CHAMUNDI HOTELS (PVT.) LTD. VS APPROPRIATE AUTHORITY
1999 P T D 641
[225 I T R 590]
[Karnataka High Court (India)]
Before G. C. Bharuka, J
CHAMUNDI HOTELS (PVT.) LTD. and another
Versus
APPROPRIATE AUTHORITY and others
Writ Petition No.34312 of 1994, decided on 02/04/1996.
Income-tax---
----Purchase of immovable property by Central Government---Condition precedent---Legally enforceable agreement for transfer of immovable property---Transferor not having title over property---Court order specifically restraining transfer of property---Agreement for transfer of property was not valid---No proceedings could be taken under 5.269-UD in respect of such property---Writ---Court cannot issue direction to appropriate Authority---Indian Income Tax Act, 1961, Chap. XX-C, S.269-UD-- Constitution of India, Art.226.
Under the scheme envisaged under Chapter XX-C of the Income Tax Act, 1961, it is axiomatic that the said jurisdiction can be founded only on a legally enforceable agreement of transfer. To hold otherwise will not only be opposed to public policy but would also be detrimental to public interest and deprive citizens of benefits available under other Acts. The appropriate authority can be directed to act under Chapter XX-C only if it is found that the agreement filed under section 269-UC is not void, and, as such, on-est in law. This being the jurisdictional premise on which the appropriate Authority can proceed to act, unless such premise is shown to exist, the High Court under writ jurisdiction cannot issue any direction to the appropriate Authority to act in any of the manners provided under Chapter XX-C of the Act:
Held accordingly, dismissing the writ petition, that the petitioners had not acquired ownership over the property in question. Even otherwise, they were not competent to transfer any interest in the property because of the judicial restraints embodied in the order, dated July 26, 1990, passed by the Karnataka High Court in certain company appeals. Moreover, the lands had been declared to be excess lands under the Karnataka Urban Land (Ceiling and Regulation) Act', 1976, by the competent authority and transfer of such lands would be null and void under section 5(3) of that Act. The agreement for sale entered into between the petitioner and the third respondent and filed in the form of a statutory statement in Form No.37-I purported to be one under section 269-UC read with Rule 48-L of the Income-tax Rules, 1962, was void and non est in law and no proceedings under section 269-UD could be validly taken in respect of it.
Appropriate Authority v. Tanvi Trading and Credits (P.) Ltd. (1991) 191 ITR 307 (SC); Gautam (C.B.) v. Union of India (1993) 199 ITR 530 (SC); Irwin Almedia v. Union of India (1992) 197 ITR 609 (Born); J. Gala Enterprises Estate and Investments (P.) Ltd. v. W. Hassan, CIT (1995) 216 ITR 110 (Bom); Kelvin Jute Co. Ltd. v. Appropriate Authority (1990) 185 ITR 453 (Cal.); Madhukar SunderW Sheth v. S.K. Laul (1992) 198 ITR 594 (Bom); Megsons Exports v. Union of India (1992) 194 ITR 225 (Delhi); Moi Engineering Ltd. v. Appropriate Authority (1992) 198 ITR 270 (Cal.); Naresh M. Mehta v. Appropriate Authority (1991) 188 ITR 585 (Mad.); Satwant Narang (Mrs.) v. Appropriate Authority (1991) 188 ITR 656 (Delhi) and Tanvi Trading and Credits (P.) Ltd. v. Appropriate Authority (1991) 188 ITR 623 (Delhi) ref.
Madhusudhana R. Naik for Petitioners.
H. L. Dattu for Respondents Nos. l and 2
Vikas Jain for Respondent No.3.
JUDGMENT
This writ petition has been filed by the petitioners for quashing the order, dated October 28, 1994, passed by the appropriate authority (respondent No. I) by which it has treated the statement filed in the prescribed Form No.37-I as required under section 269-UC of the Income Tax Act, 1961, as non-est in law and has thereby refused to exercise its powers under Chapter XX-C either to purchase the property in question or to issue a no objection certificate under section 269-UL(3) of the said Act. There is a further prayer for issuance of a writ of mandamus directing the first respondent to issue the statutory no objection certificate forthwith.
The first petitioner is a private limited company registered under the provisions of the Companies Act, 1956. The second petitioner is one of its shareholders. According to them, the petitioner-company is the absolute owner of 45 acres of land with superstructures standing thereon being a part of the property, known as "the Bangalore Palace Property" having an extent more or less of 454 acres. According to the petitioners, as disclosed in the writ petition, in the course of business, the third respondent-company, which is engaged in the business of development of properties-company, entered into an agreement, dated July 6, 1994, with the first petitioner fog developing 35 acres of land out of the said 45 acres by constructing residential complexes thereon with support facilities, such as club house, school, shopping centre, community hall, etc. As per the petitioners, under the said agreement, in consideration of the petitioners agreeing to transfer/convey their undivided 50 percent share in their property to the third respondent developer, the latter has-agreed to build and deliver to the first petitioner 50 percent of the total built-up area of the building to be constructed on the said land.
