Supreme Court of India
DELHI DEVELOPMENT AUTHORITYversusCORPORATION BANK & ORS.
- Citation
- 2025 INSC 1161
- Decided
- 25 September 2025
- Disposal
- Appeal(s) allowed
- Bench
- SANJAY KUMAR
Holding
The e‑auction and subsequent sale were illegal as they violated the lease’s pre‑emptive right and statutory provisions, and the High Court’s dismissal on res judicata grounds was erroneous; therefore, the auction and sale were set aside and the Bank must refund the purchaser with interest.
Summary
The Delhi Development Authority (DDA) had allotted a plot to Sarita Vihar Club under a lease that gave DDA a pre‑emptive right to purchase and required Lieutenant Governor’s consent for any mortgage. The Club mortgaged the plot to Corporation Bank without such consent, defaulted on the loan and the Bank sought recovery under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The Recovery Officer issued an e‑auction notice without disclosing DDA’s encumbrance or the lease terms, violating Rule 53 of the Income‑Tax Act’s Second Schedule and Rule 16 of the 1962 Rules, and the auction was conducted despite DDA’s objections. DDA filed writ petitions challenging the legality of the auction, but the Delhi High Court dismissed them on the ground of res judicata/Section 11 CPC analogies. The Supreme Court held that the auction was per se illegal, the High Court erred in not examining its validity, and the doctrine of res judicata did not apply because the earlier petition was withdrawn without merits. Consequently, the e‑auction, sale confirmation, and sale certificate were quashed and the Bank was ordered to refund the amount deposited by the auction purchaser with 9% interest per annum. The appeal was allowed, restoring the auction purchaser’s money and affirming DDA’s right to enforce its pre‑emptive claim.
Issues considered
- Whether the e‑auction conducted by the Recovery Officer was illegal for violating the lease deed’s pre‑emptive right and the provisions of the Income‑Tax Act and its Rules.
- Whether the Delhi High Court erred in dismissing DDA’s writ petition on the basis of res judicata/Section 11 CPC analogies.
- Whether the auction purchaser is entitled to restitution and interest despite the illegal auction.
Legislation cited
- Code of Civil Procedure, 1908s. s.11
- Income Tax Act, 1961s. Rule 53 of Second Schedule
- Income Tax (Certificate Proceedings) Rules, 1962s. Rule 16
- Recovery of Debts Due to Banks and Financial Institutions Act, 1993s. s.19, s. s.29
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
Headnote
Issue for Consideration Whether in the facts and circumstances of the case, the auction was per se illegal being conducted in violation of the terms and conditions of the lease deed and the provisions of the Income Tax Act, 1961 and Income Tax (Certificate Proceedings) Rules, 1962; whether the the Writ Petition filed by the appellant-DDA without adverting to the validity of the auction; whether the e-auction conducted by the Recovery Officer, DRT, the confirmation of sale and sale certificate issued in favour of the Auction Purchaser ought to be quashed and set aside and the
Subjects
E-auctionE-auction noticeE-auction sale noticeAuction illegalIllegal mortgagePre‑emptive right to purchaseLease deedRecovery OfficerRes judicataConfirmation of saleSale certificateUnearned increaseSection 11 of Civil Procedure Code, 1908Principle of restitutionUnjust enrichmentBank to refund amount
Judgment
[2025] 9 S.C.R. 1559 : 2025 INSC 1161
Delhi Development Authority
v.
Corporation Bank & Ors.
(Civil Appeal No. 11269 of 2016)
25 September 2025
[Sanjay Kumar and Alok Aradhe,* JJ.]
Issue for Consideration
Whether in the facts and circumstances of the case, the auction
was per se illegal being conducted in violation of the terms and
conditions of the lease deed and the provisions of the Income
Tax Act, 1961 and Income Tax (Certificate Proceedings) Rules,
1962; whether the High Court erred in dismissing the Writ Petition
filed by the appellant-DDA without adverting to the validity of the
auction; whether the e-auction conducted by the Recovery Officer,
DRT, the confirmation of sale and sale certificate issued in favour
of the Auction Purchaser ought to be quashed and set aside and
the amount deposited by the Auction Purchaser with the bank be
returned to it.
Headnotes†
Recovery of Debts Due to Banks and Financial Institutions
Act, 1993 – s.29, 19 – Income Tax Act, 1961 – r.53 of Second
Schedule thereto – Income Tax (Certificate Proceedings)
Rules, 1962 – r.16 – Appellant-DDA allotted subject plot to
Respondent No.2-Club, lease deed executed – Subject plot
was mortgaged with the Bank, Club defaulted in payment of
the loan taken from the Bank – E-auction notice was issued
by the Bank without disclosing inter alia that DDA had an
encumbrance i.e. the claim for an amount of unearned increase
in respect of subject plot – Subject plot purchased by auction
purchaser – Writ Petition filed by DDA for setting aside the
e-auction conducted by the Recovery Officer in pursuance of
the e-auction notice and to set aside the acts and omissions
of the Bank and the club w.r.t the subject plot – High Court
dismissed the Writ Petition without adverting to the validity
of the auction – Challenge to:
* Author
1560 [2025] 9 S.C.R.
