Case Note & Summary
The dispute concerned a leasehold plot allotted by Delhi Development Authority (DDA) to Sarita Vihar Club on 01.10.2001 for construction of a recreational and sports club. The club deposited partial premium and sought loan from Corporation Bank. DDA granted NOC on 22.02.2002 for applying loan subject to condition that mortgage permission would issue only after execution and registration of lease deed. A perpetual lease deed was executed on 28.01.2005; Clause 5(b) required previous written consent of Lieutenant Governor for mortgage. The club mortgaged the plot and deposited the original lease deed with the Bank. The Bank informed DDA of the mortgage on 09.03.2005. The club defaulted on loan, and Bank filed recovery application under Section 19 of Recovery of Debts and Bankruptcy Act, 1993 before DRT, which was allowed on 27.08.2010. Recovery Officer issued sale proclamation on 02.02.2011. DDA objected that no permission for mortgage was obtained and mortgage was illegal and void; objections were rejected by Recovery Officer on 27.02.2012 and appeal dismissed by DRT on 25.06.2012. DDA filed writ petition WP(C) 6972/2012 challenging auction notice; Bank's counsel stated auction subject to lease terms, recorded in order dated 05.11.2012, and writ was dismissed as withdrawn. Auction held on 09.11.2012, auction purchaser M/s Jay Bharat Commercial Enterprises Pvt. Ltd. highest bidder Rs.13.15 crores. Sale confirmed on 08.07.2013 and certificate issued 12.07.2013; possession handed over 17.07.2013. DDA filed second writ petition WP(C) 5005/2014 to set aside auction and acts of Bank and club. High Court dismissed on 11.08.2014, holding issues same as earlier writ and barred by principles analogous to Section 11 CPC; also DDA could challenge DRAT order dated 12.03.2014. During pending appeal, DRT released Rs.12,26,42,478 to auction purchaser on 01.12.2014. DDA argued before Supreme Court that lease deed required prior written consent of LG, no consent taken, mortgage void, Bank committed illegalities by sanctioning Rs.60 lakhs beyond NOC for Rs.35 lakhs, sale violated High Court undertaking, statutory dues recoverable. The provided judgment text ends mid-submission; the Supreme Court's final reasoning and decision are not available in this excerpt.
Headnote
A) Property Law - Leasehold Mortgage - Prior Written Consent of Lessor Essential - Perpetual Lease Deed Clause 5(b) - DDA contended that mortgage without previous written consent of Lieutenant Governor was illegal and void; Recovery Officer rejected objections; issue raised in appeal. (Paras 5,7,18)
B) Banking Law - Due Diligence by Bank - Loan Sanction Beyond NOC Limit - Recovery of Debts and Bankruptcy Act, 1993 Section 19 - DDA argued Bank sanctioned Rs.60 lakhs despite NOC only for Rs.35 lakhs and failed to intimate DDA; Bank recovered debt after default. (Paras 4,6,19)
C) Civil Procedure - Res Judicata - Principles Analogous to Section 11 CPC Bar Successive Writ Petitions - Code of Civil Procedure, 1908 Section 11 - High Court dismissed second writ petition holding issues same as earlier withdrawn writ petition; DDA's SLP against earlier order dismissed on delay. (Paras 12,15,16)
D) Debt Recovery - Auction Sale by Recovery Officer - Rights of Auction Purchaser Subject to Lease Terms - Recovery of Debts and Bankruptcy Act, 1993 Section 22 - DDA claimed auction purchaser would only have status of lessee; DRT released amount to auction purchaser during pendency. (Paras 13-14,16-17)
Issue of Consideration
Whether mortgage of leasehold plot without prior written consent of Lieutenant Governor was void; whether e-auction sale by Recovery Officer was valid despite DDA objections; whether DDA entitled to statutory dues; whether second writ petition barred by res judicata; whether auction purchaser acquired only lessee's rights
Law Points
- Leasehold property mortgage requires prior written consent of lessor
- Recovery Officer can conduct e-auction sale under Recovery of Debts and Bankruptcy Act
- 1993
- Principles analogous to Section 11 CPC bar successive writ petitions on same issues
- Statutory dues such as unearned increase and ground rent recoverable by DDA
- Auction purchaser acquires rights subject to lease terms
Case Details
2025 LawText (SC) (09) 108
Civil Appeal No. 11269 of 2016
Delhi Development Authority
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Nature of Litigation
Civil appeal against High Court order dismissing writ petition challenging e-auction sale of leasehold plot by Recovery Officer, DRT.
