TMI Blog1996 (6) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... is 23.5 grounds, comprising 5,239 sq. mts. of vacant land and 954 sq. mts. of builtup area. The respondent and one N. Krishnamoorthy agreed to purchase the aforesaid property on September 7, 1995, from the executors to the estate of Sherrard Ramsay Unger (1) Miss M. E. Gwynne, daughter of Thomas Gwynne and (2) Dr. L. C. Lobo, son of late G. L. Lobo, for a sum of Rs. 5,50,00,000 and paid an advance of Rs. 1,50,00,000 pursuant to the execution of the agreement of sale. The balance was to be paid as per the terms of the agreement later. The vendor and the purchaser together made an application in Form No. 37-I on September 7, 1995, before the Appropriate Authority, Madras. The appropriate authority on examining the application in Form No. 37-I found certain defects and wanted certain clarifications. Therefore, the said authority addressed a letter dated October 30, 1995, to the intending transferors and transferees. The intending transferees submitted a reply dated November 22, 1995. We may also point out here that in the letter dated October 30, 1995, apart from raising nine points, the appropriate authority also made it clear that under sub-section (4) of section 269UC of the Act, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well other parties to the agreement that they may file a fresh application in Form No. 37-I for transfer of the balance land after a finality is reached with regard to the excess vacant land. As the arguments are advanced on the contents of the aforesaid communication, we consider it appropriate to reproduce the said communication : " Please refer to the above. On a scrutiny of Form No. 37-I filed by you, it is seen that in column 3 of annexure to the said Form, it is mentioned that the property sought to be transferred consists of 5,239 sq. mts. of land and 954 sq. mts. of built-up area. In column 8, it is mentioned that the U. L. C. acquisition proceedings to the extent of 8.50 grounds out of a total extent of 23.50 grounds stayed by the High Court in Writ Petition No. 16211 of 1991. It transpires, therefore, that the transferors intend to transfer the entire extent of 5,239 sq. mts. (i.e., 23.50 grounds) inclusive of the excess vacant land declared as such by the U. L. C. authorities, of 2,284.5 sq. mts. (10.24 grounds and not 8.50 grounds as mentioned in column 8(b) of Form No. 37-I), which is prohibited by section 6 of the T. N U. L. (C and R) Act, 1978. For ready refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the out-house has been used as residential unit ; and (iv) that there are several fruit bearing trees spread over to an extent of 1,200 sq. mts. The above facts were not taken into account by the previous competent authority while calculating the excess vacant land and the orders passed by the former competent authority is wrong. The orders passed by the present-competent authority is, therefore, correct and the above order need not be cancelled. The points urged by you during the personal hearing have been carefully considered by the Government with reference to the records available. The former competent authority's order has not been quashed by the High Court. The High Court has not directed the petitioner to stress his grievances before -the competent authority but only before the Commissioner of Land Reforms, (i.e.), the appellate authority, since the appeal petition is still pending before him. It is seen from the topo sketch that the land consists of one main building, one out-house, and a store-room. The buildings such as store-room, out-house, garage are not eligible for building regulation area. Main buildings only are to be considered while calculating buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and Regulation) Act, which is challenged in Writ Petition No. 16211 of 1991, is not relevant for the purpose of considering the writ appeal, therefore, the writ appeal alone should be considered and Writ Petition No. 16211 of 1991 should be decided separately later on. We are of the view that the order passed by the competent authority under the Tamil Nadu Urban Land (Ceiling and Regulation) Act setting aside the earlier order and holding that there is excess vacant land, read with section 6 of the Tamil Nadu Urban Land (Ceiling and Regulation) Act would have a direct bearing on the consideration of the application filed for a no objection certificate. Hence, we direct Writ Petition No. 16211 of 1991 be posted along with this writ appeal for hearing on June 18, 1996." When the appeal and the writ petition came to be posted, Dr. L. C. Lobo, the petitioner in Writ Petition No. 16211 of 1991, made a submission that the petition may be permitted to be withdrawn. The letter requesting for withdrawal of the writ petition was also filed. On the basis of the submission and the letter, we passed the following order : " Learned counsel for the petitioner submits that the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an Land Ceiling Act determining the excess land. We may also point out at the subsequent stage of this judgment the decisions relied upon as to the effect of section 6 of the said Act. The learned single judge has held that it is not open to the appropriate authority to go into any other matter except to grant no objection certificate to decide to make pre-emptive purchase based on the decision of the Delhi High Court in Savitri Devi v. Appropriate Authority [1995] 211 ITR 10, and the decision of the Supreme Court in Appropriate Authority v. Tanvi Trading and Credits P. Ltd. [1991] 191 ITR 307. Before us it is contended by learned senior counsel for the Central Government that the provisions of section 269UC of the Act have been amended and sub-section (4) has been specifically introduced to overcome the difficulties experienced by the Department having regard to the decisions of the various High Courts that the appropriate authority has no option in the matter except to issue no objection certificate or to take a decision within a specific period