9911796707
TMI Blog1999 (5) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... rendered by a single judge. There was some controversy if a single judge could grant such a certificate. However, considering the importance of the issue involved, this court admitted the appeal. The controversy, therefore, does not survive in the present appeal. For convenience, we refer to the appellants as "Harendra" and the respondents as "Mukesh". Both Harendra and Mukesh are brothers. Harendra is elder to Mukesh. They appointed their elder brother, Lalit Mehta, as arbitrator to divide their businesses and properties both in the United States of America (U.S.A.) and India. Lalit Mohan gave his award in New York. Some proceedings arising out of the arbitration agreement and the award were held there in the courts. The arbitration agreement was entered into at New York where arbitration proceedings were held and the award given. Mukesh applied to the Bombay High Court here under the provisions of the Foreign Awards (Recognition and Enforcement) Act, 1961 (for short, the "Foreign Awards Act"), for enforcing the award. The High Court after contest ordered the award to be filed and pronounced judgment according to the award as required under section 6 of the Foreign Awards Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l agreement dated November 17, 1989, to refer the disputes to the arbitrator superseded the earlier agreement dated October 25, 1989. *** *** *** *** During the pendency of the arbitration proceedings, the parties settled their differences by entering into a detailed agreement on March 20, 1990. The agreement was to be retroactively effective as on March 1, 1999. The agreement detailed various properties and businesses which the parties were having. Harendra was to draw four packages "A", "A-1", "B" and "B-1" as under : " 'A'-U.S.A. properties and businesses. 'A-1'-U.S. Note for payment in US $ and share in jointly held US properties and businesses. 'B'- Indian properties and businesses. 'B-1' Indian Note for payment in Indian rupees and certain Indian properties and share and interest in jointly held Indian properties and businesses." It was agreed that one party would choose A+B-1 or B+A-1 ; The first choice was to be exercised by Mukesh. The arbitrator was to make his award in accordance with the selection of packages. The parties were to execute transfer and closing documents in terms of the award. The forms in which the documents were to be executed were also p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modifications. It observed that Harendra failed to demonstrate that the award either dealt with matters beyond the scope of what had been submitted or that he gave a completely irrational construction to the settlement agreement between the parties which was incorporated in the award and formed part of the award. There were certain typographical errors in the judgment which were corrected by order dated October 31, 1990. A formal order was drawn on January 14, 1991. *** *** *** *** Objections of Harendra to the award were, thus, rejected by the Nassau County Court. It, however, modified the award limiting and restricting the payment to be made to Mukesh by the U.S. company for his shares and passed judgment confirming the award so modified. *** *** *** *** Now, the scene shifted to India when Mukesh moved the Bombay High Court under provisions of the Foreign Awards Act for enforcement of the award dated October 31, 1990, of Lalit Mohan, the arbitrator, contending the same to be a foreign award. Harendra raised various pleas in opposition thereto. The High Court after elaborate discussion rejected all of them and ordered that the award be filed and proceeded to pronounce jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eupon reduce it to writing and file the requisite statement in the prescribed form with the appropriate authority, thereby enabling the appropriate authority to consider the transaction and then to decide whether or not to exercise its statutory power of compulsory purchase. Rule 48L(2) of the Income-tax Rules, 1962, lays down that the statement under section 269UC must be furnished within 15 days from the date of the entering into the "agreement for transfer". Failure to comply with this statutory requirement attracts criminal sanctions under section 276AB. The term "transfer" has been given a wide meaning under section 269UA(f). It was submitted that the purpose behind the insertion of these provisions is to ensure that each and every transaction concerning "transfer" of "immovable property" (which terms are very widely defined in section 269UA(f) and section 269UA(d) of the Income-tax Act) comes under the scrutiny of the appropriate authority as only then can there be a check on proliferation of unaccounted money. It is stated that this Chapter was introduced in order to tackle the extremely grave .problem of rampant tax evasion and generation of black money which is then utilis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evasion