Bombay High Court
Sadanand S. Varde And Ors. vs State Of Maharashtra And Ors. on 14 June, 2000
Equivalent citations: 2001(1)BOMCR261, [2001]247ITR609(BOM)
Author: B.N. Srikrishna
Bench: B.N. Srikrishna, Pratibha Upasani
JUDGMENT B.N. Srikrishna, J.
1. This writ petition under article 226 read with articles 14 and 48A of the Constitution of India is a public interest litigation by the petitioners who are taxpayers and rate payers residing in Bandra area and claim to be deeply interested in environmental protection and planned and orderly development of the city of Mumbai. The first petitioner is the president of the Bombay Civic Trust and the second petitioner is the president of the Save Bombay Committee. The first petitioner was for a number of years municipal councillor and a member of the Maharashtra Legislative Assembly and later of the Council. He is also an ex-Minister of the Government of Maharashtra. The second petitioner was an active member of the Municipal Corporation of Greater Bombay for a number of years and is active in the field of environment protection. The third petitioner was a professor of the Bombay University who takes keen interest in environment protection. The fourth petitioner was director and labour advisor in Siemens. The fifth petitioner is a businessman and a founder member of the Mumbai Grahak Panchayat. The sixth petitioner is an executive in an international bank in Bombay and the seventh petitioner was a senior manager of the State Bank of India and later consultant to the World Bank. The first respondent is the State of Maharashtra ; the second respondent is the Municipal Corporation of Greater Bombay and the third respondent is the Commissioner thereof. The fourth respondent is the Union of India. The fifth respondent is the appropriate authority under Section 269UA of the Income-tax Act, 1961. The sixth respondent is the original owner of plot bearing R. S. Nos. 416 and 417 (part) situated at Byramji Jijeebhoy Road, Bandra (West), which land is the subject-matter of this writ petition. The seventh respondent is a builder and the transferee of the land described hereinabove. The eighth respondent was the Minister of Revenue in the Government of Maharashtra at the relevant time. The ninth respondent is Enjay Hotels Private Limited and the tenth respondent is Devdut Co-operative Housing Society Limited, both being subsequently added as party respondents in the writ petition.
2. The petitioners claim to be deeply interested in environmental issues and have jointly moved this writ petition to invoke the constitutional powers of this court to obtain directions against the respondents for what the petitioners feel is unconstitutional, illegal and unjustified depredation of environmental resources in the Bandra Lands End area.
3. The petition had an extremely chequered history and it is necessary to recount the facts leading to the writ petition in some detail so as to appreciate the plethora of complicated legal issues thrown up for consideration of this court.
Facts :
4. Land's End Bandra is a peninsular piece of land which juts into the sea, being covered on the East, North and West by the sea. It comprises a hill known as Mount Mary hill which houses the well known Mount Mary Church. The hill slopes towards the Mahim Bay on the eastern side and the Arabian sea on the western side. The area around the slopes has developed into a posh residential locality which is used to house spacious bungalows owned by the elite of Bombay. in the course of time, the bungalows have given way to multi-storeyed buildings. At the tip of this peninsular piece of land are situated the ruins of an ancient Portuguese fort known as the Bandra Fort, which fort has been declared a protected monument under Section 4(3) of the Maharashtra Ancient Monuments and Archaeological Act, 1960 (Mah. XII of 1961). There has been considerable development on this peninsular piece of land and a developed road runs north-south almost to the tip of the peninsular area. Towards the west seaward of this road, there exists a five star hotel, "Sea Rock", whose construction had been permitted much before the Coastal Regulation Zone Notification under the Environment (Protection) Act, 1986, was brought into force. Hotel Sea Rock is situated towards the north of the Bandra fort within about 100 meters therefrom. A plot of land, measuring 45,000 square yards bearing C. T. S. Nos. 416 and 417 (part) situated opposite the Hotel Sea Rock, i.e., towards the eastern side of the developed road is the subject-matter of this writ petition. Towards the east of this plot, the hill slopes down to the Mahim Bay and there is a large tract of open land which now has been encroached upon and dotted by numerous unauthorised structures, though continued to be shown as green area in the sanctioned and revised development plan for H-West ward of Mumbai.
