Tata Consulting Engineers v. Union Of India

Raveendran, J.:—

The third respondent is the owner of premises bearing No. 23-24, S.B.I Senior Officer's Colony, Koramangala, III Block, Bangalore. The first Petitioner is the tenant in respect of the first floor of the said premises having taken it on lease from the third respondent. For convenience the third respondent and first petitioner will hereinafter be referred to as the ‘owner’ and the ‘tenant’. Second petitioner is an employee of the first petitioner who is in occupation of the said first floor portion (hereinafter referred to as the ‘tenant portion’). According to the tenant, the lease was originally for a period of four years from 10.5.1985 and by mutual consent, it has been extended upto 10.5.1994

2. The owner entered into an Agreement dated 21.1.1993 with one Mr. Krishna Kapila agreeing to sell the entire property for a consideration of Rs. 26,50,000/- and received Rs. 6,50,000/- as advance. The Agreement provided that the owner shall sell the property free from all encumbrances, liens, attachments, charges or claims and shall deliver vacant possession of the entire property to the purchaser, at the time of registration of the sale deed, against payment of the balance sale price.

3. The owner and the intending purchaser filed a statement under Section 269UC of the Income-tax Act (hereinafter referred to as ‘the Act’) in Form 37-I on 28.1.1993 in regard to the proposed transfer with the Appropriate Authority (Second Respondent). In Column 3 of the Annexure to the said statement, the transferor is required to mention the details of the persons in occupation of the property sought to be transferred. In the said column, the owner showed that only he was in occupation of the property. The fact that the tenant was in occupation of the first floor portion was not disclosed. However, in the statement of additional information furnished on 12.2.1993, the owner disclosed that the first floor was leased to the tenant, but reiterated that he will give vacant possession of the entire property at the time of registration of the sale deed.

4. The Appropriate Authority by letter dated 8.3.1993 informed the tenant that the statement in Form 37-I filed by the owner did not disclose that any portion of the property was tenanted and that the agreement of sale provided for delivery of vacant possession of the entire property at the time of registration of the sale deed; that when the members of the Appropriate Authority inspected the property, the owner informed them that the tenant will vacate the property at the time of the sale; and that if an order of purchase was passed under Section 269UD(1) of the Act, the property would vest in the Central Government and all the persons in occupation, will have to surrender and deliver vacant possession of the property within 15 days of service of such order of purchase. In view of the above, the tenant was called upon to file its objections on or before 22.3.1993 It appears that the tenant sent a reply dated 18.3.1993 stating that it was not in a position to vacate the premises.

5. The Appropriate Authority passed an order of purchase in favour of the Central Government (first respondent) on 29.3.1993, under Section 269UD(1) of the Act (Annexure-A). The said Order recites that notices were issued to the transferor, transferee and to the tenant; that a reply dated 18.3.1993 was received from the tenant on 19.3.1993; that under Clause 5 of the agreement, the owner had undertaken to deliver vacant possession of the property at the time of registration of sale which was to take place on or before 30.4.1993; and that consequently, in accordance with the provisions of Section 269UE(2) the Transferor or any other person who is in possession of the property should surrender and deliver possession of the property to the Appropriate Authority. A copy of the said order and the notice dated 29.3.1993 under Section 269UE(2) of the Act, calling upon the tenant to surrender and deliver vacant possession of the tenanted portion to the Appropriate Authority within 15 days from the date of the Order, were served on the tenant. Feeling aggrieved by the said order of compulsory purchase under Section 269UD(1) in so far as it directs them to deliver vacant possession of the tenanted portion and the notice under Section 269UE(2) calling upon them to vacate and deliver vacant possession thereof, the tenant has filed this Writ Petition.

6. This Court issued Rule Nisi and an interim stay of dispossession on 15.4.1993 Another interim order was made on 29.4.1993, staying all further proceedings pursuant to the impugned order of purchase, until further orders. By interim order dated 28.6.1993, the Central Government was directed to deposit the sale price with the Appropriate Authority who in turn was directed to deposit the same on or before 30.6.1993 with the State Bank of India, St. Mark's Road, Bangalore, under the Capital Gains Account Scheme 1988 to the account of the owner, without prejudice to the rights and contentions of Central Government and subject to the final decision in the Writ Petition.

