Savitri Devi Vs Appropriate Authority and others

K. Shivashankar Bhat, J.@mdashRule D. B.

2. The petitioner is the owner of a property situated in Delhi. She challenges an order of the appropriate authority under Chapter XX-C of the Income Tax Act, 1961 ("the Act", for short) the petitioner obtained a land on lease from the President of India on the condition that she should build a residential tenement on it. After the construction of the building, the petitioner was granted a perpetual lease on December 19, 1969, in respect of the land. Subsequently, the petitioner let out the premises after obtaining permission of the Rent Controller to East-West Medical Centre for residential purposes for two years. The tenant used the premises for running a nursing home; a suit was also filed by the tenant contending that the lease in favor of the tenant was for non-residential purposes; the suit was adjourned pending a decision by the Rent Controller as to whether the lease in question was for residential or non-residential purposes. There were also several other proceedings between the petitioner and the said tenant.

3. The condition of the perpetual lease under which the petitioner obtained the land from the President required that the land should be used only for residential purposes. Since the tenant of the petitioner used the premises for a different purpose, the land and development office levied penalty/charges for the misuse amounting to Rs. 1,97,85,963 for the period 1976 to July 14, 1991. The petitioner states that the charges for the subsequent period are yet to be communicated. The petitioner estimates the said charges to be about Rs. 35 lakhs. There was a threat of re-entry on behalf of the President. In view of the peculiar predicament, she agreed to sell the properties to the fourth respondent for a consideration of Rs. 80.21 lakhs; the purchaser agreed to take over all other liabilities including the liability for the penalty/charges and unearned increase of about Rs. 65 lakhs. According to the petitioner, she is an old lady aged 75 years. She is a helpless widow, without any one to assist her in various litigations.

4. Consequently, an agreement of sale was entered into between the petitioner and the fourth respondent on August 5, 1993. The total apparent consideration for the sale was Rs. 3,43,06,963. All these years the petitioner was getting only Rs. 6,000 per month as rent.

5. On August 21, 1993, a statement was filed by the petitioner and the fourth respondent u/s 269UC of the Act, in Form No. 37-I, before the appropriate authority seeking a no objection certificate.

6. On November 8, 1993, the petitioner received a notice from the appropriate authority stating that the apparent consideration stated in the statement filed in Form No. 37-I was not the fair market value of the property and, Therefore, the petitioner was asked to show cause as to why the property should not be purchased by the Central Government. As a comparison the said notice referred to the sale of another plot of land in Jor Bagh. The notice also assumed that the penalty/charges levied by the land and development office was not payable and Therefore did not form part of the apparent consideration.

7. The petitioner sent her reply. She pointed out as to how the sale instance in respect of Jor Bagh property was not comparable with that of the present agreement to sell. She also pointed out the difficulty in getting the tenant evicted and the fact that the purchaser had to pay the penalty/charges levied by the land and development office.

8. On November 23, 1993, the petitioner received the impugned order of the second respondent. This order, in effect, states that the perpetual lease under which the land was obtained by the petitioner stipulated that "for breach of any of the covenants or conditions of the perpetual lease deed, the land and development office will have the right to re-enter the premises. A total liability of Rs. 1,96,85,963 on account of misuse charges of the premises in question has already been levied by the land and development office for the period February 10, 1976, to July 14, 1992, for breach of condition No. 7 of clause 2 of the perpetual lease deed dated December 10, 1969. Since the premises in question have been used for non-residential purposes in violation of condition No. 7 of clause 2 of the perpetual lease deed, the land and development office is free to exercise the right to re-enter notwithstanding the liability on account of misuse charges amounting to Rs. 1,96,85,963 which is outstanding and for which notice has already been given by the land and development office.

9. For all these reasons and in view of the foregoing it is not possible to transfer the subject property without the express permission of the Land and Development Office, New Delhi. Therefore, your request for issue of a no objection certificate u/s 269UL(3) read with section 269UC of the Income Tax Act, 1961, is premature and cannot be acceded to at this stage.