Remedy Sought
DDA sought to set aside e-auction sale dated 09.11.2012, set aside acts/omissions of Bank and club, and claim statutory dues including unearned increase and ground rent.
Filing Reason
DDA alleged that mortgage of leasehold plot was created without prior written consent of Lieutenant Governor, rendering it illegal and void; Bank failed to exercise due diligence; auction sale violated lease covenants and High Court undertaking.
Previous Decisions
DRT allowed recovery application on 27.08.2010; Recovery Officer rejected DDA objections on 27.02.2012; DRT dismissed appeal on 25.06.2012; High Court dismissed writ petition WP(C) 6972/2012 as withdrawn on 05.11.2012 after Bank's statement; SLP dismissed on 25.10.2013 on delay; High Court dismissed second writ petition WP(C) 5005/2014 on 11.08.2014.
Issues
Whether mortgage of leasehold plot without prior written consent of Lieutenant Governor was void and illegal.
Whether e-auction sale conducted by Recovery Officer, DRT was valid despite DDA's objections and lack of mortgage consent.
Whether DDA is entitled to statutory dues including unearned increase and ground rent from sale proceeds.
Whether second writ petition was barred by principles analogous to Section 11 CPC due to earlier withdrawal of similar writ petition.
Whether auction purchaser acquired only lessee's rights subject to lease covenants and DDA's pre-emptive rights.
Submissions/Arguments
DDA argued that lease deed required prior written consent of Lieutenant Governor for mortgage; no such consent obtained; mortgage void, and DDA entitled to statutory dues.
DDA contended Bank sanctioned loan of Rs.60 lakhs beyond NOC only for Rs.35 lakhs and failed to intimate DDA; Bank had knowledge property was leasehold not freehold.
DDA asserted e-auction sale violated Bank's undertaking before High Court that auction subject to lease terms, and sale should be set aside to restore plot to DDA.
Judgment Excerpts
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.
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.
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 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.
Procedural History
On 01.10.2001, DDA allotted leasehold plot to Sarita Vihar Club. Club sought loan from Corporation Bank; DDA issued NOC on 22.02.2002 for applying loan, mortgage permission only after lease deed. Perpetual lease deed executed 28.01.2005 with Clause 5(b) requiring LG consent. Bank informed DDA of mortgage on 09.03.2005. Club defaulted; Bank filed recovery application under Section 19 of RDB Act before DRT; allowed on 27.08.2010. Recovery Officer issued sale notice on 02.02.2011; DDA objected mortgage void; objections rejected on 27.02.2012; DRT dismissed appeal on 25.06.2012. DDA filed WP(C) 6972/2012 challenging auction; Bank stated auction subject to lease terms; writ dismissed as withdrawn on 05.11.2012. Auction held on 09.11.2012; sale confirmed on 08.07.2013; possession delivered on 17.07.2013. DDA filed second WP(C) 5005/2014; dismissed on 11.08.2014 on res judicata grounds. DRT released Rs.12,26,42,478 to auction purchaser on 01.12.2014. DDA filed SLP against 05.11.2012 order; dismissed on 25.10.2013 on delay. Present appeal to Supreme Court.
Acts & Sections
- Recovery of Debts and Bankruptcy Act, 1993: Section 19, Section 22
- Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002: Section 18
- Code of Civil Procedure, 1908: Section 11