Supreme Court Reports
Held: 1.1 Under Clause 5(a) and 5(b) of the lease deed executed
between the lessee and the Club, the DDA had the right of
pre-emption – The fact that the subject plot had been allotted on
lease to the Club by the DDA was within the knowledge of the
Bank – However, DDA was not impleaded as a party in the said
proceedings u/s.19 of the 1993 Act – In pursuance of Recovery
Certificate issued by DRT, for recovery of sum of Rs.86,46,790.37,
the Recovery Officer issued notice for drawing up the proclamation
of sale and settling the terms thereof and informed, the Bank to
bring to its notice, the encumbrances, charges, claims of liabilities
attached to the said property. [Para 26]
1.2 DDA filed an objection before the Recovery Officer on the
ground that no permission was granted by it to mortgage subject
plot to the Bank – However, the aforesaid objection was rejected
by the Recovery Officer – The Recovery Officer without directing
the DDA to quantify its claim on account of unearned increase
in relation to the subject plot and without ascertaining the same,
directed, that sale proclamation be issued. [Para 26]
1.3 An e-auction notice was issued on 27.09.2012 – In the said
e-auction notice, sale price was fixed at Rs.8.85 crores – However,
the fact that DDA has an encumbrance i.e. the claim for an amount
of unearned increase in respect of subject plot was not disclosed
in the e-auction – The Bank also failed to disclose the terms and
conditions of the lease executed between the DDA and the Club,
to the Recovery Officer which, it was under an obligation to do
so in view of the statement made by it before the High Court, as
recorded in the order dated 05.11.2012 pass in W.P. (C) No. 6972
of 2012. [Para 27]
1.4 Thus, e-auction notice was issued in violation of r.53 of the
Second Schedule to the 1961 Act as well as r.16 of the Rules,
1962 – Therefore, no sanctity can be attached to the e-auction sale
notice and proclamation of sale as well as confirmation of sale and
sale certificate issued in favour of the Auction Purchaser. [Para 27]
1.5 High Court without adverting to the validity of the auction which
was per se illegal as the same was conducted in violation of the
terms and conditions of the lease deed and the provisions of the
1961 Act and 1962 Rules, erred in dismissing the Writ Petition on
the ground that the same was barred by the principles analogous
to s.11 of the CPC. [Para 29]
[2025] 9 S.C.R. 1561
Delhi Development Authority v. Corporation Bank & Ors.
1.6 Impugned order passed by the High Court, the e-auction notice
as well as the e-auction conducted by the Recovery Officer, DRT,
the confirmation of sale and sale certificate issued in favour of the
Auction Purchaser are quashed and set aside – Balance amount
deposited by the Auction Purchaser which is with the bank be
returned to the Auction Purchaser with an interest at the rate of
9% per annum. [Para 32]
Civil Procedure Code, 1908 – s.11 – Res judicata – Inapplicability
of – Writ Petition filed by DDA for setting aside the e-auction
conducted by the Recovery Officer in pursuance of the
e-auction notice and to set aside the acts and omissions
of the Bank and the club w.r.t the subject plot – High Court
dismissed the Writ Petition without adverting to the validity of
the auction inter alia holding that issues raised in the instant
petition by the DDA and in the Writ Petition (C) No.6972 of
2012, which was dismissed as withdrawn on 05.11.2012 and
the subsequent writ petition are same:
Held: The earlier writ petition i.e. Writ Petition (C) No.6972 of 2012
filed by the DDA was withdrawn in view of the undertaking furnished
by the bank that the auction shall take place in accordance with
terms and conditions of the lease – It was not decided on merits –
In view of undertaking furnished by the bank, as recorded by High
Court in its order dated 05.11.2012, DDA had a right to insist that
auction is held in accordance with terms and conditions of the
lease – However, auction was held in violation of terms of the
lease – Therefore, DDA had a fresh cause of action to approach
the Court – High Court without adverting to the validity of the
auction which was per se illegal as the same was conducted in
violation of the terms and conditions of the lease deed and the
provisions of the 1961 Act and 1962 Rules, erred in dismissing
the Writ Petition on the ground that the same was barred by the
principles analogous to s.11 of the CPC. [Para 29]
Unjust enrichment/unjust benefit – Principle of restitution:
Held: Auction Purchaser entered the auction in good faith, placed
its bid and deposited its hardearned money in the belief that the
law clothed the auction with legitimacy – It neither breached the
covenant nor failed in diligence and did not seek to profit from the
illegality – Bank having advanced the money of an illegal mortgage
and having chosen to auction what it never lawfully possessed,
bears the responsibility for the consequences. [Para 31]
1562 [2025] 9 S.C.R.
