Moi Engineering Limited & Anr. v. Appropriate Authority & Ors.

The Court:— On 17.4.89 the petitioners jointly entered into an agreement with one K.S Binayak for sale of certain land, building, structure and machinery at a price of Rs. 1,50,000.00. The petitioners and the transferee filed a statement under section 269UC of Chapter XXC of the Income Tax Act 1961 (referred to as the Act) before the respondent No. 1 being the Appropriate Authority for considering whether the Central Government would purchase the immovable property being the subject matter of the sale under section 269UD(1) of the Act.

2. By an order dated 12.6.89 the Appropriate Authority, being the respondent No. 1, held that the statement was premature inasmuch as the agreement dated 17.4.89 could not be implemented by reason of the restrictions contained in the Urban Land (Ceiling & Regulation) Act 1976 (referred to as the 1976 Act). It was stated that unless the proceedings under the 1976 Act were completed, no statement could be filed. This is the first order which has been impugned in this proceeding.

3. The petitioners then made an application under the 1976 Act to the Competent Authority for a no objection certificate on 16th May 1990. In that Application it was stated that the proposed transfer under the agreement dated 17.4.89 was not affected by the provisions of the 1976 Act. As no reply was received from the Competent Authority under section 26(2) of the 1976 Act within the statutory period of 60 days, the petitioner wrote to the respondent No. 1 on 21.8.90 to grant the necessary no objection certificate in respect of the proposed transfer under Chapter XXC of the Act. A fresh statement in Form No. 37-1 was enclosed with the letter.

4. By an order dated 25.10.90 the respondent No. 1 refused to grant a no objection certificate on the ground that there was no change in the facts and circumstances of the case, and that the reasons mentioned in the order dated 12.6.89 stood. This is the second order which has been impugned in these proceedings.

5. It is not disputed by the respondents that both the orders dated 12.6, 89 and 25.10.90 are without jurisdiction and illegal in view of the decision of the Supreme Court in the case of Appropriate Authority v. Tanvi Trading & Credits P. Ltd. by which the Supreme Court affirmed the decision of the Delhi High Court. (Tanvi Trading & Credits P. Ltd. v. Appropriate Authority : 188 ITR 623).

6. The Delhi High Court in a similar fact-situation as this, had held that the Appropriate Authority in exercise of the powers under section 269UD of the Income Tax Act did not have the jurisdiction to adjudicate upon the legality of the transaction which was proposed to be entered into by the applicant. It also held that the only order which could be passed under section 269UD was an order of purchase and none other. In view of the affirmation of the decision of the Delhi High Court by the Supreme Court, therefore, the impugned orders dated 12.6.89 and 25.10.90 passed by the Appropriate Authority in this case are liable to be quashed.

7. The only point which remains for consideration is whether in the circumstances the court should direct the Appropriate Authority to issue a no objection certificate under section 269UL(3) of the Act or whether the court should direct him to decide the matter afresh.

8. The rival contentions of the parties as to the relief to be granted in this writ may be appreciated if a brief summary of the relevant provisions in the Act is considered first. An agreement for transfer of immovable property has to be entered into 3 months prior to the actual transfer [269UD(1)]. The agreement is to be reduced into a statement (Form 37-1) and submitted to the Appropriate Authority within a prescribed time (See Rule 48-L of the Income Tax Rules 1962). The Appropriate Authority has to take a decision for purchase of the property within 2 months from the end of the month of the receipt of the statement [269UD(1)]. If a decision is taken to purchase, the property, on the date of the order, vests in the Central Government and the persons in possession are required to surrender or deliver possession to the Appropriate Authority within 15 days of the service of the order on him [269UE(2)]. If an order of purchase is made, the Central Government is required to tender the amount of consideration to the persons entitled within a period of one month from the date of vesting of the property [269UG(1)]. In default of tendering the money within such period, the order of purchase stands abrogated and the immovable property is re-vested in the transferor (269UH). If on the other hand, no order is passed for purchase under section 269UD(1), the Appropriate Authority is required to issue a certificate of no objection [269UL(3)].