The petitioners have further stated that in the said agreement between them and the third respondent, it has been mentioned that the first petitioner as the owner is in quiet enjoyment of the Schedule-A property and they did not possess the property in excess of the ceiling limit as contemplated under the Urban Land (Ceiling and Regulation) Act, 1976 (hereinafter, for brevity, "the Ceiling Act"); and that they shall obtain requisite orders/endorsements from the competent authorities to redevelop and sell the said properties and also obtain requisite orders for change of land use/classification to residential use". A copy of the agreement has been filed at Annexure "A" to the writ petition,
It has further been stated by the petitioners that on having arrived at the said agreement, the petitioners and the third respondent filed a joint statement in Form No.37-I as requited under section 269-UC of the Income tax Act; but the same has been rejected by the impugned order as noticed above.
According to the petitioners, keeping in view the judicial pronouncements referred to in paragraph 7 of the writ petition, since the respondent-appropriate authority has failed to exercise its option, to purchase as vested in it under section 269-UD(1) of the Income-tax Act within three months from the end of the month in which statement under Form No.37-I was received by the said authority, it is bound to issue a certificate as contemplated under section 269-UL of the Income-tax Act, to the extent that "it has no objection to transfer of such property for an amount equal to the apparent consideration therefore as stated in the agreement for transfer of the immovable property in respect of which it has received the statement under subsection (3) of section 269-UC".
According to Mr. Naik, learned counsel for the petitioners, the reasons which have prevailed with the respondent-appropriate authority for passing the impugned order declaring the statement in Form No.37-I as ab initio void and non-est in the eye of law, are wholly irrelevant and extraneous since the appropriate authority constituted under Chapter XX-C of the Income-tax Act cannot delve in to the questions pertaining to the Urban Land (Ceiling and Regulation) Act, 1976, having a bearing on the alienable right of the owner of the land.
From one of the replies, dated September 26, 1994 (Annexure "D"), given by the petitioner-company to the appropriate authority it transpired that Writ Petition No. 19793 of 1992 is pending consideration before this Court in relation to the land in question. Accordingly, I called for the records of the said writ petition, from which it transpired that by order, dated July 27, 1989, the competent authority under the Ceiling Act had declared the entire land over and above 1,000 square metres in the possession of the present first petitioner as excess vacant land keeping in view section 4(1)(b) of the Ceiling Act. Paragraph 7 of this order of the competent authority which is relevant for the present purpose reads thus:
"Chamundi Hotels (P.) Ltd. Bangalore, is deemed to hold to an extent of 3,87,138 sq. mtrs., of vacant land, after deducting the built area and the appurtenant land, roads, tanks, etc. The details of the land held by Chamundi Hotels (P.) Ltd., Bangalore, the built area, non-vacant area and the appurtenant area are furnished in Annexure ' B' After allowing a share of 1,000 sq. mtrs., in accordance with section 4(1)(b) of the Act, there is an excess vacant land of 3,86,138 Sq. mtrs., held by Chamundi Hotels (P.) Ltd., Bangalore."
It appears that similar orders were passed in respect of seven other declarants and all of them including the petitioner-company had filed appeals under section 33 of the Ceiling Act before the Karnataka Appellate Tribunal. The Tribunal by its order, dated May 11, 1992, dismissed all the appeals thereby confirming the order of the competent Authority. It also appears that the orders of the competent Authority and the Tribunal have been challenged in this Court by only one of the declarants, namely, Sri Srikanta Datta Narasimharaja Wadiyar, and has obtained an interim order by filing the aforesaid Writ Petition No. 19793 of 1992. There was no whisper in the entire present writ petition as to whether the petitioners had also challenged the said orders appearing against them having a direct bearing on their right to transfer or alienate the property in question in any manner. It also transpires from the order of the Tribunal that during the pendency of the appeal before it, some orders had been passed by this Court in the civil litigations between the parties regarding the right of share or ownership of the contenders including the petitioner-company.
The petitioners had nowhere whispered about the said civil litigation or the orders passed by this Court or as to whether they have also assailed the order of the competent Authority and the Tribunal passed under the Ceiling Act by filing any writ petition in this Court or by any other available remedy, and, if they had done so, what was the outcome thereof. Since, in my opinion, for determining the question as to whether the appropriate authority under the Income-tax Act had erred in refusing to exercise its option under Chapter XX-C of the said Act, by order, dated December, 13, 1995, I directed the petitioners to place on record---
(i)The order passed by this Court determining the respective rights and claims of the parties including the petitioner-company in relation to the property in question;
(ii)The order passed by the competent Authority and the Tribunal under the Ceiling referred to above; and
(iii)An affidavit statement of the petitioner as to whether it has challenged the orders of the competent authority and the Tribunal before any higher forum, and, if so, to set out the details thereof with the order passed therein, and the present status of those proceedings.