10. You may file a fresh statement in Form No. 37-I after obtaining permission for transfer from the land and development office, New Delhi, so that your request can be considered at this end. The statement filed on August 20, 1993, is being filed as infructuous, defective and inconsequential."

11. In other words, the permission sought for by the petitioner for filing the statement in Form No. 37-I was rejected on the assumption that the agreement between the petitioner and the fourth respondent was not a valid agreement, because the land and development office is free to exercise the right of re-entry.

12. The petitioner questions the above order on the ground that the appropriate authority was not competent to examine the validity of the agreement of sale; the latter is also not competent to question the defect in the title of the seller to transfer the property; the power of the appellate authority so confined to two alternatives only, viz., (i) whether the Government of Indian could buy the property through the appropriate authority; or (ii) if the property was not to be purchased by the government of India, the appropriate authority shall issue a "no objection certificate" leaving it open to the parties to deal with the property.

13. It was also contended by the petitioner that the show-cause notice issued to the petitioner nowhere sought an Explanation from the petitioner as to why From No. 37-I shall be rejected because of the alleged defect in the title of the petitioner; since the petitioner was not notified of the ground in the show-cause notice, the authority was incompetent to reject From No. 37-I on the non-disclosed ground.

14. Mr. Rajendra, learned counsel for the Revenue, contended that since the agreement to sell was a defective agreement for want a saleable interest in the petitioner, the said agreement was valid and unenforceable; if so, the appropriate authority is competent to ignore the statement filed under From No. 37-I and direct the petitioner to file a fresh statement under From No. 37-I, after her right to sell is cleared by the land and development office. Learned counsel further contended that the appropriate authority should be given an opportunity to issue a fresh show-cause notice, if necessary, to remove the defect in the procedure, in case this court holds that the earlier show-cause notice was defective.

15. We are of the view that the petitioner is entitled to succeed entirely in view of the decisions of this court on the relevant questions. The question of giving a further opportunity to the appropriate authority does not arise, because no order could now be made by him as the period within which he had to make the order expired by November 20, 1993, far earlier to the date of this writ petition.

16. The object behind Chapter XX-C of the Act and as to when power of purchase u/s 269UD could be exercised was stated by the Supreme court in C.B. Gautam Vs. Union of India and Others, . It was pointed out that the provisions of Chapter XX-C can be resorted to only where there is a significant under valuation of the property to the extent of 15 per cent. or more in the agreement of sale as evidenced by the apparent consideration being lower than the fair market value by 15 per cent. or more. The court also pointed out that the intending seller and the intending purchaser should be given an opportunity to show cause against the compulsory purchase order to be made. The court also held that only because the apparent consideration for the sale is below 15 per cent. of the fair market value, it cannot be conclusively held that there is an under valuation and the parties should be given an opportunity to show the circumstances leading to the alleged under valuation, such as the owner''s immediate need of money or dispute as to title to the property as a result of which the property might have to be sold at a lower price or there might be a subsisting lease in favor of the intending purchaser. There may be other valid reasons also for the particular sale price agreed upon.

17. In Tanvi Trading and Credits P. Ltd. and Others Vs. Appropriate Authority and Others, , a Bench of this court had occasion to consider the very questions which are before us. It was held that u/s 269UD, the appropriate authority cannot adjudicate upon the legality of the transaction sought to be entered into by the intending seller and the intending purchaser and the authority''s power is confined to the making of an order of purchase or granting the no objection certificate to the parties who filed the statement in From No. 37-I. The Bench held at page 628 :