9. It has been submitted by the petitioners that the respondent No. 1 is bound to issue a no objection certificate, and that there was no question of the respondent No. 1 exercising any right of pre-emption to purchase property under section 269UD of the Act now, as the time prescribed under the Act for exercising that right has long since expired. It is submitted that the respondents not having exercised their right within the time prescribed had lost such right, and were bound to issue a No-objection certificate under 269UL(3) of the Act. It is submitted that the Court cannot extend the period of limitation under section 269UD and should issue a writ of mandamus directing the Appropriate Authority to issue the certificate under section 269UL(3). Reliance has been placed on the following decisions:—

1. Tanvi Trading and Credits (P) Ltd. v. Appropriate Authority, reported in (1991) 188 ITR 632.

2. Irwin Almeida v. Union of India reported in (1974) 94 ITR Bombay 191.

3. Sm. Satwant Narang v. Appropriate Authority, reported in (1991) 188 ITR 656.

10. On behalf of the respondents it has been contended that the petitioner No. 1 had accepted the order passed by the Appropriate Authority on 12th June, 1989 and had acted upon it by taking steps to move the Competent Authority under the Urban Land (Ceiling & Regulation) Act, 1976. It is stated that the petitioner No. 1 was fully aware that the time to pass the order under section 269UD(1) of the Act on the Form 37-1 filed on 19th April, 1989 had expired and with such knowledge had filed a fresh application in Form 37-1 for consideration by the Appropriate Authority again. The Appropriate Authority had not given any fresh reasons but had reiterated the earlier reasons which had been expressed in the order dated 12th June, 1989 which had been accepted and acted on by the petitioner No. 1. It is contended that the petitioner No. 1 had therefore, clearly waived the limitation which was imposed by the first proviso to section 269UD(1) of the Act. It is finally submitted that the petitioner No. 1 was also estopped from challenging the reasoning of the Appropriate Authority in the order dated 12th June, 1989. The respondents have relied upon Director of Inspection of Income-Tax (Investigation), New Delhi v. Pooran Mall & Sons reported in (1974) 96 ITR 390 and Grindlays Bank Ltd. v. Income-Tax Authority, Calcutta, reported in (1980) 122 ITR 55.

11. The first question to be resolved is whether the period of limitation prescribed under section 269UD(1) may be waived.

The respondents have cited the decision of the Supreme Court in Director of Inspection of Income Tax (Investigation), New Delhi v. Pooran Mall and Sons to contend that the period of limitation prescribed under section 269UD(1) could be waived.

12. In Pooran Mall & Sons (Supra) the Income Tax Officer had passed an order under section 132(5) of the Act. An order under section 132(5) is required to be made within 120 days of the seizure of money, bullion, jewellery and other valuable article or thing under sections 132(1) or 132 (1A) of the Act. The order under section 132(5) was challenged in writ proceedings. This writ application was disposed of by a consent order in terms of which the order under section 132(5) was quashed and the department was permitted to pass a fresh order after giving an opportunity to the petitioner of being heard. The Income Tax Officer accordingly passed a fresh order after hearing the petitioner. This fresh order was challenged in a second writ petition. It was contended that the order, being passed beyond the period prescribed under section 132(5), was without jurisdiction. The Supreme Court rejected the contention. The Supreme Court held that the period prescribed under section 132(5) could be waived by the assessee. In considering whether the period of limitation prescribed under section 132(5) could be waived, the Supreme Court held that “to hold that the period of 90 days which is mentioned in the section 132(5) is an immutable one would cause more injury to the citizen than the revenue”. That reasoning does not obtain here. On the contrary, it would be prejudicial to the citizen to construe the period under section 269UD(1) as mutable and subject to waiver. I am not persuaded to read the provisions of section 269UD(1) as permitting the principle of waiver.

13. The conduct of the petitioner subsequent to the order dated 12.6.89 is therefore irrelevant. It is also well established that there is no estoppel against statute (see Ebon Machines Ltd. v. Collector of Central Excise : AIR (1989) SC 617, 619).

14. Assuming that the period of limitation under section 269UD(1) can be waived, I am of the view that the conduct of the petitioner No. 1 subsequent to the order dated 12.6.89 cannot be construed as waiver. Waiver is a conscious and voluntary relinquishment of a known right (see: Motilal Padmpat Sugar Mills Co. v. State of U.P, AIR 1979 SC 621; and Provash Chandra Dalui v. Biswanath Banerjee : AIR 1989 SC 1834). It was not clear whether the Appropriate Authority could have passed the order he did on 12.6.89, when the petitioners are alleged to have acted in compliance with that order. The Supreme Court authoritatively determined this question only on 23.4.91 in the case of Tanvi Trading (supra) when it was held that such an order could not be passed. The petitioners were not fully informed as to their right when they took the steps which the respondents claim amounted to waiver. It cannot also be said that the petitioner No. 1 had taken those steps with the intention of abandoning or surrendering its rights to a no objection certificate under section 269UL(3) within the expiry of the period under section 269UD(1).

