Jurisdiction To Make Restitution Is Inherent In Every Court & Exercised Wherever Justice Of Case Demands: Supreme Court

The Supreme Court observed that the jurisdiction to make restitution is inherent in every Court and will be exercised wherever the justice of the case demands.

The Court was hearing a Civil Appeal filed by the Delhi Development Authority (DDA) against the Order of the Delhi High Court, by which it dismissed its Writ Petition.

The two-Judge Bench of Justice Sanjay Kumar and Justice Alok Aradhe emphasised, “The principle of restitution flows from the very heart of justice that no one shall unjustly enrich himself at the instance of another and that those who suffered without fault should, so far as money can achieve, be restored to the position they once occupied. The jurisdiction to make restitution is inherent in every court and will be exercised wherever the justice of the case demands.”

The Bench said that the restitution becomes not merely a legal device but a moral imperative.

Senior Advocate C. Mohan Rao represented the Appellant while Senior Advocate Preetesh Kapur represented the Respondents.

Factual Background

The Appellant-DDA allotted a plot to the Respondent No. 2-club on a leasehold basis for construction of a recreational and sports club. The said club was required to pay a provisional premium. It, therefore, sought a loan from the Respondent No. 1-Corporation Bank and mortgaged the plot. As per the lease deed, prior written consent from the Lieutenant Governor was necesary for mortgage or charge of the plot. As the club defaulted in the payment, the Bank initiated recovery proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 before the Debts Recovery Tribunal (DRT).

The Recovery Officer, DRT rejected the objections of DDA against which an Appeal was filed. However, the said Appeal was dismissed and then DDA filed an Appeal under Section 18 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). It also filed a Writ Petition before the High Court, which was dismissed. In 2012, the plot was auctioned and M/s Jay Bharat Commercial Enterprises emerged as the highest bidder. Hence, the case was before the Apex Court.

Reasoning

The Supreme in view of the facts and circumstances of the case, elucidated, “A Constitution Bench of this Court in Daryao & Ors. v. State of U.P. and Ors. dealt with the question of applicability of principle of Res Judicata in writ proceedings, and has summarised its conclusion in para 26 of its judgement. The aforesaid paragraph was extracted by another Constitution Bench of this Court in Gulabchand Chhotalal Parikh v. State of Gujarat in para 53 as follows:-

53. In Daryao Case this Court had again dealt with the question of the applicability of the principle of res judicata in writ proceedings. The matter was going through very exhaustively and the final conclusions are to be found at p. 592. We may summarise them thus:

1. If a petition under Article 226 is considered on the merits as a contested matter and is dismissed, the decision would continue to bind the parties unless it is otherwise modified or reversed by appeal or other appropriate proceedings permissible under the Constitution.

2. It would not be open to a party to ignore the said judgment and move this Court under Article 32 by an original petition made on the same facts and for obtaining the same or similar orders or writs.

3. If the petition under Article 226 in a High Court is dismissed not on the merits but because of the laches of the party applying for the writ or because it is held that the party had an alternative remedy available to it, the dismissal of the writ petition would not constitute a bar to a subsequent petition under Article 32.

4. Such a dismissal may however constitute a bar to a subsequent application under Article 32 where and if the facts thus found by the High Court be themselves relevant under Article 32.”

The Court said that the doctrine of Res Judicata, salutary as it is, rests upon foundation that a matter once heard and finally decided between the parties cannot be reopened.

“The earlier writ petition i.e. Writ Petition (C) No. 6972 of 2012 filed by the DDA was withdrawn in view of the undertaking furnished by the bank that the auction shall take place in accordance with terms and conditions of the lease. The earlier writ petition was not decided on merits. In view of undertaking furnished by the bank, as recorded by that High Court in its order dated 05.11.2012, the DDA had a right to insist that auction is held in accordance with terms and conditions of the lease”, it noted.

The Court was of the view that the auction was held in violation of terms of the lease and hence, the DDA had a fresh cause of action to approach the Court.

“Thus, principles analogous to Section 11 of Civil Procedure Code, 1908 did not apply to obtaining factual matrix of the case. The High Court without adverting to the validity of the auction which was per se illegal as the same was conducted in violation of the terms and conditions of the lease deed and the provisions of the 1961 Act and 1962 Rules, erred in dismissing the Writ Petition on the ground that the same was barred by the principles analogous to Section 11 of the CPC”, it remarked.

The Court reiterated that any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep.

“Such remedies in English law are generally different from remedies in contract or in tort, and are now recognized to fall within a third category of the common law which has been called quasi-contract or restitution”, it added.

The Court further observed that the Auction Purchaser has been caught in the undertow of circumstances, not of its making.

“Among all the actors in this legal drama, it alone stands innocent. The Auction Purchaser entered the auction in good faith, placed its bid and deposited its hard-earned money in the belief that the law clothed the auction with legitimacy”, it also remarked.

Conclusion

The Court was of the view that the Auction Purchaser neither breached the covenant nor failed in diligence and did not seek to profit from the illegality and the restitution, therefore, becomes not merely a legal device but a moral imperative.

“It is this principle which in the facts of the case must guide the relief to the Auction Purchaser. The Bank having advanced the money of an illegal mortgage and having chosen to auction what it never lawfully possessed, bears the responsibility for the consequences”, it concluded.

Accordingly, the Apex Court allowed the Appeal, quashed the impugned Judgment, and directed the Bank to refund the entire amount lying in deposit to the Auction Purchaser.

Cause Title- Delhi Development Authority v. Corporation Bank & Ors. (Neutral Citation: 2025 INSC 1161)

Appearance:

Appellant: Senior Advocate C. Mohan Rao and AOR Deeksha Ladi Kakar.

Respondents: Senior Advocate Preetesh Kapur, AORs Arun Aggarwal, Pallavi Sharma, Advocates Anshika Agarwal, Lovelesh Kukreja, Anmol Gupta, Bikash Mohanty, Apratim Thakur, Shashwat Panda, and Aiman Zameer.

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