and recommended, by way of a drastic remedy, that the Government should empower itself to acquire the property where the consideration was found to be understated in the sale deeds. It was in pursuance of this recommendation that the provisions of Chapter XX-A were introduced in the Income-tax Act. However, the provisions of that Chapter were found inadequate for dealing with the evil of undervaluation of immovable properties in sale deeds and agreements to sell with a view to evade tax and certain difficulties emerged in the effective enforcement of the provisions of Chapter XX-A. It was in these circumstances that Chapter XX-C was introduced in the Income-tax Act. It may be mentioned here that the provisions of Chapter XX-A ceased to operate in respect of transfers of immovable property made after September 30, 1986, and as from October 1, 1986, the provisions of Chapter XX-C came into force." Mr. Ganesh submitted that the settlement agreement dated March 20, 1990, attracted the provisions of Chapter XX-C of the Income-tax Act and, thus, it mandatorily required compliance with the provisions of that Chapter. The award was at best only a consent award which stood on no b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... romise decree does not stand on a higher footing than the agreement which preceded it. A consent decree is a mere creature of the agreement on which it is founded and is liable to be set aside on any of the grounds which will invalidate the agreement. Further submission of Mr. Ganesh was that an award is also an "agreement for transfer" within the meaning of Chapter XX-C. The award declares the right of Mukesh to immovable properties comprised in the packages selected by him and also similarly declares the rights of Harendra in respect of immovable properties included in the packages allotted to him. Both these sets of packages included a large number of immovable properties located in and outside Mumbai in India and also in the United States. It was, thus, submitted that the arbitral award which declares the rights of the parties in respect of immovable properties was compulsorily required to be registered under the provisions of the Registration Act, 1908, and if the award was not registered, the court cannot look at such an award or pass a decree in terms thereof. Reference was made to a decision of this court in Lachhman Dass v. Ram Lal, AIR 1989 SC 1923; [1989] 3 SCC 99. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fectively reducing it to a dead letter as it would always be possible for parties first to enter into an agreement and then to get an arbitral award in terms of such an agreement within or outside India and then claim that the provisions of Chapter XX-C are not attracted. Mr. Ganesh said that if this interpretation was to be accepted, Chapter XX-C would become completely unworkable and meaningless and its underlying public purpose and policy would be totally frustrated. We do not think that submissions made by Mr. Ganesh on Chapter XX-C of the Income-tax Act have any sound basis. Settlement agreement dated March 20, 1990, is not a mere agreement for transfer. As noted above, the parties had vast businesses and properties both in India and in the U.S.A. The settlement agreement was between, (1) Harendra Mehta, his wife Amita Mehta and he himself as karta of Harendra Mehta Hindu undivided family ; (2) Mukesh Mehta, his wife Daksha Mehta and he himself as karta of Mukesh Mehta Hindu undivided family ; (3) Mettaco Enterprises Trust; and (4) A. D. Developments Ltd., a New York Corporation having its principal office at New York. The settlement agreement runs into 57 long pages. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 118 of the Transfer of Property Act where two persons mutually transfer the ownership of one thing for the ownership of another. When we consider exchange of immovable property falling within the definition of "exchange" in section 118 both the properties would situated in India. Agreement for transfer refers to immovable property which is defined in clause (d) of section 269UA. It is difficult to appreciate the arguments of Mr. Ganesh as to how in the present case, there is transfer of any immovable property under the settlement agreement. It appears to us that the bone of contention is a flat in Urvashi building in Mumbai which formed part of B+A1 of Mukesh . It was not disputed before us that for this the appellants did execute a gift deed in favour of the respondents on advice received but no steps were taken to complete the transaction as, it appears, relations soured. This would also show that the settlement agreement on the award did not require filing of any declaration under Chapter XX-C of the Income-tax Act. Moreover, in our view in the case of a foreign award, the provisions of Chapter XX-C of the Income-tax Act are not attracted. It was said that under Chapter X ..... X X X X Extracts X X X X X X X X Extracts X X X X
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