DRT Sale : E-auction notice issued without disclosing encumbrances : auction notice and consequent sale invalid
Supreme Court Invalidates E-Auction of DDA Property Conducted by DRT. Auction deemed illegal for non-compliance with statutory provisions; restitution ordered for the buyer with interest.
In a landmark decision, the Supreme Court of India has annulled the e-auction of a Delhi Development Authority (DDA) property conducted by the Debts Recovery Tribunal (DRT) due to non-adherence to statutory norms and lease conditions. The auction, which was held without disclosing vital encumbrances and claims, was deemed invalid by the apex court.
The case, Delhi Development Authority v. Corporation Bank, involved a contested auction of a mortgaged property at Jasola, New Delhi, originally allotted to Sarita Vihar Club on a leasehold basis. The property was auctioned by the DRT to recover debts owed by the club to Corporation Bank. However, the auction proceeded without disclosing the DDA's claims for unearned increase and without complying with essential statutory provisions under the Income Tax Act, 1961, and Rules, 1962.
The Supreme Court bench, comprising Justices Sanjay Kumar and Alok Aradhe, noted significant procedural lapses in the e-auction process. The auction notice failed to mention the encumbrances and statutory compliance required under Rule 53 of the Second Schedule to the 1961 Act and Rule 16 of the Income Tax (Certificate Proceedings) Rules, 1962. As a result, the action's legitimacy was undermined, leading to its invalidation.
Moreover, the court addressed the applicability of the doctrine of res judicata, ruling that the DDA's subsequent writ petition challenging the auction was not barred as the initial petition was withdrawn based on an undertaking by the bank to adhere to lease terms.
In a significant relief to the auction purchaser, M/s Jay Bharat Commercial Enterprises Pvt. Ltd., the Supreme Court ordered the restitution of the entire deposited amount along with an interest of 9% per annum. The court underscored the principle of restitution to ensure that the purchaser, who acted in good faith, is not unjustly burdened by the invalid auction.
The judgment serves as a critical reminder of the due diligence required in property auctions, especially those involving public assets and statutory bodies.
Bottom Line:
E-auction conducted by the Recovery Officer, DRT on mortgaged property without adherence to statutory provisions and lease terms declared invalid by the Supreme Court. Auction Purchaser entitled to restitution and interest.
Statutory provision(s):
Recovery of Debts and Bankruptcy Act, 1993 Section 29, Income Tax Act, 1961, Income Tax (Certificate Proceedings) Rules, 1962, Code of Civil Procedure, 1908 Section 11.
Delhi Development Authority v. Corporation Bank, (SC) : Law Finder Doc Id # 2783820
