Delhi Development Authority vs Corporation Bank

2025 INSC 1161 REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 11269 OF 2016

DELHI DEVELOPMENT AUTHORITY … APPELLANT

Versus

CORPORATION BANK & ORS. … RESPONDENTS

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

Signature Not Verified the duty of an instrumentality of the state, as trustee of Digitally signed by babita pandey

public property, to guard against encroachment upon its Date: 2025.09.25 16:52:50 IST Reason:

title. It also brings before us the plight of an Auction 1 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

2 person as may be approved by the Lieutenant Governor in

his absolute discretion.

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

3 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

4 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 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

5 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.

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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.

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.

7 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

8 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, 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

9 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,

10 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 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 11 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,

12 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 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

13 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 14 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.

(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 15 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.”

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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.

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

17 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

18 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.

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

1 1961 SCC OnLine SC 21 : (1962) 1 SCR 574 : AIR 1961 SC 1457

19 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

2 1964 SCC OnLineSC 99 : (1965) 2 SCR 547 : AIR 1965 SC 1153

20 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 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

21 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

3 1943 AC 32 : (1942) 2 All ER 122 (HL)

22 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.

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

4 (2012) 1 SCC 555

23 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 24 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.

……………….……………J. [SANJAY KUMAR]

..………………………….J. [ALOK ARADHE]

NEW DELHI, SEPTEMBER 25, 2025.

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