9911796707
TMI Blog1999 (4) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... greements of immovable properties, allotment agreements or other similar agreements through which interest, right or title in property exceeding Rs. 10 lakhs pass from one person to the other. By way of illustration, reference has been made to mortgage deeds executed by various persons in favour of the Gujarat Financial Corporation, GIIC, scheduled banks, co-operative banks, etc., lease deeds executed by the Ahmedabad Municipal Corporation and instruments of lease/sale executed by the Ahmedabad Urban Development Authority are being registered without obtaining no objection certificate (NOC) from the appropriate authority at Ahmedabad. The petitioner, an apex society, is a federation of urban co-operative banks within the State of Gujarat and the member co-operative banks are engaged in the business of banking. In the course of business of transacting loans, the persons securing loan facilities from the banks are required to furnish security for the repayment of loans by way of mortgage of immovable properties by creating a charge on the immovable properties. The contention of the petitioner is that the execution of a mortgage for securing repayment of loans is not a transfer with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er XX-C extend to all kinds of apparent transactions of transfer notwithstanding that they do not purport to be sale, exchange or lease of the immovable property. He further contends that, at any rate, even if a mortgage of immovable property may not fall within the meaning of transfer under section 269UA(d)(i), it does fall within sub-clause (ii) of the aforesaid provision as it includes in its ambit a wider connotation of transfer and is not confined to mere agreements of sale, exchange or lease. He further drew attention to the circular of the Central Board of Direct Taxes dated July 12, 1990, to issue a NOC in the case of mortgage within a week's time so that there may not be any difficulty on account of filing of Form No. 37-I. We have carefully considered the rival contentions. The first thing which strikes us is that the purport of Chapter XX-C is not acquisition of property but is to check the transfer for undervalued consideration as a means of evading or avoiding tax. The provision operates before any transfer actually takes effect, at a stage where the transfer is intended to take place. The provisions are in the nature of conferring a right of pre-emptive purchase by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of reducing in writing such agreements for transfer, it requires the parties to the agreement to furnish such statement to the appropriate authority in a manner and within the time from its execution as may be prescribed. Section 269UD authorises the appropriate authority, as interpreted by the Supreme Court in C. B. Gautam's case [1993] 199 ITR 530, on being satisfied about the undervaluation of the apparent consideration by more than 15 per cent. of the real market value, to make an order for the purchase of such immovable property by the Central Government at an amount equal to the amount of apparent consideration. Such order may be made within two months from the end of the month in which the statement referred to above has been received by the appropriate authority. On the making of such order under section 269UD, the immovable property referred to in sub-clause (i) of clause (d) of section 269UA is to vest in the Central Government in terms of the agreement for transfer referred to above, or in case the property under the agreement for transfer is one prescribed in sub-clause (ii) of clause (d) of section 269UA, viz., not the corpus of property but the rights of the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he value prescribed under section 269UC unless a certificate from the appropriate authority that it has no objection to the transfer of such property for an amount equal to the apparent consideration therefor as stated in the agreement for transfer of the immovable property in respect of which it has received a statement under sub-section (3) of section 269UC, is furnished, along with such document." While it inhibits the registration of immovable property envisaged under Chapter XX-C, unless the appropriate authority certifies that it has no objection to such transfer, it also requires the appropriate authority to issue a certificate to that effect in case it does not make an order under section 269UD for the purchase of the property by the Central Government or the order so made is abrogated under section 269UH. Section 269UM confers immunity on the transferor against any claim by the transferee under the agreement on account of its purchase by the Central Government under the provisions of the Act. Section 269UN declares the orders of the appropriate authority to be final and conclusive and section 269UO makes the provisions of the Chapter inapplicable to agreements for transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tings or other things therein), which has been constructed or which is to be constructed, accruing or arising from any transaction (whether by way of becoming a member of, or acquiring shares in, a co-operative society, company or other association of persons or by way of any agreement or any arrangement of whatever nature), not being a transaction by way of sale, exchange or lease of such land, building or part of a building." "(f) 'transfer',-- (i) in relation to any immovable property referred to in sub-clause (i) of clause (d), means transfer of such property by way of sale or exchange or lease for a term of not less than twelve years, and includes allowing the possession of such property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882 (4 of 1882) ; Explanation--For the purposes of this sub-clause, a lease which provides for the extension of the term thereof by a further term or terms shall be deemed to be a lease for a term of not less than twelve years, if the aggregate of the term for which such lease is to be granted and the further term or terms for which it can be so extended is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been included. Obviously, when the entire property is considered to be immovable property, a part of such property, namely, the rights therein, have also been considered to be immovable property. Sub-clause (ii) of clause (d) goes further and states that any rights in or with respect to any land or any building or a part of a building which has been constructed or which is to be constructed may also be treated as immovable property provided they accrue or arise in favour of its owner from any transaction not being a transaction by way of sale, exchange or lease of such land, building or part of the building. That is to say, those rights in or