Exclusive DRT Jurisdiction & Evidentiary Burden for Unregistered Tenancies under the Post-2016 SARFAESI Regime – Commentary on PNB Housing Finance Ltd. v. Manoj Saha (2025)

1. Introduction

The Supreme Court’s decision in PNB Housing Finance Limited v. Manoj Saha, 2025 INSC 847, deals with the perennial conflict between tenant-protections under rent-control statutes and secured-creditor rights under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI). The appeal arose from an interim order of the Calcutta High Court which, exercising supervisory jurisdiction under Article 227, directed the appellant-bank to restore possession of a mortgaged property to an alleged tenant (the 1^st respondent). Key questions included:

Whether, after the 2016 insertion of Section 17(4A) in SARFAESI, High Courts should interfere when tenants challenge possession notices.
What evidentiary threshold applies to an oral or unregistered tenancy set up to resist measures taken under Section 13(4).
How pre-existing Supreme Court precedents on tenancy vis-à-vis SARFAESI are to be reconciled post-amendment.

2. Summary of the Judgment

The Supreme Court (Justices P.S. Narasimha and Joymalya Bagchi) allowed the bank’s appeal, holding that:

The Calcutta High Court ought not to have invoked Article 227 because an effective statutory appellate remedy under Section 18 SARFAESI exists against an order of the Debt Recovery Tribunal (DRT).
Unregistered or oral tenancies rely on Section 107 of the Transfer of Property Act (TPA) and cannot, by themselves, defeat a secured creditor’s action unless robust evidence of pre-existing tenancy is produced. The respondent had failed to furnish such evidence.
The High Court’s mandatory order directing restoration of possession was unsustainable; instead, status quo would continue pending final disposal of the tenant’s Securitisation Application (SA) by the DRT, to be concluded within two months.

3. Analysis

3.1 Precedents Cited & Their Influence

Harshad Govardhan Sondagar v. IARC (2014) – Clarified that leases created after issue of Section 13(2) notice without creditor consent are void under Section 65-A TPA read with Section 13(13) SARFAESI, but registered pre-existing leases survive. The High Court relied on its observation that tenants earlier lacked DRT remedy, a position obsolete after 2016.
Vishal N. Kalsaria v. Bank of India (2016) – Carved out an exception for statutory tenancies protected by rent laws, limiting SARFAESI’s non-obstante clause. The Supreme Court in the present case notes—but does not overrule—that Kalsaria was later diluted.
Bajarang Shyamsunder Agarwal v. Central Bank (2019) – Three-Judge Bench held Section 35 SARFAESI overrides rent laws except where a bona fide registered tenancy predates the mortgage; tenants under unregistered agreements become tenants-in-sufferance one year after the Section 13(2) notice. The Court uses this to place the burden of proof squarely on the tenant.
Varimadugu Obi Reddy (2023) & South Indian Bank v. Naveen Mathew Philip (2023) – Reiterated the discipline that High Courts should rarely interfere mid-stream when SARFAESI provides efficacious remedies.
V. Dhanapal Chettiar (Constitution Bench, 1979) & Anthony v. K.C. Ittoop (2000) – Established that termination of contractual tenancy does not ipso facto extinguish the statutory tenancy under rent acts. The present bench holds these do not consider SARFAESI’s specific override clause.

3.2 Court’s Legal Reasoning

a) Jurisdictional Hierarchy
– Section 17(4A) (inserted 01-09-2016) expressly allows tenants to approach DRT against Section 13(4) measures.
– Section 18 creates an appeal to DRAT, forming a complete code.
– Therefore, High Court intervention should follow the principle of self-imposed restraint.

b) Evidentiary Burden
– An oral/unregistered lease can subsist for a maximum of one year (Sections 106 & 107 TPA).
– To claim protection beyond that, the tenant must produce cogent documentary evidence: rent receipts, municipal tax, electricity bills etc.
– Respondent’s evidence commenced only after the Section 13(2) demand notice, raising suspicion of collusion with the borrower-landlord.

c) Mandatory Relief Standard
– Restoration of possession is a mandatory injunction; courts grant it only on a cast-iron case.
– The respondent’s delay (did not contest symbolic possession in 2021; waited till 2023) and weak evidence failed this standard.

3.3 Impact of the Judgment

Streamlines SARFAESI litigation by emphasizing that tenant disputes must be confined to DRT/DRAT, curbing proliferation of Article 226/227 petitions.
Raises the evidentiary bar for unregistered tenancies: mere pleas or self-serving documents will not defeat secured creditors’ rights.
Signals deference to financial stability: accelerates asset-recovery, aligning with the legislative intent behind SARFAESI.
Clarifies the status of conflicting authorities by implicitly privileging Bajarang Agarwal over Vishal Kalsaria.
May prompt borrowers and tenants to register leases and intimate lenders at the time of mortgage to preserve their occupation rights.

4. Complex Concepts Simplified

SARFAESI Act: A 2002 statute enabling banks to enforce security interests without court intervention.
Section 13(2) Notice: Legal demand served on the borrower requiring payment within 60 days.
Section 13(4) Measures: Steps like taking possession or selling the secured asset after borrower’s default.
Symbolic vs. Physical Possession: Symbolic: bank declares control via public notice; Physical: actual takeover, often with Magistrate’s help under Section 14.
Non-obstante Clause: A legislative device (“notwithstanding anything contained in…”) giving the Act overriding effect.
Tenant-in-Sufferance: A person who remains in occupation after lawful termination of tenancy; has bare permission, no enforceable right.

5. Conclusion

The Supreme Court in PNB Housing Finance Ltd. v. Manoj Saha cements two crucial propositions:

Procedural Discipline: Post-2016, tenants have a specialised pathway under SARFAESI, making High Court interference exceptional.
Substantive Threshold: Unregistered / oral tenancies cannot casually thwart secured creditors; rigorous proof is essential, and even then protection is time-bound.

The decision harmonises earlier discordant lines of authority and advances certainty in asset-recovery jurisprudence. Going forward, litigants must tailor their strategy to the DRT framework, and tenants must maintain diligent documentary trails if they wish to safeguard occupancy against enforcement actions.