7. Sri K.G Raghavan, learned Counsel for the tenant contended that the tenant was in lawful possession of the first floor portion of the property; that the tenant had a valid lease upto 10.5.1994 as per mutual agreement between the tenant and the owner and that was disclosed to the Appropriate Authority by the owner in the statement of additional information; that even if it was to be held that there was no term lease in favour of tenant, having regard to the fact that there was no registered lease in its favour, as a bonafide tenant, its tenancy was protected against eviction; that therefore the tenant can be dispossessed or evicted only by initiating eviction proceedings in accordance with law; that if respondents 1 and 2 wanted to evict the tenant, they could do so only by taking action under the Karnataka Public Premises (Eviction of Unauthorised Occupants) Act, 1974 (hereinafter referred to as ‘the Public Premises Act’) or any other law governing tenancies; and that the tenant could not be summarily evicted or dispossessed under Section 269UE(2) of the Act in pursuance of the order of purchase and notice dated 29.3.1993

8. Sri H.L Dattu, learned Standing Counsel for the Income-tax Department contended that Chapter XX-C of the Income-tax Act is a self contained code in regard to purchase by Central Government of immovable properties, in cases of transfer dealt with in the said Chapter, and that when an order of purchase is made under Section 269UD(1) of the Act, possession can be taken from the person in possession, including a tenant, under Section 269UE of the Act and it was not, therefore, necessary to have recourse to the Public Premises Act or any other law, for taking possession. He also contended that until vacant possession of the entire property was delivered to the Appropriate Authority, the owner was not entitled to payment of the price.

9. Sri K.S Ramabhadran, learned Counsel for the owner, on the other hand, contended that once the order of purchase was passed under Section 269UD(1) of the Act on 29.3.1993, the property vested in the Central Government on the date of such order, in terms of the Agreement of Sale, under Section 269UE(1) of the Act. Consequently, having regard to Section 269UF and Section 269UG, the Central Government became liable to pay the sale consideration of Rs. 26,50,000/- within one month from the end of the month in which the property vested in the Central Government, that is on or before 30.4.1993; that the owner was ready and willing to deliver vacant possession of the entire property except the portion in the occupation of the tenant; and that the owner will deliver symbolic possession of the tenanted portion; that if the tenant did not vacate the Appropriate Authority was entitled to take possession under Section 269UE; and any delay in obtaining vacant possession from the tenant cannot be a ground for delaying payment of the sale price due to the owner; and therefore the interim order of stay should be vacated so that the owner can receive payment; and if the payment was not made there could be re-vesting in the owner, as contemplated under Section 269UH.

10. On the aforesaid facts and contentions, the following Points arise for Consideration:

(a) Whether the Appropriate Authority can require a tenant in lawful possession of the property, in regard to which an order of Purchase is made under Section 269UD(1), to vacate the property, where the tenant has not agreed to vacate and when he is not party to the Statement filed under Section 269UC of the Act in Form 37-I?

(b) Whether such a tenant is liable to surrender possession of the tenanted premises under Section 269UE(2) of the Act and on his failure to do so, whether the Appropriate Authority can forcibly evict the tenant from the premises under Section 269UE(3) of the Act?

(c) Whether payment of the price to the owner of the property can be with-held, till vacant possession of the entire property is obtained by the Central Government, when delivery of vacant possession is a term of Agreement of Sale?

RE: POINTS (a) & (b):

11. At the outset, the contention of the tenant, that it is a term lessee entitled to be in possession till 10.5.1994 has to be dealt with. According to the tenant, the first floor portion was taken on lease with effect from 15.5.1985, that the lease expired on 10.5.1992 and by mutual consent the lease was extended by two years, that is upto 10.4.1994 as per its letter dated 25.3.1992 (copy produced as Annexure - ‘C’). The tenant does not claim any term lease under any registered lease deed. A lease for a term exceeding one year can be made only by a registered lease deed, having regard to Section 107 of the Transfer of Property Act. In the absence of such lease deed, it has to be held that the tenant is only a monthly tenant.

12. It is useful to refer to the relevant Statutory Provisions at this stage:

12.1 Sub-section (1) of Section 269UE provides that where an order for purchase under Section 269UD(1) is made by the Appropriate Authority in respect of an immoveable property, such property shall, on the date of such order, vest in the Central Government in terms of the agreement for transfer referred to in Section 269UC(1). The proviso to the said sub-section (1) of Section 269UE, provides that if the Appropriate Authority is of the opinion that any encumbrance on the property or leasehold interest specified in the agreement for transfer, is so specified with a view to defeat the provisions of Chapter XX-C, the said Authority may, after giving an opportunity of being heard, to the affected parties, by order declare such encumbrance or leasehold interest to be void and thereupon the said property shall vest in the Central Government free from such encumbrance or leasehold interest.

12.2 Sub-sections (2) and (3) of Section 269UE which are relevant for determining whether the first petitioner is liable to deliver vacant possession read as under:

“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 269UD 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.

