High Court Of Bombay
Jethamal Mohanlal Khivansara vs. Union Of India & Anr.
Sections 269UE, 269UG
V.C. Daga & J.P. Devadhar, JJ.
Writ Petn. No. 5872 of 1996
4th March, 2004
Counsel Appeared
P.K. Dhakephalkar, for the Petitioner : R. Asokan i/b T.C. Kaushik, for the Respondents
JUDGMENT
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 order dt. 30th May, 1995, passed under s. 269UD(1) of the IT Act, 1961 (‘the Act’ for short). Factual matrix
The factual matrix lies in narrow compass. The petitioner was the owner of the property bearing Survey No 411/1, Plot No. 1/A at Mouje: Bhosari, Taluka Haveli, District: Pune. The petitioner had executed an agreement of sale on 13th Feb., 1995, in favour of his vendees Shri Nandkumar Khivansara and Udaykumar Jethamal Khivansara to sell the said immovable property for 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, petitioner and his vendees had jointly filed declaration in Form 37-I with the Appropriate Authority, the respondent No. 2, as required under the provisions of the Act. After inspection of the property and careful consideration of comparable sale instances in the vicinity of the said property, the Appropriate Authority prima facie came to the conclusion that the property was grossly undervalued by more than 15 per cent of the market value. In the circumstances, the Appropriate Authority issued show-cause notice, which was replied by parties to the agreement. The Appropriate Authority after hearing the parties to the show-cause notice was pleased to pass an order under s. 269UD(1) of the Act, directing the Central Government to exercise right of purchase under the provisions of Chapter XX-C of the Act. Accordingly, order came to be passed determining the apparent consideration, payable by the Central Government to the petitioner in the sum of Rs. 36,42,732 including Rs. 3,90,000 paid by the transferee of the agreement. The Central Government in spite of the order dt. 30th May, 1995, did not pay the apparent consideration to the petitioner in spite of repeated demand in this behalf. The petitioner, therefore, having left no alternative, approached this Court under Art. 226 of the Constitution of India to seek directions against the respondents to make payment of the apparent consideration in accordance with the order dt. 30th May, 1995, passed under s. 269UD(1) of the Act.
On being noticed the respondents appeared and filed their return to oppose the petition, contending therein that, as per the terms of the sale agreement dt. 13th Feb., 1995, executed by the petitioner/vendor in favour of the purchasers, the land was to be sold free from all encumbrances; however, the vendor/petitioner, in spite of demand made on 12th Feb., 1996, failed to hand over the subject land as agreed upon in terms of the sale agreement free from encumbrances. It is further stated in the counter-affidavit that the respondents have also noticed some unauthorised encroachment on the subject land and also came to know that the petitioner had also filed civil suit bearing No. 312 of 1989 before the Civil Judge, Pune, against one Hansraj Ratanchand Oswal and has obtained decree on 21st Oct., 1997, restraining the defendants therein from encroaching upon the subject property. According to the respondents, in spite of the said decree, the petitioner failed to remove encroachment. In the circumstances, it is pleaded that the Central Government was not obliged to pay balance sum of apparent consideration in the 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 30th June, 1995, under s. 269UD(1) of the Act.
5. When this petition was placed before us for hearing on 14th Jan., 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 :
6. At the outset, the learned counsel appearing for the petitioner submitted that the petitioner is not challenging the order passed under s. 269UD(1), as such, the said order may be treated as final and conclusive. He further submitted that in view of provisions of s. 269UD of the Act the property stood vested in the Union of India with the order under s. 269UD(1) which in this case was passed on 30th May, 1995.
7. Learned counsel for the petitioner submitted that prior to the order under s. 269UD(1) the property in question was inspected by the respondents. The encroachment made by Mr. Hansraj Oswal was very much noticed by them. In spite of noticing the aforesaid encroachment, the Appropriate Authority thought it fit to direct Central Government to purchase the subject property under s. 269UD(1) of the Act. He, therefore, submits that, at this stage, it is not open for the respondents to contend that the possession of the property cannot be taken by them unless the encroachment is removed and that no payment of the apparent consideration can be made by them unless possession in terms of the agreement is given to them.
8. Mr. Dhakephalkar, advocate for the petitioner, further submits that under s. 269UE(1), where an order under sub-s. (1) of s. 269UD is made by the Appropriate Authority in respect of an immovable property referred to in sub-cl. (i) of cl. (d) of s. 269UA, such property, on the date of such order, vests in the Central Government in terms of agreement for transfer referred to in subs. (4) of s. 269UC. Based on this submission, he further submits that in view of s. 269UG(1) the amount of consideration payable in accordance with the provisions of s. 269UF is required to be tendered to the person entitled thereto, within a period of one month from the end of the month in which the immovable property concerned becomes vested in the Central Government under sub-s. (1), or, as the case may be, under sub-s. (6) of s. 269UE. He, thus, submits that within a period of 30 days from the date of order, the petitioner was entitled to get the said amount.