Accordingly, on December 19, 1995, a supplementary affidavit was filed enclosing the order, dated July 26, 1990, passed by this Court in O.S. As. Nos. 10 to 13 of 1989 (Annexure "L") and the order, dated July 1, 1994, passed in O.S.A. No. 10 of 1989 (Annexure "M"). As per the certificate issued by the Corporation of the City of Bangalore, the Khata of the land stand in the name of the petitioner-company (Annexure "N"). The order passed by the Additional Special Deputy Commissioner on July 27, 1989, declaring 3,86,138 square metres of land as in excess of the ceiling limit in the hands of the petitioner-company, as already referred to above, has now been placed at Annexure "P". By a subsequent memo, the petitioner has also brought on record that the petitioner has now also filed a writ petition being W.P. No.2390 of 1996 challenging the order of the competent Authority under the Ceiling Act and of the Tribunal in which further the proceedings have been stayed.
From the documents now brought on record it transpires that the petitioner is not only guilty of suppressing material facts but has also indulged in falsehood by asserting that he is the absolute owner of 45 acres of land in question. From the order, dated July 26, 1990 (Annexure "L"), passed by this Court in O. S. As. Nos. 10 to 13 of 1989, the material facts to the extent those are relevant for the present purpose may be noticed in brief.
The family of the Maharaja of Mysore owned 454 acres of land situate on the Bangalore-Bellary Road. On portions of this land several buildings/structures as also the palace of the Maharaja also stood. Sri Jayachamarajendra Wadiyar was the last Ruler of the Mysore State who died on September 23, 1974. Sri. A. Chamaraju who was a rich building contractor and businessman had become a personal friend of the said Maharaja. These two persons evolved a scheme for exploitation of the said 454 acres of land by promoting and establishing two private companies--one of those being the present first petitioner for starting a hotel business and the second one for doing estate business under the name and style "Venkateshwara Real Estate Enterprises Limited". On December 11, 1970, an agreement was entered into between the late Maharaja and the petitioner company for sale of 110 acres of land for a consideration of Rs.1,25,00,000. Out of the said amount Rs.7,00,000 was paid by a cheque and Rs.18,00,000 was purported to have been paid in cash as advance, but that was actually not paid. It appears that subsequent to the death of the Maharaja, the members of the two families plunged into various litigations, which were, subsequently, brought to rest by this Court by its order, dated July 26, 1990 (Annexure "L"), passed under section 402 of the Companies Act, 1956.
It has been noticed by this Court in the said order that though in respect of the properties belonging to the ex-Ruler's family of the former State of Mysore, there was an uninalienable clause, on November 22, 1993, it was declared in Rajya Sabha that after the abolition of privy purses, the un-inalienable clause did not apply to private properties of former Rulers. It was after this declaration that between February 11, 1974, and April 17, 1976, there were a number of suits filed by the only son of the late Maharaja Srikantha Datta Narasimharaja Wadiyar questioning the right of alienation of the Maharaja and claiming some other reliefs. As noticed above, the Maharaja died on September 23, 1974. Subsequently, on March 26, 1978, there was a first compromise between the said two promoter families and two companies floated by them one of which was the petitioner-company. It was, inter alia, agreed that the sale of property in favour of the two companies had to be done after the properties were exempted from the operation of the Ceiling Act and the Karnataka Land Reforms Act, which appears to have created some hurdles in retention of such a vast extent of land by the Maharaja's family. But this settlement could not resolve the disputes between the parties. In June, 1987, Sri Srikantha Datta Narasimharaja Wadiyar, the son of the late Maharaja, filed Company Petitions Nos.2 of 1986 and 67 of 1987 under sections 397 and 398 of the Companies Act. Company Petition No.50 of 1987 also came to be filed under section 433(t) of the Companies Act praying for winding up of the company. Subsequent to the dismissal of the said petitions, O.S.As. Nos. 12 and 13 of 1989 were filed by Sri S.N. Wadiyar which were disposed of with other appeals on July 26, 1990, as noticed above 110 acres of land which was intended to be sold to the petitioner-company form part of Schedule-B of the property and was delineated in the annexed plan with red and blue with all buildings and structures thereon, etc. Certain directions made in the aforesaid order, dated July 26, 1990, which are relevant for the present purpose, read as under:
"(8) The appellant and Sri A. Chandrasekhar Raju representing the respondents shall make joint efforts for pursuing the proceedings for grant of exemption of the land in Bangalore Palace Property, from the restrictive provisions of the Urban Land (Ceiling and Regulation) Act, 1976, regarding ceiling in respect of which can application has been made before the State Government under section 20 thereof on the ground of undue hardship because of the huge tax and other liabilities of the late Maharaja, for clearing of which also the lands were sought to be developed by promoting the two companies. As both the parties are equally interested in securing the exemption, either of the parties may pursue the remedies to secure such exemption, informing and/or impleading the other party, as a party in such proceedings.
(9) If pursuant to such efforts exemption from the provisions of the Urban Land (Ceiling and Regulation) Act, 1976, is secured in respect of 110 acres of land, earmarked in the "B" Schedule, then the extent of 45 acres out of the portion marked red therein in the plan attached to the agreement with the easementary right of way from the Palace Road through the Palace main gate through the said portion shall vest in favour of Chamundi Hotels Private Limited or the Chamaraju group, absolutely free of all encumbrances, at the expense of the said company or the Chamaraju group. The appellant shall execute all necessary documents, deeds and/or instruments as may be required by Chamundi Hotels (Private) Limited or the Chamaraju group in this behalf at their expense.
