The Supreme Court allowed the Delhi Development Authority’s appeal and set aside the Delhi High Court’s 2014 order, quashing the e-auction sale of a Jasola plot conducted by the Debts Recovery Tribunal (DRT).
The plot had been allotted on lease to Sarita Vihar Club in 2001 for a recreational facility. The club mortgaged the property to Corporation Bank without obtaining prior approval from the Lieutenant Governor, as required under the lease deed. When the club defaulted, the bank initiated recovery proceedings before the DRT, which led to an e-auction in November 2012, where M/s Jay Bharat Commercial Enterprises Pvt. Ltd. was declared the highest bidder.
DDA challenged the auction, noting that its prior consent for the mortgage had not been obtained and that certain facts concerning the lease were not disclosed. The Supreme Court observed that the Recovery Officer did not comply with Rule 53 of the Second Schedule to the Income Tax Act, 1961, and Rule 16 of the 1962 Rules, which required disclosure of encumbrances and relevant facts in the sale proclamation. The Court found that both the bank and the Recovery Officer had suppressed material information, rendering the auction invalid.
While quashing the auction and sale certificate, the Court applied the principle of restitution to protect the bona fide purchaser, directing the bank to refund the auction amount with 9% interest from the date of deposit until repayment, within one month.
