TMI Blog2004 (3) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... hich in no event takes away the rights of the respondents to take recourse to the provisions of sub-sections (3) and (4) of S. 269UE - - - - - Dated:- 4-3-2004 - Judge(s) : V. C. DAGA., J. P. DEVADHAR. JUDGMENT The judgment of the court was delivered by V.C. Daga J. - The petitioner is seeking direction against the respondent to make payment of apparent consideration to which he is entitled, in accordance with the order dated May 30, 1995, passed under section 269UD(1) of the Income-tax Act, 1961 ("the Act" for short). Factual matrix The factual matrix lies in a narrow compass. The petitioner was the owner of the property bearing Survey No. 411/1, Plot No. 1/A at Mouje: Bhosani, Taluka Haveli, District: Pune. The petitioner had executed an agreement of sale on February 13,1995, in favour of his vendees, Shri Nandkumar Khivansara and Udaykumar Jethamal Khivansara to sell the said immovable property for a total consideration of Rs. 38,88,000. In accordance with the provisions of Chapter XX-C of the Act, the parties to the agreement, namely, the petitioner and his vendees had jointly filed declaration in Form No. 37-1 with the appropriate authority, respondent No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncroachment. In the circumstances, it is pleaded that the Central Government was not obliged to pay the balance sum of apparent consideration in a sum of Rs. 36,42,731 to the petitioner. It was thus contended that the appropriate authority was presently justified in not paying and depositing the said amount of apparent consideration in their bank account with the State Bank of India, Pune, on June 30, 1995, under section 269UD(1) of the Act. When this petition was placed before us for hearing on January 14, 2004, Mr. Asokan, learned counsel appearing for the Revenue, had sought time to seek instructions from the appropriate authority to find out as to whether or not the Department is keen to proceed with the acquisition. Accordingly, time was granted. Today, when this matter was called out for hearing, Mr. Asokan intimated to us that the respondents are very much keen to proceed with the acquisition of the property and to defend their action. That is how the petition is taken up for final hearing. The submissions: At the outset, learned counsel appearing for the petitioner submitted that the petitioner is not challenging the order passed under section 269UD(1), as such, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no point of time, the respondents expressed their willingness to take possession of the property though he approached them from time to time. Mr. Dhakephalkar, alternatively submitted that as per section 269UE(3), if any person refuses or fails to comply with the provisions of sub-section (2), the appropriate authority or any other person duly authorised by it under that sub-section can take possession of the immovable property and can, for that purpose, use such force as may be necessary. He further submits that as per sub-section (4), notwithstanding anything contained in sub-section (2), the appropriate authority can, for the purpose of taking possession of any property referred to in sub-section (1), requisition the services of any police officer to assist him and it shall be the duty of such officer to comply with such requisition. It is thus contended that it was obligatory on the part of the appropriate authority to take possession of the property, as per the procedure prescribed under section 269UE. Mr. Dhakephalkar urged that it was not open for the Appropriate Authority to take shelter of the encroachment allegedly standing on the land and to refuse to take possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of apparent consideration payable to him under the provisions of Chapter XX-C of the Act. Per contra Mr. Asokan, learned counsel for the Revenue, submitted that the net consideration of Rs. 36,42,731 has been deposited within 30 days from the date of the order under section 269UD(1) in the P.D. account of the appropriate authority. The appropriate authority has invested the said net consideration in fixed deposit in a scheduled bank under sub-section (4) of section 269UG. The fixed deposit has been renewed from time to time. The last of such renewal was made on October 18, 2003. The value of the FDR renewed on October 18, 2003, was Rs. 90,69,907. Now this FDR is due to mature on October 22, 2004. He further submitted that since the possession was not given by the petitioner, the auction proceedings could not be completed. Mr. Asokan further submitted that, as per the agreement between the petitioner and his vendee, it was declared by the petitioner/vendor that the land is free from all encumbrances, and the petitioner was bound to hand over the subject property free from encumbrances to the respondents, i.e., after removing the encroachment. In his submission till such time a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of this case. The word "encumbrance" means interests in or burden or charge upon property. The estate (encumbrances) which may be carved out of ownership, may be classified as (1) securities; (2) leases; (3) servitudes and (4) trusts. All such estates may be called "encumbrances". The encumbrance in a given case may include in its fold claim by adverse possession which again creates interests in property. Thus, it would be clear that the word "encumbrances" can only mean interest in the property or land which is a subject-matter of agreement to sale. In our view, encroachment, i.e., an unlawful gaining upon the possession of a neighbour without having any right or interest in the land can hardly be said to be an encumbrance on the property. The above aspect can be viewed from another angle in the facts of this case. The encroacher on the land has suffered a decree of a civil court directing removal of encroachment as such no legal right can be said to have been created or accrued in favour of the encroacher, so as to enable him to claim interests in the property. The encroacher is bound to vacate the encroachment in view of the decree directing him to remove himself from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property concerned, his leasehold rights would be destroyed and he would have to handover 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the leasehold rights. The apex court had an occasion to take judicial notice of the well-known fact that the property if encumbered, the value thereof gets considerably depressed if it were sold subject to encumbrances. The apex court said that equally it is well known that the property in respect of which there is a subsisting lease for a substantial period of time would fetch a comparatively low price because the purchase thereof would not carry with it the right to possession or occupation during the subsistence of the leasehold interest. In such cases, the amount of apparent consideration could be even less than the value of the encumbrances or the leasehold interests. If that be so, applying this well-known approach, normally applied for determining property prices, to the facts of the case on hand, it would be reasonable to infer that the apparent consideration in this case must have been fixed after taking into account the consideration agreed by the vendee, who must have taken into account the fact of encroachment committed by the encroacher on the property. It is thus clear that while determining the apparent consideration, the element of vacuum of encroachment on the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X
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