(25) Neither of the parties by themselves or through Chamundi Hotels Private Limited shall directly or indirectly alienate, sell, mortgage, lease, encumber or otherwise transfer any interest in any part of any portion of the property included in Schedule B."
Subsequently, a joint memo was filed by the parties in the said appeals whereupon on July 1, 1994, the following order was passed by a Bench of this Court:
"These appeals were disposed of by consent of parties on July 26, 1990, by a Division Bench of this Court and certain directions were issued as agreed to between the parties. In those directions liberty was reserved to the parties to seek necessary clarifications of these directions if there were to be any practical difficulties in their implementation and further directed that the matter be brought before the Court after 15 days for reporting the handing over the control of Venkateshwara Real Estate Enterprises Private Limited by the respondents to the appellant. That is how the matters were posted for being spoken to. Today a memo has been filed by the parties and learned counsel for the parties, on instruction submit that all the directions contained in the aforesaid order of the Court have been complied with and this fact they wanted to place on record. The memo duly signed by the parties and their counsel is kept on record. Therefore, all the directions contained in the aforesaid order are treated to have been complied with. No further orders are necessary.
(Sd.) (S.B. Majmudar),
Chief Justice
(Sd.) (Tirath S. Thakur),
Judge. "
The petitioner-company has also brought on record a certificate issued by the Corporation of the City of Bangalore, dated July 26, 1988 (Annexure "N "), wherefrom it transpires that the property No. 1 on Bangalore Palace Compound Road falling in Division No.71 has been recorded in the Khata of the petitioner-company.
I am to observe here that though the competent Authority under the Ceiling Act had already passed its order, dated July 27, 1989, under section 6(1) of the Ceiling Act declaring the entire land in question except 1,000 sq. mtrs. as excess, the same was possibly not brought to the notice of this Court. But, it may be relevant to notice here as to how the competent Authority treated the petitioner as a holder of the land in terms of section 2(1) of the Ceiling Act:
"Sri Srikjanta Datta Narasimharaja Wadiyar holds this land as the legal heirs of late Sri Jayadharmaraj Wadeyar as the karta of the Hindu undivided family, whereas the two companies possess the lands in Bangalore Palace property as 'owner'. The Explanation furnished for this definition protects the interest of both Sri Srikanta Datta Narasimharaja Wadeyar as well as Chamundi Hotels (P.) Ltd., Bangalore, and Sri Venkateswara Real Estate Enterprises (P.) Ltd., Bangalore. The Explanation makes it clear that where the same vacant land is held by the person in one capacity and another person in another capacity for the purpose of this Act, such land shall be deemed to be held by both such persons herein this case Sri Srikanta Datta Narasimharaja Wadeyar and the four sisters and the legal heirs Smt. Gayathrideviyavaru are holding these lands in the capacity of 'the owner' and they come within the definition in section 2(1)(i) of the Act and Chamundi Hotels (P.) Ltd., Bangalore, and Sri Venkateswara Real Estate Enterprises (P.) Ltd., Bangalore, fall in section 2(1)(ii) of the Act, i.e., to possess such land as owner."
Section 2(1) of the Ceiling Act reads as under
"'to hold' with its grammatical variations, in relation to any vacant land, means---
(i)to own such land; or
(ii)to possess such land as owner or as tenant or as mortgage or under an irrevocable power of attorney or under a hire-purchase agreement or partly in one of the said capacities and partly in any other of the said capacity or capacities. ,
Explanation:---Where the same vacant land is held by one person in one capacity and by another person in another capacity, then, for the purposes of this Act, such land shall be deemed to be held by both such persons."
The facts so far placed on record do not show that the title in the land at any point of time was transferred in favour of the petitioner. Therefore, it cannot be said that the petitioner is the owner of the land. Further, no doubt, it had come into possession of the land pursuant to the same agreement for sale but the said possession cannot be justified as of an owner or as a tenant or as a mortgagee or under an irrevocable power of attorney or under a hire purchase agreement, and, therefore, there is hardly any occasion to apply the Explanation appended to the aforesaid definition of "to hold". It is this aspect, though it is not very relevant for the present purposes, which amazes me as to how the competent Authority has treated the petitioner-company as a holder of the land even for the restricted purpose of the Ceiling Act. Irrespective of the said consideration, what is more material and has to ultimately clinch the issue is that admittedly the petitioner-company is not the owner of the land in question, and to this extent the petitioners have made a blatantly false statement before this Court and possibly also before the appropriate authority under Chapter XX-C of the Income-tax Act representing that petitioner-company is the absolute owner of the land in question. At the cost of repetition, I am constrained to hold that neither at any point of time was the title in the land in question transferred in favour of the petitioner-company nor in law could it have been transferred because of the statutory bar contained under the Ceiling Act. It may be further to be noticed that even if the petitioner-company had acquired interest of any nature in the land, it was not competent on its part to effect transfer thereof in favour of the third respondent because of the specific bar laid by this Court in direction No.25 of its order, dated July 26, 1990, passed in O. S. As. Nos. 10 to 13 of 1990 under section 402 of the Companies Act as reproduced above.
