A financial corporation auctioned a defaulting borrower’s building and then told the shopkeepers who were tenants in it to leave, for the single reason that the property had been sold. The Jharkhand High Court held that this is not how tenancy works. A change of ownership does not end a tenancy, and the fact of sale is no ground to evict; a tenant can be removed only on the grounds the rent-control statute allows. The corporation, having taken possession, becomes the landlord for the time being, and the tenants must pay rent to it, until the building passes to a further buyer, who inherits the same position.
Ranchi: The Jharkhand High Court has set aside a notice issued by the Bihar State Financial Corporation directing tenants of an auctioned commercial premises to vacate on the ground that the property had already been sold, holding that the sale of a property cannot be a ground to evict its tenants, who can be removed only in accordance with the Jharkhand Building (Lease, Rent and Eviction) Control Act [Kanti Lal Jain and Others v. State of Jharkhand and Others].
Justice Ananda Sen disposed of the writ petition filed by five tenants, quashing the eviction notice and laying down the terms on which the tenancy would continue.
The background
The premises originally belonged to a hotel concern, which had taken a loan from the Bihar State Financial Corporation. On default, the Corporation auctioned the property. The petitioners were tenants, shop owners in the premises, none of whom had participated in the auction. After the auction was completed, the Corporation issued a notice in May 2017 directing the tenants to vacate, solely on the ground that the property had been sold. The tenants challenged that notice.
Sale is not a ground for eviction
The Court held the notice to be unsustainable in law. The fact that the property has been sold, it held, cannot be a ground to evict the tenants; the law of tenancy is governed by the Jharkhand Building (Lease, Rent and Eviction) Control Act, and only the grounds mentioned in that Act can lead to eviction. The Corporation, therefore, could not have issued a notice directing eviction on the bare ground of sale; it is for the landlord to seek eviction of the tenants in consonance with the rent-control statute.
Underlying the conclusion is the settled principle that a tenancy does not come to an end merely because the property changes hands; the transferee takes the property subject to the existing tenancy, and a tenant lawfully in possession cannot be dispossessed except by recourse to the grounds and procedure the rent law prescribes.
Who is the landlord now
Having held the eviction notice bad, the Court settled the practical arrangement going forward. Since possession of the property had been taken over by the Corporation, it held that for all practical purposes it is the Corporation that is in possession and should be treated as the landlord, until the property is transferred by it to any purchaser. The tenants, accordingly, are to pay rent to the Corporation; and if a tenant defaults, it will be open to the Corporation to take appropriate steps under the Jharkhand Building (Lease, Rent and Eviction) Control Act to evict the defaulter, that is, through the statutory route rather than by fiat.
Looking further ahead, the Court directed that if the Corporation transfers the building to any person in future, the tenants in occupation will pay rent to the new owner, and the Corporation is to inform the existing tenants accordingly. On these terms, the writ petition was disposed of.
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Why it matters
The order affirms a protection that matters most to the many small tenants, here shopkeepers, whose premises are auctioned by a lender when their landlord defaults on a loan. A borrower’s default and the consequent sale of the mortgaged property is a transaction between the lender and the borrower; it does not, by itself, dissolve the separate tenancies that subsist in the building. The purchaser at such a sale, whether the financial institution itself or a later transferee, takes the property with the tenants in place, and cannot treat the sale deed as a self-executing eviction order.
The Court’s insistence that eviction can proceed only under the rent-control statute is the heart of the decision. Rent-control legislation exists precisely to channel the ending of a tenancy through defined grounds, non-payment of rent, bona fide requirement, unlawful subletting and the like, and a defined procedure, and a lender-turned-owner is no more entitled to sidestep that framework than an ordinary landlord. The notice to vacate “because the property is sold” was, in substance, an attempt to bypass the rent law, and the Court declined to countenance it.
What gives the order its practical value is that it did not stop at quashing the notice but resolved the consequential questions the tenants would otherwise face: to whom rent is now payable, what happens on default, and what happens when the property is sold onward. By fixing the Corporation as the landlord in the interim, preserving its right to evict a genuine defaulter through the statutory route, and providing for the transfer of the landlord’s role to a future buyer, the Court left a workable arrangement in place rather than a bare declaration. For tenants of auctioned properties, the message is that their occupation is protected until it is ended lawfully; for purchasers, that acquiring the property means acquiring the landlord’s obligations, not a shortcut around them.
Case Title: Kanti Lal Jain and Others v. State of Jharkhand and Others [W.P.(C) No. 3104 of 2017]
Bench: Justice Ananda Sen, High Court of Jharkhand at Ranchi
Date of Order: September 7, 2026 | Neutral Citation: 2026:JHHC:26876
Appearances: Advocates Indrajit Sinha, Ashwini Priya and Sanjana Shrestha for the petitioners.
Status: Writ petition disposed of. Eviction notice quashed; the Corporation to be treated as landlord until onward transfer, with tenants to pay it rent and eviction of any defaulter to be pursued only under the rent-control Act.