2000 (4) TMI 4 - SC - Income Tax

When the parties enter into a clear contract creating mutual rights & obligations the parties are bound by it and the extraordinary jurisdiction of the HC under article 226 of the Constitution cannot be allowed to be utilised for enforcing an obligation in departure from the terms of the agreement - the transferee-petitioners not entitled to any relief but are at liberty to have their remedy against the transferor and seek return of the money paid by them to the transferor under the agreement

Issues:
1. Interpretation of section 269UG of the Income-tax Act, 1961.
2. Entitlement and apportionment of consideration payable by the Central Government.
3. Rights and obligations under Chapter XX-C of the Income-tax Act.
4. Applicability of section 55(6)(b) of the Transfer of Property Act, 1882.
5. Enforcement of statutory charge for the amount of purchase money paid.
6. Relevance of the agreement between the parties concerning Chapter XX-C provisions.
7. Discretionary writ jurisdiction under Article 226 of the Constitution.
8. Non-joinder of necessary parties in the writ petition.

Detailed Analysis:

1. Interpretation of section 269UG of the Income-tax Act, 1961:
The controversy centers around the interpretation of section 269UG, which mandates the Central Government to tender the amount of consideration to the person or persons entitled thereto within a specified period. The appellants argued that the Central Government was statutorily obligated to tender the amount claimed by them, and their claim should have been honored by the appropriate authority.

2. Entitlement and apportionment of consideration payable by the Central Government:
The appellants claimed entitlement to Rs. 5,05,000, which included Rs. 4,55,000 paid as earnest money and an additional Rs. 50,000. The appropriate authority, however, did not honor their claim, stating that the appellants did not file a consent letter from the transferor. The court held that if there was no dispute regarding the payment or apportionment, the amount must be tendered to the person or persons entitled thereto. In case of a dispute, the amount should be deposited with the appropriate authority.

3. Rights and obligations under Chapter XX-C of the Income-tax Act:
Chapter XX-C modifies the contractual relationship between parties to the extent superseded by its provisions. The court noted that the rights and obligations of the parties are governed by the ordinary law of the land, including the Contract Act and the Transfer of Property Act. The Central Government's role in compulsory purchase is akin to a buyer, and the apparent consideration replaces the agreed consideration.

4. Applicability of section 55(6)(b) of the Transfer of Property Act, 1882:
Section 55(6)(b) provides that the buyer is entitled to a charge on the property for the amount of any purchase money properly paid in anticipation of delivery. The court held that this statutory charge applies to the amount of Rs. 4,55,000 paid by the appellants, as it constitutes an encumbrance on the property. The charge follows the property even after it vests in the Central Government unless annulled by the appropriate authority.

5. Enforcement of statutory charge for the amount of purchase money paid:
The court emphasized that the statutory charge under section 55(6)(b) of the Transfer of Property Act is enforceable against the property in the hands of the Central Government. The failure to tender the amount to the appellants does not defeat their lien. The court, however, did not find fault with the appropriate authority for not tendering the additional Rs. 50,000, as it was not jointly acknowledged by the transferor and transferees.

6. Relevance of the agreement between the parties concerning Chapter XX-C provisions:
Clause 5 of the agreement between the parties specified that in case of compulsory purchase by the Central Government, the vendor would receive the entire consideration, and the purchasers could claim the earnest money from the appropriate authority or the vendor. The court held that the rights and obligations should be governed by this agreement, and the appellants' remedy lies against the transferor.

7. Discretionary writ jurisdiction under Article 226 of the Constitution:
The court noted that the High Court's discretionary jurisdiction under Article 226 cannot be utilized to enforce obligations contrary to the terms of the agreement. The appellants' claim for a writ of mandamus directing the Central Government to pay the amount was not entertained, as the agreement provided a remedy against the transferor.

8. Non-joinder of necessary parties in the writ petition:
The court observed that the appellants did not implead the transferor, Indian Overseas Bank, or A. Chandrakant and Co. as parties to the writ petition. This non-joinder of necessary parties further weakened their case. The court concluded that the appellants are not entitled to relief in these proceedings and dismissed the appeal, allowing them to seek remedy against the transferor for the return of the money paid.

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