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TMI Blog2006 (2) TMI 75X X X X Extracts X X X X X X X X Extracts X X X X ..... es bearing No. 377, R.M.V. Extension, Bangalore, measuring 50'x 90'. The total consideration was fixed at Rs. 18,00,000. The appellants paid a sum of Rs. 6,00,000 by two cheques dated July 16, 1987, to the fourth respondent and the balance consideration was agreed to be paid at the time of registration of sale deed. The parties to the agreement were required under Chapter XX-C of the Income-tax Act, 1961 (in short "the Act"), read with rule 48L of the Income-tax Rules, 1962 (in short "the Rules"), to file a statement in Form No. 37-I before the appropriate authority specified under Chapter XX-C. Accordingly, the appellants and the fourth respondent filed Form No. 37-I along with certain documents on October 29, 1987. Thereafter, the appropriate authority passed an order dated December 18, 1987, purported to be under section 269UD(1) of the Act, for pre-emptive purchase of the said property by the Central Government at an amount equal to the apparent consideration. It was stated that the reasons were recorded separately. The said order dated December 18, 1987, was challenged before the Karnataka High Court in W.P. Nos. 247-248 of 1988. The challenge in the writ petitions was to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the pendency of the said writ petitions, a Constitution Bench of this court by its judgment rendered on November 17, 1992, upheld the constitutional validity of Chapter XX-C of the Act in C.B. Gautam v. UOI [1993] 1 SCC 78; [1993] 199 ITR 530. While so doing, this court, however, held that before an order for compulsory purchase is made under section 269UD, the intending purchaser and the intending seller must be given a reasonable opportunity of showing cause against the order for compulsory purchase being made by the appropriate authority. This court further held that the provisions of Chapter XX-C are to be resorted to only where there is significant undervaluation of the immovable property to be sold in the agreement of sale with a view to evading tax and that an order for compulsory purchase under section 269UD is required to be supported by reasons in writing and such reasons must be germane to the object for which Chapter XX-C was introduced in the Income-tax Act, namely, to counter attempts to evade tax. Reading down of section 269UD in the above manner, to uphold its validity, necessitated issue of certain consequential directions. We extract below the relevant portions th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose cases also nothing which we have stated in this judgment will invalidate the purchases." Subsequently, on November 27, 1992, this court issued certain clarifications in regard to the directions in C.B. Gautam's case [1993] 1 SCC 78; [1993] 199 ITR 530, in regard to pending matters. As cases where public auctions had already been held were excluded from the directions relating to pending matters, the clarifications did not apply to such cases. The writ petitions filed by the appellants were taken up for hearing by the Karnataka High Court after the decision in C.B. Gautam's case [1993] 1 SCC 78; [1993] 199 ITR 530. The only point urged by the appellants at the hearing of the writ petitions was that in the impugned order no reasons were stated, as to on what basis the valuation of the property was arrived at and since the order was non-reasoned without giving opportunities to the appellants the same was liable to be quashed. The stand of the appropriate authority on the other hand was that the decision of this court in C.B. Gautam's case [1993] 1 SCC 78; [1993] 199 ITR 530 was squarely applicable to the facts of the case. It was pointed out that instead of declaring the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding it cannot be said that the transaction was not completed. In support of the appeals, Mr. T.L.V. Iyer, learned senior counsel has submitted that the order dated August 1, 1991, on which the High Court placed reliance itself made it clear that the same was subject to the result of the writ petitions. No prejudice should be caused to a party by an order of the court. Therefore, the ratio in C.B. Gautam's case [1993] 1 SCC 78; [1993] 199 ITR 530, more particularly, the clarificatory order was not applicable to the facts of the case. If any act is done pursuant to the order of the court the same is subject to the result of the writ petitions and it cannot be affected. Reference was made to paragraphs 41, 42, 43 and 46 of C.B. Gautam's case [1993] 1 SCC 78; [1993] 199 ITR 530, in this context. Even if there was any auction sale by the Income-tax Department the principle of lis pendens was clearly applicable. The position would have been the same if there would not have been any interim order, and the final order in the writ petitions would have covered the matter. In response, learned counsel for the auction purchaser submitted that interestingly the prospective vendor had not q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ened by its interim order when at the end of the proceedings the court pronounces its judicial verdict which does not match with and countenance its own interim verdict. Whenever called upon to adjudicate, the court would act in conjunction with what is the real and substantial justice. The injury, if any, caused by the act of the court shall be undone and the gain which the party would have earned unless it was interdicted by the order of the court would be restored to or conferred on the party by suitably commanding the party liable to do so. Any opinion to the contrary would lead to unjust if not disastrous consequences. Litigation may turn into a fruitful industry. Though litigation is not gambling yet there is an element of chance in every litigation. Unscrupulous litigants may feel encouraged to approach the courts, persuading the court to pass interlocutory orders favourable to them by making out a prima facie case when the issues are yet to be heard and determined on the merits and if the concept of restitution is excluded from application to interim orders, then the litigant would stand to gain by swallowing the benefits yielding out of the interim order even though the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the appellants wanted to take back the money that had been paid to the prospective vendor. The submission was made on behalf of the appellant that a sum of Rs. 6 lakhs paid by way of advance may be refunded. By seeking the return of the advance, the appellants have acquiesced in the property being sold in auction. In the order it was clearly mentioned that it was open to the writ petitioners (the present appellants) to seek refund of the same from the transferor, namely, respondent No. 4. The controversy can be looked at from another angle. This court, in Union of India v. Shatabadi Trading and Investment Pvt. Ltd. [2001] 6 SCC 748; [2001] 251 ITR 93, 96, 98, dealt with a somewhat similar issue. In paragraphs 3 and 9 of the judgment it was noted as follows: "3. The High Court admitted the writ petition and granted an interim order of stay restraining the Department to proceed further in the matter. Against the said interim order, a special leave petition was preferred before this court. During the pendency of the proceedings before this court, an order was made on April 25, 1994, directing that the property be auctioned subject to bid confirmation by this court. Auction wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brushed aside that sale in the manner it has been done. The impact of such decision ought to have been taken note of by the High Court. Indeed in K. Basavarajappa v. Tax Recovery Commissioner [1996] 11 SCC 632; [1997] 223 ITR 297 this court has held that an agreement to sell creates no interest in the property and in the absence of a decree of specific performance of an agreement even though authorised by the general power-of-attorney holder of the original owner of the property (sic the purchaser, the appellant therein) had no locus standi to move an application for setting aside the auction-sale on offer to deposit full tax dues. If we extend the said principle to the present facts, we find it hardly possible to come to the conclusion the High Court has arrived at. It is possible that the writ proceedings were still pending before the High Court but those writ proceedings were not at the instance of the owner of the subject property and the agreement-holder did not have any interest other than what was indicated in K. Basavarajappa case [1996] 11 SCC 632. In that view of the matter, we do not think the High Court should have ignored the effect of the same." It is thus clear tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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