Supreme Court Reports
Case Law Cited
Daryao & Ors. v. State of U.P. and Ors. [1962] 1 SCR 574;
Gulabchand Chhotalal Parikh v. State of Gujarat [1965] 2 SCR
547 – followed.
Nagpur Golden Transport Company v. Nath Traders & Ors. [2011]
13 SCR 481 : (2012) 1 SCC 555 – referred to.
Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd.,
1943 AC 32 : (1942) 2 All ER 122 (HL) – referred to.
List of Acts
Recovery of Debts and Bankruptcy Act, 1993; Recovery of Debts
Due to Banks and Financial Institutions Act, 1993; Securitisation
and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002; Code of Civil Procedure, 1908; Income Tax Act,
1961; Income Tax (Certificate Proceedings) Rules, 1962.
List of Keywords
E-auction; E-auction notice; E-auction sale notice; Auction illegal;
Illegal mortgage; Construction of recreational and sports club; Pre-
emptive right to purchase; Mortgage or charge on the subject plot;
Perpetual lease deed; Recovery Officer; Res judicata; Confirmation
of sale; Sale certificate; Sale; Previous consent in writing of the
Lieutenant Governor of Delhi; Unjust enrichment; Unjust benefit;
Default in payment of loan; Not impleaded as a party; Fresh
cause of action; Violation of terms of the lease; Section 11 of Civil
Procedure Code, 1908; Principle of restitution; Illegal mortgage;
Bank to refund the amount to Auction Purchaser.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 11269 of 2016
From the Judgment and Order dated 11.08.2014 of the High Court
of Delhi at New Delhi in WP No. 5005 of 2014
Appearances for Parties
Advs. for the Appellant:
C. Mohan Rao, Sr. Adv., Ms. Deeksha Ladi Kakar.
[2025] 9 S.C.R. 1563
Delhi Development Authority v. Corporation Bank & Ors.
Advs. for the Respondents:
Preetesh Kapur, Sr. Adv, Arun Aggarwal, Ms. Anshika Agarwal,
Lovelesh Kukreja, Bikash Mohanty, Ms. Pallavi Sharma, Apratim
Thakur, Shashwat Panda, Aiman Zameer.
Judgment / Order of the Supreme Court
Judgment
Alok Aradhe, J.
1. This appeal emanates from an order dated 11.08.2014 passed in
Writ Petition (C) No. 5005 of 2014 by which High Court of Delhi has
dismissed the writ petition preferred by the appellant.
The present appeal brings before this Court a contest not merely of
rights but of duties - the duty of the lessee to honour the covenants
of the lease, the duty of a bank to exercise due diligence before
advancing public money and the duty of an instrumentality of the state,
as trustee of public property, to guard against encroachment upon
its title. It also brings before us the plight of an Auction Purchaser
who entered the field in good faith only to find the ground beneath
its feet unstable.
2. The relevant facts leading to filing of this appeal are as under:-
(i) FACTS: -
3. The Delhi Development Authority-the Appellant (hereinafter referred
to as “DDA”) on 01.10.2001 allotted Plot No. 25, Facility Centre-33
Kalindi Kunj Road, Jasola, New Delhi admeasuring 877.50 square
metres (hereinafter referred to as “subject plot”) to Respondent No.
2 namely, Sarita Vihar Club (hereinafter referred to as “the club”)
on leasehold basis. The subject plot was allotted to the club on a
premium of Rs.62,96,664/- for construction of a recreational and
sports club. The club was required to pay a provisional premium, in
respect of subject plot, at the rate of Rs.2,90,40,000/- per acre with
annual ground rent at the rate of Rs. 2.5 % per annum of the total
premium. As per the letter of allotment dated 01.10.2001, the club,
with previous consent in writing of the Lieutenant Governor of Delhi,
could mortgage or charge the subject plot to such person as may
be approved by the Lieutenant Governor in his absolute discretion.
1564 [2025] 9 S.C.R.
