Pnb Housing Finance Limited vs Manoj Saha

2025 INSC 847 Reportable

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. OF 2025 (Arising out of SLP (C) No.7288 of 2024)

PNB Housing Finance Limited …..Appellant(s)

VERSUS

Sh. Manoj Saha & Anr. …..Respondent(s)

JUDGMENT

Joymalya Bagchi, J.

1. Leave granted.

2. Appellant has assailed the judgment and order passed by High

Court whereby the secured asset1 whose possession was taken by

the Appellant, was directed to be handed back to the 1 st

Respondent.

3. 1st Respondent claims to be a tenant of the secured asset. He

had entered into an unregistered tenancy agreement with M/s Signature Not Verified Digitally signed by SATISH KUMAR YADAV

Janapriya Finance and Industrial Investment (India) Pvt. Ltd 2 for Date: 2025.07.15 17:19:24 IST Reason:

1 Space of 450 sq.ft. on first floor, 1 Allenby Road, Kolkata – 700020 2 Original landlord

Page 1 of 14 a period of 5 years. In 1992, the term of tenancy expired. But 1 st

Respondent alleged he continued as a monthly tenant under the

original landlord. In 2007, the original landlord sold the secured

asset to 2nd Respondent. By letter of attornment dated

04.03.2008, 2nd Respondent that is, the new landlord called upon

1st Respondent to pay rent. 1st Respondent contends he paid rent

to 2nd Respondent and continued to occupy the secured asset as

a tenant.

4. On 09.02.2017, 2nd Respondent took a loan from the Appellant

against creation of security interest on the premises. A second

loan was also taken. The loan account was not serviced and

became a Non­Performing Asset (NPA). Demand notice under

Section 13(2) of the Securitisation and Reconstruction of

Financial Assets and Enforcement of Security Interest Act, 2002 3

was issued to the 2nd Respondent on 13.07.2021, requiring the

latter to pay Rs.3,09,65,636.97/­ along with applicable future

interest and charges within 60 days. The notice further stated

that, in the event of non­payment, the secured creditor would

initiate measures under Section 13(4) of SARFAESI, including 3 hereinafter referred to as, ‘SARFAESI’

Page 2 of 14 taking possession and sale of the secured asset. Despite such

intimation, no payment was made within 60 days of receipt of

notice. In the meantime, 2nd Respondent instituted an ejectment

suit against 1st Respondent on various grounds, including non­

payment of rent.

5. On 02.12.2021, symbolic possession of the secured asset was

taken by the Appellant under section 13(4) of SARFAESI. As per

Rule 8 (1) and (2) of the Security Interest (Enforcement) Rules,

2002, notice of symbolic possession was published in two leading

newspapers and also affixed on a conspicuous part of secured

asset.

6. 2nd Respondent filed a securitization application 4 before Debt

Recovery Tribunal5 ­ III, Kolkata challenging the recovery

measures initiated under section 13(4) of SARFAESI.

7. On 08.04.2022, Appellant filed an application under section 14

of SARFAESI, seeking assistance of District Magistrate to take

physical possession of the secured asset. District Magistrate

allowed the application and directed Deputy Magistrate to take

4 No.139/2022 5 hereinafter referred to as, ‘DRT’

Page 3 of 14 possession of the secured asset. However, DRT by order dated

09.11.2022, directed the Appellant to serve prior notice to 2 nd

Respondent before taking physical possession. Accordingly, on

19.07.2023 intimation was given to 2 nd Respondent with regard to

taking over possession of the secured asset. Similar notice was

also pasted on the secured asset. On 02.08.2023, physical

possession was taken by the Deputy Magistrate and handed over

to the Appellant.

8. On 23.08.2023, 1st Respondent informed the Appellant he was a

tenant of the secured asset and called upon the latter to hand

over documents on the basis of which possession of secured

asset was taken. Thereafter, 1 st Respondent filed a securitization

application6, inter alia, praying for various reliefs including

handing back possession of the secured asset. An interim

application7 seeking stay of notice dated 02.08.2023 under

section 13(4) and other reliefs was also filed.

