High Court Of Gujarat
Panorama Builders (P) Ltd. vs. Union Of India
Sections 269UD, 269UE
D.A. Mehta & Ms. H.N. Devani, JJ.
Special Civil Appln. No. 2678 of 2005
19/20th April, 2005
Counsel Appeared
R.K. Patel & B.D. Karia, for the Petitioner : Manish R. Bhatt, Pranav G. Desai & Anip A. Gandhi, for the
Respondents
JUDGMENT
D.A. Mehta, J. :
The petitioner, a private limited company, engaged in the business of construction activity, purchased at a public auction, property situated at final plot No. 607-A, SP No. 1, TPS No. 3, Near Law Garden, Ahmedabad, being open plot of land admeasuring 1424 sq. yds. along with plinth level construction of 278 sq. mtrs. (out of which 181 sq. yds. to be surrendered for passage and road alignment entitling the purchaser to additional floor space) for a sum of Rs. 1,40,00,000. The auction was held on 27th Dec., 2000, in the following circumstances. It appears that Smt. Jayshreeben Vadilal Mehta and Smt. Chandra Devi Chandulal Mehta Agrawal (Transferors) agreed to transfer the property in the name of Shri N.G. Patel representing the Law Garden Shops & Office Complex Owners Association (Transferee) by an agreement entered into on 12th Sept., 1989. Appropriate Authority acting under the provisions of Chapter XX-C of the IT Act, 1961 (the Act), made an order under s. 269UD(1) of the Act on 25th Nov., 1989. Accordingly, in terms of provisions of s. 269UE of the Act, the property vested in the Central Government and the transferors were directed to surrender the possession within fifteen days of passing of the order. Respondent No. 6—SBI preferred Civil Suit No. 3917 of 1990 before the City Civil Court at Ahmedabad against one M/s Aarvy Power Tools Ltd. and others. It is the say of respondent No. 6 that one of the transferors viz., Smt. Jayshreeben Vadilal Mehta was the owner of the property in question and the said property had been placed with SBI by the said transferor by way of equitable mortgage by deposit of title deeds of the property in question. SBI appears to have obtained an injunction on 10th Aug., 1990, against sale of the said property. Thereafter, IT Department was impleaded in the said civil suit as one of the defendants and the original injunction operating since 10th Aug., 1990, was modified and made operative qua the newly added defendant. It is an admitted position that the said civil suit came to be transferred before Debt Recovery Tribunal.
On 1st Nov., 1999, SBI moved an application being Exhibit A/107 seeking modification of the injunction order in the light of the meeting held on 19th Nov., 1997, in the chamber of CIT (Appropriate Authority). Debt Recovery Tribunal (DRT) after hearing the learned advocates of the respective parties before it passed the following order : “It is further submitted that a meeting was held on 19th Nov., 1997, in the chamber of the CIT (Appropriate Authority) and it was agreed that the applicant-bank would file appropriate application before this Tribunal praying for modification of injunction and further praying that the said immovable and equitable mortgage property be allowed to be disposed of by the IT Department subject to the condition that the sale proceeds realised therefrom shall be deposited with the applicant-bank in interest-bearing deposit and the sale proceeds as well as the interest accrued thereon shall be subject to the final order to be passed by this Tribunal. The learned advocate for the respondent Nos. 5 and 6 states that the Appropriate Authority of the IT Department has filed their reply to the application. The affidavit is duly sworn by the Dy. CIT of the IT Department in which it is stated that in the meeting held on 19th Nov., 1997, it was decided that SBI will move an application for modification of injunction order to enable the IT Department to auction the property. It was further decided that the sale proceeds of the property shall be deposited with the bank in interest-bearing deposits. The amount of sale proceeds and interest thereon will be appropriated after and according to the adjudication of claims of the SBI. Under these circumstances, the application Exh. A/107 is allowed, the injunction order passed by the City Civil Court dt. 10th Aug., 1990, is modified to the extent that property described in para 2 (b), i.e., ‘All those pieces and parcel of the land situated at Mouje Kochrab, Taluka City Ahmedabad, District and sub-District, Ahmedabad, Ellisbridge, Town Planning Scheme No. 3 bearing plot No. 603, admeasuring 2748 sq. yds. and the super structure standing thereon as per the plan owned and held by Smt. Jayshreeben R. Shah’. will be auctioned by the IT Department.
