The Supreme Court held that a mortgage of leasehold property executed without the prior written consent of the competent authority, as required under the lease deed, is illegal and unenforceable, and any subsequent actions based on such mortgage, including sale or auction, are invalid. In a bench comprising Justices Sanjay Kumar and Alok Aradhe, quashed the e-auction of a plot allotted by the Delhi Development Authority (DDA) in Delhi Development Authority vs Corporation Bank on September 25, 2025.

The Court determined that the club mortgaged the site to Corporation Bank without the Lieutenant Governor of Delhi’s prior written authorization, rendering the mortgage unconstitutional. As a result, the Bank’s following auction was unlawful since it violated the lease deed’s stipulations as well as legislative prohibitions.

The Court underlined that the DDA’s statutory rights over the property remained intact, including the opportunity to recover unearned increase and preemptive purchase rights. The DDA’s earlier writ petition, which was dropped in response to the Bank’s undertaking, did not preclude it from challenging the auction, which violated lease restrictions.

The Court further stated that the auction purchaser behaved in good faith and was free of any misconduct. Upholding the concept of restitution, it directed the Bank to restore the auction profits to the purchaser with interest at 9% per year, ensuring that no party was unfairly enriched at the expense of an innocent third party.

As a result, the e-auction notice, auction, and sale confirmation were cancelled, and the Bank was ordered to comply with the refund order within one month.