9911796707
TMI Blog2004 (4) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... H S. THAKUR J. - This writ appeal arises out of an order passed by a learned single judge of this court whereby W.P. No. 26455 of 1993 filed by the appellant herein has been dismissed and an order of pre-emptive purchase of property passed by respondent-Appropriate Authority under section 269UD(1) of the Income-tax Act, 1961, upheld. The controversy arises in the following backdrop: In terms of an agreement dated December 11,1992, respondent No.3 in this appeal who happened to be the owner of property bearing No. 28-29 situate in 12th "D" Main Road, 6th Block, Rajajinagar, Bangalore, agreed to sell the same to the appellant herein for a total consideration of Rs. 14,50,000. A sum of Rs. 3 lakhs representing part payment of the sale price was paid by the appellant to the vendor of the property aforementioned. Since however the consideration fixed was beyond the stipulated amount, the parties appear to have filed Form No. 37-I before the Appropriate Authority in accordance with the provisions of Chapter XXC of the Income-tax Act, 1961, for permission to complete the transaction in terms of the agreement. The Appropriate Authority upon consideration of the said request issued a no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owner of the property filed an application purporting to be one under section 269UG(4) of the Income-tax Act with a request that the entire amount deposited by the Chief Commissioner of Income-tax be invested in a fixed deposit. Three months later, on August 19, 1993, the owner refunded to the appellant herein the advance amount of Rs. 3 lakhs received from him in pursuance of the agreement to sell. Sometime later, on September 8, 1993, the Appropriate Authority directed the release of the apparent consideration determined by it in favour of the owner who received the same without protest and in full and final settlement of his claim. The property in question was three years later sold by the Income-tax Department in a public auction for a sum of Rs. 34,10,000 in favour of M/s. Manipal Sowbhagyanidhi Ltd. Writ Petition No. 26455 of 1993 had in the meantime been filed by the appellant herein before this court challenging the validity of the order of pre-emptive purchase made by the Appropriate Authority under section 269UD of the Income-tax Act. The petition came up for hearing before our esteemed Brother, V.K. Singhal J., who by his order dated May 27, 1999, dismissed the same ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prospective purchaser of the property under the sale agreement was, therefore, one of the persons entitled to receive the amount of consideration referred to in section 269UG of the Act. No amount, leave alone Rs. 3 lakhs, which the appellant had paid to the seller of the property was at any stage offered to the appellant. She further argued that in terms of section 269UG(2) of the Act, the amount of consideration could be deposited with the Appropriate Authority only in case there was any dispute as to the apportionment of the amount of consideration among persons claiming to be entitled thereto. So also, in terms of sub-section (3) to section 269UG, such a deposit could be made before the Appropriate Authority only if a person entitled to the amount of consideration did not consent to receive it or if there was any dispute as to his or their title to do so. None of these contingencies having arisen in the instant case, deposit of the sale consideration by the Central Government before the Appropriate Authority was not proper nor even a substantial compliance with the provisions of section 269UG of the Act. In cases where the amount of consideration was not paid or deposited in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cy of writ petitions filed to challenge the pre-emptive purchase orders. It was also contended that the appellant-purchaser in the instant case had received the amount paid by him to the seller and that no real prejudice had been caused to him on account of the pre-emptive purchase of the property in terms of the impugned order passed by the Appropriate Authority. The writ jurisdiction could not in such circumstances be exercised to unsettle the settled position especially when interference with the transfer made during the pendency of these proceedings would cause considerable prejudice to an innocent third party. Alternatively, it was argued by Mr. Seshachala, that the objection raised by the appellant to the deposit of the sale consideration with the Appropriate Authority was untenable both on facts and in law. He argued that the agreement to sell executed between the appellant on the one hand and respondent No. 3 on the other entitled the appellant to the property in question free of all encumbrances whatsoever. In the course of the proceedings before the Appropriate Authority, however, it was noticed that the property was not actually free from any encumbrance and that Sri S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g market value of the property was much higher than what was agreed to be paid and received in pursuance of the agreement. Although an effort was made before the learned single judge to show that the conclusion drawn by the Appropriate Authority regarding the adequacy of the sale consideration was not justified, no such attempt was made before us by learned counsel for the appellant. The only question that was strenuously and at considerable length argued before us related to the compliance by the Central Government with the mandatory requirements of section 269UG. Section 269UG, as already noticed