IMPORTANT POINT
In respect of compulsorily purchased property under Section 269UD of the Income Tax Act, the transferee has charge under Section 55(6) of the T.P. Act over the property to the extent of amount paid by him to the transferor and the Central Government cannot defeat the transferee s lien under Section 5(6)(b); the Appropriate Authority is bound to pay the amount to the transferee in the absence of finding that the payment was to defeat the provisions of law or there exists dispute between the vendor and transferee.

Headnote:(i) Income Tax Act, 1961-Section 269UG-Transfer of Property Act, 1882-Section 55-Pre-emptive purchase of immovable property by Central Government-Payment of sale consideration-Transferee s right to get back amount paid to transfer of under sale agreement-To the extent of purchase money paid purchaser has charge over property vested in Central Government-In the absence of finding by Appropriate Authority that payment was with a view to defeat provisions of law and in absence of dispute among seller and purchaser Appropriate Authority is bound to pay amount to purchaser-Central Government cannot defeat the transferee s lien under Section 55(6)(b) of the T.P. Act.
       A purchase under the provisions of Chapter XX-C may be called a compulsory purchase or a pre-emptive purchase. Sub-section (1) of Section 269 UF obliges the Central Government to pay an amount equal to the apparent consideration by way of consideration for such purchase. Sub-section (1) of Section 269 UG provides for the person or persons to whom the amount of apparent consideration is to be tendered by the Central Government. Without cataloguing or categorising the person or persons to whom the amount shall be tendered the Parliament has chosen to employ the expression - "the person or persons entitled thereto". The expression is not defined in Chapter XX-C or elsewhere in the Act. We have to go by the ordinary meaning of the expression and the context in which it has been used. The word entitle means "to give a claim, right, or title to; to give a right to demand or receive, to furnish with grounds for claiming". (Para 7)
       Chapter XX-C is not an encroachment or inroad on the right of a citizen to hold property. It merely modifies the contractual relationship between the parties to the extent superseded by the provisions of Chapter X X-C. The rights and obligations of the parties to the contract are governed by the ordinary law of the land including the provisions of the Contract Act and the Transfer of Property Act. (Para 8)
       Just as the seller has a charge on the property for unpaid price under Section 55 (4) (b) of T.P. Act, the buyer has a charge for price pre-paid. Thus the amount of any purchase money properly paid by the buyer in anticipation of the delivery and also the earnest where the buyer had justification for declining to accept the delivery constitutes a charge on the property forming subject-matter of sale to the extent of the seller s interest in the property and thuswould be an encumbrance on the property. A charge under Section 55(6)(b) of T.P. Act is created soon on payment of purchase money. It can be lost on wrongful refusal to accept delivery of property. A charge under Section 55(6)(b) may not be created if the parties expressly stipulate that the purchase money will not form the charge on the property or it will be released from the charge on certain circumstances or that earnest would be forfeited under certain circumstances. (Paras 9 and 12)
       In view of C.B. Gautam s case [1993(1) SCC 78] the vesting of the property in the Central Government cannot be free from encumbrance unless the Appropriate Authority has exercised the power conferred by proviso to sub-section (1) of Section 269UE and annulled the encumbrance after recording a finding and following the procedure as contemplated by the proviso whereupon only the property shall vest in the Central Government free from such encumbrance; else the encumbrance shall run with the property. The language of Section 269UE(1) gives an indication that on the passing or an order under Section 269UD(1) the immovable property vests in the Central Government in terms of the agreement for transfer referred to in sub-section (1) of Section 269UC. The scheme of the provisions suggests that on the passing of the order of compulsory purchase the Central Government stands substituted in place of the buyer and the apparent consideration stands substituted in place of the agreed consideration. Further in view of the property having vested in the Central Government, the agreement need not be performed by the transferor. Ordinarily, in the event of the private agreement between the parties falling to the ground (i.e. not because of intervention of Chapter XX-C proceedings) the transferor would have been liable to refund the amount of purchase money to the transferees and so long as the amount was not returned the transferees would have held a lien on the property to the extent of the seller s interest. (Paras 10 and 11)
       During the course of the proceedings under Chapter XX-C the Appropriate Authority may, subject to the principles of natural justice, record a finding that the purchase money which purports to have been paid by the transferees to the transferor is being claimed to have been paid only with a view to defeat the provisions of this Chapter. Then the Appropriate Authority may make a declaration avoiding the charge claimed to have been created for the purchase money paid. Else, the charge shall continue to exist and follow the property in the hands of the Central Government. (Para 13)
       If there be no dispute between the buyer and the seller or a third person as to the amount of purchase money having been paid or as to the apportionment of the amount forming part of the purchase money then the amount must be tendered by the Central Government to the person or persons entitled thereto. If there be any dispute raised as to the apportionment of the amount by more than one person staking claims seeking payment of the amount resulting into a dispute as to the apportionment of the amount of consideration, in that case the Central Government shall deposit so much part of the apparent consideration as is the subject matter of dispute with the appropriate authority as provided by sub-section (2) of Section 269UG. In either case the compliance must be made within a period of one month from the end of the month in which the immovable property concerned becomes vested in the Central Government. Failure to make such tender shall result in the pre-emptory purchase being abrogated and the immovable property shall stand re-vested in the transferor as provided by sub-section (1) of Section 269UH. (Para 14)
       Thus where the Appropriate Authority did not take into account the claim of the purchaser and paid the amounts to other persons in favour of whom there was encumbrances and the balance amount to the seller.
       Held : Nobody had questioned the genuineness of this payment. The transferor never disputed having received the said amount. The factum of payment of Rs. 4.55,000/- finding place in the agreement which was the basis of commencement of the proceedings and formed part of Form 37-I could not have been treated as a disputed payment. In any case, if the Appropriate Authority entertained any doubt about the genuineness or otherwise of such payment then the Appropriate Authority should have said so in its order and then left the amount in deposit with the Appropriate Authority. That having not been done the vesting of the property in the Central Government under the order of compulsory purchase cannot defeat the transferees lien under Section 55(6)(b) of the T.P. Act. (Para 15)
       (ii) Income Tax Act, 1961-Section 269UG-Constitution of India-Article 226-Pre-emptive purchase of immovable property by Central Government-Transferee s right to receive back money paid under agreement from Central Government-Sale agreement providing that in case Appropriate Authority does not pay amount paid to transferor, in event of pre-emptive purchase, to transferee, transferee shall be entitled to recover amount from vendor-Appropriate Authority did not pay amount claimed to have been paid by transferee to vendor-Writ petition against Central Government claiming amount-Sale consideration already stood distributed among various encumbrance holders-Transferee has to work out his remedy in terms of agreement-Discretionary remedy under Article 226 not available. (Paras 20 and 21)

