Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-011269-011269 – 2016 |
| Diary Number | 34816/2014 |
| Judge Name | HON’BLE MR. JUSTICE SANJAY KUMAR |
| Bench | HON’BLE MR. JUSTICE SANJAY KUMAR, HON’BLE MR. JUSTICE ALOK ARADHE |
| Precedent Value | Binding precedent |
| Overrules / Affirms | Affirms existing statutory requirements for auction notices and rescinds lower orders |
| Type of Law | Recovery of Debts & Bankruptcy Act, 1993; procedural law; property law |
| Questions of Law |
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| Ratio Decidendi |
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| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon |
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| Facts as Summarised by the Court |
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Practical Impact
| Category | Impact |
|---|---|
| Binding On | Debts Recovery Tribunals and all subordinate courts |
| Persuasive For | High Courts and tribunals in similar auction-notice and recovery-sale disputes |
| Follows | Daryao & Ors. v. State of U.P.; Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. |
What’s New / What Lawyers Should Note
- Auction proclamations under the RDDBFI Act must disclose all material encumbrances and quantify statutory claims (Rule 53, Income-tax Second Schedule).
- Recovery Officers can summon and examine parties on auction terms (Rule 16, IT Certificate Proceedings Rules).
- A writ petition withdrawn on the basis of a recorded undertaking gives a fresh cause of action; res judicata does not bar subsequent merits challenges.
- Innocent auction purchasers sold land in violation of mandatory notice rules are entitled to full restitution with interest.
- Banks and Recovery Officers bear responsibility for statutory non-compliance; they cannot foist undisclosed claims on purchasers.
Summary of Legal Reasoning
- Statutory framework: Section 29 of the RDDBFI Act imports Income-tax Second/Third Schedules; Rule 53 mandates auction proclamations state property, dues, debt amount and “any other thing…material for a purchaser to know.”
- Rule 16 of the Income Tax (Certificate Proceedings) Rules empowers Recovery Officers to summon and examine witnesses on auction terms.
- The Recovery Officer issued the auction notice and proclamation without quantifying or disclosing the DDA’s unearned-increase claim/pre-emptive right, violating Rule 53 and Rule 16.
- The bank’s undertaking in the withdrawn writ petition revived the DDA’s cause of action; res judicata did not apply to merits.
- Citing Fibrosa and Nagpur Golden Transport, the Court applied the unjust-enrichment/restitution principle to protect an innocent auction purchaser.
- All impugned sale documents and confirmations were quashed; the purchaser must be refunded with interest.
Arguments by the Parties
Petitioner (DDA):
- Lease covenants required LG’s written consent before any mortgage; no such consent was obtained.
- DDA’s claim for unearned increase was quantified and communicated; sale without recognizing it is illegal.
- Bank’s non-disclosure of lease terms violated the High Court undertaking, warranting quashing of auction.
Respondent (Bank):
- Bank informed DDA of mortgage in 2005; DDA remained silent until 2011.
- Sale was on “as is where is” basis, giving DDA an opportunity to buy at auction but it did not.
- DDA is estopped by prior NOC-in-principle and late objections; appeal is an abuse of process.
Respondent (Auction Purchaser):
- Mandatory Second/Third Schedule and IT Certificate Rules were violated; proclamation did not disclose DDA’s claim or market value.
- DDA cannot saddle purchaser with undisclosed unearned-increase liability; sale must be set aside and deposit refunded with interest.
Factual Background
In 2001, the Delhi Development Authority leased institutional land to a club with a covenant for pre-emptive purchase rights and LG-approved mortgages. The club mortgaged the plot to a bank without obtaining the required written consent. After the club defaulted, the bank obtained a DRT recovery certificate and issued an e-auction notice in September 2012, fixing a reserve price but failing to disclose the DDA’s encumbrance. The DDA’s earlier writ petition was withdrawn based on the bank’s undertaking; a fresh petition was later dismissed on res judicata grounds, leading to this Supreme Court appeal.
Statutory Analysis
- Section 29, RDDBFI Act, 1993: Applies Income-tax Second and Third Schedules and the IT Certificate Proceedings Rules to debt-recovery sales “as far as possible.”
- Rule 53, Second Schedule to the Income-tax Act, 1961: Requires auction proclamations to state property details, assessed revenue, recovery amount, and all material facts affecting value.
- Rule 16, Income Tax (Certificate Proceedings) Rules, 1962: Empowers the Recovery Officer to summon and examine persons and require documents relevant to proclamation of sale.
Dissenting / Concurring Opinion Summary
None. The judgment was delivered by a two-judge bench with a single opinion.
Procedural Innovations
None beyond reaffirmation of existing statutory notice requirements and restitution principles.
Alert Indicators
- ✔ Precedent Followed