Provided that the provisions of this sub-section and sub-sections (3) and (4) shall not apply where the person in possession of the immovable property, in respect of which an order under sub-section (1) of Section 269UD is made, is a bonafide holder of any encumbrance on such property or a bona fide lessee of such property, if the said encumbrance or lease has not been declared void under the proviso to sub-section (1) and such person is eligible to continue in possession of such property even after the transfer in terms of the aforesaid agreement for transfer.

(3) It any person refuses or fails to comply with the provisions of sub-section (2), the appropriate authority or other person duly authorised by it under that sub-section may take possession of the immovable property and may, for that purpose, use such force as may be necessary.”

13. Section 269UE(1) as originally enacted provided that on an order of purchase being made under Section 269UD(1), such property will vest in the Central Government, free from all encumbrances. There were also no provisos to sub-sections (1) and (2) of Section 269UE. The words ‘in terms of the agreement for transfer referred to in sub-section (1) of Section 269UC’ was substituted for the words ‘free from all encumbrances’ in sub-section (1) and provisos to sub-sections (1) and (2) were added, by Finance Act 1993 with retrospective effect from 17.11.1992 These amendments were necessitated by the Decision of the Supreme Court in C.B Gautam v. Union of India . 1993 ITR 530., rendered on 17.11.1992 In that Decision the Constitutional validity of Chapter XX-C of the Act was upheld, by reading down the provisions of Section 269UD and Section 269UE. One of the grounds of attack on the Constitutional validity of Chapter XX-C was that the said Chapter affected the rights of third parties without safeguarding their rights. It is useful to extract the relevant portion of Supreme Court's Decision dealing with this aspect:

“We now take up the submissions of learned counsel for the petitioners that the provisions of the said Chapter are arbitrary and violate the provisions of the Fundamental Rights Chapter in so far as an order for compulsory purchase under Section 269UD of the said Chapter has the effect of vesting the property in the Central Government free from all encumbrances or leasehold rights the value of which might not be reflected in the apparent consideration mentioned in the agreement for sale. It was submitted by him that these encumbrance holders and holders of leasehold rights might not have anything to do with the attempt at tax evasion in the intended sale……. and yet they would be deprived of their valuable rights practically without any compensation in the event of an order for compulsory purchase being made. In our view, the submissions of learned Counsel are not without merit. Under the provisions of sub-section (1) of Section 269UD, on an order for purchase by the Central Government of an immovable property, the Government would be liable to pay as compensation to the owner of the property, an amount equal to the amount of apparent consideration. Under the express provisions of sub-section (1) of Section 269UE which we have set out above, in case an order for compulsory purchase is made under sub-section (1) of Section 269UD, the property in respect of which the order is made shall vest in the Central Government free from all encumbrances. Sub-section (2) of Section 269UE provides that 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 269UD is made, is required to surrender or deliver possession of the property to the appropriate authority or any other person duly authorised by the appropriate authority within 15 days of the service of the order on him. If there is a lessee in occupation of the property concerned, his leasehold rights would be destroyed and he would have to hand over possession of the property to the appropriate authority or any other person nominated by the appropriate authority. Similarly, if an encumbrance holder like a usufructuary mortgagee were in occupation, he would lose his valuable right to remain in possession and enjoy the usufruct. This clearly shows that an order for compulsory purchase results in the rights of holders of encumbrances and leasehold rights being destroyed or significantly diminished. In a given case, it might happen that property is intended to be sold under an agreement to sell subject to encumbrances and leasehold rights, and very often agreements to sell immovable property do not provide that the property sold would be free from encumbrances or leasehold rights. In such a case, the apparent consideration, even if it is equivalent to the fair market value, would be indicative of the market value of the property subject to such encumbrances. If, in such a case, an order for compulsory purchase is made, the result would be that the property would be compulsorily purchased and the amount to be paid for the purchase would be only equal to the apparent consideration and this apparent consideration would not take into account the value of the encumbrances on the property like mortgages and so on or the leasehold rights. It is well known that a property may be heavily encumbered and its value can be considerably depressed if it were sold subject to encumbrances. It is equally well known that a property in respect of which there is a subsisting lease for a substantial period of time would fetch comparatively low price because the purchase thereof would not carry with it the right to possession or occupation during the subsistence of the leasehold interests. In such cases, the amount of apparent consideration could be even less than the value of the encumbrances or the leasehold interests. An order for compulsory purchase in such cases would necessarily result in gross injustice to the encumbrance holders or the lessees and to their being deprived of their rights without their being in any way involved in the attempt at tax evasion. It, therefore, appears to us difficult to uphold the last part of sub-section (1) of Section 269UE in so far it provides that the property in respect of which an order under sub-section (1) of Section 269UE is made shall vest in the Central Government free of all encumbrances. In our opinion, the expressions ‘free of all encumbrances’ is liable to be struck down as arbitrary, without any rational nexus with the object of the legislation in question and violative of Article 14 of the Constitution. Similarly, the provisions of sub-section (2) of Section 269UE set out by us earlier must be read down so as to make them inapplicable to bona fide lessees in possession or bona fide encumbrance holders in possession.”