5. The first sanctioned Development Plan of Greater Bombay (H-West ward) was sanctioned on September 14, 1964. in this development plan, about 53,000 square yards from R. S. No. 6 and about 18,000 square yards from C. S. Nos. 416 and 417, representing the eastern slope, were reserved for garden. The remaining land, including the plot which is the subject-matter of the writ petition, was to be in the residential zone. The development plan also incorporated a loop comprising a 120 feet wide development plan road skirting the edge of the peninsula. This loop was conceived as a part of the larger arterial road under the plan. The southeastern portion of this loop was to join the Western Express Highway at the corner of AH Yavar jung bridge. The northern portion of this 120 feet road was aligned along with the existing road known as Carter Road and was to lead right up to Bortvali running parallel to Swami Vivekanand Road and Link Road which are existing roads. For smooth implementation and proper alignment of the eastern portion of this development plan road, it was necessary to make some marginal reclamation of land as envisaged.
6. Some time in the year 1972, the State Government received representations urging it to extend the reservation for garden in the development plan to cover the plot which is the subject-matter of this writ petition (hereinafter referred to as the "concerned plot"). The concerned plot, which was situated in the residential zone, had in the meanwhile been purchased by the sixth respondent. Since alteration of the sanctioned development plan is the subject-matter falling within the jurisdiction of the planning authority under the Maharashtra Regional Town Planning Act, 1971, the first respondent instructed the second respondent to take suitable action under Section 37 of the Maharashtra Regional Town Planning Act, 1966 (hereinafter referred to as the "MRTP Act"), by the letter dated January 25, 1973. By this letter, the Government was responding to the representations made to it and was of the opinion that, in the larger public interest of the people of Bandra, there was need for providing adequate space for recreation and it would be desirable if the Bombay Municipal Corporation took suitable action under Section 37 of the Maharashtra Regional Town Planning Act by making a minor modification in the development plan of H-Ward to extend the reservation of the park by including in the reservation R. S. Nos. 416 and 417 (part) which was currently available for residential development. The Government was also of the opinion that, while making a modification of the H-Ward development plan, it would be desirable to shift the alignment of the 120 feet D. P. road so that it would divide the park at two places. The Government, therefore, requested the Bombay Municipal Corporation to consider the proposal and take suitable action under Ssection 37 of the Maharashtra Regional Town Planning Act. Under Section 37 of the Maharashtra Regional Town Planning Act, the Bombay Municipal Corporation as the planning authority had to pass a general body resolution, give an opportunity for objectors to be heard and thereafter submit the proposal as deemed fit for the consideration of the State Government. Hence, the second respondent passed a resolution on December 3, 1973, suggesting full extension of the garden reservation to cover the concerned plot. This was done despite the objection of the owner, the sixth respondent. By another general body resolution passed on March 14, 1974, the garden and in return the sixth respondent was left free to develop the remaining plot without any claim on floor space index of the surrendered 7,000 square yards portion of the concerned plot.
7. The modification made in the proposal was challenged by the present petitioners vide Misc. Petition No. 463 of 1974, before this court. This miscellaneous petition came to be dismissed by this court. Appeal No. 82 of 1979 carried thereagainst was dismissed by this court. Review Petition No. 8 of 1985 moved to review the decision of this court was also dismissed by this court. Thereafter, the petitioners filed a Special Leave Petition No. 17376 of 1985 in the Supreme Court contending, inter alia, that : (a) the mandatory directions under Section 37(1) of the Maharashtra Regional Town Planning Act were not followed, and (b) that the second general body resolution passed by the Bombay Municipal Corporation was bad in law and void.
8. On July 26, 1978, the sixth respondent obtained from the State Government an exemption under Section 30 of the Urban Land (Ceiling and Regulation) Act, 1976 (the "ULCA"), in respect of the concerned plot. This order granted the exemption subject to the conditions that : (a) 18,683.15 square metres would be used for construction of a hotel and for no other purpose ; (b) 5,852.07 square metres would be transferred to the Bombay Municipal Corporation as gift for development of a garden without asking for any floor space index in respect thereof, the area to be identified and demarcated by the Bombay Municipal Corporation out of the total area of 24,535.22 square metres exempted under the order. if the Bombay Municipal Corporation did not require the land, the land holder had to utilise it for the purpose of developing a garden on it and for no other purpose ; (c) an area of 13,079.95 square metres was to be utilised for development plan road as per reservation and was excluded from the purview of the exemption order, and (d) the user of the land was subject to several restrictions and conditions which were indicated in the order.
