Property Key to Economic Security, Centre to Pay ₹1.76 Cr: Delhi HC

The Delhi High Court, recently, emphasized that immovable property, for an individual, is not merely a corporeal asset or a physical manifestation of ownership; It constitutes a fundamental pillar of economic security, social identity, and personal dignity.

The court further highlighted that the right to property, though no longer a fundamental right post the 44th Amendment to the Constitution, continues to occupy a sacrosanct position within the democratic framework as a constitutional and legal right under Article 300-A of the Constitution.

These observations were made in a civil suit filed by the owners of a flat in Ansal Bhawan, New Delhi, seeking damages on account of mesne profits, loss of rent, and property tax dues, along with interest. The property was leased to the Directorate of Estates in 1976, with the lease expiring on 25 November 1995. Subsequently, in 1998, the Competent Authority under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (SAFEMA), passed a forfeiture order concerning the suit property. Following this, the tenant ceased paying rent from May 1999.

The plaintiffs challenged the forfeiture order, which the High Court quashed in 2014 on the ground that the Competent Authority lacked jurisdiction under Section 2(2)(b) of SAFEMA. Despite this, possession of the premises was not restored to the plaintiffs, prompting them to file a second writ petition. In 2020, the court directed the return of the property and ordered payment of rent arrears at the rate of ₹20,500 per month.

The defendants argued that the forfeiture remained valid until 2016 and invoked protection under Section 23 of SAFEMA, further submitting that they had already paid ₹52,08,323 in rent arrears in compliance with court directions. However, they also admitted to having remained in possession of the suit property from 01 May 1999 to 02 July 2020. The plaintiffs’ counsel highlighted that this fact was clearly acknowledged in the pleadings and evidence, specifically in paragraph 40 of the written statement. The defendants admitted that no lease agreement existed during this period and that Defendant No. 2 had paid electricity bills until November 2019, indicating continuous occupation.

The court’s order dated 28 July 2020 confirmed that rent had only been paid until April 1999 and ordered Defendant No. 1 to clear arrears from 01 May 1999 to 02 July 2020 at ₹20,500 per month. No lease or renewal document was produced to justify continued possession after the expiry of the original lease in 1995.

The central issue before the court was whether the continued occupation of the premises was unlawful. The defendants contended that the plaintiffs had no enforceable rights during the forfeiture period (1998–2016), relying on Section 23 of SAFEMA. However, the court observed that the original detention order under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act (COFEPOSA) had never been executed and was revoked in 1977. It noted that the ex parte forfeiture order passed in 1998 was quashed in 2014 due to a lack of jurisdiction.

The court emphasized that any action undertaken without jurisdiction was void ab initio and could not be cured by consent or delay. Accordingly, the forfeiture proceedings were nullified by judicial orders and were rendered legally ineffective. Consequently, the protection under Section 23 of SAFEMA did not apply.

“The powers of the State are not plenary or absolute but are circumscribed by constitutional and statutory limitations. Any executive or legislative action that seeks to divest a citizen of property without due process, in the absence of an enabling law, would fall foul of Article 300-A and render such action void ab initio”, the court emphasized.

The court also clarified that the statutory protection of good faith required honesty, fairness, and compliance with the law. The defendants' continued occupation, despite having no lease or lawful basis, did not satisfy this requirement. The court reiterated that the defendants could not claim immunity under the guise of good faith.

“Therefore, it is noted that the defendants' continued occupation of the suit property even after the quashing of the proceedings under SAFEMA, does not exhibit any bona fide and good faith on the part of the defendants… the Court concludes that the possession and occupation of the suit property by the defendants cannot be justified under the provisions of Section 23 of SAFEMA. Holding otherwise would mean stretching the doctrine of good faith to an extent where an illegal action which has already been found to be impermissible in law would be impliedly approved by this Court”, the court held.

It was further noted that the plaintiffs regained possession only in July 2020, seven years after the quashing of the forfeiture order. The defendants neither offered valid justification for continued possession nor paid rent at market rates for the period post-1999.

Given that the last lease expired in November 1995 and no further lease agreement existed thereafter, the Court held that the defendants' occupation from May 1999 to July 2020 was unlawful. It reaffirmed that under Article 300-A of the Constitution, a person could not be deprived of their property except by a lawful authority, and the judiciary must uphold this constitutional protection.

The court highlighted that, “The right to property, though no longer a fundamental right post the 44th Amendment to the Constitution, continues to occupy a sacrosanct position within the democratic framework as a constitutional and legal right under Article 300-A of the Constitution. The said Article stipulates that no person shall be deprived of their property except by authority of law”.

Accordingly, the Court declared the defendants’ occupation from 01 May 1999 to 02 July 2020 as illegal. This finding was based on the absence of a valid lease, non-payment of rent, and the judicial determination that the forfeiture proceedings were void.

Furthermore, referring to the Supreme Court case of N. Nagendra Rao & Co. v. State of A.P [(1994) 6 SCC 205], the court reiterated that “the doctrine of sovereign immunity cannot be invoked where the State or its officers act negligently in discharge of their statutory duties or interfere unlawfully with the life, liberty, or property of citizens”.

In light of these legal principles, the court held that the defendants, being Government authorities, were not exempt from liability. It held that even where forfeiture was held to be without jurisdiction, the property owner remained entitled to compensation for unlawful dispossession.

The court noted that the payment of ₹52,08,323 by the defendants only covered rent arrears calculated at the earlier contractual rate, with no adjustment for rental appreciation or interest. Thus, the court held that the payment did not constitute a full and final settlement of the plaintiffs’ claim. The plaintiffs had not received compensation for business loss, loss of income, or deprivation of commercial use during the period of illegal occupation.

Therefore, the court concluded that the plaintiffs were entitled to mesne profits as compensation for the defendants’ unlawful occupation of the suit property from 1999 to 2020. The court, therefore, directed the defendants to pay Rs. 1,76,79,550/ as mesne profits.

For Plaintiff: Advocates Sidhant Kumar, Manya Chandok and Om Batra

For Defendant: Advocates Vikrant N. Goyal, Nitin Chandra, Aditya Shukla and Nishu

Case Title: Rajiv Sarin v Directorate of Estates (2025:DHC:3297)