Supreme Court Reports
4. The club on 28.11.2001 deposited a sum of Rs.29,50,000/- to the
DDA. It appears that the club applied for sanction of loan for a sum
of Rs.35,00,000/- to Respondent No. 1 namely, the Corporation
Bank (hereinafter referred to as the “Bank”). The Bank thereafter
by a communication dated 07.02.2002 informed the club that
the proposal of sanction of loan is being forwarded to the higher
authorities for consideration and requested the club to seek a
permission for mortgaging the subject plot from the DDA. The club
vide communication dated 11.02.2002, sought the permission of
the DDA for mortgaging the subject plot for arranging the balance
payment. The DDA, by a communication dated 22.02.2002, granted
NOC to the club for applying loan to the Bank for making payment
to the DDA, on account of the premium of the plot subject to the
condition that permission for mortgage of the plot shall be issued only
after execution/registration of the lease deed. The Bank thereafter
by a communication dated 22.03.2002 sought the permission of the
DDA for mortgage of the subject plot and to note lien of the Bank
on the subject plot. The club on 12.04.2002 deposited an additional
amount of Rs.2,05,000/- to the DDA which included the interest on
the delayed payment as well. Thereupon DDA on 29.04.2002 issued
a modified letter of allotment in favour of the club and the amount
of initial premium of Rs.64,53,107/- was modified to Rs.64,54,126/-.
5. A perpetual lease deed in respect of subject plot was executed on
28.01.2005 between the DDA and the club. Clause 5(b) of the lease
deed provided that previous consent in writing of Lieutenant Governor
of Delhi for mortgage or charge of the subject plot was necessary.
Clause (6) deals with DDA’s right to recover an unearned increase
and pre-emptive right to purchase the subject plot. The club was
under an obligation to complete the construction within a period of
two years.
6. It appears that the subject plot was mortgaged with the Bank and
original registered perpetual lease deed was deposited with the
Bank. The Bank thereupon by a communication dated 09.03.2005
informed the DDA that the club has mortgaged the subject plot with
it and the DDA was requested to take a note of mortgage of the
subject plot with the Bank.
7. The club defaulted in payment of the loan taken by it from the Bank.
Thereupon the Bank filed an original application under Section 19 of
[2025] 9 S.C.R. 1565
Delhi Development Authority v. Corporation Bank & Ors.
Recovery of Debts Due to Banks and Financial Institutions Act, 1993
[now known as Recovery of Debts and Bankruptcy Act, 1993 (for short
“1993 Act”] before the Debts Recovery Tribunal-I, Delhi (hereinafter
referred to as “DRT”) for recovery of sum of Rs.86,46,790.37. The
aforesaid application was allowed on 27.08.2010 by the DRT. The
Recovery Officer, DRT on 02.02.2011 issued a notice, for drawing up
the proclamation of sale and settling the terms thereof and informed
the Bank to bring to its notice the encumbrances, charges, and claims
of liabilities attached to the subject plot or any portion thereof. The
DDA by a communication dated 24.02.2011 informed the Recovery
Officer, DRT that the club has not sought the permission of the DDA
to create a mortgage in favour of the Bank and therefore the mortgage
of the subject plot in favour of the Bank is illegal and void. The DDA
in the aforesaid communication stated that the sale of the property
be set aside and the proceeding to draw the proclamation of sale
and settling the terms thereof be immediately stopped.
8. The DDA thereafter on 30.06.2011 filed an affidavit before the
Recovery Officer, DRT objecting to the sale of the subject plot on
the ground that the permission to mortgage the subject plot was
never granted by the DDA and therefore the mortgage in favour
of the Bank is illegal. The Bank thereupon by a communication
dated 22.07.2011 requested the DDA to inform about the amount
of unearned increase which is due and payable to it after the sale
of the subject plot is effected.
9. The DDA thereupon again filed an affidavit before the Recovery
Officer, DRT objecting to the sale inter alia on the grounds that under
the lease deed it has the right to recover the unearned increase and
has the pre-emptive right to purchase the subject plot. The Recovery
Officer by an order dated 27.02.2012 rejected the objections raised
by the DDA as contained in the affidavits dated 16.02.2012 and
30.06.2011.
10. The DDA filed an appeal before the DRT against the order of the
Recovery Officer dated 27.02.2012. The aforesaid appeal was
dismissed by an order dated 25.06.2012, by the DRT. The Recovery
Officer of DRT by an order dated 21.09.2012 held that the subject
plot shall be sold by an e-auction sale on 09.11.2012. Thereafter on
27.09.2012 e-auction sale notice and proclamation of sale published
by DRT which recorded the terms and conditions of the e-auction
notice.
1566 [2025] 9 S.C.R.
Supreme Court Reports
11. The DDA sometime in October, 2012 filed an appeal under Section
18 of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 against orders dated
27.02.2012 and 25.06.2012 passed by DRT.
12. The DDA on 03.11.2012 filed a Writ Petition (C) No. 6972 of 2012
before Delhi High Court seeking to quash and set aside the order
dated 25.06.2012 passed by the DRT and to quash and set aside
e-auction notice dated 27.09.2012 issued by Recovery Officer, DRT.