for making pre-emptive purchase with effect from July 1, 1995. This aspect of the matter has not been taken into consideration by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be deemed to have been received by the appropriate authority on the day the defect is rectified. Where the defect is not rectified, it will be considered as if the statement was never furnished to the appropriate authority. " The reasons for introducing such amendment has been further stated as follows : "Many High Courts have held that the provisions of Chapter XX-C allow the Income-tax Department to either purchase the property or issue a no objection certificate in response to an application for no objection certificate furnished in Form No. 37-I. There is no third alternative. The Supreme Court, while dismissing the Department's special leave petition in Appropriate Authority v. Tanvi Trading and Credits Pvt. Ltd. [1991] 191 ITR 307, has upheld this view of the High Courts. Problems are faced by the appropriate authorities when an application for no objection certificate submitted by any intending seller is found to be defective. The appropriate authorities are, therefore, being empowered to intimate the defects, if any, in Form No. 37-I to parties for rectification within the specified time. Where the defects are not rectified within the specified period, it shall be pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions relied upon by learned counsel for the respondent--the writ petitioner have been rendered with reference to cases in which the appropriate authority had passed orders before July 1, 1995. Thus, sub-section (4) of section 269UC of the Act is applicable to the agreement in question. We will now refer to the decisions relied upon by learned counsel for the writ petitioner. In C. B. Gautam v. Union of India [1993] 199 ITR 530 (SC), the Constitution Bench of the Supreme Court considered the constitutional validity of Chapter XX-C of the Act and held that the said provision is valid with certain modifications regarding the right of the purchaser. This decision was relied upon in support of the plea that the object of Chapter XX-C is only to eliminate undervaluation and in cases of undervaluation which would be 15 per cent. or more than below the real value of the property, to make pre-emptive purchase of the same. Therefore, in this decision, it has not been laid down that the appropriate authority has got only two options either to make a pre-emptive purchase or to grant no objection certificate. No doubt, the scope of Chapter XX-C of the Act has been dealt with. But, sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 ITR 623 (Delhi) was taken to the Supreme Court (see [1991] 191 ITR 307). However, no decision was rendered on merits. It was dismissed as withdrawn on the ground that no objection certificate had been issued as early as on January 15, 1991. However, while dismissing the case, the Supreme Court observed as follows (page 308) : "Counsel for the petitioners fairly tells us that a 'no objection certificate' was issued as early as on January 15, 1991. The suggestion that it was issued under pressure and threat of a contempt proceeding is made out from the record. 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. The special leave petition is dismissed. No costs. The said decision is reported in [1991] 191 ITR 307 (SC). The decision in Appropriate Authority v. Naresh M. Mehta is a decision of a Division Bench of this court reported in [1993] 200 ITR 773 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uk Haveli, District Pune. The consideration was Rs. 25,00,000. On September 14, 1994, the petitioners filed Form No. 37-I and on December 12, 1994, a show-cause notice was issued by the appropriate authority under section 269UD(1A) of the Act to the petitioners. The appropriate authority passed an order dated December 26, 1994. Thereafter, the petitioners filed an application for rectification on January 19, 1995, before the appropriate authority and also filed supplementary submissions on May 17, 1995. The appropriate authority rejected the application for rectification by the order dated June 30, 1995, passed under section 269UD(1A). Both the orders were challenged. In that decision, it has been held that the only power which is conferred upon the appropriate authority under section 269UD of the Act is the power to decide whether to purchase the property or not. The investigation to be under taken by the appropriate authority is only with a view to determine whether the pre-emptive right of purchase could 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 the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al provisions have been enacted under the Bombay Public Trusts Act to ensure that property belonging to a public trust is not sold by the trustees for an apparent consideration which is less than the real value of the property. In other words, it is necessary to ensure that when immovable property of a publjc trust is'. sold,, the public trust gets the full market value of the property. Hence, section 36 of the Bombay Public Trusts Act makes the sale of immovable property of a public trust invalid without the sanction of the Charity Commissioner. If section 269UD can be brought into operation before the sanction of the Charity Commissioner is obtained, the consequences of an agreement for sale. of the property of a public trust for a consideration less than the market value of the property may be visited on the public trust. The income-tax authorities would pay the apparent consideration which is less than the market value to the public trust to acquire the property. The beneficiaries of the public trust would be the losers. They would lose the protection which section 36 of the Bombay Public Trusts Act gives them. In our view such is not the intention of sections 269UC and 269UD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 ITR 443 (Raj), the agreement of sale related to an area of land measuring 1,033.33 sq. yards. The agreed consideration was