In a judgment that firmly closes a long-running debate, the Supreme Court of India (“SC“) in British Motor Car Company (1939) Ltd. v. M/s Hindustan Commercial Bank Ltd. (since merged into Punjab National Bank) & Anr., Civil Appeal No. 5714 of 2012, decided on July 9, 2026 (“Judgment“), held that a tenant cannot escape Section 14(1)(b) of the Delhi Rent Control Act, 1958 (“DRC Act“) merely because possession passed to a third party through a statutory bank amalgamation rather than a voluntary bargain.

A Division Bench of Hon’ble Mr. Justice Sanjay Karol and Hon’ble Mr. Justice Nongmeikapam Kotiswar Singh restored the eviction decree and set aside the judgment of the High Court of Delhi dated March 12, 2012, holding that what matters is the fact of parting with possession, not the reason behind it.

Background.

In 1947, British Motor Car Company (1939) Ltd. (“Landlord“) let out two premises on the ground floor and the mezzanine floor of Pratap Building, N-Block, Connaught Circus, New Delhi (“Tenanted Premises“) to Hindustan Commercial Bank (“HCB“) at a rent of Rs. 585 per month for non-residential use. For nearly four decades the arrangement was unremarkable. That changed on December 18, 1986, when the Government of India issued a Gazette Notification under Section 45(7) of the Banking Regulation Act, 1949 (“BR Act“), sanctioning a scheme framed by the Reserve Bank of India (“RBI“) under which HCB was amalgamated with Punjab National Bank (“PNB“) with effect from December 19, 1986. On that appointed date all rights and liabilities of HCB vested in PNB, and the transferee bank came into possession of the Tenanted Premises.

The Landlord treated this as parting with possession and instituted an eviction petition under Section 14(1)(b) read with Section 14(1)(j) of the DRC Act, contending that HCB had sublet, assigned or parted with possession in favour of PNB without its written consent, so that PNB stood as an unauthorised sub-tenant liable to be evicted.

The Additional Rent Controller, by order dated November 3, 1995, dismissed the petition, holding that the amalgamation scheme carried the status of a statute, was binding on the Landlord, which is a law providing for amalgamation of the two banking companies in public interest and thus protected under Article 31- A(1) (C) of the Constitution of India, and that PNB is the successor-in-interest, in pursuance of the scheme had become a tenant by operation of law, with no subletting, assignment or parting with possession. The Additional Rent Control Tribunal, by order dated May 21, 2001 in RCA No. 22/2000, reversed and decreed eviction, holding that the DRC Act, a later and special enactment overriding any contrary law or contract, prevailed, so that the Landlord’s prior written consent was a must before any subletting, assignment or parting with possession, irrespective of the merger. The High Court, by the impugned judgment dated March 12, 2012 relying on Asha Rohatgi v. Erstwhile New Bank of India^[1], set aside the decree, characterizing the merger as an involuntary act of the tenant flowing from a Gazette Notification over which it had no control. The Landlord appealed to the Supreme Court.

Submissions before SC.

(i)     Appellant’s Contentions.

For the Landlord, the learned senior counsel argued that Section 14(1)(b) of the DRC Act draws no distinction between voluntary and involuntary transfers of possession, and that on amalgamation HCB ceased to exist while possession and tenancy rights vested in PNB, satisfying the provision, relying on Singer India Ltd. v. Chander Mohan Chadha^[2] and Parasram Harnand Rao v. Shanti Parsad Narinder Kumar Jain^[3]. An RBI scheme under Section 45 of the BR Act was administrative and, following K.I. Shephard v. Union of India^[4], could not be treated as a statute so as to displace Section 14(1)(b). The High Court had also wrongly relied on Asha Rohatgi, which arose under Section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (“Acquisition Act“), held legislative in New Bank of India Employees’ Union v. Union of India^[5], unlike the administrative Section 45 scheme.

ii.     Respondents’ Contentions.

For the respondents, the amalgamation was in no sense a voluntary act, agreement or assignment by the tenant, but was carried out pursuant to a scheme framed by the RBI and sanctioned by the Government under Section 45 of the BR Act, so that the vesting of tenancy rights in PNB flowed from a statutory scheme. Relying on G. Sridharamurti v. Hindustan Petroleum Corpn. Ltd.^[6], Hindustan Petroleum Corpn. Ltd. v. Shyam Coop. Housing Society^[7] and Asha Rohatgi, they argued that where tenancy rights vest in another entity by force of statute, such vesting is a transfer by ‘statutory operation’, not a ‘voluntary act of assignment of interest intra-vivos’.

The SC’s Analysis.

The SC framed a single, pointed question: whether the amalgamation of HCB with PNB, effected pursuant to a scheme framed under the BR Act, attracts Section 14(1)(b) of the DRC Act OR NOT.

(i)     The two ingredients and the meaning of parting with possession.

Turning to Section 14(1)(b), SC distilled two ingredients that must coexist before eviction: first, that the tenant has sub-let, assigned or parted with possession of the whole or any part of the premises; and second, that this was without the landlord’s written consent. On the meaning of parting with possession, SC drew on Jagan Nath v. Chander Bhan^[8], which explained that it means giving possession to someone other than the lessee, requiring the tenant to divest itself not only of physical possession but also of the right to possession. So long as the tenant retains the right to possession, there is no parting with possession within the clause.

(ii)    Amalgamation and the fate of the transferor.

