TMI Blog2000 (4) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 was paid by the transferees to the transferor on May 1, 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 May 6, 1994, the transferor and the transferees jointly filed a statement in Form No. 37-1 under section 269UC of the Income-tax Act, 1961 (hereinafter the "Act", for short). A copy of the agreement was annexed with Form No. 37-I as statutorily required and as per the pro forma the names of the six transferees were mentioned in column No. 4 of Form No. 37-1. On August 12, 1994, the appropriate authority issued notice under section 269UD(1A) of the Act to the transferor and the transferees in view of its having formed an opinion that there was significant undervaluation of the property and calling upon the transferor and the transferees to show cause Why an order of compulsory purchase by the 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 May 1, 1994, an amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant and Co. against the transferor Hemant Chawla. An amount of Rs. 36,50,878 was paid to Indian Overseas Bank, Bandra branch, on December 27, 1994, to satisfy the encumbrance of mortgage existing in favour of the bank. Retaining an amount of Rs. 22,000 towards transfer fee payable to the society, the balance amount of Rs. 1,52,002 was paid to the transferor on December 23, 1994. It is clear from these facts that in so far as the claim of the transferees, appellants before us, is concerned it was neither taken note of nor honoured by the appropriate authority. On January 25, 1995, the transferees/appellants served a notice demanding payment of Rs. 5,05,000 from the appropriate authority. On March 16, 1995, they filed a writ petition in the High Court of Bombay seeking the same relief. A learned single judge dismissed the writ petition summarily forming an opinion that the remedy of the appellants was to sue the transferor for return of the earnest money and remedy of civil writ petition was misconceived. The appellants preferred a writ appeal which also has been dismissed by the Division Bench. The aggrieved appellants have come up to this court seeking special leave to appeal which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (6), of section 269UE : Provided that if any liability for any tax or any other sum remaining payable under this Act, the Wealth-tax Act, 1957 (27 of 1957), the Gift-tax Act, 1958 (18 of 1958), the Estate Duty Act, 1953 (34 of 1953), or the Companies (Profits) Surtax Act, 1964 (7 of 1964), by any person entitled to the consideration payable under section 269UF, the appropriate authority may, in lieu of the payment of the amount of consideration, set off the amount of consideration or any part thereof against such liability or sum, after giving an intimation in this, behalf to the person entitled to the consideration. (2) Notwithstanding anything contained in sub-section (1), if any dispute arises as to the apportionment of the amount of consideration amongst persons claiming to be entitled thereto, the Central Government shall deposit with the appropriate authority the amount of consideration required to be tendered under sub-section (1) within the period specified therein. (3) Notwithstanding anything contained in sub-section (1), if the person entitled to the amount of consideration does not consent to receive it, or if there is any dispute as to the title to rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect from November 17, 1992, provided for the vesting in the Central Government of such immovable property "free from all encumbrances". In C. B. Gautam v. Union of India [1993] 199 ITR 530 ; [1993] 1 SCC 78, a Constitution Bench of this court held the employment of the expression "free from all encumbrances" in sub-section (1) to be violative of article 14 of the Constitution and, therefore, directed the said expression to be quashed and struck down from the language of section 269UE(1). Vide para. 36, this court has held : "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... 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 sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unpaid price under section 55(4)(b) of the Transfer of Property 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 the subject-matter of sale to the extent of the seller's interest in the property and thus would be an encumbrance on the property. Section 269UE(1) as amended by the Finance Act, 1993 (with effect from November 17, 1992), reads as under : "269UE. Vesting of property in, Central Government.---(1) Where an order under sub-section (1) of section 269UD is made by the appropriate authority in respect of an immovable property referred to in sub-clause (i) of clause (d) of section 269UA, such property shall, on the date of such order, vest in the Central Government in terms of the agreement for transfer referred to in sub-section (1) of section 269UC : Provided that where the appropriate authority, after giving an opportunity of being heard to the transferor, the transferee or other persons interested in the said property, under sub-section (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A charge under section 55(6)(b) of the Transfer of Property Act is created soon on payment of purchase money. It can be lost on wrongful refusal to accept delivery of property. As held in Saidun Nessa Hoque v. Calcutta Vyapar Pratisthan Ltd., AIR 1978 Cal 285, with which we find ourselves in agreement, 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. In the present case, the property having been compulsorily purchased by the Central Government there was no occasion for the buyer to have improperly declined to accept delivery of the property. The amount of purchase money was properly paid by the buyer and was in anticipation of the fulfilment of the contract which would include delivery of the property. In view of the order of compulsory purchase having intervened the transferees were excluded from accepting delivery of the property. The applicability of section 55(6)(b) of the Transfer of Property Act was fully attracted. During the course of the proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to apportionment of the amount does not necessarily amount to a dispute raised. The action of the appropriate authority as evidenced by the proceedings in the case at hand itself exposes the worth of the plea so raised. Neither A. Chandrakant and Co. nor Indian Overseas Bank had filed a consent letter from the transferor. Still their encumbrances were discharged. How the appellants could have been treated differently ? Form No. 37-I filed jointly by the transferees and the transferor stated purchase money to the extent of Rs. 4,55,000 having been paid by the appellants and received by the transferor. 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 No. 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntered into between the parties. It reads as under : "5. Since 1st October, 1986, the provisions of Chapter XX-C of the Income-tax Act, 1961, have come into force and in view thereof the parties hereto agree as under : (a) This agreement shall be treated as the memorandum of understanding between the parties hereto for the purpose of section 29UC of the Income-tax Act, 1961. (b) Within 15 days from the execution hereof, the vendor and the purchasers shall file the copy of this agreement along with a statement in Form No. 37-I, with the appropriate authority as required by section 269UC, sub-section (3), of the Income-tax Act, 1961. (c) In the event the appropriate authority makes an order for purchase by the Central Government of the said property under section 269UD of the Income-tax Act, 1961, then in such an event--- (i) the vendor shall be entitled to receive from the Central Government entire consideration and the purchasers hereby consent for the same ; (ii) The purchasers shall be entitled to claim from the appropriate authority the refund of Rs. 4,55,000 (rupees four lakhs fifty five thousand only) being the earnest money paid by the purchasers to the vendor. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion cannot be exercised in favour of the transferee-appellants. Even if the High Court were to exercise its discretionary writ jurisdiction in favour of the transferee-petitioners by directing payment of purchase money from the Central Government to the petitioners, the direction should be one binding on the transferor as well so that the Central Government, in its turn, could have recovered the amount from the transferor. Strangely enough the transferee-petitioners have not impleaded the transferor as party to the writ petition. As the amount left available with the Central Government was less than the amount of purchase money paid by the transferees to the transferor, if the full amount of Rs. 4,55,000 was directed to be paid by the Central Government to the transferee-petitioners then a corresponding reduction was required to be made from the amount paid to the Indian Overseas Bank and/or the amount deposited in the court honouring the garnishing order/order of attachment in favour of A. Chandrakant and Co. Indian Overseas Bank and A. Chandrakant and Co. were also not joined as parties to the petition. The only persons impleaded as respondents before the High Court were the Unio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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