The Supreme Court has ruled that an agreement to lease does not automatically confer leasehold rights unless a lease deed is both executed and registered. The decision came as the Court settled a long-running dispute involving the Delhi Development Authority (DDA) over a contested property auction.
The case stemmed from a 1957 agreement between the DDA (then the Delhi Improvement Trust) and M/s Mehta Constructions for a plot of land. However, no formal lease deed was ever executed. Clause 24 of the agreement explicitly stated that no rights, title, or interest would be established until proper execution and registration took place.
Despite this, Mehta Constructions attempted to sell the property to M/s Pure Drinks Pvt. Ltd. in 1972, with a formal sale deed registered in 1985. When Pure Drinks went into liquidation, the plot was auctioned in 2000 and purchased by S.G.G. Towers.
Challenging the auction, the DDA argued that since Mehta Constructions never held valid leasehold rights, it could not transfer ownership. Both a Single Judge and the Division Bench of the Delhi High Court upheld the auction sale, prompting DDA to appeal to the Supreme Court.
In its ruling, the Supreme Court reinforced that Mehta Constructions never gained leasehold rights due to the absence of a registered lease deed. As a result, the subsequent buyers—including S.G.G. Towers—had no legitimate claim to the property. The Court emphasized that the auction was conducted on an “as-is” basis, meaning the buyer acquired only the rights held by the seller—none in this case.
The Court dismissed the appeal but clarified that the DDA retains the right to pursue legal remedies for possession recovery and unearned income against S.G.G. Towers. It also left open the possibility for S.G.G. Towers to seek approval from the DDA to regularize the transaction, subject to payment of unearned income.
With this ruling, the Supreme Court reaffirmed that an unexecuted lease agreement does not translate into property rights, potentially impacting similar disputes in real estate transactions.
