2005 (12) TMI 55 - HC - Income Tax

Purchase at Auction - These writ petitions by a person who was the highest bidder in an auction sale conducted by the income-tax authorities who had put up for sale several parcels of properties they had acquired by pre-emptive purchase under Chapter XXC, in terms of public auction notice - learned counsel for the petitioner, vehemently urged that the court should see the injustice of the matter in the sense the petitioner is being deprived of the huge sum without any justification and therefore, the reliefs could be extended by examining such question even in the writ jurisdiction. The amount being huge by itself cannot be a criterian for interference. A person doing a business on large scale definitely hazards or invests large amounts. In so far as the petitioner is concerned, it is nothing but an activity of buying and selling. The forfeiture orders are if at all incident to such activity of the petitioner and moreover being one attributable to the very conduct, inadequacies of the petitioner, I do not find any injustice in the impugned order

Issues involved:
1. Legality and jurisdiction of the forfeiture order.
2. Justification for non-payment of the balance sale consideration.
3. Allegations of arbitrariness and unfair action by the respondent.
4. Validity of the auction sale terms and conditions.
5. Petitioner's right to reclaim the forfeited amount.

Detailed Analysis:

1. Legality and jurisdiction of the forfeiture order:
The petitioner contended that the forfeiture order was a blatant arbitrary action without jurisdiction, as the respondent had no statutory or other power to pass such orders. The petitioner argued that the order resulted in unjust enrichment for the State since the properties were subsequently sold at a higher price. The petitioner also claimed that there was no concluded contract between the petitioner and the State, thus invalidating the forfeiture order. The respondent, however, maintained that the forfeiture order was fully in accordance with the terms and conditions of the auction sale, which the petitioner had accepted by participating in the auction. The court concluded that the Commissioner had the jurisdiction to pass the forfeiture order, as it was in line with the terms and conditions of the sale and the authorization issued by the President of India under Article 329 of the Constitution of India.

2. Justification for non-payment of the balance sale consideration:
The petitioner argued that they were justified in withholding the balance sale consideration because the properties were not conveyed as described in the auction sale publication. The petitioner claimed that the properties' description in the auction notice and the pamphlet issued by the Chief Commissioner of Income-tax did not match the actual properties. The court found that the petitioner's failure to deposit the balance sale consideration was a breach of the auction sale conditions, and the forfeiture was a consequence of this default. The court held that the petitioner could not avoid the consequences of their own default.

3. Allegations of arbitrariness and unfair action by the respondent:
The petitioner alleged that the forfeiture order was an example of unfair action by the State and that the State should not benefit from an unfair sale condition. The respondent argued that the petitioner, having participated in the auction and accepted the terms and conditions, could not now claim arbitrariness. The court found no substance in the petitioner's argument, stating that the petitioner was not singled out for any unfavorable treatment and that the terms and conditions were applied uniformly to all participants. The court concluded that there was no arbitrariness or unfairness in the impugned orders.

4. Validity of the auction sale terms and conditions:
The petitioner contended that the auction sale did not result in a contract, and thus the respondents could not enforce the forfeiture. The court held that the terms and conditions of the auction sale were clear and known to the petitioner, who had accepted them by participating in the auction. The court found that the petitioner, as the highest bidder, was bound by the auction sale conditions and that the forfeiture was a consequence of the petitioner's failure to comply with these conditions.

5. Petitioner's right to reclaim the forfeited amount:
The petitioner sought the court's intervention to reclaim the forfeited amount, arguing that the forfeiture was unjust. The court reserved the petitioner's liberty to pursue a claim to reclaim any part of the forfeited amount in a manner known to law. However, the court dismissed the writ petitions, stating that they did not merit interference in the exercise of writ jurisdiction.

Conclusion:
The court dismissed the writ petitions, upholding the forfeiture order as being within the jurisdiction and in accordance with the terms and conditions of the auction sale. The court found no arbitrariness or unfairness in the respondent's actions and held that the petitioner was bound by the auction sale conditions. The petitioner's liberty to pursue a claim for the forfeited amount was reserved, but the writ petitions were not entertained.

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