15. Even assuming that by submitting a statement in Form 37-1 for the second time under section 269UC, the petitioner had waived, its rights in respect of the first statement in Form 37-1—that second statement was filed on 21.8.90 If this is taken as a fresh submission under section 269UC, the Appropriate Authority was bound to consider the same within a period of 2 months under the first proviso to section 269UD. That period expired in October 1990 or at the most in November 1990. If the order of the Appropriate Authority dated 25.10.90 rejecting the statement is construed as one of refusal, Section 269UL(3) came into play immediately thereafter. If the order dated 25.10.90 is not construed as a refusal, then there was no decision at all within the period prescribed. In which case, also, the provisions of section 269UL(3) would be clearly attracted. It is not the case of the respondents that the petitioners had taken any steps waiving their rights under the second statement in Form 37-1.

16. I am therefore unable to accept the submissions of the respondent authorities that the petitioners had waived the period of limitation under section 269UD(1).

17. The last question is whether the Court can and if so should extend the period for the Appropriate Authority to consider the matter afresh. In my view the Court cannot and should not.

18. Under the provisions of the section 269UD the transferor and transferee have to enter into an agreement to transfer land at least 3 months before the intended date of transfer. This agreement is required to be reduced into writing in the form of a statement (Form 37-1). This statement is to be submitted to the appropriate authority. Under section 269UD the Appropriate Authority is empowered to make an order for the purchase of the property sought to be transferred for the apparent consideration in the agreement for transfer. However under the first proviso to section 269UD(1) no such order may be made by the appropriate authority after the expiration of a period of 2 months from the end of the month in which the statement submitted under section 269UC has been received by the appropriate authority.

19. The appropriate authority has to look at the transaction as its stands, however illegal or defective it may be, and decide wheher the Central Government wishes to purchase the property irrespective of and subject to such illegality or defect. If not, the Appropriate Authority is bound to issue a certificate of no objection under the provisions of section 269UL(3). The provisions of section 269UL(3) clearly show that where an order under section 269UD(1) is not passed for purchase of the property sought to be transferred “the appropriate authority shall issue a certificate of no objection and deliver copies thereof to the transferor and the transferee”.

(Emphasis supplied).

20. The terms of the statute are therefore explicit. There is no ambiguity which requires construction. In terms of the statute, immediately upon the expiry of the period prescribed under the first proviso to section 269UD(1), the Appropriate Authority is under a mandatory obligation to issue a certificate of no objection.

21. This time-frame has been obviously evolved for the purpose of minimising the period of uncertainty in the transaction. The language of section 269UD and section 269UL(3) are explicit. There is no ambiguity relating to limitation. There is no hiatus between the expiry of the period under section 269UD(1) and the commencement of the obligation under section 269UL(3).

22. It does not appear from the language of section 269UD that the Court has been given any discretion to extend the period within which the Appropriate Authority may exercise its power of preemption. There can be no doubt that the provisions of section 269UD are a serious inroad on the right of a citizen to dispose of the property to a person of his choice. This inroad is justifiable perhaps in the light of the purpose sought to be achieved, namely, the control of black money. However, being such an inroad, the provisions of section 269UD are to be strictly construed. The legislature has protected the right of the citizen to some extent by laying down a timeframe within which the entire exercise is to be completed. When the legislature wanted to provide for an extension of the period it has specifically provided for it, as in the second proviso to section 269UD(1).

23. This reading of the provisions is also borne out by considering their legislative background.

24. The background for the introduction, and the ambit, of the pre-emptive right of the Central Government in respect of transfer of immovable property have been stated in the paper published by the Central Government on the Long-term fiscal policy 1985 in respect of the Seventh Plan as follows:

5.29 “As a measure for countering evasion, the Income-Tax Act at present contains a provision empowering the Government to acquire an immovable property on its sale or transfer if the consideration recorded in the transfer deed is found to be less than its estimated fair market value by more than a specified margin. These provisions have not proved to be effective and have generated a great deal of litigation and harassment. It is essential to find ways in which tax payers would be induced to disclose the true values of their properties.

