Shri Savitri Devi Petitioner v. Appropriate Authority And Others S

K. Shivashankar Bhat, J.:— Rule D.B

1. 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). Petitioner obtained a land on lease from President of India on the condition that she should build a residential tenement on it after the construction of the building, Petitioner was granted a perpetual lease on 19th December 1969 in respect of the land. Subsequently petitioner let out the premises after obtaining permission of the Rent Controller to East West Medical Centre for residential purposes for 2 years. The tenant used the premises for running a Nursing Home; a suit was also filed by the tenant contending that the lease in favour of the tenant was for non-residential purpose; the suit was adjourned pending a decision by the Rent Controller as to whether the lease in question was for residential or non-residential purpose. There were also several other proceedings between the petitioner and the said tenant.

2. The condition of the Perpetual lease under which petitioner obtained the land from the President required that the land should be used only for residential purpose. Since the tenant of the petitioner used the premises for a different purpose, L & DO levied penalty/charges for the misuse amounting to Rs. 1,97,85,963.00 for the period 1976 to 14th July, 1991. Petitioner states that the charges for the subsequent period are yet to be communicated. Petitioner estimated 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 4th for a consideration of Rs. 80.21 lakhs; purchaser agreed to take over all other liablities including the liability of the penalty/charges and unearned increase of about Rs. 65 lakhs. According to the petitioner she is an old lady 75 years. She is a helpless widow, without any one to assist her in various litigations.

3. Consequently an agreement of sale was entered into between the petitioner and the 4th respondent on 5-8-1993. The total apparent consideration from the sale was Rs. 3,43,06,963. All these years the petitioner was getting only Rs. 6,000 per month as rent.

4. On 21-8-1993 a statement was filed by the petitioner and the 4th respondent under Section 269 UC of the Act, in form 37-I, before the Appropriate Authority seeking no objection certificate.

5. On 8-11-1993, petitioner received a notice from the Appropriate Authority stating that the apparent consideration stated in the statement filed in form 37-I was not the fair market value of the property and therefore, 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 L & DO was not payable and therefore did not form part of the apparent consideration.

6. 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 L & DO.

7. On 23-11-1993 petitioner received the impugned order of the 2nd respondent. This order, in effect, states that as per the perpetual lease under which land was obtained by the petitioner stipulated that “for breach of any of the covenants or conditions of the perpetual lease deed the L&DO 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 L & DO for the period 10-2-1976 to 14-7-1992 for breach of condition No. 7 of clause-2 of the perpetual lease deed dated 10-12-1969. Since the premises in question have been used for non-residential purposes in violation of conditon No. 7 of clause 2 of the perpetual lease deed, the L & DO is free to exercise the right to re-enter not withstanding 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 L & DO.

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 L & DO, New Delhi. Therefore, your request for issue of no objection certificate u/s. 269 UL (3) read with Section 269 UC of the Income Tax Act, 1961 is premature and cannot be accepted to at this stage.

You may file a fresh statement in form No. 37-I after obtaining permission for transfer from L & DO, New Delhi so that your request can be considered at this end. The statement filed on 20-8-93 is being filed as infructuous, defective and inconsequential.”

8. In other words, the permission sought for by the petitioner for filing the statement in Form 37-I was rejected, on the assumption that the agreement between the petitioner and the 4th respondent was not a valid agreement, because, L & DO is free to exercise the right of re-entry.

9. 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 detect in the title of the seller to transfer the property; the power of the Appellate Authority is confined to two alternatives only viz. (i) wheher the Government of India 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.

10. It was also contended by the petitioner that the show cause notice issued to the petitioner nowhere sought an explanation of the petitioner as to why form 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 the Form 37-I on this non-disclosed ground.

11. Mr. Rajendra, the learned counsel for the Revenue contended that since the agreement to sell was a defective agreement for want of a saleable interest in the petitioner, the said agreement was void and unenforceable; if so, the Appropriate Authority is competent to ignore the statement filed under Form 37-I and direct the petitioner to file a fresh statement under Form 37-I, after her right to sell is clear by L & DO. The learned counsel further contended that the Appropriate Authority should be given an opportunity to issue a fresh show cause notce, if necessary, to remove the defect in the procedure, in case this court holds that the earlier show cause notice was defective.