9. The order of exemption under the Urban Land (Ceiling and Regulation) Act was challenged by the petitioners by Misc. Petition No. 1406 of 1978, inter alia, on the ground that it was contrary to the State Government's directives to fully reserve the suit plot for garden. The said petition was dismissed on January 10, 1979, by the judgment and order of Bharucha J.
(as his Lordship then was) holding that the exemption order did not violate the Government guidelines or the guidelines issued on December 20, 1977, by the Government of India recommending liberal exemption of lands under the Urban Land (Ceiling and Regulation) Act for certain purposes including construction of a hotel. The learned judge took the view that, considering the urgent necessity to increase the foreign exchange of the country, construction of a multi-star hotel which was likely to attract foreign visitors was in the public interest. The petitioners carried Appeal No. 81 of 1979, against the order of Bharucha J. This appeal was dismissed by the Division Bench on Augus.t 1, 1984. The petitioners filed Review Petition No. 8 of 1985, which was also rejected on October 10, 1985. The petitioners thereafter preferred Special Leave Petitions Nos. 17376 and 17377 of 1985 to the Supreme Court. By a common judgment, dated February 9, 1988, the Supreme Court of India dismissed Special Leave Petitions Nos. 17376 and 17377 of 1985, and Civil Appeal No. 2537 of 1985, and categorically rejected all the contentions urged before it. The Supreme Court observed :
"19. The above grounds of challenge to the order of exemption granted to respondent No. 5 have all been considered by the High Court in its judgment disposing of the review applications. The petitioners have not challenged the judgment on review applications. The petitioners are only interested in seeking that sufficient area is kept reserved for a park or recreation ground for the benefit of the members of the public. They are not, in our opinion, concerned with the question as to the legality or otherwise of the exemption granted by the Government to respondent No. 5 under the Urban Land Ceiling Act. A copy of the draft revised development plan has been produced before us by Mr. Desai, learned counsel appearing on behalf of respondent No. 5. We are satisfied that the question whether or not sufficient quantity of land has been kept reserved for park and recreation ground has been adequately considered and taken into account by the High Court. in the circumstances, we do not think that we are called upon to decide the legality or otherwise of the order granting exemption to respondent No. 5 under the Urban Land Ceiling Act. There is, therefore, no substance also in Special Leave Petition (Civil) No. 17377 of 1985."
10. Thus, the challenge to the modified resolution of the general body of the Bombay Municipal Corporation and the challenge to the exemption granted under the Urban Land Ceiling Act attained finality by the said judgment and order of the Supreme Court.
11. Then started another fresh round of litigation, all in "public interest". The sixth respondent, after obtaining the Urban Land Ceiling Act exemption order sought permission to construct a hotel on the concerned plot. Four municipal councillors of H-ward had written to the Municipal Com-
missioner (third respondent) on February 19, 1982 (exhibit "G" to the writ petition), requesting the Commissioner of the Bombay Municipal Corporation to reserve about 45,000 square yards of land in Land's End, Bandra, for a public park in the revised development plan for Greater Bombay. They had requested him to prepare a tentative proposal on the above lines and not to sanction any plan for residential development and/or construction of the hotel on the said land.
12. On August 6, 1982, the Municipal Commissioner refused the development permission sought by the sixth respondent for construction of a hotel on the concerned plot. On August 7, 1982, the sixth respondent filed an appeal under Section 47 of the Maharashtra Regional Town Planning Act against refusal of the development permission. On October 8, 1982, the Municipal Commissioner addressed his report (exhibit "G-3") stating the circumstances under which he was of the opinion that a hotel should not be permitted to be constructed on the said piot. The main reason given by the Municipal Commissioner was paucity of open spaces in Bandra West area of H-vvard. He also pointed out the ratio of lung" space to population density as a reason for refusing the permission. The appeal under Section 47 of the Maharashtra Regional Town Planning Act was heard by the eighth respondent, the then Minister of State for Urban Development, Shri Chandrakant Tripathi. By an order dated April 26, 1983, he set aside the order of the Municipal Commissioner refusing to grant development permission for construction of a hotel on the concerned plot. This order of the Minister of State was challenged in this court by Writ Petition No. 1432 of 1983 which was permitted to be replaced by Writ Petition No. 1822 of 1983. This order was set aside by this court on the ground that bias had been alleged against the said Shri Chandrakant Tripathi and that proper - hearing had not been given to the petitioners, who were objectors to the development permission.
