JUDGMENT

Thomas, J.-Whether a bona fide statutory tenant has the right to continue in possession even after an order of purchase was made under Section 269-UE(1) in Chapter XX-C of the Income Tax Act, 1961 (for short the Act ), is the question sought to be raised in this appeal. According to the appellant the answer to the said question must be in the affirmative.

2. A brief sketch of the racts .

The Appellant-a Private Limited Company - is tenant on the ground floor of a building situate on the Mount Road (now called Anna Salai), Madras. On 30.3.1989, owner of the building entered into an agreement with another person for sale of the building, for a sum of Rs. 26 lacs. The Appropriate Authority, constituted under Chapter XX-C of the Act, on coming to, know of the aforesaid agreement initiated proceedings, in exercise of its powers under the said Chapter for purchase of the building. He ordered the building to be purchased by the Central Government for the same consideration as shown in the agreement in accordance with Section 269-UA(C) of the Act. Appropriate Authority then issued a communication to the appellant informing it that the building stood vested in the Central Government by virtue of Section 269-UE(1) of the Act free from all encumbrances with effect from 22.6.1989. The appellant was requested to surrender possession of the building. A writ petition was filed before the High Court of Madras challenging the said communication and the subsequent request. A Division Bench of the Madras High Court dismissed the writ petition. This appeal by special leave has been filed against the judgment of the Division Bench.

3. The two sub-sections of Section 269-UE of Chapter XX-C of the Act which are relevant for this appeal are quoted below :

"269-UE. Vesting of property in Central Government.-(1) Where an order under sub-section (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 free from all encumbrances.

(2) The transferor or any other person who may be in possession of the immovable property in respect of which an order under sub-section (1) of Section 269-UD is made, shall surrender or deliver possession thereof to the appropriate authority or any other person duly authorised by the appropriate authority in this behalf within fifteen days of the service of such order on him."

The contention of the appellant before the Madras High Court was two-fold. First is that as the Constitution Bench of this Court in C.B. Gautam v. Union of India & Ors.1, has struck down the expression "free from all encumbrances" in sub-sectional) of Section 269-UE, what was vested with the Central Government is only the right of the erstwhile owner of the building without affecting the leasehold right of the appellant. Second is that appellant s right in the building has been protected by the Tamil Nadu (Lease and Rent Control) Act, 1960 (for short the T.N. Act ) and as such his statutory right cannot be by-passed through the vesting process.

4. Division Bench of Madras High Court repelled both contentions. Learned Judges pointed out that the transferor has stipulated in the agreement for sale date 30.3.1989 (which led to the action taken by the Appropriate Authority) that the transfer of the premises shall be free from all encumbrances and then held: "when the agreement in this case provides for a sale free of all encumbrances, the property agreed to be sold would also vest in the Central Government free of such encumbrances. Only in a case where the agreement does not provide that the sale would be free from all encumbrances, the encumbrance holder of leases in possession may not be obliged to deliver possession of the property". Regarding the second contention the High Court pointed out that even otherwise the provisions of the T.N. Act do not afford any protection to