The Supreme Court next dealt with the rights of encumbrance holders and term Lessees, that is Lessees in possession in pursuance of a registered lease Deed for a term, and held as follows:

“It was submitted by the learned Attorney General that the provisions of sub-section (1) of Section 269UD might be read down so as to mean that the property compulsorily purchased under an order made under Section 269UD(1) would vest in the Central Government subject to bona fide encumbrances or leasehold interests subsisting thereon other than monthly tenancies. It was urged by him that, in a pre-emptive purchase, normally, what would be purchased is only that which was put up for sale or sold, and if the same principle was applied to the compulsory purchase by the Central Government under Section 269UD, the rights of the encumbrance holders or the holders of leasehold interests subject to which the property was agreed to be sold could be protected. We agree that in order to save a statute or a part thereof from being struck down it can be suitably read down. But such reading down is not permissible where it is negatived by the language of the statute. Reading down is not permissible in such a manner as would fly in the face of the express terms of the statutory provisions. In view of the express provision in Section 269UE that the property purchased would vest in the Central Government free from all encumbrances, it is not possible to read down the Section as submitted by the learned Attorney General. In the result, the expression ‘free from all encumbrances’ in sub-section (1) of Section 269UE is struck down and sub-section (1) of Section 269UE must be read without the expression ‘free from all encumbrances’ with the result that the property in question would vest in the Central Government subject to such encumbrances and leasehold interests as are subsisting thereon except for such of them as are agreed to be discharged by the vendor before the sale is completed. If under the relevant agreement to sell, the property is agreed to be sold free of all encumbrances or certain encumbrances, it would vest in the Central Government free of such encumbrances. Similarly, sub-section (2) of Section 269UE will be read down so that if the holder of an encumbrance or a lessee is in possession of the property and under the agreement to sell the property, it is not provided that the sale would be free of such encumbrances or lease hold interests, the encumbrance holder or the lessee who is in possession will not be obliged to deliver possession of the property to the appropriate authority or any person authorised by it and the provisions of sub-section (3) also would not apply to such persons. If the provisions of Section 269UE are read down in the manner indicated above, then in our opinion the provisions of sub-section (6) of that Section do not present any difficulty because the vesting in the Central Government would be subject to such encumbrances and leasehold rights as stated earlier.”

13.2) The effect of bogus encumbrances or leases created just to defeat the provisions of Chapter XX-C was next considered by the Supreme Court:

“It was urged by the learned Counsel for the Revenue, that, in case a view is taken that the expression “free from all encumbrances” should be struck down, it would be left open to an intending seller of immoveable property to undervalue the property by creating a bogus lease or a bogus encumbrance thereon and this would defeat the purpose for which the Chapter XX-C was introduced. We are unable to agree. If a lease or an encumbrance is found to be bogus, it can be treated as of no legal effect and in that event it would not affect any of the rights of the Central Government on the vesting of the property in the event of an order for purchase being made under Section 269UD(1). If it is so considered necessary, the provisions of the Chapter might be so amended so as to clarify that if any lease or encumbrance is created with a view to defeat the provisions of Chapter XX-C, such lease or encumbrance will be regarded as void or ignored for the purposes of the said Chapter. That, however, is for the Parliament to consider.”

13.3) Dealing with the position of monthly tenants, who did not hold term leases, the Supreme Court held:

“The next controversy posed was regarding the monthly tenancies. As far as monthly tenancies are concerned, they do not pose any difficulty because monthly tenants are also lessees in law although their right is very limited one. If the agreement to sell does not provide for vacant possession or the determination of monthly tenancies, such tenancies would continue even on an order for purchase by the Central Government being made by the appropriate authority concerned under Section 269UD(1); but such tenants would lose the protection given to tenants under the rent protection laws because such laws are not made applicable to properties owned by the Central Government with the result that their tenancies could be terminated by the Central Government. The loss of the protection of the Rent Control Act cannot be regarded as an interest for which any compensation is liable to be paid.”