13. By an order made on December 8, 1983, by Smt. Sujata Manohar J. (as her Lordship then was), the appeal was revived before the Minister of State for a fresh hearing. At this stage, the eighth respondent heard the appeal. During the hearing of the appeal, the second petitioner in the present writ petition and his advocate were heard in support of the objections. The eighth respondent made an order on February 4, 1984, partially allowing the appeal of the sixth respondent under Section 47 of the Maharashtra Regional Town Planning Act. The eighth respondent made the following order :
"Appeal partly allowed. Due to north-south and east-west proposed 120 ft. wide development plan roads land is divided in three parts, viz.. Block A, Block B on south towards west of north-south D. P. Road.
As decided earlier, 7,000 sq. yards of land which is the subject-matter of the urban land ceiling exemption, should be kept on Block B at the extreme end on the southern side abutting the sea. This area shall be kept as green space along with the Block C of Old Fort area.
The Municipal Commissioner, Municipal Corporation of Greater Bombay, has informed that the Municipal Corporation of Greater Bombay proposes to shift the alignment of 120 feet east-west development plan road in the proposed revision of development plan of H ward of Greater Bombay. As such the Municipal Commissioner shall exercise the powers under the Development Control Rule 39(viii) and shift the alignment of the 120 feet east-west development plan road of the sanctioned development plan towards south, touching the green space kept in Block B as shown on the enclosed plan, and include this area in the green space so as to form the compact block for the purpose of park and green space. This would leave a compact block of enlarged plot A on the northern side as shown on the plan.
The development permission to this plot A shall be allowed for the purpose of hotel which is permissible as per the sanctioned Development Control Rules subject to following conditions :
(i) 15 per cent, recreation space to be left in Block A shall be kept on the southern side of the plot abutting the green space left from Block B after merging the road area in the green space.
(ii) the development shall be allowed, 10D and CC shall be issued as per the Development Control Rules.
(iii) The FSI of the road area would be admissible on plot A as per the Development Control Rules 10(2).
(iv) The Municipal Commissioner, Municipal Corporation of Greater Bombay, Bombay, shall take over the possession of the land proposed to be kept as green on the southern side, abutting the sea after getting the plots properly demarcated.
As regards directive of the Prime Minister for keeping 500 metres distance from the sea, this directive cannot be made applicable in this case, as this would stand applicable only for the beaches.
The Municipal Commissioner, M. C., G. B., Bombay, may consider the proposal of allowing the development and maintenance of the park and garden space by the applicant party at their own cost after obtaining the possession of the lands now proposed to be kept green.
The permission for development of plots as per plans submitted by the appellants be granted by the M. C., B. M. C., subject to the conditions mentioned above.
No orders as to costs each party to bear its own costs."
14. This order was consonant with the exemption order under Section 20 of the Urban Land Ceiling Act and also made some realignment of the 120 feet development plan road as a result of which three distinct plots : (a) one comprising the Fort ; (b) one comprising the garden measuring about 7,000 square yards to be made available to the Municipal Corporation of Greater Bombay, and (c) one comprising a plot where the hotel could be constructed, were constituted.
15. The order of the Minister of Slate for Urban Development made on February 4, 1984, under Section 47 of the Maharashtra Regional Town Planning Act was again challenged in Writ Petition No. 704 of 1984, before this court. A Division Bench of this court found no merit in the writ petition and dismissed the writ petition by its judgment and order dated April 27, 1984. Thin decision of the Division Bench of this court was challenged before the Supreme Court of India by Civil Appeal No. 2537 of 1985. The Supreme Court by its common judgment and order dated February 9, 1988, made in Civil Appeal No. 2537 of 1985, and Special Leave Petition (Civil) Nos. 17376 of 1985, and 17377 of 1985, dismissed all the three. We have already extracted the observations of the Supreme Court in the said judgment.
