One of the busiest cPanel servers that we are running refused to login through SSH with following message.
Server refused to allocate pty stdin: is not a tty
The server was returning standard incorrect password if tried with wrong password, but with correct password it was showing this error.
I found several posts where the problem was resolved after multiple retries and some times after reboot. In our case it was the reboot. This type of error ofcourse will need physical access of server so you better have to have a KVM or will need to seek data center help.