5.30 One way of tackling this problem is to confer on the Government a preemptive right to acquire any immovable property undergoing a transfer for consideration at a value of 15 per cent above the price or consideration stated in the transfer deed. The scope of such a provision may be limited initially to the metropolitan towns and also to properties worth more than Rs. 10 lakhs. To be fair, selection will have to be based on a system of random sampling. Furthermore, the Government will be required to make full payment for any property it notifies for acquisition within 30 days of such notification. To reduce undue uncertainty in property-transactions the Government's pre-emptive right of purchase will automatically lapse after 60 days of the seller's applying for the clearance certificate from the Income-Tax Department for an particular property sale.”

(Emphasis supplied)

The intention of the legislature was that the pre-emptive right under section 269UD would automatically lapse after 60 days. No power of extension was intended.

25. In Grindlays Bank case (Supra) cited by the respondents there was no question of extending the period of limitation at all. It was found that the bar of limitation for making of an assessment had not come into play at all, such assessment proceeding having been stayed during the pendency of writ proceedings. The Supreme Court also held that the Court could direct a fresh assessment unless there was a complete want of jurisdiction to make the assessment at all. This case is not apposite. The question here is whether the period of limitation prescribed should be extended at all. In Pooran Mall's case (supra) the Supreme Court held that the Court could otherwise extend (he time if the Income-Tax Officer had not lost jurisdiction over the matter (See: page 398 of the report). In this case the Appropriate Authority has lost the jurisdiction which it now claims to exercise. After the expiry of the period under section 269(a)UD(1) the provisions of 269UL(3) came into operation and the Appropriate Authority automatically lost the power under section 269UD(1). When section 269UL(3) is operative the Appropriate Authority does not continue to retain his jurisdiction under section 269UD(1). Therefore these cases are of no assistance to the respondents.

26. In the absence of any express provision for extension of time and given the nature of the power sought to be exercised, no principle of interpretation or equity could justify the Court in exercising its inherent jurisdiction to extend the time for the Appropriate Authority to reconsider the matter under section 269UD(1).

27. The issue is not res-integra. In the decision of Satwant Narang (Supra), in substantially similar circumstances, a Division Bench of the Delhi High Court stated that “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 15, 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.”

28. Other High Courts have also held that once the period under section 269UD(1) has expired, there is no option for the Appropriate Authority but to issue the certificate under, section 269UL(3) and the Court should enforce such obligation by way of a writ of madaruus. In the decision of Tanvi Trading (Supra) the Delhi High Court at page 630 of the report held:—

“The impugned orders show that the appropriate authority has not exercised its pre-emptive right of purchase within the stipulated period. The decision not to issue a certificate under section 269UL(3) and the direction that the statement under Form No. 37-1 be filed are clearly without jurisdiction.

For the aforesaid reasons, we issue a writ of certiorari quashing the impugned orders and we also issue a writ of mandamus directing respondent No. 1 to issue to the petitioners within four weeks from today a ‘no objection certificate’ in terms of section 269UL(3).”

29. In the case of Irwin Almeida v. Union of India (1974) 94 ITR Reports 191 a Division Bench of the Bombay High Court held that the Appropriate Authority may either decide that the property should be purchased by the Central Government or issue a no objection. The Division Bench further held that upon the failure to exercise jurisdiction under section 269UD(1) within the prescribed period, the jurisdiction of the appropriate authority to direct purchase of the property by the Central Government stands extinguished and the petitioners are entitled to secure a no objection certificate. (See also Satwant Narang v. Appropriate Authority (1991) 188 ITR 656).

30. Therefore, I have no hesitation in quashing the impugned orders dated 12.6.89 and 25.10.90 and I direct the respondents to issue the no objection certificate under section 269UL(3) of the Act in respect of the transfer of the premises in terms of the agreement between the petitioners and the transferee being annexure B to the writ petition within 2 weeks from date. The application is accordingly allowed. However there will be no order as to costs.

Let xerox copy of this judgment be given to the parties upon the undertaking to apply for the Certified Copy of the Judgment and payment of usual charges.

Application allowed.

A.R