British Motor Car Co. v. Hindustan Commercial Bank (2026): a statutory bank merger is 'parting with possession' under the Delhi Rent Control Act

In British Motor Car Company (1939) Ltd. v. M/s Hindustan Commercial Bank Ltd. (since merged into Punjab National Bank) & Anr. (2026 INSC 671), a Bench of Justices Sanjay Karol and Nongmeikapam Kotiswar Singh (Justice Karol writing) allowed a landlord's appeal and restored a decree of eviction against Punjab National Bank, holding that a statutorily compelled bank merger is no answer to a claim under Section 14(1)(b) of the Delhi Rent Control Act, 1958. The judgment matters far beyond its facts: it puts every old tenancy held by a bank on notice that a Section 45 amalgamation can, by itself, ripen into a ground for eviction unless the landlord's written consent is separately obtained.

The dispute

In 1947 the appellant, British Motor Car Company, let out an area of 2443.75 sq. ft. on the ground floor and 1150.25 sq. ft. on the mezzanine floor of Pratap Building, N-Block, Connaught Circus, New Delhi, to Hindustan Commercial Bank (HCB) at a monthly rent of Rs. 585, for non-residential purposes.

On 18 December 1986, the Government of India issued a Gazette Notification under Section 45(7) of the Banking Regulation Act, 1949 amalgamating HCB with Punjab National Bank (PNB). The notification prescribed 19 December 1986 as the date on which the amalgamation scheme — prepared by the Reserve Bank of India under Section 45(4) of the BR Act — would take effect. On that date, all rights and liabilities of HCB stood vested in PNB, which thereupon came into possession of the tenanted premises.

The landlord filed an eviction petition (E-161/1987) in 1987 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, making PNB an unauthorised sub-tenant liable to be evicted.

The road through the courts below

The Additional Rent Controller dismissed the petition in 1995, reasoning that the amalgamation scheme, once sanctioned by the Central Government and made binding by Section 45(8) of the BR Act, acquired "the status of a Statute itself," leaving the landlord no room to invoke Section 14(1)(b). On the landlord's appeal, the Additional Rent Control Tribunal reversed that view in 2001 and decreed eviction, holding that the DRC Act — a later special enactment opening with a non obstante clause — prevailed, and that the tenant had breached Section 14(1)(b) by parting with possession without written consent "irrespective of the fact that the banking merger... was brought into effect vide the concerned banking statute."

PNB then moved the Delhi High Court under Article 227. Relying on Asha Rohatgi v. Erstwhile New Bank of India, the High Court set aside the eviction decree in 2012, treating the merger as an involuntary act flowing from a Gazette Notification over which the tenant had no control, so that the ground of subletting was "not available to the landlord." The landlord's appeal to the Supreme Court followed.

The short question

The Court framed a single issue: 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. That provision permits recovery of possession where a tenant has "sub-let, assigned or otherwise parted with the possession of the whole or any part of the premises without obtaining the consent in writing of the landlord." Its two ingredients, the Court reiterated, are (1) a subletting, assignment or parting with possession, and (2) the absence of the landlord's written consent.

Section 14(1)(b) does not distinguish voluntary from involuntary transfers

The core of the reasoning is that the statutory text draws no line between transfers a tenant chooses and transfers a tenant suffers. Tracing the meaning of "parted with possession" through Jagan Nath v. Chander Bhan — where it was held that there must be a "vesting of possession by the tenant in another person by divesting himself not only of physical possession but also of the right to possession" — the Court found that test squarely met: on 19 December 1986 HCB ceased to exist and all its rights, liabilities, assets and interests, including the tenancy, stood vested in PNB.

The Court then leaned on two precedents interpreting the very provision. In Parasram Harnand Rao v. Shanti Parsad Narinder Kumar Jain it had held that Section 14(1)(b) "is wide enough not only to include any sublease but even an assignment or any other mode by which possession of the tenanted premises is parted," and "does not exclude even an involuntary sale." In Singer India Ltd. v. Chander Mohan Chadha, a three-judge Bench had held that the provision turns on "occurrence of a factual situation," and that "whether it is a voluntary act of the tenant or otherwise and also the reasons for doing so are wholly irrelevant."

On that footing, both ingredients were undisputedly met: possession together with the tenancy passed from HCB to PNB, and it did so without the landlord's written consent. The conclusion was "further fortified" by Bhairon Sahai v. Bishamber Dayal, that parting with possession without consent is itself sufficient for eviction, without reaching the separate question of subletting or assignment.

A Section 45 scheme is administrative, not legislative

PNB's principal defence was that the RBI-framed scheme was legislative in nature, so that the vesting of the tenancy occurred by statutory operation rather than by any act of assignment. The Court rejected this, relying on K.I. Shephard v. Union of India, which had "categorically held that the scheme-making process under Section 45 of the BR Act is administrative in nature and not legislative." That a scheme must be sanctioned by the Central Government and laid before both Houses of Parliament under Section 45(11) does not make it legislation — as K.I. Shephard explained, the same laying requirement attaches to orders removing difficulties, so it "is not a relevant test."

The decisions PNB relied on to the contrary were distinguished on this axis. G. Sridharamurti and Shyam Coop. Housing Society turned on the Esso (Acquisition of Undertakings in India) Act, 1974 — a genuine legislative enactment that expressly vested tenancy rights in the Central Government — and so had no application. Critically, the Court held the High Court's reliance on Asha Rohatgi to be misplaced: that decision arose under Section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, which New Bank of India Employees' Union v. Union of India had held to be legislative precisely because, unlike a BR Act scheme, an Acquisition Act scheme becomes effective only after Parliament agrees to it with such modifications as it makes. The two provisions were "not pari materia."

Why it matters

For banks and their landlords, the practical reach of this judgment is considerable. Section 45 of the BR Act is the machinery through which the RBI restructures or amalgamates failing banks, and every such compulsory merger transfers the transferor bank's leasehold premises to the transferee. British Motor Car Company holds that this transfer — however involuntary, however much in the public interest (the Court declined to reach the Ganesh Bank of Kurundwad public-interest argument, having found Section 14(1)(b) attracted the moment possession passed) — is "parting with possession" that exposes the surviving bank to eviction wherever the tenancy predates the merger and the landlord never consented in writing. The lesson for transferee banks is concrete: written landlord consent for the continuation of each tenancy should be secured as part of, or immediately following, any Section 45 amalgamation, because the statute will not treat the merger as its own excuse.

The Court allowed the appeal, set aside the High Court's 2012 order, and restored the Tribunal's decree of eviction. Given PNB's long occupation, it granted time until 31 January 2027 to deliver vacant possession, subject to an undertaking to that effect within four weeks and continued payment of rent on contractual terms.

Related reading

• Jindal Equipment Leasing v. CIT: amalgamation and the character of business income
• Banking and SARFAESI: a May–June 2026 roundup
• Makardhwaj Ram v. Jagdish Rai: constructive res judicata in property litigation

Sources

• Supreme Court of India, British Motor Car Company (1939) Ltd. v. M/s Hindustan Commercial Bank Ltd. (since merged into Punjab National Bank) & Anr., 2026 INSC 671 (Judgment dated 9 July 2026; Civil Appeal No. 5714 of 2012)
• Delhi Rent Control Act, 1958, Section 14
• Banking Regulation Act, 1949, Section 45