Non-disclosure in auction sale of leased property vitiates recovery proceedings and supports restitution to a bona fide purchaser.

The SC held that withdrawal of an earlier writ petition did not bar a later challenge where the impugned auction created a fresh cause of action and the earlier matter was not decided on merits. It further held that an e-auction of leased immovable property was vitiated because the sale proclamation failed to disclose material lease restrictions and the Development Authority's claim for unearned increase, contrary to the recovery procedure incorporated through Section 29 of the 1993 Act and the Income-tax certificate proceedings framework. The auction process, sale confirmation and sale certificate were therefore quashed, and the bona fide auction purchaser was granted restitution with refund and interest.

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Issues: (i) whether the writ petition was barred by principles analogous to res judicata under Section 11 of the Code of Civil Procedure, 1908; (ii) whether the e-auction proceedings, sale confirmation and sale certificate were invalid for non-disclosure of the lessee's lease conditions and the Development Authority's claim for unearned increase, in breach of the recovery procedure applicable under Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the relevant provisions of the Income-tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962; (iii) what relief, if any, ought to be granted to the auction purchaser.

Issue (i): whether the writ petition was barred by principles analogous to res judicata under Section 11 of the Code of Civil Procedure, 1908.

Analysis: The earlier writ petition had been withdrawn and was not decided on merits. The auction was conducted after the bank gave an undertaking that the sale would be in accordance with the lease conditions. Since the impugned auction took place in violation of those conditions, the later writ petition rested on a fresh cause of action. The earlier withdrawal therefore did not create a bar based on principles analogous to Section 11 of the Code of Civil Procedure, 1908.

Conclusion: The bar of res judicata or principles analogous thereto did not apply.

Issue (ii): whether the e-auction proceedings, sale confirmation and sale certificate were invalid for non-disclosure of the lessee's lease conditions and the Development Authority's claim for unearned increase, in breach of the recovery procedure applicable under Section 29 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the relevant provisions of the Income-tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962.

Analysis: Section 29 of the 1993 Act attracts the recovery procedure under the Second and Third Schedules to the Income-tax Act, 1961 and the Income Tax (Certificate Proceedings) Rules, 1962. Rule 53 of the Second Schedule requires material particulars affecting the nature and value of the property to be disclosed in the sale proclamation, and Rule 16 empowers inquiry into matters relevant to the proclamation. The subject property was leased land, the lease terms imposed restrictions on mortgage and sale, and the Development Authority's claim for unearned increase was not disclosed in the auction process. The sale proclamation was therefore issued without compliance with the governing procedure.

Conclusion: The auction process, sale confirmation and sale certificate were invalid and liable to be quashed.

Issue (iii): what relief, if any, ought to be granted to the auction purchaser.

Analysis: The auction purchaser had participated in good faith and had deposited the sale consideration. Since the sale itself could not stand, restitution was necessary to prevent unjust enrichment and to restore the auction purchaser as far as money could do so. The bank, having proceeded on an invalid mortgage and sale, was bound to return the amount received, with appropriate interest on the balance retained in deposit.

Conclusion: The auction purchaser was entitled to refund with interest by way of restitution.

Final Conclusion: The appeal succeeded, the impugned High Court order and the auction-related actions were set aside, and restitutionary relief was directed in favour of the auction purchaser.

Ratio Decidendi: Where a sale of leased immovable property under the 1993 recovery regime is conducted without disclosure of material lease restrictions and the public authority's enforceable claim, the sale proceedings are vitiated and restitution must follow to protect an innocent auction purchaser.

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