earlier, requires the Central Government to tender the amount of consideration payable in accordance with section 269UF to the person or persons entitled within a period of one month from the end of the month in which the immovable property concerned vested in the Central Government under sub-section (1), or, as the case may be, sub-section (6) of section 269UE. The property in question had vested in the Central Government on March 23, 1993, i.e., the date on which the order of pre-emptive purchase was made by the Appropriate Authority. The period of one month referred to in section 269U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Department [1991] 190 ITR 290. In that case, the court was examining the meaning of the word "dispute" appearing in sub-section (3) to section 269UG of the Income-tax Act, 1961. In the absence of any statutory definition of what would constitute a "dispute", the court relied upon the literal meaning of the said expression and held that the expression must be understood in the widest possible sense and should imply any controversy as to title to the property or the right to receive the consideration for the same. The court observed that just because there was no rival claimant to the consideration, section 269UG(3) did not necessarily compel the authority to tender the apparent consideration determined under section 269UG(1) of the Act. If the authorities had a bona fide or genuine doubt as to the title of the appellant-vendor, it was open to them not to tender consideration under sub-section (1) of section 269UG of the Act but to make deposit under section 269UG(3). The claimant had in that case challenged the order passed by the Appropriate Authority apart from challenging the vires of the provisions under which the order was made. The court held that so long as the challen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the relevant agreement to sell the property is agreed to be sold free of all encumbrances or certain encumbrances, it would vest in the Central Government free of such encumbrances. Similarly, sub-section (2) of section 269UE will be read down so that if the holder of an encumbrance or a lessee is in possession of the property and under the agreement to sell the property, it is not provided that the sale would be free of such encumbrances or leasehold interests, the encumbrance-holder or the lessee who is in possession will not be obliged to deliver possession of the property to the Appropriate Authority or any person authorised by it and the provisions of sub-section (3) also would not apply to such persons. If the provisions of section 269UE are read down in the manner indicated above, then, in our opinion, the provisions of sub-section (6) of that section do not present any difficulty because the vesting in the Central Government would be subject to such encumbrances and leasehold rights as stated earlier." The court then proceeded to deal specifically with encumbrances in the form of tenancies whether monthly or long-term. In so far as monthly tenancies were concerned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a case, the holders of the encumbrances or leasehold interests would have to obtain their compensation from the amount awarded as the purchase price to the owner of the property. This appears to be a fair construction because, in such a case, the apparent consideration can be expected to include the value of such leasehold interests or encumbrances. The holders of the encumbrances or leasehold interests which would be destroyed in this manner can be said to be persons interested as contemplated in clause (e) of section 269UA. In this connection, we may refer to sub-section (5) of section 269UE which declares that nothing in the said section which deals with the vesting of property in the Central Government shall operate to discharge the transferor or any other person (not being the Central Government) from liability in respect of any encumbrances on the property and, notwithstanding anything contained in any other law for the time being in force, such liability may be enforced against the transferor or such other person. This provision makes it amply clear that in the case we have just referred to, the encumbrance-holder or the holder of the leasehold rights could claim the fair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sen on account of the objections filed by him is evident from a plain reading of the said objections. It was evident from the stance adopted by Mr. Sheshadri that he either wished to continue in occupation of the property or would expect to be suitably compensated for the surrender or termination of his tenancy rights over the same. Viewed in this background, the Central Government was in our opinion perfectly justified in perceiving that there was a bona fide dispute regarding the entitlement of the owner to receive the entire amount of the apparent consideration payable to him. The existence of such a dispute and the time-frame within which the deposit had to be made would leave no option for the Central Government except to deposit the amount in discharge of its obligation under section 269UG. There was in the circumstances no failure of any essential requirement prescribed by law in the instant case so as to result in an abrogation of the purchase in terms of section 269UH of the Income-tax Act. There is considerable merit even in the alternative submission made by Mr. Seshachala. The property in question has since been put to public auction and has been sold in favour of res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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