The sale proceed of the property shall be deposited with the applicant-bank in interest-bearing deposit. The amount sale proceed and interest thereon will be appropriated after and according to the adjudication of claims and rights of the SBI by this Tribunal. Under these circumstances, the application is disposed of with no order as to costs”. In pursuance of the aforesaid order, IT Department conducted public auction as per terms and conditions of auction sale, more particularly stated in Annex. C. The petitioner emerged as the highest bidder at the said auction sale conducted on 28th June, 2000, for a sum of Rs. 1,40,00,000. Accordingly on the said day, over and above caution money of Rs. 25,000, the petitioner made payment of Rs. 14,00,000 towards the purchase price. The petitioner made payment of subsequent instalments on 26th July, 2000 and 26th Sept., 2000 and thereafter called upon respondent No. 3 to issue possession letter/certificate in favour of the petitioner. The letter of 28th Sept., 2000 was followed up by further letters dt. 14th Nov., 2000 and 24th Nov., 2000. Ultimately on 27th Dec., 2000, respondent No. 3 issued a certificate handing over possession of the property in question and on the same day petitioner confirmed having received the possession. On 28th Dec., 2000, the petitioner called upon respondent No. 3 to make arrangement to execute the conveyance deed in favour of the petitioner at the earliest. This communication was followed up by similar written request made on 2nd Jan., 2001, 5th Jan., 2001, 10th Jan.,2001, 12th March, 2001, 16th May, 2001, 21st Jan., 2002, 5th Dec., 2002 and 12th June, 2003.
In the meantime, on 24th Jan., 2003, respondent No. 4 addressed a communication to its counsel to the effect that SBI did not have any charge over the property in question and was unnecessarily delaying the execution of the sale-deed. Thereupon, it appears that there was exchange of correspondence between the IT Department through its counsel on the one hand and SBI on the other hand. The reason appears to be the fact that the original title deeds of the property in question were lying with SBI and SBI was not willing to part with the same. Ultimately on 18th Sept., 2003, IT Department moved an application before DRT praying for a direction qua SBI to handover the original title deeds of the property in question. The petitioner kept on approaching the IT Department with personal visits as well as written requests to execute the final sale-deed considering the fact that the petitioner had already made payment of the entire sale price and abided by all the terms and conditions of the auction sale. Some of the communications are dt. 27th Feb., 2004, 3rd March, 2004, 20th May, 2004 and on 27th Sept., 2004; the petitioner also applied before DRT praying for similar direction for execution of the conveyance deed. It is an accepted position that application moved by the IT Department and the petitioner before DRT are yet pending. Mr. B.D. Karia, learned advocate for the petitioner appearing with Mr. R.K. Patel, submitted that the sequence of events spoke for themselves and petitioner was being made to run from pillar to post without any fault of the petitioner. It was submitted that the petitioner had complied with all the requirements as per terms of the auction sale, paid up the entire sale consideration, was a bona fide third party purchaser and hence, the delay on the part of the IT Department was not only hurting the petitioner financially but also amounted to harassment. It was submitted that the petitioner was in no way concerned with the disputes inter se between respondent Nos. 1 to 5 on the one hand and respondent No. 6 on the other hand. In terms of provisions of s. 269UE of the Act, the property had vested in the Central Government, the respondent authorities of the IT Department had conducted the auction, the petitioner had made payment as per terms and conditions of the auction and in these circumstances, the petitioner was entitled to a writ of mandamus directing the respondent authorities to execute the conveyance deed. Mr. M.R. Bhatt, learned standing counsel appearing on behalf of respondent Nos. 1 to 5, i.e., Central Government and the IT Department, submitted that the IT Department was ready and willing to execute the conveyance deed but for the non co-operative attitude adopted by SBI in not parting with the original title deeds. That, in the circumstances, the Department was not in a position to execute conveyance deed with a clear title. Inviting attention to the additional affidavitin-reply dt. 21st March, 2005, it was submitted that the Department was ready and willing to execute the sale-deed in favour of the petitioner “on receipt of sale consideration in the ZAO (CBDT) account”. It was contended that the aforesaid request was made in the light of provisions of s. 269UE of the Act and similar prayer was made before DRT by the Department. Mr. Pranav G. Desai, learned advocate appearing on behalf of respondent No. 6—SBI, narrated the historical facts to explain in what circumstances the said respondent came into possession of the original title deeds. It was submitted that an injunction order made by a Competent Civil Court continued to operate in favour of SBI and that the order made on 1st Nov., 1999 by DRT did not lift the injunction but merely modified the same.
