Summary
The DDA's predecessor executed only an agreement to lease a Nazul plot in 1957; clause 24 provided that no right, title or interest would pass until a lease was executed and registered, and no lease was ever executed. The intended lessee nonetheless conveyed the plot to a company in 1985, and in that company's liquidation the plot was auctioned on an 'as is' basis to the first respondent in 2000; the sale was confirmed and the DDA's appeal dismissed. The Supreme Court held that the auction purchaser acquired neither ownership nor leasehold rights but at most whatever rights the original intended lessee had under the agreement, declined to direct payment of unearned income out of the liquidation funds, left the DDA free to pursue possession or unearned income, and dismissed the appeal subject to those findings.
Issues
- Whether the first respondent, as auction purchaser in the liquidation of the second respondent, acquired ownership or leasehold rights in the plot when the lease in favour of the original intended lessee was never executed.
- Whether the Court should direct that part of the auction consideration lying in the liquidation proceedings be appropriated towards unearned income payable to the DDA.
- What remedies remain open to the DDA and to the auction purchaser.
Provisions considered
- Section 22; Rule 43 of the Delhi Development Authority (Disposal of Developed Nazul Land) Rules, 1981, Delhi Development Act, 1957Relied on by the appellant to contend that Nazul land can be disposed of only under Section 22 and the 1981 Rules and that Rule 43 required the lessor's prior consent to any transfer. The Court recorded the submission but decided the appeal on clause 24 of the agreement to lease and the terms of the auction, without construing these provisions. (¶ 5)
Held
- It was undisputed that only an agreement to lease dated 17 July 1957 was executed and that a lease was never executed. Under clause 24 of that agreement nothing in it was to operate as a demise or confer any right, title or interest on the intended lessee until the lease was executed and registered. No rights, title or interest were therefore created in favour of the intended lessee, and the second respondent, by the sale deed of 15 February 1985, could at the highest claim the benefits under the agreement to lease, if entitled to them in law. (¶¶ 7, 8, 11)
- The proclamation of sale recorded that the plot was sold on an 'as is' basis, and the Company Judge's order confirming the sale held that the purchaser acquired only such lessee rights as the intended lessee or the second respondent had. The first respondent accordingly gets only those rights which the intended lessee had under the agreement, provided they can still be claimed; the Division Bench's findings that the auction did not amount to a sale of the plot and that the DDA's remedies against the parties remained open were accepted by the first respondent. (¶ 12)
- The Court will not direct that the auction consideration lying in fixed deposits in the pending liquidation be appropriated towards unearned income payable to the DDA: the liquidation proceedings are seized by the High Court, claims of about Rs 60.66 crores including of the Income Tax Department have been lodged against roughly Rs 10 crores available, and the funds are governed by the Company Court's orders. The Division Bench rightly passed no order on unearned income. (¶¶ 9, 10, 13)
- The first respondent is not entitled to ownership or leasehold rights in the plot and cannot claim to be a lessee. If the DDA's case is that the intended lessee breached the agreement to lease, it remains open to the DDA, notwithstanding the impugned orders, to adopt appropriate remedies for recovery of possession and/or unearned income against the first respondent. (¶ 14)
- If the first respondent wishes to have the transaction regularised it may apply to the DDA to accept unearned income or any other amount, and the DDA shall consider such request in accordance with law. (¶ 15)
Result
Appeal dismissed, subject to the findings recorded, including that the auction purchaser acquired no ownership or leasehold rights and that the DDA's remedies for possession and unearned income remain open.