12. 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. 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 20th November, 1993, far earlier to the date of this writ petition.

13. The object behind Chapter XX-C of the Act and as to when power of purchase under Section 269 UD could be exercised, was stated by the Supreme Court in C.B Gautam v. Union of India and others: 199 ITR 530. (1) 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 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 can not be conclusively held that there is an undervaluation and the parties should be given an opportunity to show the circumstances leading to the alleged undervaluation, such as the owner's immediate need of money or dispute as to title to the property as a result of which property might have to be sold at a lower price or there might be a subsisting lease in favour of the intending purchaser. There may be other valid reasons also for the particular sale price agreed upon.

14. In Tanvi Trading & Credits P. Ltd. and others v. Appropriate authority and others; 188 ITR 623, (2) a Bench of this court had occasion to consider the very questions which are before us. It was held that under Section 269 UD 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 grant the no objection certificate to the parties who filed the statement in form 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 far 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 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 under Section 269 UD 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 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 under Section 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.”

15. The Bench, further held at page 630, that “where no order for purchase has been passed, then the appropriate authority shall issue a certificate of no objection referred to the sub-section (1) of Section 269UD”.

16. It is necessary to quote the further observations which have a direct bearing on the question before us. The Bench held:

“The certificate issued under Section 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.”

17. 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’.

18. Above decision was affirmed by the Supreme Court in Appropriate Authority v. Tanvi Trading & Credits P. Ltd. and others; 191 ITR 307(3). While deciding the appeal the Supreme Court observed:

“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.”

19. Another Bench of this Court also had taken a similar view, in Mrs. Satwant Narang…Petitioner v. Appropriate Authority, I.T Deptt., New Delhi…; 188 ITR 656(4). Appropriate Authority held that the agreement of sale which was under consideration under Section 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 transactions, or its legality and validity. The Bench, also rejected the request of the Revenue for another opportunity to consider the question of alleged undervaluation 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 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. 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 favour for allowing them another opportunity to make up their mind.”

20. A reading of the proviso to Section 269UD(1) itself shows that the order for purchase under Section 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.”

21. In view of the two Division Bench decisions of this Court and the observations of the Supreme Court in Tanvi Trading Case (191 ITR 307), it is unnecessary to refer to the decisions of other High Courts cited before us, in detail.

22. A learned Judge of Calcutta High Court followed Tanvi Trading case, in MOI Engineering Ltd. and another v. Appropriate Authority and others 198 ITR 270(5). Similar is the view expressed by a Bench of Bombay High Court in Irwin Almeida and others v. Union of India and others; 197 ITR 609. (6) It was a case where the Appropriate authority had rejected the statement filed in Form 37-I by holding that the intending seller had no title to transfer the property in question. This order was set aside by the High Court and the Authority was directed to issue the ‘no objection certificate’.

23. In T Amudha V. Members, Appropriate Authority, 202 ITR 525(7), 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 v. Naresh M. Mehta; 200 ITR 773. (8.)

24. Mr. Rajendra strongly relied on the decision of the Bombay High Court in Madhukar Sunderlal Sheth and others v.S K. Kaul and others; 198 ITR 594. (9) Statement filed in form 37-I was rejected by the Authority on the ground that 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 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. v. Appropriate Authority (1991) 188 ITR 623, 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 v. Union of India [1992] 197 ITR 609) 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.”

25. We need not go into the precedential value of the above decision, as we are bound by the decision of this Court, which clearly lay down that the Appropriate Authority acting under Section 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 ‘no objection certificate’.

The order of this court dated 4-10-1993 in C.W 2370 of 1993 (Shri Sanpat v. Appropriate Authority) referred by Mr. Rajendra is only an interim order and therefore has precedential force.

26. Accordingly, the order of the Appropriate Authority (1st respondent) dated 19-11-1993 is set aside. The said respondent is directed to issue the ‘no objection certificate’ to the petitioner and to the 4th respondent in terms of Chapter XX-C of the Act. The writ petition is allowed. Rule is made absolute. Time to comply two months.

I.KAllowing the Petition