9. After hearing the parties, DRT held the claim of tenancy was

based on an unregistered instrument. Neither borrower nor the

6 No.737/2023 7 No.2331/2023 Page 4 of 14 tenant had intimated the Appellant about the tenancy at the time

of creation of mortgage. Given these facts, in view of Harshad

Govardhan Sondagar v. International Assets Reconstruction

Company Limited and Ors.8, DRT rejected interim relief and fixed

the matter for final hearing.

10. 1st Respondent assailed DRT order before the High Court under

Article 227 of the Constitution. The Appellant resisted the

application on the ground of existence of alternate remedies as

well as on merits. Referring to paragraph 29 of Harshad

Govardhan Sondagar (supra), High Court repelled the argument

regarding alternate remedy and directed restoration of possession

as follows:

“17. Thus, the contention of the bank that there is an alternative remedy of appeal is not accepted by this court in the peculiar facts and circumstances of this case. By the order impugned, the right of the petitioner as canvassed in his SA, has been finally decided. A doctor who was in occupation of the premises and running his chamber, in my, prima facie, view could not be thrown away without due process of law. The issue whether the doctor was inducted as a valid tenant and/or whether his possession was legal or not, are matters which will be decided in the SA, but the occupation cannot be doubted, as available from the records.

18. Under such circumstances, the interim prayer for use of the premises as a chamber ought to have been granted to the petitioner by the learned tribunal in lawful exercise of jurisdiction vested upon it, with certain conditions. 8 (2014) 6 SCC 1

Page 5 of 14

19. Accordingly, the revisional application is allowed.”

11. Mr. Suri contended the High Court ought not to have

entertained the matter in view of the existence of appellate

remedy under section 18 of SARFAESI. We are in wholesome

agreement with this submission.

12. In 2016, SARFAESI was amended. By the amending Act,

section 17(4A) was introduced with effect from 01.09.2016,

enabling any person claiming to be lessees/tenants in respect of

secured assets to approach the DRT against measures under

section 13(4) of SARFAESI, including taking possession of the

secured asset. Tribunal was empowered to declare such

measures invalid and restore possession. Order of DRT was

made appealable before the appellate tribunal under section 18

of SARFAESI. In light of the aforesaid statutory scheme, this

Court repeatedly deprecated interference of High Courts under

Article 226/227 in matters pertaining to SARFAESI. 9

13. In the present case, High Court erroneously relied on Harshad

Govardhan Sondagar (supra) to entertain the application. The

9 Varimadugu Obi Reddy v. B. Sreenivasulu and Ors. (2023) 2 SCC 168 [Para 36]; South Indian Bank Ltd. and Ors. v. Naveen Mathew Philip and Anr. (2023) 17 SCC 311 [Para 17]

Page 6 of 14 observations in Harshad Govardhan Sondagar (supra) with

regard to absence of statutory remedy available to a

lessee/tenant to assail measures under section 13(4) before

DRT is based on the pre­amended law and has no manner of

application under the post amendment regime. Be that as it

may, as the High Court had examined the matter on merits and

restored possession of the secured asset to 1 st Respondent, we

have tested the correctness of the impugned direction in the

facts and circumstances of the case.

14. Defending the order, Mr. Gupta submitted 1st Respondent had

been inducted as a tenant in 1987 initially under an

unregistered lease agreement for 5 years. Thereafter, he was

continuing as a monthly tenant. His tenancy is protected under

the West Bengal Premises Tenancy Act, 1997 10 and he could be

evicted only on the grounds enumerated under section 6 of the

said Act. Recovery of possession of secured asset by the

Appellant illegally extinguished the tenancy and deprived him of

his constitutional right to property.

