A bench of Acting Chief Justice Gita Mittal and Justice C Hari Shankar made the observation after the south Delhi municipal corporation (SDMC) replied in the negative to a court query whether it had sanctioned a single building plan for an eatery or a pub in the area.
"Have you sanctioned even a single building plan for a restaurant," it had asked the SDMC and said, "not one (restaurant) has taken a sanctioned building plan".
The court also said the municipal corporation "does not apply its mind" on whether sufficient space and other facilities for the public are in place when it permits such establishments to come up.
The corporation in its defence said it was not the only one to be blamed for the situation and it was a collective failure of all authorities concerned.
The arguments will continue on January 19.
The petitioners in their pleas have also alleged that the streets in the village were not wide enough for a fire tender to move easily in case of an emergency.
The court had earlier termed the Hauz Khas Village as "a ticking time bomb".