16. In the meanwhile, the draft revised development plan for H-West ward was published by the second respondent with some further changes in the alignment of the 120 feet development plan road and increased area of garden beyond 7,000 square yards stipulated in the exemption order under the Urban Land Ceiling Act and the appeal order under Section 47 of the Maharashtra Regional Town Planning Act. The fact of the draft development plan having been published has been noticed in the judgment of the Supreme Court dated February 9, 1988, in Civil Appeal No. 2537 of 1985, and Special Leave Petitions Nos. 17376 of 1985 and 17377 of 1985. The Municipal Corporation granted development permission sought by issuing IOD under Section 346 of the Bombay Municipal Corporation Act, 1888, and issued commencement certificate for construction of the hotel on the concerned plot.
17. On July 5, 1974, the then Prime Minister of India, Smt. Indira Gandhi, had addressed a letter to Shri V. P. Naik, the then Chief Minister of Maharashtra, stating, inter alia, therein that she was distressed to hear that Bandra Land's End area was to be developed for yet another housing project. She suggested that it was a kind of area that should be kept entirely unspoilt for recreational and leisure activities. There were also representations received by the Ministry of Environment, Union of India (fourth respondent), which resulted in voluminous correspondence between the first and the fourth respondents. After a full report was received by the Prime Minister's office from the Ministry of Environment and Forest, the matter appeared to have come to a close as indicated in the letter dated February 23, 1982, from the Joint Secretary, Ministry of Environment, who advised the Secretary, Urban Development and Public Health Department, Government of Maharashtra. "The proposal of Enjay Estates to construct residential and other facilities in the land in their possession in Bandra's Land's End, has been reviewed by the Government of India and that the Prime Minister has been apprised of the issues and has directed us to inform the Maharashtra Government that the Government of India have no comments to offer in the matter". He also requested that the final decision in the matter may kindly be intimated to his Department for record.
18. By another letter dated November 30, 1981, the Government of India had stated that the Department of Environment, Government of India, had sought for detailed information of the present status of the Bandra Land's End's developmental activity and that there was no implied directive to hold up any action proposed by the State Government on any pending* issue, that it has been brought to the Government's notice by Enjay Estate Private Limited that construction on plots of land owned by them was being held up on account of the Government's enquiry. The letter advised that the State Government should settle the question expedi-liously and send a report to the Department at an early date.
19. When Smt. Maneka Gandhi was in-charge of the Ministry of Environment, she had an occasion to visit Bandra Land's End. This gave rise to another round of objections before the fourth respondent. This also resulted in a meeting being held with the Chief Minister of the Government of Maharashtra on May 3, 1990, wherein several issues were discussed between the Chief Minister of Maharashtra and the Union Minister of State for Environment and Forest. The said meeting appears to have been held without prior notice to the Ministry of Urban Land Development and without any prior briefing of the Chief Minister on the status of the development activity at Land's End. Consequently, the minutes of the meeting read as under :
"2. Development of Land's End, Bandra, as a nature area : The Government of India desired that the Land's End area at Bandra should be a part of green belt to be developed as a nature area. The State Government were requested not to give permission for multi-storeyed buildings in this area. The Union Minister of State further observed that no construction work should be permitted within a distance of 500 meters from coast line in violation of the guidelines of the Government of India."