The legal question that now arises for consideration this whether, in the background of the said hard facts, it can be held that the appropriate authority has erred in refusing to act upon the agreement statement filed by the petitioner-company which was ex facie void and, thus non-est in law.
Before proceeding to adjudge the rival contentions, I find it essential to refer to the relevant statutory provisions contained in Chapter XX-C of the Act. They are---
"S.269-UA. In this Chapter, unless the context otherwise requires,--
(a) 'agreement for transfer' means an agreement, whether registered under the Registration Act, 1908 (16 of 1908), or not, for the transfer of any immovable property;...
(d) 'immovable property' means---
(i) any land or any building or part of a building, and includes, where any land or any building or part of a building is to be transferred together with any machinery, plant, furniture, fittings or other things, such machinery, plant, furniture, fittings or other things also.
Explanation. ---For the purposes of this sub-clause, 'land, building, part of a building, machinery, plant, furniture, fittings and other things' include any rights therein;
(ii) any rights in or with respect to any land or any building or a part of a building (whether or not including any machinery, plant, furniture, fittings 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 cooperative 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 53-A 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 not less than twelve years;
(ii) in relation to any immovable property of the nature referred to in sub-clause (ii) of clause (d), means the doing of anything (whether by way of admitting as a member of or by way of transfer of shares in a cooperative society or company or other association of persons or by way of any agreement or arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, such property."
"Section 269-UC. (1) Notwithstanding anything contained in the Transfer of Property Act, 1882 (4 of 1882), or in any other law for the time being in force, no transfer of any immovable property in such area and of such value exceeding five lakhs rupees, as may be prescribed, shall be effected except after an agreement for transfer is entered into between the person who intends transferring the immovable property (hereinafter referred to as the transferor) and the person to whom it is proposed to be transferred (hereinafter referred to as the transferee) in accordance with the provisions of subsection (2) at least four months before the intended date of transfer.
(2) The agreement referred to in subsection (1) shall be reduced to writing in the form of a statement by each of the parties to such transfer or by any of the parties to such transfer acting on behalf of himself and on behalf of the other parties.
(3) Every statement referred to in subsection (2) shall, ---
(i) be in the prescribed form;
(ii) set forth such particulars as may be prescribed; and
(iii) be verified in the prescribed manner,
and shall be furnished to the appropriate authority in such manner and within such time as may be prescribed, by each of the parties to such transaction or by any of the parties to such transaction acting on behalf of himself and on behalf of the other parties. "
"Section 269-UD. (1) Subject to the provisions of subsections (1-A) and (1-B), the appropriate authority, after the receipt of the statement under subsection (3) of section 269-UC in respect of any immovable property, may, notwithstanding anything contained in any other law or any instrument or any agreement for the time being in force, make an order for the purchase by the Central Government of such immovable property at an amount equal to the amount of apparent consideration:
Provided that no such order shall be made in respect of any immovable property after the expiration of a period of two months fr9m the end of the month in which the statement referred to in section 269-UC in respect of such property is received by the appropriate authority:
Provided further that where the statement referred to in section 269-UC in respect of any immovable property is received by the appropriate authority on or after the 1st day of June, 1993, the provisions of the first proviso shall have effect as if for the words two months', the words 'three months' had been substituted: ...."
"Section 269-UE.(1) Where an order under subsection (1) of section 269-UD is made by the appropriate authority in respect of an immovable property referred to in sub-clause (i) of clause (d) of section 269-UA, such property shall, on the date of such order, vest in the Central Government in terms of the agreement for transfer referred to in subsection (1) of section 269-UC:..."
"Section 269-UF. (1) Where an order for the purchase of any immovable property by the Central Government is made under subsection (1) of section 269-UD, the Central Government shall pay, by way of consideration for such purchase, an amount equal to the amount of the apparent consideration.
(2) Notwithstanding anything contained in subsection (1), where, after the agreement for the transfer of the immovable property referred to in that subsection has been made but before the property vests in the Central Government under section 269-UE, the property has been damaged (otherwise than as a result of normal wear and tear), the amount of the consideration payable under that subsection shall be reduced by such sum as the appropriate authority for reasons to be recorded in writing, may by order determine. "
"Section 269-UG. (1) The amount of consideration payable in accordance with the provisions of section 269-OF shall be tendered to the person or persons entitled thereto, within a period of one month from the end of the month in which the immovable property concerned becomes vested in the Central Government under subsection (1), or, as the case may be, subsection (6), of section 269-UE:.. "
"Section 269-UL. (1) Notwithstanding anything contained in any other law for the time being in force, no registering officer (G. C. Bharuka, J) appointed under the Registration Act, 1908 (16 of 1908), shall register any document which purports to transfer immovable property exceeding the value prescribed under section 269-UC 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 subsection (3) of section 269-UC, is furnished, along with such document.