"As we read section 269UD, it is clear that the only right which it confers on the appropriate authority is to enable it to make an order for purchase of the immovable property at an amount equal to the amount of the apparent consideration. Furthermore, the first proviso stipulates the time within which such an order can be passed. Section 269UD, Therefore, contains the pre-emptive right of purchase by the central government. The said provision does not give jurisdiction to the appropriate authority to adjudicate upon the legality of the transaction which is proposed to be entered into by the applicant. It is to be remembered that Chapter XX-C was incorporated in an effort to curb sales of immovable properties for apparent consideration which would be less than the actual consideration. In other words, the effort was to see that immovable property is not transferred by taking sale consideration in black. Section 269UD was not concerned with the validity of the sale. If there was any impediment or defect in the title of the transferor or if there was any other law which was violated by such a sale, the same was to be of no consideration to the appropriate authority except that it could take all such factors into consideration while making up its mind whether to exercise the pre-emptive right of purchase or not. The appropriate authority cannot, on grounds of alleged infringement of law, exercise its right of purchase and, at the same time, refuse to grant the certificate sought for by the seller.

An authority constituted under the act can exercise only those powers which are, expressly or by necessary implication, conferred on it. The only power which is conferred on the appropriate authority u/s 269UD is the power to decide whether to purchase the property or not. Of course, in exercise of this power, the authority will have other implied powers which will make such a power effective. The authority would be entitled to see materials and document like documents of title, agreements etc., in order to satisfy itself whether the apparent consideration is proper or not in order to come to the conclusion whether to purchase the property or not. The investigation which will be undertaken by the appropriate authority is only with a view to determine whether the pre-emptive right of purchase should be exercised or not.

If the appropriate authority has reservations or doubts with regard to the legality of the proposed sale, it is open to the authority not to exercise its right to purchase. Section 269UD, however, does not contemplate the rejection of any statement by the appropriate authority. Section 269UD speaks of only one type of order which can be passed by the appropriate authority and that is an order of purchase. If the appropriate authority chooses not to purchase the property in question, then section 269UD does not contemplate the passing of any order similar to the order which has been passed by respondent No. 1 in the present case. In fact, the proviso to section 269UD says that if no such order, meaning an order referred to u/s 269UD says that if no such order, meaning an order referred to u/s 269UD(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."

18. The Bench further held at page 630 that "whether no order for purchase has been passed, then the appropriate authority shall issue a certificate of no objection referred to in sub-section (1) of section 269UL".

19. It is necessary to quote the further observations which have a direct bearing on the question before us. The Bench held (at page 630) :

"The certificate issued u/s 269UL would, in effect, only indicate that the government is not interested in purchasing the property. The certificate so issued does not pronounce on the legality or validity of the transaction. If the transaction is otherwise illegal or invalid, it will be for some other authority, in another forum, to decide on the same. As far as the appropriate authority is concerned, the certificate which is issued has relation only to the question whether the Government is interested in purchasing the property or not."

20. The next sentence indicates the condition that the exercise of the pre-existing right of purchase shall have to be done within the "stipulated period".

21. The above decision was affirmed by the Supreme Court in Appropriate Authority and Another Vs. Tanvi Trading and Credits P. Ltd. and Others, . While deciding the appeal, the supreme Court observed (at page 308) :

"We agree that two alternatives are open under the scheme of the legislation : (1) 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."

22. Another Bench of this court also had taken a similar view in Satwant Nakang Vs. Appropriate Authority, Income Tax Department, New Delhi, . The appropriate authority held that the agreement of sale which was under consideration u/s 269UD itself was unlawful. This order was set aside by the court, holding that the appropriate authority had no jurisdiction to go into the object or the purpose of the transaction, or its legality and validity. The Bench also rejected the request of the Revenue for another opportunity to consider the question of alleged under valuation as the said question had not been considered by the authority in the impugned order. In this connection, the Bench observed at page 664 :

"We are not impressed by this submission. The agreement under reference is dated October 9, 1989. The petitioner moved the appropriate authority by filing the statement in Form No. 37-I on October 20, 1989. Thereafter, the Act lays down a very tight schedule for the appropriate authority to make up its mind to purchase or not to purchase the property. There is no provision for extension of time. The respondents have missed the bus and have passed the impugned order on December 1, 1989, rejecting the permission on quite irrelevant considerations. This court would not like to extend the period and frame a fresh time schedule for the Department specially when the statute does not give any such power to the court. There is no worthwhile Explanation as to why, at this point of time, the Department wants to purchase the property except the only consideration that the prices have gone up. This will then be a case of unjust enrichment. In our opinion, there is no equity in their favor for allowing them another opportunity to make up their mind."

