What is the effect of the principle that a person cannot transfer a better title than he himself holds, in the context of a court auction?

The appellant, Delhi Development Authority agreement”) dated 17th July 1957 in respect of plot no.3 Constructions”). On 25th November 1972, M/s Mehta

Delhi.

Even the second respondent went into liquidation, and the plot was sold to the first respondent in the auction on 24th August 2000 in liquidation proceedings before the Delhi High Court. The auction was held pursuant to the notice of proclamation of sale issued by the High Court of Punjab and Haryana on 9th June 2000.

On 7th December 2000, the first respondent applied for confirmation of the sale made in the auction. The appellant appeared in the said proceedings and filed a reply. The appellant contended that at no point of time had M/s Mehta Constructions acquired any interest in the plot, and therefore, the plot could not have been sold in the auction. By the order 19th October 2001, the learned Single Judge allowed the application filed by the first respondent and confirmed the auction sale. Aggrieved by the said order, the present appellant preferred an appeal before the Division Bench. By the impugned judgment dated 21st January 2010, the appeal was dismissed.

The learned senior counsel appearing for the appellant urged that what was executed on 17th July 1957 in favour of M/s Mehta Constructions was only an agreement to lease. The agreement provided that the lease deed was to be executed only upon certain compliances being made by M/s Mehta Constructions. As no such compliance was made, the lease deed was not executed, and therefore, leasehold rights were never acquired by M/s Mehta Constructions with respect to the said plot. He relied upon Clause 24 of the lease agreement, which clearly provided that unless the lease is executed, the agreement will not create any right, title or interest in respect of the said plot in favour of M/s Mehta Constructions.

The learned senior counsel submitted that the plot is Nazul land, which belongs to the Union of India and is in the care and custody of the appellant. He submitted that a Nazul land can be sold only in accordance with Section 22 of the Delhi Development Act, 1957 (for short, “the said Act”) and the Delhi Development Authority (Disposal of Developed Nazul Land) Rules, 1981 (for short, ‘the 1981 Rules’). The learned counsel submitted that though no right, title or interest was created in favour of M/s Mehta Constructions, it purported to execute an agreement for sale in favour of the second respondent. It appears that in Company Application pending before the learned Single Judge, M/s Mehta Constructions was represented by one Shri R.P. Dutt, its Managing Director who stated that an absolute irrevocable authority has been conferred upon Shri S.Daljit Singh and Shri S.Charanjit Singh of the second respondent to take steps to get the title of M/s Mehta Constructions perfected. An order was passed by the learned Company Judge of the High Court on 4th February 1985, directing the Registrar of the High Court to appear before the Sub-Registrar of Assurances and to admit execution of a sale deed in favour of the second respondent. Accordingly, the deed of Conveyance and Assignment dated 15th February 1985 executed by and between M/s Mehta Constructions and the second respondent was registered. He pointed out that the Company Court was not made aware that even leasehold rights regarding the said plot were not available with M/s Mehta Constructions. He submitted that that is how, in the liquidation proceedings of the second respondent, the plot was put to public auction and sold to the first respondent. He submitted that under Rule 43 of the 1981 Rules, the lessor's prior consent was required to transfer the said plot. Placing reliance on a decision of this Court in the case of Delhi Development Authority v. Vijaya C. Gurshaney & Anr.,1 he submitted that the sale in favour of the first respondent was illegal. The learned senior counsel also relied upon the decisions of this Court in the cases of Food Corporation of India & Ors. v. Babulal Agrawal[^2], Delhi Development Authority v. Anant Raj Agencies Pvt.Ltd.3, State of Rajasthan & Ors. v. Gotan Lime Stone Khanij Udyog Pvt. Ltd. and Anr.4 and Delhi Development Authority v. Nalwa Sons Investment Ltd. & Anr.5

The learned counsel appearing for the respondents submitted that until the first respondent applied for confirmation of sale, the appellant never filed any proceedings to challenge the transactions between M/s Mehta Constructions and the second respondent. It was submitted that the appellant never challenged the auction process. It was submitted that no interference is called for with the impugned judgment.