20. By a letter dated February 19, 1991, the Ministry of Environment and Forest, Government of India, was informed by the Secretary, Urban Land Development, Government of Maharashtra, that the issue of reserving the concerned plot for a garden for recreation in the revised development plan for Greater Bombay was still under consideration of the State Government and would be taken up at the time of finalisation of tbe draft revised plan of Greater Bombay which was being sanctioned wardwise. On account of an interim order made by the Division Bench of the Bombay High Court, the State Government had been restrained from taking a decision in isolation in respect of individual development of draft deve-
lopment plan. Hence, a final decision in the case would be taken only at the time of sanctioning of the revised draft development plan for the relevant part of Greater Bombay and that the final decision regarding the plot would be conveyed to the Ministry of Environment and Forest, Government of India. Thereafter, a committee specially appointed by the State Government considered the proposal for changes to be made in the draft revised development plan for H-West ward showing the concerned plot in the residential zone. Taking stock of all developments up-to-date, the committee of secretaries felt that the third respondent having already granted development permission, no change need be made in the proposals of the draft revised development plan published by the first respondent. The committee's recommendation in the matter about the status of the con-. cerned plot was accepted by the first respondent, Government of Maha-rashtra. The committee of secretaries, however, recommended deletion from the adjoining garden reservation C. T. S. No. 922 which was already covered by a slum. The committee's recommendation was also based on the suggestions from the third respondent who had suggested some changes in the network of 120 feet wide development plan roads. These changes were accepted and incorporated in the final sanctioned development plan on May 7, 1992.
21. By an application dated February 17, 1979, the sixth respondent (Enjay Estates Private Limited) applied to the State Government for a no objection to the transfer of the concerned plot, which was exempted land under the Urban Land Ceiling Act exemption order dated July 25, 1978, to the ninth respondent (Enjay Hotels Private Limited) on the ground that the sixth respondent was proposed to be amalgamated into the ninth respon-. dent. By an order dated February 7, 1980, the State Government conveyed its no objection to the transfer of the exempted taken land to Enjay Hotels Private Limited with which Enjay Estates Private Limited was proposed to be amalgamated "provided that the shareholders of Enjay Estates Private Limited will hold shares in the same proportion in Enjay Hotels Private Limited (after amalgamation) as they hold at present in Enjay Estates Private Limited". It was further stipulated that under no circumstances the shareholding of the shareholders of Enjay Estates Private Limited shall fall below 26 per cent, of the total subscribed or paid-up equity capital in Enjay Hotels Private Limited, failing which the exemption order was liable to be revoked. A scheme of amalgamation of Enjay Estates Private Limited (sixth respondent) with Enjay Hotels Private Limited (ninth respondent) was prepared and, after taking necessary steps under the Companies Act, the sixth respondent and the ninth respondent filed in this court petitions for sanctioning the scheme of amalgamation vide Company Petition No. 442 of 1992, and Company Petition No. 443 of 1992. By an order made on February 3, 1993, the learned company judge sanctioned the scheme of amalgamation in the said petitions. Certified true copies of the orders made in Company Petition No. 442 of 1992, and Company Petition No. 443 of 1992, were lodged with the Registrar of Companies as required under the Companies Act, 1956, and the Rules framed thereunder. Consequent to this amalgamation order, the ninth respondent became the owner of the concerned plot and started constructing' a multi-starred hotel thereupon.
22. This writ petition was filed on October 21, 1992, but despite applications made on behalf of the petitioners, neither any ad interim relief nor interim relief was granted. However, by an order made on February 5, 1993, by the Bench of Mohta and Jhunjhunwala JJ., while admitting the writ petition, it was directed that the sixth respondent and/or the ninth respondent may proceed with the construction, if they so desire, provided they give an undertaking to the effect that the construction shall be carried out at their own risk and without claiming any equity in the event of the petition succeeding. Such undertakings have been given by the sixth and the ninth respondents and accepted by the court. Though the record of this writ petition is replete with a number of chamber summonses and notices of motion taken out from time to time by the petitioners and the interlocutory orders made therein by this court, we do not think it necessary to burden this judgment with the history of all the interlocutory proceedings. in our view, the facts recited hereinabove, would be broadly sufficient to deal with the contentions urged before us in support of the writ petition.
23. The petition raises a number of contentions some of them quite diffusely, and alleges contravention of different provisions of various statutes on the part of the sixth and the ninth respondents in the construction of the hotel. We may mention here in passing that this long drawn out litigation in "public interest", which has spanned about two decades, has seen a multi-starred hotel being constructed on the concerned plot, which has been completed, become operational and is functioning in full swing. The petitioners have, however, continued with the spate of their litigations with unmitigated zeal.