(2) Notwithstanding anything contained in any other law for the time being in force, no person shall do anything or omit to do anything which will have the effect of transfer of any immovable property unless the appropriate authority certifies 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 subsection (3) of section 269-UC.
(3) In a case where the appropriate authority does not make an order under subsection (1) of section 269-UD for the purchase by the Central Government of an immovable property, or where the order made under subsection (1) of section 269-UD stands abrogated under subsection (1) of section 269-UH, the appropriate authority shall issue a certificate of no objection referred to in subsection (1) or, as the case may be, subsection (2) and deliver copies thereof to the transferor and the transferee. "
In the case of C.B. Gautam v. Union of India (1993) 199 ITR 530, the Supreme Court, keeping in view the legislative history of Chapter XX-C of the Act and the stand taken on behalf of the Revenue has held that the power of compulsory purchase conferred under the said Chapter is being used and intended to be used only in cases where in an agreement to sell an immovable property in an urban area to which the provisions of this Chapter apply, there is significant under valuation of the property concerned, namely, by 15 per cent or more. It has further held that (at page 548):
"If the appropriate authority concerned is satisfied that, in an agreement to sell immovable property in such area as set out earlier, the apparent consideration shown in the agreement for sale is less than the fair market value by 15 per cent. or more it may draw a presumption that this undervaluation has been done with a view to evade tax. Of course, such a presumption is rebuttable and the intended seller or purchaser can lead evidence to rebut such a presumption. Moreover, an order for compulsory purchase of immovable property under the provisions of section 269-UD requires 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."
The mechanism devised by Parliament for achieving the aforesaid objects is that though under the provisions of the Transfer of Property Act the transfer of immovable property, though compulsorily register able, need not necessarily be preceded by an agreement for transfer, under section 269-UC of the Act, the execution and filing of such an agreement in the prescribed form and the manner, has been made mandatory. Disobedience of this mandate restrains registration of the instrument of transfer except on obtaining a no objection certificate from the appropriate authority (section 269-UL) resulting in non-recognition of the intended transfer in law. With the filing of the agreement referred to as the statement for statutory purposes of Chapter XX-C, section 269-UD is activated conferring jurisdiction on the appropriate authority to make an order for purchase by the Central Government of the said immovable property at an amount equal to the apparent consideration. The provisions contained in sections 269-UE to 269-UN provide for the consequences, which will flow from the exercise/non-exercise of the said jurisdiction by the appropriate authority. Under the scheme envisaged under Chapter XX-C of the Act is axiomatic that the said jurisdiction can be founded only on a legally enforceable agreement of transfer. To hold otherwise will not only be opposed to public policy but would also result in the detriment of public interest and will prove to be defeative of other beneficial Acts.
To illustrate: (1) 1f X and Y enter into an agreement for sale of a property Z at a miserably low consideration as compared to the market price and- file a statement under section 269-UC, is the appropriate authority, despite having found the said fact still obliged to either pass an order for purchase of the property by the Central Government or to issue a statutory certificate according its no objection to such a palpably void and fraudulent transaction. (2) Similarly, if A files an agreement for sale of a property to Y which is admittedly an excess vacant land within the meaning of the Ceiling Act, the sale whereof is completely prohibited under section 5(3) thereof declaring the intended transfer to be null and void, even in this case also is the appropriate authority left with only either of the said two options. (3) Similarly, if the person files an agreement to sell the Bangalore City Railway Station for an apparent consideration of rupees one lakh to some intending buyer, can the appropriate authority even in such a case be compelled to either make an order of purchase by the Central Government of its own property or to give statutory consent to such a palpably illegal transaction.
In my opinion, the giving of such a grammatical construction to the said provisions will amount to attributing absurdity to the legislative exercise which is impermissible under the established canons of interpretation of enactments.
The only conclusion, therefore, can be that the appropriate authority can be directed to act under Chapter XX-C only if it is found that the agreement filed under section 269-UC is not void, and as such is not non-est in law.
This being the jurisdictional premise on which the appropriate authority can proceed to act, unless such premise is shown to exist, this Court under writ jurisdiction cannot issue any direction to the appropriate authority to act in any of the manners provided under Chapter XX-C of the Act.
Section 7 of the Transfer of Property Act provides for a person competent to transfer property and it reads as under:
"Every person competent to contract and entitled to transferable property, or authorised, to dispose of transferable property not his own, is competent to transfer such property either wholly or in part, and either absolutely or conditionally, in the circumstances, to the extent and in the manner, allowed and prescribed by any law for the time being in force."
Sectionof the Contract Act defines the capacity to contract as follows:
"Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject."
In the present case, the petitioners cannot be said to be persons competent to transfer the property in question, because, as found above,
(i)they have not acquired any title over the land;
(ii)the order, dated July 26, 1990, passed by this Court in O.S.As. Nos.12 and 13 of 1989 has specifically restrained the petitioners from effecting any such transfer; and
(iii)the lands in question had already been declared to be excess under the Ceiling Act and section 5(3) of this Act declares transfer of such lands as null and void.