10 hereinafter referred to as, ‘the Rent Act’

Page 7 of 14

15. Rights of lessees/tenants in properties which are held by

financial institutions as secured assets under SARFAESI fell for

consideration in Harshad Govardhan Sondagar (supra). The

Bench analyzed the impact of SARFAESI, particularly section

13 on the rights of lessees/tenants in the secured asset. The

Bench held though section 13(13) of SARFAESI overrides

section 65A of the Transfer of Property Act, 1882 11 and renders

invalid any lease created by the borrower after issuance of

notice under section 13(2) without taking written permission of

the secured creditor, the said section does not determine a

prior lease created by a registered instrument. However, if the

lessee claims tenancy through an oral/unregistered agreement,

the term of the lease cannot exceed one year and the lessee is

not entitled to possession of the secured asset beyond a period

of one year.

16. In Vishal N. Kalsaria v. Bank of India and Ors. 12, a Coordinate

Bench carved out an exception from the ratio in Harshad

Govardhan Sondagar (supra) with regard to tenancies created

11 hereinafter referred to as, ‘TP Act’ 12 (2016) 3 SCC 762

Page 8 of 14 under the rent laws. The Bench held SARFAESI and rent laws

operate in separate fields and the non­obstante clause in the

former cannot override the latter:

“35. The decision of this Court rendered in Harshad Govardhan Sondagar cannot be understood to have held that the provisions of the SARFAESI Act override the provisions of the Rent Control Act, and that the banks are at liberty to evict the tenants residing in the tenanted premises which have been offered as collateral securities for loans on which default has been done by the debtor/landlord”

xxx xxx xxx xxx xxx

“37. It is a settled position of law that once tenancy is created, a tenant can be evicted only after following the due process of law, as prescribed under the provisions of the Rent Control Act. A tenant cannot be arbitrarily evicted by using the provisions of the SARFAESI Act as that would amount to stultifying the statutory rights of protection given to the tenant. A non obstante clause (Section 35 of the SARFAESI Act) cannot be used to bulldoze the statutory rights vested in the tenants under the Rent Control Act. The expression “any other law for the time being in force” as appearing in Section 35 of the SARFAESI Act cannot mean to extend to each and every law enacted by the Central and State Legislatures. It can only extend to the laws operating in the same field.”

17. Subsequently, a Three­Judge Bench in Bajarang Shyamsunder

Agarwal v. Central Bank of India and Anr.13 differed from Vishal

N. Kalsaria (supra) with regard to width of the non­obstante

clause under section 35 of SARFAESI:

13 (2019) 9 SCC 94

Page 9 of 14 “23. While we agree with the principle laid out in Vishal N. Kalsaria case that the tenancy rights under the Rent Act need to be respected in appropriate cases, however, we believe that the holding with respect to the restricted application of the non obstante clause under Section 35 of the SARFAESI Act, to only apply to the laws operating in the same field is too narrow and such a proposition does not follow from the ruling of this Court in Harshad Govardhan case” (emphasis supplied)

18. Noting the interplay between the objective of the SARFAESI vis­à­

vis TP Act and rent laws, Bajarang Shyamsunder Agarwal (supra)

clarified onus lies on tenants claiming through an

oral/unregistered agreement to produce rent receipts,

property/water taxes receipts, electricity charges, etc., to

establish the creation of a valid tenancy.14 Even then, such

tenancies created through an oral/unregistered agreement would

not continue beyond one year from issuance of notice under

section 13(2) of SARFAESI and the tenant upon expiry of the said

period shall be deemed to be a ‘tenant in sufferance’.

19. Mr. Gupta vehemently argued the ratio in Bajarang

Shyamsunder Agarwal (supra) that tenancy under the Rent Act is

determined by efflux of time runs counter to the Constitution

14 See Para 27

Page 10 of 14 Bench in V. Dhanapal Chettiar v. Yesodai Ammal15 and is not

good law.