In the said Writ Petition, the counsel for Bank on 05.11.2012 made
a statement that auction will be subject to terms and conditions
of the lease. In view of the aforesaid statement made by the
Bank, which was also recorded by the High Court in its order, the
counsel for the DDA did not press the writ petition. The High Court
thereupon by an order dated 05.11.2012 dismissed the writ petition
as withdrawn. The DDA by a communication dated 06.11.2012
informed the Manager of the Bank and the Recovery Officer, DRT
about the undertaking by the Bank recorded by the High Court in
its order dated 05.11.2012.
13. The auction of the subject plot was held on 09.11.2012 wherein
Respondent No. 6 -M/s Jay Bharat Commercial Enterprises Pvt. Ltd.
(hereinafter referred to as “Auction Purchaser”) was declared the
highest bidder in respect of subject plot. The bid price of the Auction
Purchaser of Rs.13.15 crores as against the reserve price Rs.8.85
crores was accepted. The Auction Purchaser deposited sale proceeds
through various demand drafts in favour of Recovery Officer, DRT.
The Recovery Officer, DRT by an order dated 08.07.2013 confirmed
the sale in favour of the Auction Purchaser. A sale certificate dated
12.07.2013 was issued in favour of the Auction Purchaser, and on
17.07.2013, the possession of the subject plot was handed over to
auction purchaser.
14. The auction purchaser on 29.07.2013 filed an application before
the Recovery Officer DRT for exonerating itself from paying the
liabilities and claims over the subject plot which was sold in a public
auction. The notice of the said application was issued to the DDA
to disclose the amount of unearned increase. The DDA however,
sought an adjournment in the aforesaid proceedings. The Recovery
Officer, DRT, on 18.09.2013 directed the DDA to file an affidavit,
[2025] 9 S.C.R. 1567
Delhi Development Authority v. Corporation Bank & Ors.
in respect of rules of calculation of unearned increase as well as
details of institutional land/sold/allotted/leases in recent time by the
DDA so as to enable it to know the present rates for institutional
lease hold property.
15. The DDA filed a Special Leave Petition against the order dated
05.11.2012 passed by the High Court. The aforesaid Special Leave
Petition was dismissed on 25.10.2013 on the ground of delay. The
DDA on 07.11.2013 informed the Recovery Officer of DRT about
the dismissal of SLP preferred by it and therefore sought time for
compliance with the directions issued by DRT. The DDA on 10.12.2013
filed an affidavit of compliance before the Recovery Officer with regard
to calculation of the amount of unearned increase. The Recovery
Officer vide order dated 22.01.2014 recorded that DDA is not ready
to redeem the property at the cost of Rs.27.73 crores which was
being demanded approximately. The DDA filed an application under
Section 22 of the 1993 Act before the Recovery Officer stating that
even if the sale is considered to be valid, the Auction Purchaser
would only have the status of a lessee.
16. The DDA filed another writ petition namely, Writ Petition (C) No. 5005
of 2014 before the High Court seeking to set aside the e-auction
conducted by the Recovery Officer on 09.11.2012 in pursuance of
e-auction notice dated 27.09.2012 and to set aside the acts and
omissions of the Bank and the club with respect to the subject plot.
The High Court by an order dated 11.08.2014 held that it is open
to the DDA to challenge the order dated 12.03.2014 passed by the
DRAT in accordance with law. The High Court further inter alia held
that issues raised in the instant petition by the DDA and in the Writ
Petition (C) No. 6972 of 2012, which was dismissed as withdrawn
on 05.11.2012 and the subsequent writ petition are same. It was
further held that aforesaid order dated 05.11.2012 in Writ Petition (C)
No. 6972 of 2012 has attained finality and the same issues cannot
be raised once again. It was further held that principles analogous
to Section 11 of the Code of Civil Procedure, 1908 would apply.
Accordingly, the petition was dismissed. In the aforesaid background
this appeal arises for consideration.
17. During the pendency of this appeal the DRT on an application
filed by the Auction Purchaser, by an order dated 01.12.2014, has
released the amount of Rs.12,26,42,478/- in favour of the Auction
1568 [2025] 9 S.C.R.
Supreme Court Reports
Purchaser inter alia on the ground that at this stage the sale cannot
be set aside/cancelled and at the most amount lying in FDRs can
be returned to the Auction Purchaser till the Special Leave Petition
preferred by DDA pending before this Court is decided.