9. Learned counsel for the petitioner further submits that after vesting of the property in the Central Government, the transferor is required to deliver possession thereof to the Appropriate Authority, or any other person duly authorised by the Appropriate Authority within 45 days from the date of service of the order. In this view of the matter, he submitted that at no point of time, the respondents expressed their willingness to take possession of the property though he approached them from time to time.
10. Mr. Dhakephalkar, alternatively submitted that as per s. 269UE(3), if any person refuses or fails to comply with the provisions of sub-s. (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-cl. (4), notwithstanding anything contained in sub-s. (2), the Appropriate Authority can, for the purpose of taking possession of any property referred to in sub-s. (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 s. 269UE.
11. 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 of the subject property. He submits that, in view of order under s. 269UD(1) he cannot deal with the property, that is how he is deprived of the property and at the same time he has not been paid consideration in pursuance of the provisions of Chapter XX-C of the Act, and on the top of it, the Appropriate Authority wants to stick up to the order so as to justify their action. He, thus, submits that the respondents cannot be allowed to blow hot and cold. He submits that the stand taken by the respondents is not only arbitrary but mala fide and they are not only trying to take undue advantage of the situation in which petitioner is placed but are exploiting the provisions of the Act.
12. Learned counsel for the petitioner urged that having noticed encroachment on the land, it was open for the Appropriate Authority not to exercise its option under s. 269UD(1), but once having exercised this option it is not open for them to contend that they will stick to the order but at the same time they will not take possession of the property and that they will also not make payment of the apparent consideration to the petitioner/land owner who has lost his title under law. He, therefore, submits that the action of the respondent is bad and illegal and cannot stand to the scrutiny of law.
13. The learned counsel appearing for the petitioner further contended that at no point of time he obstructed the respondents from taking possession of the subject property. He further submitted that the alleged encroacher has no legal right to be in possession of the property. He further pointed out that the decree obtained by him from the competent civil Court against the encroacher was known to the respondents. The respondents, at no point of time, took any steps to take possession of the property. He further reiterated that there is absolutely no legal impediment in the way of the respondents to take possession of the property. In spite of this, if the respondents are not proceeding to take possession of their property on their own, then the petitioner cannot be blamed. In his submission, petitioner cannot be told that he is deprived of his property with (sic– without) compensation thereof. Neither the petitioner can be allowed to suffer nor the petitioner can be placed in such a prejudicial situation. Under these circumstances, he submits that the petitioner is entitled to receive amount of apparent consideration payable to him under the provisions of Chapter XX-C of the Act. Per contra
14. 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 s. 269UD(1) in the PD account of the Appropriate Authority. The Appropriate Authority has invested the said net consideration in fixed deposit in a scheduled bank under sub-s. (4) of s. 269UG. The fixed deposit has been renewed from time to time. Last of such renewal was made on 18th Oct., 2003. The value of the FDR renewed on 18th Oct., 2003, was Rs. 90,69,907. Now this FDR is due to mature on 22nd Oct., 2004. He further submitted that since the possession was not given by the petitioner, the auction proceedings could not be completed.
15. 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 encroachment. In his submission till such time the possession after removing encroachment is not delivered, the petitioner has no right to claim apparent consideration or withdrawal thereof from the bank. He thus prayed for discharge of the rule. Consideration Having heard rival parties, the first aspect which needs consideration is, can the petitioner be asked to discharge obligation which he cannot, in the sense, petitioner, though obtained decree from the competent Court directing removal of encroachment; still as on date he cannot execute that decree claiming to be the decree-holder in view of the order under s. 269UD(1) by virtue of which he has lost his title to the subject property. As on date, the petitioner has no saleable interest in the property. If he puts that decree in execution, the execution thereof may be successfully objected by the encroacher on the ground indicated. It is, therefore, necessary for the respondents to take steps to remove encroachment may be by executing decree or by resorting to the provisions of sub-cl. (2) r/w sub-cls. (3) and (4) of s. 269UE.
In the above backdrop, it would also be logical to infer that the Central Government has stepped into the shoes of the petitioner (decree-holder) and is entitled to execute decree to remove the encroachment. As a matter of fact, all these steps ought to have been taken by the respondents during the pendency of this petition. Even otherwise as indicated hereinabove under the provisions of sub-cl. (2) r/w sub-cls. (3) and (4) of s. 269UE, it is open for the Central Government to take possession of the property, if necessary by using force. No steps were taken by the Central Government to exercise its right of possession for a long period of seven years. No justification is to be found on record for this inaction. The citizen like petitioner, who is deprived of his right to property, in exercise of powers under Chapter XX-C of the Act, may be in accordance with law, surely he cannot be asked to comply with the requirements which he cannot in view of the intervening events, referred to hereinabove. It is well settled that impossibilities give rise to no obligation.
Having heard rival parties, the first aspect which needs consideration is : Can illegal encroachment made on the property be said to be an encumbrance on the property in the facts and circumstances 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 the property. Thus, in the peculiar facts and circumstances of the case, encroachment on the land can hardly be said to be ‘encumbrance’ on the property in question, as such, respondents were not justified in calling upon the petitioner to remove encumbrance from the property so as to enable him to claim the amount of apparent consideration. The decision of the respondents refusing to pay was unwarranted.