14. It will be seen from the portions extensively extracted above, that the Supreme Court, considered the effect of term leases and monthly tenancies, where the agreements of sale referred to the subsisting term leases or monthly tenancies, as the case may be, and provided that the orders of purchases passed by the Appropriate Authority will be subject to such leases/tenancies, where an intending transferor had not agreed to deliver vacant possession of the premises subject to such leases/tenancies, at the time of sale. The Supreme Court did not specifically consider a case where ignoring or suppressing the fact that the premises was in the occupation of a monthly tenant who had not agreed to vacate, the agreement of sale, without referring to such tenancy, provided for delivery of vacant possession at the time of sale. Chapter XX-C also does not provide for a case where the agreement of sale contained an incorrect information regarding possession, that is agreeing to deliver vacant possession even though vacant possession could not be delivered having regard to the fact that the premises was in the occupation of a bona fide tenant. What should happen in such a case? Whether the monthly tenancy should be recognised so that the consequences as laid down by the Supreme Court (extracted in para 13.3 above) will follow as contended by the tenant? or whether the tenancy should be ignored and the Appropriate Authority permitted to proceed with the dispossession of the tenant in exercise of its power under Section 269UE(2) as contended by the Appropriate Authority and the owner?

15. In this case, the Appropriate Authority was aware of the fact that the tenant was in possession of the first floor. There was no consent or undertaking from the tenant that it will vacate and deliver vacant possession or abide by the terms of the Agreement of sale executed by the owner. Though neither the sale agreement nor the 37-I statement referred to the first floor tenancy, the statement of additional information filed by the owner as required by the Appropriate Authority specifically stated that the first floor was leased to the tenant but however, the owner will give vacant possession at the time of registration of the sale deed. It is probable that the owner thought that he could negotiate with the tenant and get vacant possession of the premises before the sale. However, the owner did not obtain vacant possession from the said tenant. There was no material to show that the tenant in possession, is not a bona fide tenant, and that he had been inducted to defeat the provisions of Chapter XX-C. Though the Appropriate Authority was aware of the lease (monthly tenancy) in favour of the tenant regarding the first floor portion, no order was made under the Proviso to Section 269UE(1) declaring that the leasehold interest held by the tenant was void. It is also seen that the Appropriate Authority did not call upon the owner nor make any effort to find out how he proposed to deliver vacant possession by 30.4.1993 when the first floor portion of the premises was in the occupation of the tenant and the tenant had not agreed to vacate the said portion of the premises. In fact, being aware of the fact that the tenant was in possession, the Appropriate Authority sent a show-cause notice dated 8.3.1993 to the tenant. Thus, the Appropriate Authority was aware that they will not get vacant possession of the first floor at the time of sale, as stated in the agreement of sale. Consequently, on the facts and circumstances set out above, in so far as the tenant is concerned, the term of the sale agreement providing for delivery of vacant possession should be read down as only providing for delivery of vacant possession of the remaining portions of the premises and not the first floor subject to the tenancy and further read as specifying the first floor tenancy in the Agreement of sale. Any other interpretation will have the effect of visting the consequences of an erroneous statement made by the owner (either deliberately or unintentionally), upon the innocent tenant. Courts should endeavour to ensure that on account of the acts of one party, injustice is not caused to another party. Such reading of the contract is only for determining the rights of the tenant, and not for determining the rights and obligations of the owner who is a party to the Contract.

16. It is in this background that the order of compulsory purchase and the notice under Section 269UE(2) issued by the Appropriate Authority calling upon the transferor or any other person who may be in possession of the, property to surrender and deliver possession of the property to the Appropriate Authority within 15 days from the date of service of the order, requires to be examined. If the Appropriate Authority has assumed, without any concurrence from the tenant, that the owner will be able to deliver vacant possession, then the Appropriate Authority can take appropriate steps against the owner, for failure to do so. But the Appropriate Authority cannot, on the basis of a term agreed by the owner, forcibly dispossess the tenant, by having recourse to sub-sections (2) and (3) of Section 269UE.

