjab National Bank without the landlord's written consent.

The bench set aside the Delhi High Court's 2012 judgment and restored the eviction decree.

Referring to Section 14(1)(b) of the Delhi Rent Control Act, the court observed , "The said provision does not distinguish between voluntary and involuntary transfers, nor does it carve out any exception in favour of transfers effected pursuant to a scheme of amalgamation or to secure compliance with law. Therefore, where, upon amalgamation effected under Section 45 of the BR Act, the tenancy rights vest in another entity and possession qua tenanted premises passes to it without the written consent of the landlord, the ingredients of Section 14(1)(b) shall stand fully satisfied. The reasons necessitating such transfer or whether it was voluntary or involuntary, are wholly immaterial for the purposes of attracting the said provision"

The dispute arose from premises leased by the British Motor Car Company to Hindustan Commercial Bank in 1947. In December 1986, Hindustan Commercial Bank was amalgamated with Punjab National Bank under a scheme framed by the Reserve Bank of India. As a consequence, all its assets, rights, liabilities, obligations, and tenancy rights vested in Punjab National Bank, which came into possession of the premises.

British Motor Car Company initiated eviction proceedings, contending that Hindustan Commercial Bank had transferred the tenancy rights and parted with possession of the premises in favour of Punjab National Bank without obtaining its written consent. The Additional Rent Controller dismissed the eviction petition in 1995.

The Additional Rent Control Tribunal reversed that decision in 2001 and ordered eviction. In 2012, the Delhi High Court restored the dismissal of the eviction petition after holding that the transfer resulted from an involuntary amalgamation effected under the Banking Regulation Act.

The Supreme Court disagreed with that view. It held that the eviction provision covers every mode of transfer of tenancy rights or possession without the landlord's written consent and does not distinguish between voluntary and involuntary transfers.

Referring to the effect of the merger, the bench observed that once the original tenant ceased to exist and another entity acquired the tenancy rights and possession without the landlord's written consent, the requirements for eviction stood satisfied.

The court also rejected the argument that the Reserve Bank's amalgamation scheme amounted to a statutory enactment capable of overriding the landlord's rights under the Delhi Rent Control Act.

On this aspect, the bench observed, "Thus, in view of the above, the amalgamation scheme framed by the Reserve Bank of India, in exercise of power under Section 45(4) of the BR Act, cannot be accorded the status of a statutory enactment so as to override the operation of Section 14(1)(b) of the DRC Act."

The court relied on its earlier ruling in K.I. Shephard to reiterate that a scheme framed by the Reserve Bank under the Banking Regulation Act is administrative rather than legislative.

It also distinguished earlier decisions under the Esso (Acquisition of Undertakings in India) Act, observing that those rulings concerned tenancy rights vesting under a legislative enactment and therefore did not apply to amalgamations under the Banking Regulation Act.

Allowing the appeal, the Supreme Court restored the eviction decree. It granted Punjab National Bank time until January 31, 2027, to hand over vacant possession of the premises and directed the bank to file an undertaking before the Supreme Court within four weeks.

For Appellant: Senior Advocates Shyam Divan, Shyam Mehta, Bhargava R. Desai, AOR, Manjula Gandhi, Shyam Sharma, Harsh Narwal, Sudipto Sircar, Shaishir Divatia, Rahul Dubey, Amar Kumar Yadav, SK Gandhi, Shivam Makkar, Advocates

For Respondent: Mitter & Mitter Co., AOR