The Court explained amalgamation as the fusion of two or more companies into one, so that the transferor ceases to exist as a separate entity. Citing Singer India Ltd. and Saraswati Industrial Syndicate Ltd. v. CIT^[9], it noted that on merger the transferor loses its identity from the date the amalgamation takes effect. Thus, on December 19, 1986, HCB ceased to be, and everything it held, tenancy rights included, passed to PNB.

(iii)   Voluntary or involuntary: a distinction without a difference.

The heart of the Judgment is its treatment of the voluntary versus involuntary debate. Reviewing Parasram Harnand Rao, SC reiterated that Section 14(1)(b) is wide enough to cover not just a sublease but an assignment or any other mode of parting with possession, and does not exclude even an involuntary sale. This was reinforced by Singer India Ltd., in which it was held by SC that the Section’s applicability depends on the occurrence of a factual situation, and that whether it is a voluntary act of the tenant, and the reasons for it, are wholly irrelevant.

Analyzing the judicial precedents, SC held that Section 14(1)(b) “is wide enough to encompass every mode by which possession or tenancy rights of the demised premises are transferred from the original tenant to another entity“, and that once the possession of the tenanted premises together with  the accompanying rights, passes to an entity other than the original tenant without written consent of the landlord, and the tenant loses its identity and control of the tenanted premises, the Section 14(1)(b) of the DRC Act stands automatically attracted. SC further observed that “Therefore, what is material is only that- (a) there is a transfer of tenancy rights and possession of the tenanted premises; and (b) such transfer is done without the written consent of the Landlord“.

SC also observed  that in the present case, it was undisputed that upon the amalgamation taking into effect, the original tenant, viz.  HCB ceased to exist, and all its rights, liabilities, assets and interests, including the tenancy rights qua the tenanted premises stood vested in PNB. As a result, HCB parted with the tenanted premises and PNB came to occupy the same. It is equally undisputed that such a transfer took place without the written consent of the Landowner. SC also invoked Bhairon Sahai v. Bishamber Dayal^[10], holding that parting with possession without the Landlord’s consent was itself sufficient for eviction, without going into subletting or assignment.

(iv)   Is a Section 45 scheme legislative?

The respondents’ remaining stronghold was that an RBI scheme under Section 45 of the BR Act is legislative, so that a statutory vesting could not be equated with assignment or parting with possession. SC found this misconceived. Following K.I. Shephard, SC held that scheme-making under Section 45 is administrative, not legislative, and that sanction by the Central Government and placement before both Houses of Parliament does not make it legislative. A legislative act creates a general rule of conduct without reference to particular cases, whereas an administrative act applies a general rule to a particular case. The RBI scheme therefore could not be accorded the status of a statutory enactment so as to override Section 14(1)(b).

SC’s Decision.

SC held that the amalgamation of the original tenant HCB with PNB rendered PNB liable to be evicted under Section 14(1)(b) of the DRC Act, and allowed the appeal. The impugned judgment of the High Court dated March 12, 2012 was set aside, and the eviction decree passed by the Additional Rent Control Tribunal on May 21, 2001 was restored. Mindful that the respondents had occupied the premises for a very long time, the Court granted time until January 31, 2027 to hand over vacant possession, subject to the respondents furnishing an undertaking within four weeks and continuing to pay rent on contractual terms, failing which the Landlord would be at liberty to proceed in accordance with law.

Conclusion.

This matter is certainly a landmark illustration of the famous maxim ‘justice delayed is justice denied”. The landlord had to go from pillar to post and litigate for nearly 40 years to secure possession of its most valuable and sought-after commercial property in Delhi from a tenant (ironically a public sector bank) who was paying a negligible rent.

Nonetheless, the Judgment is a crisp reaffirmation of a principle blurred through repeated re-litigation. Its central message is that Section 14(1)(b) of the DRC Act asks a factual question, not a moral one: has possession, along with the right to it, moved from the original tenant to a stranger without the landlord’s written consent. If it has, the ground for eviction is made out, and the tenant cannot shelter in the plea that the transfer was forced upon it by a statutory scheme. Equally significant is SC’s reiteration that a Section 45 scheme is administrative and cannot masquerade as legislation to displace rent control protections, while Acquisition Act schemes stand on a different plane.

For landlords, the decision reassures that the shield of Section 14(1)(b) does not dissolve the moment a corporate reorganisation is dressed up as an act of the State. For tenants navigating mergers and amalgamations, it is a pointed reminder that written consent, and not the elegance of the legal mechanism through which possession changes hands, remains the key that keeps the tenancy intact.

[1] Asha Rohatgi v. Erstwhile New Bank of India through General Manager PNB 2005 SCC OnLine Del 464.

[2] Singer India Ltd. v. Chander Mohan Chadha (2004) 7 SCC 1.

[3] Parasram Harnand Rao v. Shanti Parsad Narinder Kumar Jain (1980) 3 SCC 565.

[4] K.I. Shephard v. Union of India (1987) 4 SCC 431.

[5] New Bank of India Employees’ Union v. Union of India (1996) 8 SCC 407.

[6] G. Sridharamurti v. Hindustan Petroleum Corpn. Ltd. (1995) 6 SCC 605.

[7] Hindustan Petroleum Corpn. Ltd. v. Shyam Coop. Housing Society (1988) 4 SCC 747.

[8] Jagan Nath v. Chander Bhan (1988) 3 SCC 57.

[9] Saraswati Industrial Syndicate Ltd. v. CIT 1990 Supp SCC 675.

[10] Bhairon Sahai v. Bishamber Dayal (2017) 8 SCC 492.