2004 (3) TMI 12 - HC - Income Tax

Apparent consideration in accordance with the passed u/s 269UD(1) - Petitioner is seeking direction against the respondent to make payment of apparent consideration to which he is entitled, in accordance with the order dated May 30, 1995, passed under section 269UD(1) Held that once having acquired the property under section 269UD(1), it is not open for the respondents to say that unless the property is delivered in their possession, removing the encroachment, the petitioner is not entitled to claim the amount of apparent consideration - Hence petitioner is entitled to receive the amount of apparent consideration and the respondents are bound to pay the same. It would be open for the respondents to take possession of the property, in accordance with law or as per the provisions of section 269UE. The petitioner has undertaken to extend his co-operation, if necessary, even by lending his name as a party-applicant in the execution proceeding, if the Central Government decides to execute the decree through the process of court, which in no event takes away the rights of the respondents to take recourse to the provisions of sub-sections (3) and (4) of S. 269UE

Summary

Issues Involved:
1. Payment of apparent consideration as per section 269UD(1) of the Income-tax Act, 1961.
2. Obligation to deliver property free from encumbrances.
3. Legal implications of encroachment on the property.
4. Execution of decree for removal of encroachment.
5. Rights and obligations under sections 269UE and 269UG of the Act.

Issue-wise Detailed Analysis:

1. Payment of Apparent Consideration:
The petitioner sought a direction for the respondent to make payment of the apparent consideration as per the order dated May 30, 1995, under section 269UD(1) of the Income-tax Act, 1961. The court noted that the property vested in the Union of India with this order, and the petitioner was entitled to the consideration amount within 30 days from the date of the order. The petitioner argued that the respondents did not express their willingness to take possession of the property and thus failed to make the payment.

2. Obligation to Deliver Property Free from Encumbrances:
The respondents contended that the petitioner was obliged to deliver the property free from encumbrances as per the sale agreement. However, the court found that the petitioner, having lost his title to the property due to the order under section 269UD(1), could not execute the decree for removing the encroachment. The court held that the respondents should take steps to remove the encroachment, either by executing the decree or by using the provisions of section 269UE.

3. Legal Implications of Encroachment:
The court examined whether the encroachment could be considered an encumbrance. It concluded that encroachment, being an unlawful possession without any legal right, does not qualify as an encumbrance. The court emphasized that the respondents were aware of the encroachment before passing the order under section 269UD(1) and thus could not refuse to pay the apparent consideration on this ground.

4. Execution of Decree for Removal of Encroachment:
The court highlighted that the Central Government, having stepped into the shoes of the petitioner, was entitled to execute the decree for removing the encroachment. The court criticized the respondents for not taking steps to remove the encroachment for seven years and held that the petitioner could not be asked to comply with the requirements which he could not fulfill due to the loss of title.

5. Rights and Obligations under Sections 269UE and 269UG:
The court referred to the provisions of sections 269UE and 269UG, which mandate the transferor to deliver possession of the property and the Central Government to tender the consideration amount within a specified period. The court noted that the respondents failed to take possession of the property and thus could not withhold the payment of the apparent consideration. The court also referred to the Supreme Court's observations in C.B. Gautam v. Union of India, which emphasized that the apparent consideration should reflect the market value, including any encumbrances.

Conclusion:
The court allowed the petition, directing the respondents to pay the apparent consideration deposited in the P.D. account along with accrued interest within 30 days. The court held that the respondents could take possession of the property in accordance with the law and that the petitioner had undertaken to cooperate in the execution proceedings. The court made the rule absolute with no order as to costs.