High Court Order Restoring Possession to Alleged Tenant Set Aside; Status Quo Directed Pending DRT Adjudication

A Bench of Justices Pamidighantam Sri Narasimha and Joymalya Bagchi heard an appeal by PNB Housing Finance Limited challenging a Kolkata High Court order that directed restoration of possession of a secured commercial premises to an alleged tenant after the bank had taken possession under SARFAESI. The primary question before the Court was whether the High Court erred in exercising revisional jurisdiction under Article 227 when the dispute fell within the statutory remedy under the SARFAESI Act and whether the respondent had established pre‑existing tenancy rights sufficient to defeat the bank’s possession.

The Supreme Court allowed the appeal, set aside the impugned High Court order and directed maintenance of status quo in respect of the secured asset until disposal of the securitization application by the Debt Recovery Tribunal. The Court emphasised that, after the 2016 amendment to SARFAESI, tenants/lessees could approach the DRT under section 17(4A) and that interference by High Courts under Articles 226/227 should be rare in such matters. The Court, in its reasoning, observed: “We choose not to delve into the aforesaid issue further as we are not convinced with the evidence adduced by 1st Respondent before the DRT with regard to prior tenancy. Although 1st 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 pre existing tenancy in the sale deed or issuance of letter of attornment by 2nd Respondent (who is also the borrower) unsubstantiated by independent and convincing possessory evidence would not establish a compelling case of pre existing tenancy in favour of 1st Respondent. Given this situation, institution of the ejectment suit by 2nd Respondent 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.” The Court directed the DRT to dispose of the securitization application within two months from communication of the order, without granting unnecessary adjournments.

Background The dispute arose over a 450 sq. ft. first‑floor space at 1 Allenby Road, Kolkata. The 1st Respondent claimed tenancy originally created in 1987 by an unregistered five‑year lease and asserted continued monthly tenancy after expiry. The property was sold by the original landlord to the 2nd Respondent, who later borrowed from the appellant bank and defaulted. The bank issued a demand notice under section 13(2) of SARFAESI on July 13, 2021, and, following non‑payment, took symbolic possession on December 2, 2021 and physical possession through the District Magistrate on August 2, 2023 after due notice.

The 2nd Respondent instituted an ejectment suit against the 1st Respondent. The bank invoked SARFAESI remedies; the 1st Respondent and the 2nd Respondent separately filed securitization applications before the DRT contesting the bank’s measures. The DRT declined interim relief to the 1st Respondent and proceeded to final hearing. The High Court, invoking earlier precedent and concerned with the occupant’s asserted use of the premises as a medical chamber, allowed a revisional petition and ordered restoration of possession, observing that “A doctor who was in occupation of the premises and running his chamber ... could not be thrown away without due process of law.”

On appeal, the Supreme Court reviewed the post‑2016 statutory scheme that expressly enabled tenants to approach the DRT (section 17(4A)) and noted the line of decisions on the interplay between SARFAESI and rent/transfer laws (including Harshad Govardhan Sondagar, Vishal N. Kalsaria, Bajarang Shyamsunder Agarwal and authorities on protection of unregistered tenancy). The Court found that the 1st Respondent had failed to produce independent possessory evidence (rent receipts, tax or electricity bills) predating the bank’s demand notice and that the High Court had not correctly weighed these shortcomings when ordering restoration. The Supreme Court therefore allowed the appeal, set aside the High Court order and directed status quo until the DRT disposed of the securitization application within two months. Pending applications stood disposed.

Case Details: Case No.: 2025 INSC 847 (Arising out of SLP (C) No.7288 of 2024) Case Title: PNB Housing Finance Limited v. Sh. Manoj Saha & Anr. Appearances: For the Petitioner(s): Mr. Suri (Counsel for Appellant) For the Respondent(s): Mr. Gupta (Counsel for Respondent)