Bona /ides of the litigation :
24. At the outset, it is contended by Mr. Tulzapurkar, learned counsel for the sixth and ninth respondents, that this is not a bona fide public interest litigation at all. It is urged that it is nothing but harassment and vindictive action on the part of the petitioners under the garb of public interest litigation. Learned counsel pointed out that the petitioners had filed several writ petitions and appeals in this court which were all dismissed. Finally, the litigation landed up in the Supreme Court and was the subject-matter of Civil Appeal No. 2537 of 1985, and Special Leave Petitions (Civil) Nos. 17376 of 1985 and 17377 of 1985. By its judgment delivered on February 9, 1988 (which is now reported in S. N. Rao v. Slate of Maharashtra, ), the Supreme Court rejected all the contentions urged by the peti-
tioners before the courts. Mr. Tulzapurkar urges that the petition is barred by res judicata since most of the issues urged in the petition have already been settled by the Supreme Court in its judgment in S. N. Rao's case, . As to some of the contentions which were not the subject-matters of the litigation before this court and the Supreme Court, it is urged by Mr. Tulzapurkar that they must be deemed to be barred by the principle of constructive res judicata inasmuch as such contentions ought to have been urged before this court at the time when the earlier writ petitions were filed. Hence, learned counsel submits that the attempt to raise the contentions piecemeal involving multiplicity of litigation is indicative of gross mala fides on the part of the petitioners. It is urged that, though the petitioners claim to be environmentalists who are espousing issues affecting environmental protection, the fact that the present writ petition urges the question as to the applicability of Chapter XX-C of the Income-tax Act, 1961, in a so-called public interest litigation by environmentalists, is indicative of the fact that the petitioners have other objectives than mere environmenta! protection. That the petitioners are challenging the amalgamation of the two companies, namely, Enjay Estates Private Limited and Enjay Hotels Private Limited, and urging contravention of the order made under Section 20 of the Urban Land Ceiling Act which has nothing to do with environmental protection, shows their lack of bona fides according to counsel. Hence, for all these reasons, relying on the judgment in Sachidanand Pandey v. State of West Bengal, , Mr. Tulzapurkar urges that this court should hold that the petition is not bona fide, and not really for advancing public interest, but appears to be the result of something else. Learned counsel echoed the lurking doubt expressed by 'Khalid J. in Sacludanand Pandey's case, : "Is there something more than what meets the eye in this case?"
25. On the material presented to us, we are unable to say that the litigation before us is not bona fide, though it does appear to us that the petitioners have been unduly persistent to the point of being odious in the pursuit of this case. As to the arguments based on res judicata and constructive res judicata, we shall deal with them when we take up for consideration the specific contentions. We shall, for the nonce, give the petitioners the benefit of doubt and assume that the petition is intended to be a bona fide public interest litigation, albeit pursued with misguided zeal. We would, however, like to add for the record that public interest litigation, even if pro bono publico initially, if it persists beyond the limits of tolerance, loses its halo and becomes oppressive and turns into persecution interest litigation. Such appears to be the present case.
Legal contentions :
26. The petitioners urged a number of contentions which were diffused and unstructured. We have gathered them as best as we can and the contentions of the petitioners can be broadly summarized under the following heads' :
(a) Violation of Coastal Regulation Zone (CRZ) Rules.
(b) Contravention of the Urban Land Ceiling Act and the exemption order made thereunder.
(c) Contravention of the provisions of the Maharashtra Regional and Town Planning Act, 1966.
(d) Violation of the sanctioned development plan.
(e) Challenge to the decision of the Ministry of Environment and Forests, Government of India.
(f) Challenge to the corrigendum notification dated November 22, 1996.
(g) Challenge to sanctioned development plan.
(h) Challenge to permission granted by the State Pollution Control Board.
(i) Contravention of the provisions of the Maharashtra Regional and Town Planning Act, 1966, and the Development Control Regulations for Greater Bombay, 1991.
(j) Contravention of the Development Control Regulation No. 59.
(k) Amalgamation of sixth and ninth respondents fraudulent, illegal and intended to circumvent law.
(l) Application of Chapter XX-C of the Income-tax Act, 1961.