23. A reading of the proviso to section 269UD(1) itself shows that the order for purchase u/s 269UD shall have to be made within the stipulated period. Thereafter there is a bar against making such an order. The proviso reads thus :

"Provided that no such order shall be made in respect of any immovable property after the expiration of a period of two months from the end of the month in which the statement referred to in section 269UC in respect of such property is received by the appropriate authority."

24. In view of the two Division Bench decisions of this court and the observations of the Supreme Court in Appropriate Authority and Another Vs. Tanvi Trading and Credits P. Ltd. and Others, , it is unnecessary to refer to the decisions of other High Courts cited before us in detail.

25. A learned judge of the Calcutta High Court followed Appropriate Authority and Another Vs. Tanvi Trading and Credits P. Ltd. and Others, , in Moi Engineering Ltd. and Another Vs. Appropriate Authority and Others, . Similar is the view expressed by a Bench of the Bombay High Court in Irwin Almeida and others Vs. Union of India and others, . It was a case where the appropriate authority had rejected the statement filed in Form No. 37-I by holding that the intending seller had no title to transfer of property in question. This order was set aside by the High Court and the authority was directed to issue the "no objection certificate."

26. In T. Amudha and others Vs. Members, Appropriate Authority and others, , the appropriate authority directed the parties to file a fresh agreement and statement after setting right certain irregularities and infirmities; the earlier statement filed by the petitioner was held as non est in law by the authority. This order was set aside by a learned judge of the Madras High Court. To the same effect is the decision of a Bench of that court in Appropriate Authority, Government of India Vs. Naresh M. Mehta, .

27. Mr. Rajendra strongly relied on the decision of the Bombay High Court in Madhukar Sunderlal Sheth v. S. K. Laul [1992] ITR 594 . The statement filed in Form No. 37-I was rejected by the authority on the ground that the sale cannot take place without the approval of the Charity Commissioner and such an order was sustained by the High Court. The decision of the High Court and of the Bench of the Bombay High Court were distinguished. At page 597, the court observed :

"The ratio of the decision of the Delhi High Court in the case of Tanvi Trading and Credits P. Ltd. and Others Vs. Appropriate Authority and Others, , has no application to the present case. The decision of a Division Bench of this Court (Pendse and Jhunjhunwala JJ.) dated March 11, 1991. In Writ Petition No. 683 of 1991 ( Irwin Almeida and others Vs. Union of India and others, also cannot apply because this is not a case where the Income Tax authorities have purported to examine the title of the parties to the agreement or questioned their right to enter into the agreement. There is a clear statutory prohibition in the present case against the sale of immovable property of a public trust without the approval of the Charity Commissioner."

28. We need not go into the precedential value of the above decision, as we are bound by the decisions of this court, which clearly lay down that the appropriate authority acting u/s 269UD cannot go into the legality of the agreement before him and his only power is to make an order of purchase for the Central Government or grant a "no objection certificate".

29. The order of this Court dated October 4, 1993, in Civil Writ No. 2370 of 1993 (Shri Sampat v. Appropriate Authority) referred by Mr. Rajendra is only an interim order and Therefore has no precedential force.

30. Accordingly, the order of the appropriate authority (first respondent) dated November 19, 1993, is set aside. The said respondent is directed to issue the "no objection certificate" to the petitioner and to the fourth respondent in terms of Chapter XX-C of the Act. The writ petition is allowed. Rule is made absolute. Time to comply with two months.