The said view taken by me finds ample support from a Division Sunderlal Sheth v. S.K. Laul (1992) 198 ITR 594, wherein Mrs. Sujata V. Manohar, J. as she then was, has held at page 596 as follows:
"In our view such is not the intention of sections 269-UC and 269-UD, nor need the sections be interpreted in this manner. Section 269-UC comes into picture when the sale of a property is intended to take place. At least three months before such sale the statement is required to be furnished. This would necessarily imply that the statement must refer to an agreement to sale which is capable of being put into effect. In the present case, the trust property cannot be validly sold without the permission of the Charity Commissioner. Hence, such an agreement of sale cannot be acted upon by the income-tax Authorities. We are not dealing with a situation where there may be disputes between various parties as to their right to the property in question, their right to enter into the agreement of sale, etc. Here is a case where the sale cannot take effect by reason of a statutory bar on such sale without the approval of the Charity Commissioner. Therefore, section 269-UC can come into operation only after the approval is granted by the Charity Commissioner for such sale. The period of filing such a statement has to be computed with reference to the approval granted by the Charity Commissioner for the sale of the property, bearing in mind the public purpose underlying such approval. The Department was, therefore, right in considering the form in question as invalid."
Mr. Naik sought to submit that the view taken by the Bombay High Court in Madhukar Sunderlal Sheth's case (1992) 198 ITR 594, has been overruled in a subsequent case in J. Gala Enterprises Estate and Investments (Pvt.) Ltd. v. W. Hassan, CIT (1995) 216 ITR 110. But, I find the contention to be erroneous, because the factual premise leading to challenge of the orders passed by the appropriate authority were quite different in the two cases; and, as such, in the latter case the first was found to be distinguishable. In the first case, as noticed hereinafter the Court had found the agreement of sale to be unenforceable, whereas in the second case, it has been observed that (at page 113):
"It Cannot be said that the said agreement for transfer entered into by and between the first petitioner and respondents Nos.6 to 8 is ~contrary to law or void. "
Now, I may proceed to discuss the decisions cited at the bar on behalf of the petitioners. In the case of Kelvin Jute Co. Ltd. v. Appropriate Authority (1990) 185 ITR 453 (Cal), the petitioner-company was, admittedly, the owner of the land involved therein. It was declared to be a sick industrial unit within the meaning of the Sick Industrial Companies (Special Provisions) Act, 1985. In order to help raise finance so that it could be revitalised it entered into an agreement to sell part of its land. The State Bank of India and the State of West Bengal had given consent to the transaction. Accordingly, the petitioner-company entered into an agreement on September 1, 1988, for sale with Granite Ceramics (Pvt.) Ltd. Thereupon it filed an application under Form No.37-I as required under Chapter XX-C of the Act; but the appropriate authority refused to act thereon on the ground that it was premature. The reason given was that the petitioner may choose to surrender the subject property as excess land under the provisions of 'the Ceiling Act in preference to its other lands. On these facts, the Court held the order of the appropriate authority as unsustainable in law by, inter alia, observing that: "Under the present concept of law, the prospective transferor and the transferee have right to enter into an agreement for sale if there is no bar or impediment in law. The sale is proposed without offending any provisions of law prohibiting such transfer." It was further held that the appropriate authority as the pre-emptor cannot demand to better the title before he exercises the right of pre-emption. The Court after noticing that it was nobody's case that the transferor-company had no title to the property in question held, therefore, that the only option left with the appropriate authority was either to purchase the property by exercising the right under section 269-UD of the Act or else to issue "No objection certificate".
In the case of Naresh M. Mehta v. Appropriate Authority (1991) 188 ITR 585 (Mad), the ownership of the transferor was admitted. Nonethe less, the appropriate authority had refused to act upon the statement filed in Form No.37-I of the Act mainly on the ground that the division of the property of which the land under sale formed part was not done in accordance with the municipal laws. The Court held on the facts of the case that there was no scope on the part of the appropriate authority to examine as to whether the division of property was done in accordance with or contrary to the municipal laws, and that he could have merely acted by either exercising the right of purchase with all the defects, shortcoming and limitations of the property which was the subject-matter of the statement or he should have issued a certificate of "no objection".
In the case of Mrs. Satwant Narang v. Appropriate Authority, I.T. Department (1991) 188 ITR 656 (Delhi), the petitioner was undisputedly found to be the owner of the freehold immovable property which was the subject-matter of the statement filed in Form No.37-I. Here also the appropriate authority refused to act on the said statement by alleging that the division of the property between the petitioner and his son was irregular and illegal being violative of the provisions of the municipal bye-laws. The Court found such consideration to be extraneous and issued a direction for issuance of no objection certificate under section 269-UL of the Act.
