In the recent years of the (already old) history of Supreme Court of India the case PNB Housing Finance Limited versus Sh. Manoj Saha & Anr.
gives much needed clarity on the conflict between Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the state rent control laws that especially relate to the rights of tenants in secured assets. Issued in July 15, 2025 by Justice Joymalya Bagchi, the judgment is against a High Court order by which the court had asked the restoration of possession of a secured asset to a tenant.
Practical Facts on the Conflict
It all started with a property quabble in one of the flats of 1 Allenby Road Kolkata of 450 sq.ft. covering the first floor. The respondent number one is Sh. Manoj Saha is supposedly a tenant of this property who previously signed a tenancy agreement with this house on unregistered basis and for a period of five years in 1987 with the landlord M/s Janapriya Finance and industrial Investment (India) Pvt. Ltd. The tenancy term expired in the year 1992 but Sh. Saha argued that he remained a monthly-tenant.
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The secured asset was sold by the original landlord to the second respondent in the year 2007. Later on, Sh was requested by the second respondent who is the new landlord. Saha to rent by letter of attornment of 4 th march 2008 and Sh. Saha had declared that he had been paying rent and staying in the premises as a tenant.
In 2017, the second respondent availed a loan (secured by the property) against the PNB Housing Finance Limited (the Appellant). After the Loan account turned into a Non-Performing Asset (NPA), the PNB Housing Finance Limited gave a demand under Section 13(2) of the SARFAESI Act on July 13, 2021, to pay off more than Rs.3 crores. Although the notice was sent, there was absence of payment.
The Appellant took over the secured asset symbolically under Section 13(4) of SARFAESI on December 2, 2021, and gave a public notice in accordance with rules. The Appellant filed the application with the District Magistrate seeking physical possession on April 8, 2022, and the same was granted. A direction was issued by the Debt Recovery Tribunal (DRT) on the aspect of service of a prior notice, and as a result, the Deputy Magistrate took physical possession on the same, which was later delivered to the Appellant on August 2, 2023.
Sh. On August 23, 2023, Manoj Saha indicated to the Appellant his claim of tenancy and later filed a securitization application, filed at the DRT, seeking inter alia restoration of possession. The DRT had denied his request of interim relief since the tenancy claim was founded based on an unregistered instrument and neither the borrower nor the tenant had given information to the Appellant regarding the tenancy when he/she created the mortgage.
Sh. Saha appealed the decision of the DRT to the High Court that upheld the decision basing it on a previous case of
Harshad Govardhan Sondagar versus. International Assets Reconstruction Company Limited and Ors., the restitution of possession was made in favor of the tenant and it was stressed that a person in occupation could not be deprived of possession without any due process of law. PNB Housing Finance Limited moreover appealed against this High Court order to the Supreme Court.
Important Legal Problems and the Court Analysis
There were some underlying concerns which were dealt with by the Supreme Court. First it faulted the High Court on allowing the case in terms of Article 227 of the Constitution especially since there was an appeal procedure under Section 18 of the SARFAESI Act. The Court pointed out that SARFAESI Act had been amended in 2016 and now in Section 17(4A), special provision has been made in the form of a lessee/tenant to file application in the DRT against action taken under Section 13(4) and also that an appeal could be taken to the appellate tribunal under Section 18. Hence, the High Court did not have to resort to the use of the information contained in the decision.
A decision of the Harshad Govardhan Sondagar basing the pre-amendment law on lack of statutory remedy was held to be faulty.
Secondly, the Supreme Court entered deep waters in the interplay between the SARFAESI Act on one hand and the rent control legislation on the other esp. in the context of the rights of rent-paying tenants in case of an unregistered or oral agreement. The Court re examined its precedents set out.
Magic Man Harshad Govardhan Sondagar
Vishal N. Kalsaria v. Ors.. Bank of India. While
Harshad Govardhan Sondagar case believed that a previous lease at an instrument which was recorded cannot be considered by the SARFAESI Act the agenda further opined that, in case of a tenancy in which the claim is raised by a verbal agreement or an instrument that is unregistered then the term of such tenancy must not pass one year and that after a Section 13(2) notice a tenant is not entitled to receive possession of any duration beyond one year.
Vishal N. Kalsaria adopted an exception to tenancies that took their origin under rent laws with contention that non-obstante clause in SARFAESI (Section 35) could not prevail over the statutory benefits of tenants under the rent control enactments. But the highest court observed that a panel of three judges stated in the case.
Bajarang Shyamsunder Agarwal v Central Bank of India and Anr. had not been agreed like
Vishal N. Kalsaria on such limited application of the non-obstante clause, the application which is broader in scope.
Bajarang Shyamsunder Agarwal clarified the burden lies on the tenants who present their claims based on oral or unregistered agreements to provide documentary evidence in the form of rent receipts, tax receipts, and electricity bills so as to prove the existence of valid tenancy. Those too would not be more than one year (starting with the distribution of Section 13(2) notice) after which a tenant would be held as a tenant at sufferance.
Choice and Reason
Importantly, Supreme Courts decided not to go deeper into the discussion of the effect of non obstante clause on the rent laws, hearing the evidence produced by Sh. Manoj Saha on his previous tenancy is not convincing. Although he claims that he has been a tenant since the year 1987, Sh. Saha has also not brought into the market a single rent receipt, tax receipts, and electricity bills before the issue of the demand notice of Section 13(2) of SARFAESI which indicated continuous occupation. The only document he submitted were Rent deposits with Rent Controller throughout the period of January 2022 to December 2022.
this was after the Appellant had issued a demand notice.
The Court ruled that there was no sufficient evidence to prove possession of a pre-existing tenancy, when making reference to a pre-existing tenancy to the sale deed, or a letter of attornment signed by the borrower (the second respondent). No possibility of a collusive action of the tenant and the borrower against the secured creditor could be eliminated.
In addition, Supreme Court emphasized Sh. The apathetic behavior of Saha. In spite of the fact that on December 2, 2021, the Appellant published notifications about symbolic possession in the most important publishing houses and pasted notifications on symbolic possession on the secured asset, and subsequently, on July 19, 2023, he pasted on the secured asset some notification relating to physical possession, Sh. Saha was not quick to inform the Appellant of his right to be a tenant or move to the DRT. He got involved with the DRT after physical possession was established.
Since there was no sufficient evidence of a previous and viable tenancy and the first respondent was slow in action, the Supreme Court decided that there was no justification in granting an order of reinstatement of status quo ante. It was therefore granted leave of appeal which resulted in the order made by the High Court being overturned. The application of securitization made by Sh. was instructed by the Supreme Court to Ch. Manoj Saha (No.737/2023) be set aside after two months – counted after the date of communication of this order, without in vain adjournment. This decision emphasizes the quality of tangible kitchens in the claim of tenancy, particularly against the appeal enforcement procedures under the process of SARFAESI Act, and highlights how to address the grievances accordingly.