That such modification was carried out by DRT only in the light of the application moved by SBI in concurrence with the IT Department. That, at no point of time had SBI agreed to part with original title documents either in favour of IT Department or any other person. Therefore, he contended that any insistence on part of the IT Department or the petitioner that original title deeds should be handed over was not warranted in the light of the fact that property in question was under equitable mortgage with SBI. He also invited attention to the affidavit-in- reply filed by the said respondent and submitted that respondent No. 6—SBI, was entitled to retain possession of title deeds also in the light of the fact that the said property was available for satisfaction of its debts qua two other concerns wherein Smt. Jayshreeben was involved. Alternatively, it was submitted by Mr. Desai that SBI was ready and willing to handover the title deeds subject to entire sale consideration being made over to SBI in satisfaction of its debts, without prejudice to its right to pursue its remedy in accordance with law. Mr. Anip A. Gandhi, learned advocate appearing on behalf of newly added respondent No. 7 viz., the Asset Reconstruction Company (India) Ltd. (ARCIL) submitted that it had stepped into the shoes of respondent No. 6—SBI, as per terms of deed of assignment dt. 29th March, 2004 and accordingly, the account of M/s Aarvy Power Tools was taken over from SBI. The title deeds in question lying with SBI are required to be delivered to ARCIL but same have not been delivered by SBI. He submitted that ARCIL was ready and willing to deliver the title deeds in question for execution of deed of conveyance as and when the title deeds are available with ARCIL. This statement was made without prejudice to right of ARCIL to effect the recovery taking into consideration its rights in the proceedings pending before DRT. Further submission was also made that the charge was over the property in question and despite the sale by the IT Department, the charge would go with the property. Lastly it was submitted that ARCIL must be made a confirming party in the light of equitable mortgage created in favour of ARCIL (SBI). As the facts stated hereinbefore show the petitioner, who is admittedly a bona fide third party purchaser without notice has been deprived of enjoying property, which it purchased at a public auction for a period of more than four years, without any rhyme or reason.
All the learned advocates appearing on behalf of respondents are agreed that the petitioner is in no way concerned with the proceedings pending before DRT; the petitioner is in no way concerned with either the original owners of the property viz., mortgagors nor is linked with the said parties in any manner whatsoever. Once this factual position is accepted, the legal consequence flowing therefrom must follow as a natural corollary and that is : the petitioner is entitled to obtain a final conveyance in its favour without any cloud over the property in question.
Sec. 269UE of the Act as was operative upto 16th Nov., 1992, reads as under : “269UE. Vesting of property in Central Government.—(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 shall, on the date of such order, vest in the Central Government free from all encumbrances”. On a plain reading of the provision, it is apparent that once an order under s. 269UD(1) of the Act is made by the Appropriate Authority in respect of immovable property, as defined under s. 269UA (d)(i) of the Act, such property shall vest in the Central Government free from all encumbrances on the date of such order. In other words, the property in question, which admittedly falls within the definition of immovable property under s. 269UA(d)(i) of the Act vested in the Central Government free from all encumbrances on 25th Nov., 1989, the date on which order under s. 269UD(1) of the Act came to be passed by the Appropriate Authority. It is necessary to note that on the said date, no injunction was operating even against Smt. Jayshreeben, the original owner. The order of injunction came to be made only on 10th Aug., 1990. In the circumstances, even if SBI had impleaded IT Department in the pending civil suit, it was admittedly much later in point of time. It is not necessary for this Court to render any opinion as to validity of such injunction order, but at the sametime, the Court cannot lose sight of the position of law as obtaining on the date when the order under s. 269UD(1) of the Act came to be made. It is not necessary to emphasise the legal position : effect of statutory provision has to be taken into consideration by a Court, regardless of the fact as to whether the attention of the Court was invited to the provision or not. The Court cannot ignore the consequence of a legal provision. Therefore, at the cost of repetition, it requires to be noted that when order of pre-emptive purchase came to be made by the Appropriate Authority on 25th Nov., 1989, the property in question vested in Central Government free from all encumbrances, that even otherwise on the said day, no injunction was operating either against the original holders of the property or the IT Department, the IT Department having not even been impleaded in the said proceedings on the said day, i.e., 25th Nov., 1989. It is not known as to whether the civil suit was even filed on the said day, i.e., 25th Nov., 1989. 20th April, 2005
15. However, aforesaid phrase “free from all encumbrances” occurring in the latter portion of s. 269UE(1) of the Act came to be struck down by the apex Court in the case of C.B. Gautam vs. Union of India (1992) 108 CTR (SC) 304 r/w (1993) 110 CTR (SC) 179 : (1993) 199 ITR 530 (SC). The judgment was pronounced on 27th Nov., 1992. The legislature stepped in and substituted the said expression “free from all encumbrances” by the Finance Act, 1993 with retrospective effect from 17th Nov., 1992, by the portion in parenthesis. Simultaneously, by the very same Finance Act and with retrospective effect from the said date, i.e., 17th Nov., 1992, proviso to sub-s. (1) of s. 269UE came to be inserted. The substituted provision and the proviso read as under : “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 shall, on the date of such order, vest in the Central Government [in terms of the agreement for transfer referred to in sub-s. (1) of s. 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-s. (1A) of s. 269UD, is of the opinion that any encumbrance on the property or leasehold interest specified in the aforesaid agreement for transfer is so specified with a view to defeat the provisions of this Chapter, it may, by order, declare such encumbrance or leasehold interest to be void and thereupon, the aforesaid property shall vest in the Central Government free from such encumbrance or leasehold interest.”