17. It is no doubt true that when a statement is filed under Section 269UC in Form 37-I, the Appropriate Authority has only two alternatives: either to pass an order of purchase under Section 269UD(1) or to issue a ‘No Objection Certificate’ for the sale under Section 269UL(3). The Appropriate Authority has no power to reject the statutory statement in Form 37-I or order it to be filed (see the Decision of Delhi High Court in Tanvi Trading & Credits P. Ltd. v. Appropriate Authority . 188 1991 ITR 623 Affirmed in 191 1991 ITR 307., affirmed by the Supreme Court in 191 (1991) ITR 307). But this does not mean that the Appropriate Authority has no power to call upon the transferor to clarify the position regarding delivery of vacant possession. In fact before making an order of purchase under Section 269UD(1), the Appropriate Authority is required by Section 269UD(1A) to give an hearing to the transferor and the persons in occupation of the property. Nothing prevents the Appropriate Authority from making such enquiry or investigation as is necessary, to satisfy itself whether it will be able to get vacant possession or not. If there is a tenant and such tenant has not agreed to vacate and the agreement of sale provides for vacant possession, the Appropriate Authority should, before passing an order of purchase, specifically call upon the owner to refer to the existence of the tenancy, in a supplement to the Agreement and the 37-I Statement and to explain how he proposes to deliver vacant possession of the tenanted premises and confirm whether the 37-I statement should be treated as one relating to sale of a property with vacant possession or not. The owner cannot take exception to such a demand and will be bound to give the required clarifications. The Decision in Tanvi Trading case does not come in the way of the Appropriate Authority from seeking and obtaining relevant information or rectification of mistakes or requiring the Transferor/owner to fulfil his obligations specifically undertaken by him in the contract. It only lays down that the Appropriate Authority cannot, on grounds of alleged infringement of law or defect in title, reject a 37-I Statement or order the Statement to be filed; and nor can it require the transferor to comply with any requirement to get his title rectified or obtain any clearances. But if there is a difference between the factual position and the position represented in the 37-I statement, it is open to the Authority to require the parties to the Statement to rectify the statement. To illustrate: If the measurement of a property is 60′ × 100′ and the said measurements are specifically so given in the agreement, but the aggregate area is wrongly mentioned as 8000 sq. ft instead of 6000 sq. ft. either in the Agreement or 37-I statement; or if the price agreed is Rs. 26,50,000/- and is so stated in the agreement of sale, but it is wrongly mentioned as Rs. 25,00,000/- in the 37-I statement. Having regard to the scheme of Chapter XX-C the Appropriate Authority can certainly call upon the parties to the 37-I Statement, to correct or clarify such mistakes or any incorrect Statement, and act on the basis of the additional information furnished by the parties in any supplemental Agreement or additional Statement. The following observations of the Delhi Court in Tanvi Trading case support the said view.

“An authority constituted under the Act can exercise only those powers which are, expressly or by necessary implication, conferred on the appropriate authority under Section 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 material and documents 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 preemptive right or purchase should be exercised or not.”

If the Appropriate Authority however does not choose to get the required clarification from the owner in regard to vacant possession, being aware of the tenancy, it has to be inferred, so far as the tenant is concerned, that the Appropriate Authority is proceeding on the basis that the premises is subject to the tenancy and it will not get vacant possession of the portion subject to the tenancy, or passing of an order of purchase. As far as the transferor/owner is concerned, the Appropriate Authority has the choice of issuing a ‘No Objection Certificate’ or passing an order of purchase and require performance, namely delivery of possession and with-hold the price till such performance.

18. Having regard to the scheme of Chapter XX-C the provisions of Section 269UE(2) and (3) will operate only where the agreement provides that vacant possession of the premises will be delivered at the time of sale and where in spite of such a term, the transferor or any other person who has been put into possession by the transferor (other than a lawful tenant or encumbrance-holder or person in possession in his own right) fails to deliver vacant possession. The provisions of Section 269UE(2) and (3) provides for a mode of summary eviction of the transferor or an intending transferee who might have been put in possession in pursuance of the agreement of sale or any bogus tenant/occupant put up by the owner, to defeat the provision of Chapter XX-C, referred to in the Proviso to Section-269UE(1). The said provisions cannot be applied or used against a lawful lessee, whether a term lessee or a statutory tenant whose tenancy is protected under Rent Control Laws, or lawful encumbrance holder like an usufructuary mortgagee. Sub-sections (2) and (3) of Section 269UE are not intended to provide a mode of eviction, of all tenants of the Central Government in regard to properties purchased under Chapter XX-C. This is evident from the Decision in Gautam's case which makes it clear that on a purchase of Central Government, a monthly tenant in possession will merely lose the protection of Rent Control laws and Central Government can terminate their tenancies. It follows that such tenants can be evicted only under the public Premises Act or other appropriate law.

19. Sri H.L Dattu, learned Counsel for the Department, contended that Section 269UE(2) to (4) will not be attracted only if the three conditions specified in the proviso to sub-section (2) of Section 269UE are satisfied, that is (a) the person in possession should be a bona fide encumbrance holder or bonafide lessee; (b) that such encumbrance or lease should not have been declared as void under Section 269UE(1); and (c) such person should be eligible to continue in possession of property even after the transfer, in terms of the agreement of transfer. He pointed out that in the case of the tenant, even though the first and second conditions were satisfied, the third condition was not satisfied as the agreement did not provide that the tenant was eligible to continue in possession even after the transfer, but on the other hand provided that vacant possession was to be delivered. Therefore, he contended that sub-sections (2) to (4) of Section 269UE were applicable and the tenant will not be entitled to resist any action for forcible dispossession, as the Appropriate Authority had issued a notice under Section 269UE(2) to the tenant in pursuance of the order of purchase under Section 269UD(1).

