Special CBI Judge Talwant Singh passed the order while discharging Ajay Kumar Dixit in a case filed under provisions of the Prevention of Corruption Act.
The court said Dixit belonged to 'A' category employees of the corporation and in his case, the sanction to prosecute him was granted by the MCD commissioner, who was not the competent authority.
It said MCD was the competent authority to grant sanction and gave liberty to the CBI to obtain fresh sanction from the competent authority for his prosecution.
"However, CBI is at liberty to obtain fresh sanction for the prosecution of the applicant/accused from a competent authority and proceed further in accordance with law. Present proceedings against the accused stand dropped," it said.
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Dixit had sought discharge in the corruption case for want of legitimate sanction to prosecute him. In May 2005, a search was conducted at Dixit's house and an FIR registered by the CBI.
The probe agency, however, did not produce any evidence before the court to show that the MCD Commissioner was delegated with powers in this regard.