The effect of the amendment in the main provision is that the vesting takes place in terms of the agreement for transfer which was entered into by the transferor and the transferee as referred to in s. 269UC(1) of the Act… As per proviso, the Appropriate Authority is empowered to declare as void any encumbrance or leasehold interest which is mentioned in the agreement for transfer only with a view to defeat the provisions of Chapter XX-C of the Act, and thereupon, the property shall vest in the Central Government free from such encumbrance or leasehold interest. At this stage and in this context, it is necessary to note the contention raised on behalf of respondent No. 6—SBI, to the effect that the Appropriate Authority ought to have informed SBI before the Appropriate Authority initiated any action under proviso to Chapter XX-C of the Act. This submission proceeds on the presumption that the encumbrance in question (which is in dispute) was mentioned in the agreement for transfer. SBI is not in a position to show that any such statement was made in the agreement for transfer. It is only in such eventuality that the question of hearing SBI as “interested person” would arise. However, to satisfy itself, the Court called upon the learned standing counsel for Revenue to place on record a copy of the declaration made in Form No. 37-I along with copy of the agreement for transfer and the enclosure thereto, which were produced for the perusal of the Court from the record of the IT Department.
On going through the said documents, it is apparent that in Form No. 37-I, Column No. 4 pertaining to persons interested in the property, only the name of the transferor is mentioned and no other interested person is mentioned. Similarly in the agreement for transfer, on the basis of which Form No. 37-I had been filed, there is no mention of any encumbrance or leasehold interest in existence. In the said document vide paragraph No. 2 of the conditions, it is stated that title to the property is as certified by M/s H. Desai & Co., solicitors, advocates and notary, Ahmedabad. The said certificate dt. 24th June, 1989 states that after having caused the necessary search to be taken with the Revenue and Sub-Registrar’s records for a period of last about 40 years, the title to the property is clear, marketable and free from all encumbrances and reasonable doubts subject to— (i) Usual declaration, (ii) Provisions of the Urban Land (Ceiling & Regulations) Act, (iii) Variations, if any, in Town Planning Scheme. In the circumstances, it is not possible to accept the contention on behalf of SBI that it was required to be heard as interested person or that any default had been committed by the IT Department in not informing about the transaction between the transferor and transferee and the proceedings under Chapter XX-C of the Act.
Hence, coming back to the provisions of s. 269UE(1) read with proviso thereunder, it is apparent that the property in question vested in the Central Government in terms of the agreement and the order made by the Appropriate Authority under s. 269UD(1) of the Act would result in the vesting being free from all encumbrances as per the documents available on record with the IT Department. Even otherwise, once respondent Nos. 1 to 5 on the one hand and respondent No. 6 on the other hand had agreed to put the property in question to auction sale, moved an application in this regard before DRT and obtained an order from DRT on these lines, it was incumbent upon said respondents to ensure that auction sale was completed in all respects including transfer of the property by executing a valid conveyance in accordance with law after the successful bidder had complied with all the terms and conditions of the auction sale. Admittedly, in the present case, it is an undisputed position that the petitioner has abided by the requirements of the terms and conditions of the auction sale, made the payment of full consideration and is thus entitled to obtain execution of conveyance deed in its favour accompanied by original title deeds of the property.