(ii) SUBMISSIONS BY DDA: -
18. Learned Senior counsel for the DDA submitted that the terms of
the lease deed, specifically stipulated that a mortgage or charge
has to be created in respect of subject plot only with prior consent
in writing, of the Lieutenant Governor. It is further submitted that
no consent in writing of the Lieutenant Governor before creation of
mortgage in favour of the Bank was taken and the DDA is entitled
for its statutory dues. It is pointed out that DDA by a communication
dated 22.07.2011 informed the Bank about the amount of unearned
increase, which was to be deposited. It is further pointed out that
the DDA had filed a detailed affidavit before the Recovery Officer
regarding its statutory claims including the ground rent due and the
amount due and payable to it on account of unearned increase. It
is contended that the subject plot was sold in contravention of the
statement made before the High Court in Writ Petition (C) No. 6972
of 2012, which was recorded in the order dated 05.11.2012 passed
by the High Court.
19. It is argued that the Bank has committed multiple illegalities, from
the stage of application for grant of loan till sale of land. It is urged
that the Bank has disbursed the loan to the club without intimating
the DDA and ought to have appreciated that DDA had granted, no
objection only, to apply for a loan to the extent of 35 lakhs only.
However, the bank sanctioned a loan of Rs.60 lakhs. It is contended
that the Bank had the knowledge that the property was not a freehold
property and DDA is entitled for statutory dues. It is further contended
that the sale is therefore liable to be set aside and the subject plot
be restored to the DDA permitting it to claim its statutory dues from
the Bank.
(iii) SUBMISSIONS BY BANK: -
20. Learned counsel for the Bank submitted that the Bank vide
communication dated 09.03.2005 had informed the DDA that
the club had mortgaged, the subject plot with the Bank and had
[2025] 9 S.C.R. 1569
Delhi Development Authority v. Corporation Bank & Ors.
deposited perpetual lease deed dated 28.01.2005, however, the DDA
maintained a stoic silence till 25.02.2011 i.e. the first appearance
before the Recovery Officer, DRT. It is contended that by an
auction notice dated 27.09.2012, the subject plot was sold on “as
is where is basis” and therefore the DDA could have exercised its
pre-emptive right to purchase the subject plot through auction and
recover its dues. It is further contended that for the reasons, best
known to the DDA, the said option to purchase the subject plot,
was not exercised. It is urged that, in principle, NOC was granted
by the DDA vide letter dated 22.02.2002 and DDA was aware of the
lien of the bank on the subject plot. It is submitted that this appeal
amounts to an abuse of process of law. It is further submitted that
principle of estoppel applies to facts of the case and appeal is
liable to be dismissed.
(iv) SUBMISSIONS OF AUCTION PURCHASER: -
21. Learned Senior counsel for Auction Purchaser submits that Section 29
of the 1993 Act makes the provision of Second and Third Schedule
to the Income Tax Act, 1961 (hereinafter referred to as “1961 Act”)
and Income Tax (Certificate Proceedings) Rules, 1962 (hereinafter
referred to as “the Rules, 1962”) applicable to sales of immovable
property under the 1993 Act. It is further submitted that under Rule
16 of the Rules, 1962, it was incumbent on the Recovery Officer as
well as parties before the DRT to have determined and conclude all
issues that materially affect, the value of the property or fixation of the
reserve price under Rule 18, prior to issue of proclamation of sale.
It is contended that the sale has been held in violation of Second
and Third Schedule to the 1961 Act and, therefore, the auction sale
is liable to be set aside. It is further contended that neither the sale
proclamation disclosed any quantified claim of the DDA nor the reserve
price reflected the market value, that DDA claims. It is submitted that
DDA cannot foist its right to claim an amount of unearned increase
over and above the auction price on the Auction Purchaser. It is
therefore submitted that e-auction conducted on 09.11.2012 by the
Recovery Officer, DRT be set aside and the Bank be directed to
refund the Auction Purchaser an amount of Rs.1,68,28,488/- retained
by it along with interest at the rate of 15% being the rate charged
by it which is evident from the sale proclamation.
1570 [2025] 9 S.C.R.
Supreme Court Reports
(v) CONSIDERATION : -
22. We have considered the rival submissions made on both sides and
have perused the records, as well as the written submissions filed on
behalf of DDA, Bank and the Auction Purchaser. Before proceeding
further, it is apposite to take note of relevant statutory provisions.
23. Section 29 of the 1993 Act deals with application of certain provisions
of Income-tax Act. It provides that provisions of Second and Third
Schedules to the Income Tax Act, 1961 and the Income Tax (Certificate
Proceedings) Rules, 1962, as in force from time to time, shall as
far as possible, apply with necessary modifications as if the said
provisions and the Rules referred to the amount of debt due under
this Act instead of to the Income-tax. The Second Schedule provides
for procedure of recovery of tax, whereas the Third Schedule deals
with procedure for distraint by Assessing Officer or Tax Recovery
Officer. Rule 53 of Second Schedule to 1961 Act deals with contents
of proclamation. It provides that a proclamation of sale of immovable
property shall be drawn up after notice to the defaulter, and shall
state the time and place of sale, and shall specify, as fairly and
accurately as possible: -
“(a) The property to be sold;
(b) The revenue, if any, assessed upon the property or
any part thereof;
(c) The amount for the recovery of which the sale is ordered
(d) Any other thing which the Tax Recovery Officer
considers it material for a purchaser to know, in order to
judge the nature and value of the property.”