20. When a tenant is in possession of a property, his right to continue in possession is governed by the terms of the lease or the provisions of the Statute which extends the protection against eviction of such tenants. The tenant's right to continue in possession, subject to eviction in accordance with law, does not depend on the whims of his landlord (owner) or the terms of any agreement which the landlord-owner may enter into with third parties for sale or transfer of the property. Where the Appropriate Authority is aware that a bonafide tenant is in occupation (either on account of statement to that effect being incorporated in the agreement or in the statement in Form 37-I or in the additional information furnished or on account of spot inspection), unless the tenant had also agreed to deliver up vacant possession, it should be deemed, so far as the tenant is concerned, that the agreement of sale contains a term that the tenant is entitled to continue in possession, even after the transfer, in terms of agreement of sale. It is a fundamental Rule of contract that no person can be bound by the terms of a contract, to which he is not a party. An absolute term in a contract by a landlord that he will deliver vacant possession, cannot in any way bind or affect the tenant, unless the tenant is a consenting party to such a contract. The right of the tenant to continue in possession should not be allowed to be defeated by his landlord, by entering into a mischievous agreement providing for vacant possession without the consent of such tenant. To hold otherwise would be to encourage illegal eviction of tenants. Owners of properties are conscious of the fact that evicting their tenants is not possible, unless they are able to make out any one of the grounds enumerated under the relevant Rent Control Act. Even then, eviction proceedings take considerable time. As a consequence, in Cities like Bangalore, Bombay or Delhi, when compared to the market price of a property with vacant possession, a property subject to a lease/tenancy will fetch only a considerably lower price, the price difference varying as much as 20% to 50% or more.

21. Let me demonstrate the serious consequences, if the interpretation sought to be put up by the Appropriate Authority and the owner on Section 269UE is to be accepted, by means of an illustration. Let us say that the market value of a property with vacant possession, is Rs. 20 Lakhs. Sale thereof without vacant possession will fetch only Rs. 10 lakhs to Rs. 12 lakhs. If a 37-I Statement is filed in regard to the sale of such property with vacant possession, showing the apparent consideration as say Rs. 16 lakhs, the Appropriate Authority will find it attractive to exercise the option to purchase the property. Thus an unscrupulous owner, who is unable to evict a bonafide and lawful tenant and who will not be able to obtain a price of more than Rs. 10 to 12 lakhs, can by entering into an agreement for sale of the property for Rs. 16 lakhs, agreeing to deliver vacant possession without the consent of the tenant, obtain a price of Rs. 16 lakhs. And if the Appropriate Authority has no difficulty in summarily evicting the tenant under Section 269UE, an order of purchase will be passed purchasing the property as the price is cheap and as obtaining vacant possession will not a problem having regard to Section 269UE(2). Thus an unscrupulous owner will get Rs. 16 lakhs and make a profit of Rs. 4 lakhs. The Central Government stands to gain as it would have purchased the property at Rs. 16,00,000/- and by evicting the tenant under Section 269UE, can immediately increase the value of the property to Rs. 20 lakhs. In the bargain, the innocent and bonafide tenant will lose the tenancy and protection against eviction. This is not to say that the owner in the case on hand is guilty of any such unscrupulous act. The illustration is merely to indicate the consequences of accepting the interpretation placed by the respondents on Section 269UE(2) & (3).

22. Let us look at the matter from another angle. Each transferor is bound to disclose the true facts in the statement to be filed in Form 37-I. In this case, the transferor has admittedly not mentioned the true position regarding tenancy and vacant possession, either in the agreement of sale or in the 37-I Statement. It has been noticed earlier that the owner has made a wrong statement, in the 37-I statement, that he is in possession of the entire property. It is no doubt true that in the Statement of additional information, he refers to the tenancy. But there also, he reiterated that he will deliver vacant possession on the date of sale. Thereby the owner represented and held out to the Appropriate Authority that vacant possession of the entire property will be delivered. The consequences of such wrong statements and misrepresentations are sought to be visited upon the tenant. If the owner had mentioned in the Agreement of Sale, the true fact that a tenant is in possession of the first floor and he will not be delivering vacant possession at the time of sale, then the tenant will not liable to be summarily evicted, but will be entitled to continue in possession. If truth on the part of the Landlord will lead to no adverse consequences, should the tenant be made to suffer as a result of a false or wrong statement by the owner? Obviously the answer is no. If it has to be held that the tenant can be summarily evicted under Section 269UE(2) because of a wrong statement filed by the owner, then it will lead to an injustice to the tenant, which is not the intendment of the Act. It is well settled that the Court will opt for an interpretation which is just, reasonable and sensible and avoid an interpretation that will lead to hardship, inconvenience, injustice, absurdity and anomaly.