In the case of Tanvi Trading & Credits (P.) Ltd. v. Appropriate Authority (1991) 188 ITR 623 (Delhi), the facts needs to be noticed in slightly greater detail. In this crave the transferee was the petitioner before the High Court. He had challenged the order of the appropriate authority, dated July 20, 1989, and January 22, 1990, purported to have been passed under Chapter XXC of the Act. Admittedly, eight transferors (respondents Nos.3 to 10) were owning 5,000 square yards of land in Delhi on the date of enforcement of the Ceiling Act. Out of the said lands, the competent Authority declared 680.26 square metres owned by the said respondents as excess vacant lands. Under an agreement, dated May 10, 1989, the said respondents agreed to sell the aforesaid lands to the petitioners and, accordingly, filed a statement in Form No.37-I with the appropriate authority for grant of "no objection certificate". The appropriate Authority refused to act on the said statement on the ground as indicated in his order, dated July 20, 1989, that it was not certain as to which portion of the land will be surrendered to the State Government since part of it has been declared to be excess under the Ceiling Act. Thereupon, on September 25, 1989, the transferor-respondents wrote a letter to the competent Authority under the Ceiling Act specifying and demarcating the excess vacant land which they surrendered with a request for issuance of a notification under section 10 of the said Act. Immediately, thereafter, the appropriate authority was apprised of the said fact with a request for issuance of the desired no objection certificate. On November 24, 1989, even a fresh statement in Form No.37-1 was filed for securing the said object. But again the appropriate authority held it to be an invalid statement keeping in view its earlier order, dated July 20, 1989.
On these facts, after examining the scheme under Chapter XXC of the Act, the Court held as under (at page 629):
"If the appropriate authority chooses not to purchase the property in question, then section 269-UD does not contemplate the passing of any order similar to the order which has been passed by respondent No. l in the present case. In fact, the proviso to section 269-UD says that if no such order, meaning an order referred to under section 269-UD (1) for purchase, is passed and the period within which such an order can be passed has expired, then no order for purchase can at all be passed. When no other order of purchase is passed, then the provisions of section 269-UL come into operation."
The appropriate authority had filed a special leave petition before the Supreme Court against the judgment in Tanvi Trading and Credits' case (1991) 188 ITR 623 (Delhi), which was dismissed by the Supreme Court by its order in Appropriate Authority v. Travi Trading and Credits (P.) Ltd. (1991) 191 ITR 307, which reads as under (at page 308):
"Counsel for the petitioners fairly tells us that a no objection certificate' was issued as early as on January 15. 1991. The suggestion that it was issued under pressure and threat of a contempt proceeding is made out from the record.
We agree that two alternatives are open under the scheme of the legislation:
(i)the Union of India through the appropriate authority could buy the property, or (ii) in the event of its decision not to buy, it has to issue a ' no objection certificate' leaving it open to the parties to deal with the property. In that view of the matter, the High Court was right in its conclusion. The special leave petition is dismissed. No costs."
The judgment of the Delhi High Court as approved by the Supreme Court with the observations noticed above his been followed in the cases of Megsons Exports v. Union of India-(1992) 194 ITR 225; Irwin Almedia v. Union of India (1992) 197 ITR 609 (Bom); MOI Engineering Ltd. v. Appropriate Authority (1992) 198 ITR 270 (Cal); and J. Gala Enterprises Estate and Investment (Pvt.) Ltd. v. W. Hassan, CIT (1995) 216 ITR 110 (Bom).
From the resume of the reported cases noticed above, it will be found that in none of the cases could it have been said that in the eye of law the agreements of transfer of immovable properties filed by the transferors under section 269-UC were void either for want of title or because of specific statutory or judicial restraints prohibiting such transfer. Therefore, the pronouncements made in the judgments cited on behalf of the petitioners cannot help them in seeking the relief which they have desired in the present writ petitions.
So far as the declaration of law trade by the Supreme Court in the case of Tanvi Trading and Credits (P.) Ltd.'s case (1991) 191 ITR 307, is concerned, that has to be viewed in the light of the facts which were before their Lordships, It is well-settled that the ratio of the judgment has to be discerned keeping in view the factual background in which the judgment was rendered. In the case before the Supreme Court, the facts were of too-telling spelling out unwarranted inactions resulting in gross harassment. It was not a case where the transferor lacked competence to contract or was not entitled to any transferable property within the meaning of section 7 of the Transfer of Property Act.
As found above, in the present case, the petitioners have neither acquired any ownership over the property in question nor even otherwise are competent to transfer any interest in the property because of the judicial restraints embodied in the order, dated July 26, 1990, passed by this Court in O.S.As. Nos.12 and 13 of 1989. Moreover, the lands have already been declared to be excess under the Ceiling Act by tae competent Authority and transfer of such lands would be null and void under section 5(3) thereof For all these reasons, it has to be held that the agreement for sale entered into between the petitioner and the third respondent and filed in the form of a statutory statement in Form No.37-I purported to be one under section 269-UC read with Rule 48-L is void and non-est in law and no proceedings under section 269-UD of the Act can validly founded thereon.
The petitioners are also guilty of suggestion falsi suppressio veri having falsely stated in the writ petition that they are the owners of the property in question and for having suppressed material facts as noticed above.
For the said reasons, I am not inclined to issue a writ of mandamus as sought for by the petitioners. The writ petition is, accordingly, dismissed with costs assessed at Rs.5,500.
Let a copy of this judgment be placed on record in Writ Petition No.2390 of 1996.
C. M. A./1749/FCPetition dismissed.