24. Thus, Rule 53 mandates the Recovery Officer to mention in the
proclamation of sale any other thing which he considers material for
purchaser to know in order to judge the nature and value of the property.
25. In exercise of powers under Section 295(1) of the 1961 Act and
Rules 91 and 92 of the Second Schedule of the 1961 Act, the
Central Board of Revenue has made the Rules namely, the Income
Tax (Certificate Proceedings), Rules 1962. Rule 16 of the Rules
empowers the Recovery Officer to summon any person whom he
thinks necessary to summon and may examine him in respect of
any matters relevant to the proclamation and require him to produce
any document in his possession or power relating thereto.
[2025] 9 S.C.R. 1571
Delhi Development Authority v. Corporation Bank & Ors.
26. In the backdrop of aforesaid relevant statutory provisions, we advert
to the facts of the case in hand. Sometimes in the year 2008, the
Bank filed an application under Section 19 of 1993 Act for recovery
of the dues against the club. It is pertinent to note that under Clause
5(a) and 5(b) of the lease deed, executed between the lessee and
the Club, the DDA had the right of pre-emption. The fact that the
subject plot had been allotted on lease to the Club by the DDA was
within the knowledge of the Bank. However, DDA was not impleaded
as a party in the said proceedings under Section 19 of the 1993
Act. In pursuance of Recovery Certificate dated 27.08.2010 issued
by DRT, for recovery of sum of Rs.86,46,790.37, the Recovery
Officer on 02.02.2011 issued notice for drawing up the proclamation
of sale and settling the terms thereof and informed, the Bank to
bring to its notice, the encumbrances, charges, claims of liabilities
attached to the said property. The DDA filed an objection before
the Recovery Officer on the ground that no permission was granted
by it to mortgage subject plot to the Bank. However, the aforesaid
objection was rejected on 27.02.2012 by the Recovery Officer. The
Recovery Officer without directing the DDA to quantify its claim on
account of unearned increase in relation to the subject plot and
without ascertaining the same, directed, that sale proclamation be
issued.
27. An e-auction notice was issued on 27.09.2012. In the said e-auction
notice, sale price was fixed at Rs.8.85 crores. However, the fact
that DDA has an encumbrance i.e. the claim for an amount of
unearned increase in respect of subject plot was not disclosed
in the e-auction. The Bank also failed to disclose the terms and
conditions of the lease executed between the DDA and the Club,
to the Recovery Officer which, it was under an obligation to do
so in view of the statement made by it before the High Court, as
recorded in the order dated 05.11.2012 pass in W.P. (C) No. 6972
of 2012. Thus, it is evident that e-auction notice was issued in
violation of Rule 53 of the Second Schedule to the 1961 Act as
well as Rule 16 of the Rules, 1962. Therefore, no sanctity can
be attached to the e-auction sale notice and proclamation of sale
dated 27.09.2012 as well as confirmation of sale and sale certificate
dated 08.07.2013 and 12.07.2013 respectively issued in favour of
the Auction Purchaser.
1572 [2025] 9 S.C.R.
Supreme Court Reports
28. A Constitution Bench of this Court in Daryao & Ors. v. State of U.P.
and Ors.1 dealt with the question of applicability of principle of Res
Judicata in writ proceedings, and has summarised its conclusion in
para 26 of its judgement. The aforesaid paragraph was extracted by
another Constitution Bench of this Court in Gulabchand Chhotalal
Parikh v. State of Gujarat2 in para 53 as follows :-
“53. In Daryao Case this Court had again dealt with the
question of the applicability of the principle of res judicata
in writ proceedings. The matter was going through very
exhaustively and the final conclusions are to be found at
p. 592. We may summarise them thus :
1. If a petition under Article 226 is considered
on the merits as a contested matter and is
dismissed, the decision would continue to
bind the parties unless it is otherwise modified
or reversed by appeal or other appropriate
proceedings permissible under the Constitution.
2. It would not be open to a party to ignore the said
judgment and move this Court under Article 32 by
an original petition made on the same facts and
for obtaining the same or similar orders or writs.
3. If the petition under Article 226 in a High
Court is dismissed not on the merits but because
of the laches of the party applying for the writ
or because it is held that the party had an
alternative remedy available to it, the dismissal
of the writ petition would not constitute a bar to
a subsequent petition under Article 32.