JUDGMENT

R.C. Lahoti, J.-Flat No. 201, 2nd Floor, New Jaldarshan, Perry Cross Road, Bandra (West), Bombay was owned by one Hemant Chawla (hereinafter the Transferor , for short). On 1.5.1994 the transferor entered into an agreement to sell the said flat for a consideration of Rs. 45,50,000/- in favour of the six appellants herein (hereinafter referred to as the Transferees , for short). An amount of Rs. 4,55,000/- was paid by the transferees to the transferor on 1.5.1994, i.e. the date of the execution of the agreement. The balance consideration of Rs. 41 lakhs was to be paid on completion of sale within 30 days from the receipt of no objection certificate" from the Appropriate Authority. On 6.5.1994 the transferor and the transferees jointly filed a statement in Form 37-I under Section 269 UC of the Income-tax Act, 1961 (hereinafter the Act , for short). A copy of the agreement was annexed with Form 37-I as statutorily required and as per the proforma the names of the six transferees were mentioned in column No. 4 of Form 37-I.

2. On 12.8.1994 the Appropriate Authority issued notice under Section 269 UD (IA) of the Act to the transferor and the transferees in view of its having formed an opinion that there was significant under valuation of the property and calling upon the transferor and the transferees to show cause why an order of compulsory purchase by Central Government be not made. Vide para 6 of the notice the Appropriate Authority noted that out of the amount of consideration agreed upon between the parties to the agreement dated 1.5.1994, an amount of Rs. 4,55,000/- was paid by way of earnest money on the execution of the agreement and the balance amount was payable within 30 days from the receipt of NOC from the Appropriate Authority. The transferor and the transferees filed responses to the show cause notice disputing the grounds for compulsory purchase by the Central Government.

3. On 30.8.1994 the Appropriate Authority passed an order directing compulsory purchase in favour of the Central Government for a discounted value of Rs. 44,25,680/-. Vide paras 8 & 9 of its order, the Appropriate Authority directed that out of the consideration payable by the Central Government, the encumbrance as mentioned in Clause 3 of the agreement, should be satisfied by the transferor and in the meantime the amount shall be deposited in the account of the appropriate authority. Vide Clause 9 of the agreement, the vendor was to bear 50 transfer fee payable to the Society which liability amounted to Rs. 22,000/-. The order directed this amount also to be retained by the Appropriate Authority towards the vendor s liability for payment of transfer fee. Clause (3) of the agreement referred to the flat forming subject matter of sale having been offered as security to Indian Overseas Bank in connection with a loan of Rs. 36,50,878/- taken by the transferor. There was also an order of attachment before judgment-cum-garnishing order dated 13.9.1994 secured by one Chandrakant & Co., a partnership firm, creating an encumbrance to the tune of Rs. 6,00,800/- on the flat.

4. On 26.9.1994 the transferees made a representation to the Appropriate Authority inviting the attention of the latter to the fact that they had paid a sum of Rs. 4,55,000/- (as mentioned in the agreement) and another sum of Rs. 50,000/- after signing of the said agreement to which they were entitled to be reimbursed under Clause 5(e) of the agreement. They prayed that their lien on the flat be honoured and the amount of Rs. 5,05,000/- be released to them out of the consideration proposed to be paid by the Central Government to the transferor. Ultimately the amount of consideration payable by the Central Government was distributed as follows. An amount of Rs. 6,00,800/- was deposited in the Court on 30.9.1994 to honour the order of attachment made in summary suit No. 2012 of 1994 filed by M/s. A, Chandrakant & Co. against the transferor Hemant Chawla. An amount of Rs. 36,50,

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2000 Supreme(SC) 850

Cases Referred (3)