20. In V. Dhanapal Chettiar (supra), question which fell for

consideration before the Constitution Bench is whether a notice

to determine tenancy under section 106 of the TP Act is

necessary for eviction of a tenant under the rent laws. Answering

in the negative, the Bench, inter alia, held under the extended

definition of the word “tenant” under various State laws, 16 jural

relationship between the landlord and tenant is not snapped on

determination of contractual tenancy and continues till order of

eviction is passed.

21. In Anthony v. K.C. Ittoop & Sons and Ors. 17, this Court reiterated

jural relationship between lessor/lessee created through an

unregistered instrument shall be protected under rent laws.

22. It has been argued on behalf of the Appellant that the impact of

the non­obstante clause in SARFAESI on the provisions of the

Rent Act did not fall for consideration in the aforesaid authorities. 15 (1979) 4 SCC 214 [Para 6] 16 Section 2(g) of West Bengal Premises Tenancy Act, 1997– “ ‘tenant’ means any person by whom or on whose account or behalf the rent of any premises is or, but for a special contract, would be payable, and includes any person continuing in possession after termination of his tenancy….” 17 (2000) 6 SCC 394

Page 11 of 14 On the other hand, such issue was raised and answered vis­à­vis

rights of tenants/lessees under oral/unregistered agreement in

Bajarang Shyamsunder Agarwal (supra).

23. We choose not to delve into the aforesaid issue further as we are

not convinced with the evidence adduced by 1 st Respondent

before the DRT with regard to prior tenancy. Although 1 st

Respondent claimed he was a tenant in the secured asset from

1987, he was unable to place on record any rent receipt, tax

receipt or electricity bill evidencing continued occupation of the

premises prior to issuance of demand notice under section 13(2)

of SARFAESI. 1st Respondent has only relied on documents

showing deposit of rent with Rent Controller from January 2022

to December 2022, that is, after demand notice was issued by the

Appellant. Mere reference to some pre­existing tenancy in the sale

deed or issuance of letter of attornment by 2 nd Respondent (who

is also the borrower) unsubstantiated by independent and

convincing possessory evidence would not establish a compelling

case of pre­existing tenancy in favour of 1 st Respondent. Given

this situation, institution of the ejectment suit by 2 nd Respondent

Page 12 of 14 may not be a determining factor as the possibility of setting up a

sham and collusive suit to defeat the claim of the Appellant

cannot be ruled out.

24. High Court failed to consider these relevant aspects and illegally

directed restoration of status quo ante. High Court also lost sight

of the conduct of the 1st Respondent in failing to take prompt

steps to protect his interest in the secured asset. Appellant had

on 02.12.2021 published notice of taking symbolic possession of

the secured asset in two leading newspapers and also pasted the

notice in a conspicuous place on the secured asset. In spite of

such publication, 1st Respondent did not bother to intimate the

Appellant with regard to his pre­existing tenancy rights or

approach the DRT.

25. Thereafter, on 19.07.2023 intimation notice regarding taking over

physical possession had been pasted on the secured asset. Even

then 1st Respondent remained indifferent. Only after physical

possession had been taken over by the Appellant, did he

approach the DRT for restoration of possession. A mandatory

order restoring status quo ante necessitates a compelling cast

Page 13 of 14 iron case which 1st Respondent has failed to establish. His

indifferent conduct and failure to produce rent receipts and/or

other evidence regarding continued possession prior to issuance

of demand notice under section 13(2) of SARFAESI does not

justify a mandatory order.

26. In light of the aforesaid discussion, we allow the appeal and

set aside the impugned order passed by the High Court and

direct status quo in respect of the secured asset till the

disposal of securitization application18. The application shall be

disposed of within 2 months from the date of communication

of this order without granting unnecessary adjournment to

either of the parties.

27. Pending applications, if any, shall stand disposed of.

….……..…..……...……………………….J. (PAMIDIGHANTAM SRI NARASIMHA)

….……..…..……...……………………….J. (JOYMALYA BAGCHI) New Delhi, July 15, 2025.

18 No.737/2023 Page 14 of 14