Rs. 25 lakhs. The agreement was entered into on March 7, 1991, and was got registered with the Sub-Registrar, Jaipur, on March 7, 1991. The agreement was subject to certain conditions. The appropriate authority held that the agreement inter se between the parties and respondent No. 4 was required to get no objection certificate under Chapter XX-C of the Act. Therefore, the authority did not grant no objection, certificate or take a decision to make pre-emptive purchase of the property. It was held by the Rajasthan High Court as follows (page 459) : While considering the third submission urged by Shri Ranka that the appropriate authority has to make up its mind on the basis of Form No. 37-I as to whether the apparent consideration has been understated, the appropriate authority has no right to examine the title or legality or illegality or invalidity of the transaction or other deficiencies in such transaction it will be sufficient to observe that if the particulars of the agreement for transfer furnished in the annexure to the statement made in Form No. 37- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the Supreme Court reported in [1991] 191 ITR 307 shows that the no objection certificate had already been issued on January 15, 1991, when the order was passed on April 23, 1991, and the Supreme Court itself has observed that the suggestions that the no objection certificate was issued under pressure and threat of contempt proceedings, are made out from the record. In the latter part of this order, the Supreme Court has agreed that two alternatives are open under the scheme of legislation, i.e., either to buy the property or even in the event of its decision not to buy it, it has to issue the no objection certificate leaving it open to the parties to deal with the property. In the case of Tanvi Trading and Credits P. Ltd. [1991) 188 ITR 623 (Delhi), there is no violation of the provisions of the Income-tax Act as such before the filing of the statement in Form No. 37-I and it was observed by the Delhi High Court that it was not certain as to which portion of the land would be surrendered to the State Government in view of the orders having been passed under the Urban Land Ceiling Act and that the agreement to sell was not capable of being made certain and. was void as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of the Income-tax Act. We are of the considered opinion that when the parties have violated the provisions of the Income-tax Act and have acted in a manner so as to thwart the very purpose of the provisions relating to the restrictions on transfer of immovable property and to thwart the Central Government's pre-emptive right of purchase, besides the alternatives of either purchasing or issuing a no objection certificate, the option is also available not to act upon the statement in Form No. 37-I which is found to be violative of the provisions of the Income-tax Act and to prosecute the concerned parties by taking resort to the machinery under the Act. Mr. Ranka has failed to cite any case in which there is a direct violation of the relevant provisions of the Income-tax Act itself relating to the Central Government's right to pre-emptive purchase and the restrictions on transfer of immovable property and, therefore, none of the decisions cited by Mr. Ranka, except the decision of the Delhi High Court in Megsons Exports' case [1992] 194 ITR 225, are of any assistance for the purposes of the controversy, which we are called upon to decide in this case." (emphasis suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as "the Act"). That provision inhibits the coming into existence of any such transaction as the present one and further says that such transaction will be null and void. The court is not supposed to lend its hands for the purpose of arriving at this result, assuming that the plaintiff has got a case on merits otherwise. " A similar view was taken in Samiappan (B. P.) v. Arunthavaselvan [1994] 1 LW 399. That decision related to the bar on sale contained in section 23 of the Tamil Nadu Land Reforms (Fixation of Ceiling on Land) Act, 1961, which provision is also in pari materia with section 6 of the Urban Land Ceiling Act. The Division Bench held thus (page 402) : "The plaintiff seeks to have the agreement enforced by a court of law and get a sale deed in pursuance thereof. If the court grants a decree in favour of the plaintiff and it leads to a sale deed in favour of the plaintiff, either by the party or by the Court, that sale is automatically void and it is deemed to be void always as per the provisions of the Act. The court cannot be a party to a transaction which would be void in law. Hence, there is no substance in the contention that the agreements are not affected by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterpretation should advance and subserve the object of the statute and should not result in defeating the very object of the statute. We have already referred to the objects and reasons for introducing sub-section (4) of section 269UC of the Act. A statutory authority exercising statutory power cannot be compelled to ignore the basic defect in the agreement, which also disables the appropriate authority to make its decision as to pre-emptive purchase, on determining the real market value, which will be the basis for taking a decision regarding pre-emptive purchase. As in the instant case, until the proceeding is completed as per section 11 of the Urban Land Ceiling Act, no transaction of sale or purchase can take place. The appropriate authority cannot be expected or compelled to act in contravention of section 6 of the Urban Land Ceiling Act and to make a decision as to pre-emptive purchase. Such an interpretation would not only defeat the very object of sub-section (4) of section 269UC of the Act, and it would also result in compelling the appropriate authority to act in contravention of the provisions of the Urban Land Ceiling Act, or, not to make any decision as to pre-emptive ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