There is no dispute that the Delhi Improvement Trust executed an agreement to lease dated 17th July 1957 in favour of M/s Mehta Constructions regarding the said plot. Various terms and conditions were included in the said agreement. The agreement provided for the execution of the lease deed in favour of M/s Mehta Constructions. Clause 24 of the agreement is relevant which reads thus:

Admittedly, a lease in terms of the lease agreement was never executed. On 25th November 1972, M/s Mehta Constructions executed an agreement for sale in favour of the second respondent for a consideration of Rs.3,06,700/-. It appears that on 15th February 1985, M/s Mehta Constructions executed a sale deed in favour of the second respondent in respect of the said plot. As per the order dated 4th February 1985 passed by the learned Single Judge of the High Court, the High Court Registrar presented the sale deed for registration before the sub-Registrar of Assurances at Delhi. On 9th June 2000, a notice for Proclamation of Sale was published by the High Court of Punjab and Haryana of the said plot. Accordingly, in the auction sale, the highest bid of the first respondent was accepted by the High Court. The auction sale was confirmed by the learned Single Judge. The order of the learned Single Judge had been confirmed by the impugned order of the Division Bench.

An order dated 4th October 2023 passed by this Court read thus:

An affidavit was filed by the Provisional Liquidator of the second respondent in terms of the order. The Provisional Liquidator relied upon the orders passed by the Company Court. The Provisional Liquidator pointed out that as per letter dated 7th November 2023 addressed to the Provisional Liquidator by the Registrar General of Punjab and Haryana High Court, out of the amount deposited by the first respondent towards confirmation of sale, amounts of Rs.70,49,036/- and Rs.14,00,579/- have been invested in fixed deposits. The Registrar General pointed out that the maturity value of the fixed deposits was Rs.2,14,06,677/- and Rs.51,43,324/-, respectively. It is true that the aforesaid amounts which are invested in fixed deposits are available. However, the liquidation proceedings are still pending. In the report, the liquidator stated that a number of parties had made claims against the second respondent, including the Income Tax Department. The total claims are of Rs.60.66 crores or more. The total amount available is approximately Rs.10 crores. The amount available will be governed by the orders passed by the Company Court. When the High Court is seized of liquidation proceedings, and as there are other creditors of the second respondent, it will not be appropriate to direct that a part of the amount paid towards consideration by the first respondent should be appropriated towards unearned income payable to the appellant.

It is an accepted position that the lease was never executed by the appellant in favour of M/s Mehta Constructions, and no rights, title, and interest were created in favour of M/s Mehta Constructions in respect of the said plot. Therefore, at the highest, the second respondent, by virtue of the sale deed dated 15th February 1985, executed by M/s Mehta Constructions, can claim benefits under the lease agreement, provided in law, the second respondent is entitled to it in accordance with law.

We may note here that as far as the auction conducted in the liquidation proceedings of the second respondent is concerned, the notice of proclamation itself records that the sale of the said plot was on “as it is basis”. Moreover, the order dated 19th October 2001 of the Company Judge making sale absolute in favour of the first respondent reads thus:

As regards the unearned income, the Division Bench was right in not passing any order on that behalf. We cannot direct the funds available in liquidation proceedings for payment of the unearned income as large number of claims have been submitted.

Thus, the scenario which emerges is that the first respondent is not entitled to either ownership or leasehold rights in respect of the said plot. The first respondent cannot claim to be a lessee as the lease in terms of the lease agreement was never executed. At the same time, if according to the case of the appellant, M/s Mehta Constructions had committed breach of the lease agreement, notwithstanding the impugned orders, it will be always open for the appellant to adopt appropriate remedy for recovery of possession and/or recovery of unearned income against the first respondent.

If the first respondent desires to get the transaction regularised, it is for the first respondent to apply to the appellant to accept unearned income or any other amount. If such a request is made, the appellant will consider the same in accordance with the law.

Subject to the findings recorded as above, there is no reason to interfere with the impugned judgments. Accordingly, the appeal stands dismissed in the light of the findings recorded as above. .…………………………….J. (Abhay S Oka) …………………………….J. (Ujjal Bhuyan) New Delhi; March 07, 2025.