in respect of the immovable property defined in sub-clause (ii) are independent of proprietorship right acquired by way of sale, exchange or lease to any concerned person under some agreement or agreement, whether as a result of becoming a member of a society, by becoming a member of a co-operative society or of other association of persons or company, one becomes entitled to enjoy the property without becoming its owner. There being no transaction of lease, exchange or lease in their favour or by some form of agreement such rights have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e an "immovable property". Acquisition of interest in immovable property, a creditor's right to enforce his recovery against the property apart from against the person of the debtor is not by way of transaction of sale, exchange or lease, nor is the same for enjoyment of property, nor is it transfer of a whole bundle of rights of the seller in the immovable property. Before the mortgage deed is executed, no right in favour of the mortgagee comes into existence which can be considered to be a right in or in respect of land or any building or part of a building or other attachments thereto within the meaning of sub-clause (ii) of clause (d). In such event, even if it can be taken to be that a mortgage results in creation of such rights, the question of applying sub-clause (ii) of clause (f) would arise only when such rights are said to be transferred within the meaning of sub-clause (ii) of clause (f) by the mortgagee. Thus, on a plain reading of the definition of transfer under section 269UA(f), transfer of interest in immovable property by way of a mortgage is not envisaged to be covered under the Chapter. To this extent, apparently, the appropriate authority was in error when it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty by the transferee. A transfer by way of lease also is a transfer of the right to enjoy the property to the exclusion of all, for the period for which the right of exclusive enjoyment of the property is transferred. As against this, no such right of ownership or enjoyment of property is envisaged in a transfer of interest by mortgage. If the transfer by way of mortgage is a transfer in the form of providing security for repayment of loan, the purpose for which transfer of interest in property can take place has statutorily been accepted to be to secure the payment of money advanced. If it is not for that purpose the transfer would cease to be a mortgage. In other words, the transfer of property by way of a mortgage is to create a charge only which may be with or without possession of the property but the proprietory rights remain with the mortgagor and ordinarily the mortgagee gets the right to recover his dues if the debtor fails to discharge his obligation, by putting the property to sale or from the usufruct of the mortgaged property. The property only becomes subject to the rights of the mortgagee, who can enforce his right in terms of the provisions of the Transfer of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transferor of such interest and on repayment of such loan the charge comes to an end. The transferee's right under the mortgage to sell the property arises only in case the transferor fails to discharge his obligation under the agreement. A transaction of mortgage preconditions to put the transferee in the position of a person who has advanced or promises to advance a loan and to hold the right to sell the property only in default. If sections 269UC and 269UD are read to be applicable to a transfer of property by way of mortgage in terms of an agreement for transfer, it would result in placing the Central Government as a loan advancing agency in place of the creditor who has agreed to advance the loan to the owner of the immovable property by creating charge over the property to secure repayment of his loan. On the contrary, if section 269UD is read in a literal sense, it would result in outright sale of the property annihilating the transaction of loan inasmuch as the amount of loan would become the apparent consideration. The contention raised on behalf of the respondents apparently loses sight of the fact that the amount of loan for securing repayment of which a property is m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents which purport to transfer immovable property exceeding the value prescribed, that is to say, it is the apparent nature of the documents which is to be considered for the purpose of operating various provisions of Chapter XX-C. If the document apparently purports to transfer by way of sale, exchange or lease any immovable property defined under clause (d) of sub-clause (ii) or purports to transfer rights or enjoyment of such rights as are referred to in sub-clause (ii) of clause (d), the provisions of section 269UL are attracted but where the document does not purport to be a transfer, neither the mandate to the registering officer not to register the document without NOC from the appropriate authority nor the other provisions requiring a decision to order the Central Government to purchase the property at the apparent consideration comes into operation. The scope of inquiry by the Registrar under the various provisions of Chapter XX-C is whether the document sought to be registered purports to transfer immovable property within the meaning of section 269UA. If it falls into that he cannot register unless the same is supported by a "no objection certificate" from the appropriat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the registering officer to abide by before registering the documents contemplated under the provisions, the appropriate authority was not justified in directing the registering officer of the State to withhold registration of mortgages by holding that Chapter XX-C and the definition of transfer, under section 269UA takes within its sweep all kinds of transfer without any inhibition. It may further be noticed that the illustration which has been picked up by the appropriate authority for pointing out to the registering officer his laxity in not effecting the provisions of section 269UL was misplaced. It has referred to the mortgages executed in favour of the Gujarat State Financial Corporation, Gujarat Industrial Investment Corporation, scheduled banks and co-operative banks. By the very nature of their business, these institutions are involved in the business of lending money and obtaining mortgages of immovable property to secure repayment of their loans. The question of those transactions being transactions of transfer of ownership rights or transfer of property by way of sale, exchange or lease does not arise. It would be a flight of imagination to consider the GSFC, GIIC, sc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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