Let us now consider the contention of the Revenue from another angle, presuming an encroachment to be a encumbrance on the land, in the light of the observations and findings recorded by the apex Court in the case of C.B. Gautam vs. Union of India & Ors. (1992) 108 CTR (SC) 304 r/w (1993) 110 CTR (SC) 179 : JT 1992 (6) SC 678, while dealing with the contention that the provisions of Chapter XX-C are arbitrary and violate the provisions of the fundamental rights chapter in so far as an order for compulsory purchase under s. 269UD of the Act and it has the effect of vesting the property in the Central Government ‘free from all encumbrances’; the value of which might not be reflected in the apparent consideration mentioned in the agreement for sale. In that case it was canvassed that these encumbrance holders and holders of lease-hold rights might not have anything to do with the attempt at tax evasion in the intended sale, assuming that such an attempt is made by the intending seller or the intending purchaser by undervaluing the property concerned in the agreement for sale and yet they would be deprived of their valuable rights practically without any compensation in the event of an order for compulsory purchase being made, the apex Court, observed as under: “Under the express provisions of sub-s. (1) of s. 269UE which we have set out above, in case an order for compulsory purchase is made under sub-s. (1) of s. 269UD, the property in respect of which the order is made shall vest in the Central Government free from all encumbrances (emphasis, italicized in print, supplied), sub-s. (2) of s. 269UE provides that the transferor or any other person who may be in possession of the immovable property in respect of which an order under sub-s. (1) of s. 269UD is made is required to surrender or deliver possession of the property to the Appropriate Authority or any other person duly authorised by the Appropriate Authority within 15 days of the service of the order on him. If there is a lessee in occupation of the property concerned, his leasehold rights would be destroyed and he would have to hand-over the 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 steeply the property is intended to be sold under an agreement to sell subject to encumbrance and leasehold rights, and very often agreements to sell the 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 only equal to the apparent consideration and this apparent consideration would not take into account the value of the encumbrances on the property like mortgages and so on or the leasehold rights. It is well known that a property may be heavily encumbered and its value can be considerably depressed if it were sold subject to encumbrances. It is equally well known that a 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 interests. In such cases, the amount of apparent consideration could be even less than the value of the encumbrances or the leasehold interests. An order for compulsory purchase in such cases would necessarily result in gross injustice to the encumbrance holders and lessees and to their being deprived of their rights without their being in any way involved in the attempt at a tax evasion. It, therefore, appears to us difficult to uphold the last part of sub-s. (1) of s. 269UE in so far as it provides that the property in respect of which an order under sub-s. (1) of s. 269UD is made shall vest in the Central Government free of all encumbrances. In our opinion, the expression “free of all encumbrances” is liable to be struck down as arbitrary, without any rational nexus with the object of the legislation in question and violating of Art. 14 of the Constitution. Similarly, the provisions of sub-s. (2) of s. 269UE set out by us earlier must be read down so as to make them inapplicable to bona fide lessees in possession or bona fide encumbrance holders in possession”.
21. Reading of aforesaid extracted portion and the observations made by the apex Court, make it clear that while determining 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 only equal to the apparent consideration and this apparent consideration would not take into account the value of the encumbrances on the property like mortgages and so on or the leasehold rights. The apex Court had an occasion to take judicial notice of well-known fact that the property if encumbered, the value thereof gets considerably depressed if it were sold subject to encumbrances. Apex Court said that equally it is well known that the property in respect of which there is subsisting lease for 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 interests. 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 property must have been taken into account, so as to slash down the amount of consideration payable to the petitioner. If that be so, having passed the order under s. 269UD (1) after taking into account the consideration agreed between the vendor and vendee, it is not open for the respondents to refuse to act upon the said order and go to the extent of refusing to pay the amount of apparent consideration only because the encroachment stands on the property.
In the above view of the matter, in our opinion, once having acquired the property under s. 269UD(1) of the Act, it is not open for the respondents to say that unless the property is delivered in their possession, removing encroachment, the petitioner is not entitled to claim the amount of apparent consideration. Thus, taking overall view of the matter we are of the view that the petitioner is entitled to receive the amount of apparent consideration and the respondents are bound to pay the same. It would be open for the respondents to take possession of the property, in accordance with law or as per the provisions of s. 269UE of the Act. The petitioner has undertaken to extend his co-operation, if necessary, even by lending his name as a party-applicant in the execution proceeding, if the Central Government decides to execute the decree through the process of Court, which in no event takes away the rights of the respondents to take recourse to the provisions of sub-cls. (3) and (4) of s. 269UE of the Act.
In the result petition is allowed. Respondents are directed to pay the amount of apparent consideration deposited in the PD account or balance thereof as may be payable to the petitioner with accrued interest therein within 30 days from the date of this order, failing which the said amount shall carry further interest @ 12 per cent per annum till repayment in full and final. Rule is made absolute in terms of this order, with no order as to costs.
[Citation : 272 ITR 143]