The contention raised on behalf of respondent Nos. 1 to 5 that the conveyance can be executed only on receipt of sale consideration in the ZAO (CBDT) account requires to be stated only to be rejected. When DRT passed the order on 1st Nov., 1999, granting application Exhibit A/107, a specific direction has been made that “sale proceeds of the property shall be deposited with the applicant-bank in interest-bearing deposit”. In these circumstances, there is no question of modifying order of DRT especially when DRT has further observed that amount of sale proceeds and interest thereon will be appropriated after and according to the adjudication of claims and rights of the SBI by DRT. Respondent No. 3 is therefore directed to execute the final conveyance deed without insisting on any such condition. Prayer made on behalf of respondent No. 7—ARCIL that it should be impleaded as confirming party requires to be rejected for the simple reason that even if it has stepped into the shoes of respondent No. 6—SBI, it is not the person who has sold the property or is selling the property in question. As per record and proceedings before DRT, SBI had merely moved an application seeking modification of injunction order dt. 10th Aug., 1990; there was no request before DRT by the said respondent viz., SBI (now its successor respondent No. 7), to the effect that it should be permitted to sell the property in question. It, in fact, could not have moved any such application as it was not in possession of the property. In these circumstances, the prayer made by ARCIL and supported by SBI to be joined as confirming parties stands rejected. Before parting, it is necessary to take note of the fact that this litigation could have been avoided if DRT had taken the minimum care which it is otherwise required to take, while dealing with properties wherein multiple and conflicting claims are made by different parties like banks and the IT Department, etc. When the order came to be made on 1st Nov., 1999 by DRT permitting the IT Department to put up the property for auction sale, it was necessary for DRT to first of all ascertain as to who was in possession of the title deeds of the property in question. Next step which it ought to have taken was to obtain custody of the title deeds and retain them in its own custody. This would have ensured that a person, who is a third party bona fide purchaser without notice of the property at the auction would not have been put to rack in the manner the petitioner has been made to wait for execution of the conveyance deed for a period of more than four years despite the petitioner having made payment of the entire consideration in terms of the auction sale. On conclusion of the sale, DRT ought to have itself ensured that the sale which has otherwise taken place under its aegis in terms of the order made by it, is made effective by transfer of the title to the property in question in favour of the highest successful bidder at the auction.
It is a sorry state of affairs that DRT has not been able to even ensure, despite applications having been moved before it by the IT Department as well as the petitioner, that the auction sale which DRT had ordered is fruitfully completed in favour of the highest bidder. It is necessary for DRT to appreciate that it is a quasi-judicial body which is entrusted with various powers under the statute and in exercise of those powers, it must ensure that not only proceedings before it are conducted in a proper and fair manner, but the orders made by it are complied not only by mere collection of monies but effective completion of the entire transaction resulting in a valid, legal and complete transfer which can be so only when the title to the property passes in favour of the purchaser. It is, therefore, expected that DRT shall evolve a mode and method so as to regulate the procedure in such circumstances qua all the transactions that may have to be undertaken hereinafter in future.In the result, respondent No. 6—SBI, is hereby directed to handover the original title deeds to ARCIL, i.e., respondent No. 7 under cover of forwarding letter within a period of seven days from today, i.e., on or before 26th April, 2004, with copy of such forwarding communication endorsed to the IT Department, more particularly respondent No. 3. Respondent No. 7—ARCIL, is thereupon directed to forward the original title deeds of the property in question to the IT Department, more particularly respondent No. 3, within a period of four days from the date of receipt of the original title deeds from respondent No. 6—SBI but not later than 30th April, 2005, under cover of forwarding letter.
The IT Department, more particularly respondent No. 3, is directed to ensure that the final deed of conveyance is executed in favour of the petitioner on or before 5th May, 2005. The said respondent shall ensure that copies of the communication from respondent No. 6—SBI, to respondent No. 7—ARCIL and from respondent No.7ARCIL to respondent No. 3, are handed over to the petitioner at the time of execution of the deed of conveyance. It is also necessary to take cognisance of the fact that the approach of the IT Department as well as SBI has left much to be desired. The officials concerned, in their desire to realise monies from sale of the property, failed to take care of the minimum requirement to ensure that a sale which is carried out by the Department of Central Government jointly with premier nationalised bank does not leave a bad taste in the mouth of the successful bidder. The situation could have been avoided if the parties had taken care to ensure : whether the title deeds to the property in question are available and if available, with whom and what would be the stage at which the same would be handed over. SBI has shown absolutely callous and careless approach to the difficulties faced by a third party bona fide purchaser without even caring to think as to what would happen to a purchaser of a property in absence of title deeds to the property in question. In the circumstances, it is necessary that the said parties are visited with costs which are quantified at Rs. 5,000/payable by IT Department, i.e., respondent Nos. 1 to 5 and Rs.10,000/payable by respondent No. 6—SBI. The petition is accordingly allowed in terms of the directions given hereinabove. Rule made absolute accordingly.
[Citation : 291 ITR 294]