4. Such a dismissal may however constitute a
bar to a subsequent application under Article 32
where and if the facts thus found by the High Court
be themselves relevant even under Article 32.”
29. Thus, the doctrine of Res Judicata, salutary as it is, rests upon
foundation that a matter once heard and finally decided between
the parties cannot be reopened. In light of the aforesaid well settled
1 [1962] 1 SCR 574 : 1961 SCC OnLine SC 21 : AIR 1961 SC 1457
2 [1965] 2 SCR 547 : 1964 SCC OnLineSC 99 : AIR 1965 SC 1153
[2025] 9 S.C.R. 1573
Delhi Development Authority v. Corporation Bank & Ors.
legal propositions, the facts of the case in hand may be noticed. The
earlier writ petition i.e. Writ Petition (C) No. 6972 of 2012 filed by
the DDA was withdrawn in view of the undertaking furnished by the
bank that the auction shall take place in accordance with terms and
conditions of the lease. The earlier writ petition was not decided on
merits. In view of undertaking furnished by the bank, as recorded by
that High Court in its order dated 05.11.2012, the DDA had a right
to insist that auction is held in accordance with terms and conditions
of the lease. The auction was held in violation of terms of the lease
on 09.11.2012. Therefore, the DDA had a fresh cause of action to
approach the Court. Thus, principles analogous to Section 11 of Civil
Procedure Code, 1908 did not apply to obtaining factual matrix of the
case. The High Court without adverting to the validity of the auction
which was per se illegal as the same was conducted in violation of
the terms and conditions of the lease deed and the provisions of the
1961 Act and 1962 Rules, erred in dismissing the Writ Petition on
the ground that the same was barred by the principles analogous
to Section 11 of the CPC.
30. We now address the position of the Auction Purchaser. In Fibrosa
Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd.3, it was
held that any civilized system of law is bound to provide remedies for
cases of what has been called unjust enrichment or unjust benefit,
that is, to prevent a man from retaining the money of or some
benefit derived from another which it is against conscience that he
should keep. Such remedies in English law are generally different
from remedies in contract or in tort, and are now recognized to fall
within a third category of the common law which has been called
quasi-contract or restitution. The aforesaid legal proposition was
referred to with approval by a Two Judge Bench of this Court in
Nagpur Golden Transport Company v. Nath Traders & Ors.4 The
restitution therefore becomes not merely a legal device but a moral
imperative. The principle of restitution flows from the very heart of
justice that no one shall unjustly enrich himself at the instance of
another and that those who suffered without fault should, so far as
money can achieve, be restored to the position they once occupied.
The jurisdiction to make restitution is inherent in every court and will
be exercised wherever the justice of the case demands.
3 1943 AC 32 : (1942) 2 All ER 122 (HL)
4 (2012) 1 SCC 555
1574 [2025] 9 S.C.R.
Supreme Court Reports
31. In the facts of the present case, the Auction Purchaser has been
caught in the undertow of circumstances, not of its making. Among
all the actors in this legal drama, it alone stands innocent. The
Auction Purchaser entered the auction in good faith, placed its
bid and deposited its hard-earned money in the belief that the law
clothed the auction with legitimacy. The Auction Purchaser neither
breached the covenant nor failed in diligence and did not seek to
profit from the illegality. The restitution therefore becomes not merely
a legal device but a moral imperative. It is this principle which in
the facts of the case must guide the relief to the Auction Purchaser.
The Bank having advanced the money of an illegal mortgage and
having chosen to auction what it never lawfully possessed, bears
the responsibility for the consequences.
(vi) CONCLUSION: -
32. In the result, impugned order dated 11.08.2014 passed by the
High Court in Writ Petition (C) No. 5005 of 2014, the e-auction
notice dated 27.09.2012 as well as the e-auction conducted by the
Recovery Officer, DRT on 09.11.2012, the confirmation of sale and
sale certificate dated 08.07.2013 and12.07.2013 respectively issued
in favour of the Auction Purchaser are quashed and set aside. We
direct the bank to refund the entire amount lying in deposit to the
Auction Purchaser. The Auction Purchaser has been deprived of the
use of its money for a considerable time, the money which would
have earned value elsewhere. Therefore, the Auction Purchaser is
entitled to interest on the balance amount which is lying in the deposit
of the Bank. We, therefore, direct that the balance amount deposited
by the Auction Purchaser which is with the bank be returned to the
Auction Purchaser with an interest at the rate of 9% per annum
within a month to be reckoned from the date of deposit till repayment.
33. The appeal is accordingly allowed in the aforesaid terms.
Result of the case: Appeal allowed.
†
Headnotes prepared by: Divya Pandey
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