23. The result of the above discussion is that the tenant is entitled to continue in occupation of the first floor portion. The tenant is not liable to vacate and deliver up vacant possession under Section 269UE(2). Consequently, the tenant cannot be dispossessed or forcibly evicted under Section 269UE(3), irrespective of the order of purchase under Section 269UD(1). The tenancy will continue even after the order of purchase in favour of Central Government, by the order of Appropriate Authority. But the tenant has lost the protection against eviction, to which it was entitled under the Karnataka Rent Control Act, as the said Act is inapplicable to properties owned by the Central Government. The Central Government is, therefore, entitled to evict the tenant either under the Public Premises Act or under any other law providing for eviction of tenants.

Re: POINT (a):

24. The agreement provides that the balance of sale price, namely Rs. 20 lakhs is payable only at the time of registration and that vacant possession shall be delivered at the time of registration. Hence the purchaser of the property is liable to pay the balance price of Rs. 20 lakhs only at the time of delivery of vacant possession. In view of the order of purchase, having regard to the terms of the sale agreement, the Appropriate Authority will be well within its right to release only Rs. 6,50,000/- now and pay the balance of Rs. 20 lakhs at the time of getting vacant possession.

25. Sri K.S Ramabhadran, vehemently contended that the owner will be put to irreparable loss and hardship if the amount is with-held. He pointed out that on the date of the order of compulsory purchase (29.3.1993) the property vested in the Central Government and if the payment of the price is delayed, the owner would have lost the property without getting the price. He also pointed out that there was no deliberate false statement by the owner; that failure to refer to the tenant in the Agreement and 37-I statement was due to an oversight and the owner has disclosed the existence of the tenant in the statement of additional information; and that the owner bonafide believed that he could get vacant possession from the tenant. He next contended that if the tenant is not summarily evicted under Section 269UE(2) & (3) of the Act, eviction under the Public Premises Act or any other law, may be a long drawn process and receiving the balance price will be postponed indefinitely.

26. No doubt the owner will be put to hardship if there is delay in getting the payment. It is a consequence of his own doing. If he had not chosen to contract in absolute terms, that is agreeing to deliver a vacant possession by 30.4.1993 (date agreed for sale) or if he had honoured his terms by negotiating and arranging for vacant possession from the tenant, he will not be in this predicament. It should be remembered that even if the property had not been purchased by the order under Section 269UD(1), he would be in no better position. Under the terms of the agreement, he would have got the balance price only on performing the contract by delivering vacant possession. If the Central Government is directed to pay the sale price, without getting the vacant possession, they will be put to hardship as they cannot be expected to pay the price agreed for premises with vacant possession, without getting vacant possession. The tenant will be put to hardship if it is required to vacate now, as they had not agreed to vacate now. The owner will certainly be put to hardship if he is required to wait for balance of price, having already parted with property. Then the question is who should be made to bear the hardship. Naturally the person responsible for this predicament should bear the burden of the consequences of his action. The present situation is solely the making of the owner by making incorrect statements or wrong assurances in the Agreement of sale and 37-I statement. Hence the owner will not be entitled to the entire price at this stage, even though the errors on the part of the owner may be unintentional.

27. For these reasons, this Writ Petition is allowed on the following terms:

(a) The compulsory order of purchase dated 29.3.1993 passed by the Appropriate Authority (Annexure-A) is upheld subject to the condition that para 14 directing delivery of possession is quashed in so far as the tenant is concerned.

(b) The order under Section 269UE(2) dated 29.3.1993 (Annexure-A1) is hereby quashed.

(c) The tenant shall be entitled to continue in occupation of the first floor portion of the property as tenant under Central Government; and Central Government shall be entitled to evict the tenant from the first floor portion in accordance with law either under the provisions of Public Premises Act or in accordance with any other law relating to eviction that may be applicable.

(d) The owner will be entitled to Rs. 6,50,000/- from out of the sale price (apparent consideration) now. The balance of Rs. 20 lakhs will be payable only when the Central Government gets vacant possession of the entire premises. If the Central Government has already deposited the entire price in State Bank of India, to the Capital Gains Accounts of the owner, (through the Appropriate Authority), the owner will not be entitled to withdraw Rs. 20 lakhs until vacant possession of entire premises is obtained by the Central Government. The Central Government will be entitled to the interest on the sum of Rs. 20 lakhs from the date of deposit to date of obtaining vacant possession of the entire premises.

Rule made absolute on the above terms. The petitioner will be entitled for costs of Rs. 1,000/- from the respondents.