Scope of judicial review :
27. Before we take up the specific contentions urged by the petitioners, it is necessary to chalk out the compass within which this court exercises jurisdiction under article 226 in such matters. Doubtless, judicial review has been held to be a basic feature of the Indian Constitution and the power of the constitutional courts, whether they be High Courts exercising jurisdiction under article 226, or the Supreme Court under article 32, is virtually limitless except for self-imposed limitations in the interest of administration of justice and the dictates of prudence. A public interest litigation is not adversary in nature, but is intended to focus the public interest aspect before the court. if the court is apprised of substantial injury to public interest, the court is empowered and duty bound to interfere to do justice to the inarticulate public whose interest is projected as affected. Despite the awesome powers available in writ jurisdiction, the courts have constructively bridled this power and deferred to experts in matters of public interest where, in view of the amplitude of complexity and technical nature involved, judicial proceedings in the nature of a writ petition would be wholly inappropriate for determination of the issues thrown up. Policy matters have also been rightly left for the public autho-
rities to decide and the final say in such matters should normally not come within the purview of judicial review.
28. In Dahanu Taluha Environment Protection Group v. Bombay Suburban Electricity Supply Co. Ltd. , the Supreme Court observed with respect to judicial review as under (page 541) :
"The limitations, or more appropriately, the self-imposed restrictions of a court in considering such an issue as this have been set out by the court in Rural Litigation and Entitlement Kendra v. State of U. P. [1986] Supp. SCC 517 and Sachidanand Pandey v. State of West Bengal . The observations in those decisions need not be reiterated here. It is sufficient to observe that it is primarily for the governments concerned to consider the importance of public projects for the betterment of the conditions of living of the people on the one hand and the necessity for preservation of social and ecological balances, avoidance of deforestation and maintenance of purity of the atmosphere and water free from pollution on the other in the light of various factual, technical and other aspects that may be brought to its notice by various bodies of laymen, experts and public workers and strike a just balance between these two conflicting objectives. The court's role is restricted to examine whether the government has taken into account all relevant aspects and has neither ignored nor overlooked any material considerations nor been influenced by extraneous or immaterial considerations in arriving at its final decision."
29. In a recent judgment in Tata Iron and Steel Co. Ltd. v. Union of India, , these principles were reiterated by the Supreme Court in the following words (page 727 and page 2473 of AIR 1996 SC) :
"At this juncture, we think it fit to make a few observations about our general approach to the entire case. This is a case of the type where legal issues are intertwined with those involving determination of policy and a plethora of technical issues. in such a situation, courts of law have to be very wary and must exercise their jurisdiction with circumspection for they must not transgress into the realm of policy-making, unless the policy is inconsistent with the Constitution and the law. . ."
30. Keeping this overall approach in view, we shall now examine the legal disputes posed for our resolution.
(a) Violation of Coastal Regulation Zone (CRZ) Rules :
***** The restrictions against construction in CRZ-I would apply only to a stretch of 500 metres from the High Tide Line as long as that area falls within the area declared as heritage monument under the MAMA Act. Looking at the revised dimensions in the notification of July 31, 1998, it is not possible to accept the contention that the concerned plot would fall within CRZ-I area so as to completely prohibit constructional activity on it.
In fact, construction of hotels is permitted in CRZ-Ii and CRZ-III as evidenced from paragraph 7 of the said notification. Hence, the contention that the hotel is an "industry" and as such construction of the hotel on the concerned plot is prohibited under paragraph 2 of the CRZ notification dated February 19, 1991, must fail.
***** If there was any doubt as to the manner in which the construction had to be carried out, even on the landward side, this is clarified by a subsequent notification which provides that construction shall be permitted on the landward side of an imaginary line between the two authorised constructions drawn parallel to the High Tide Line. Looked at this way also, we find that the construction does not contravene the CRZ-II Regulations.
***** Hence, we see no violation of sub-clause (v) of Clause 2 of 1991 CRZ notification.
***** In fact, by the notification dated July 9, 1997, Sub-clause (viii) has been completely substituted and the activity of construction of the Bombay Municipal Corporation Sewerage Purification Plant is wholly permitted thereunder.
In our view, Sub-clause (ix) of Clause 2 of the CRZ notification has no application at all.
***** Sub-clause (xiii) of Clause 2 of the notification uses the expression "except as permissible under the notification". in our view, if the construction activity is permitted under any other part of the notification, then the prohibition contemplated by Clause 2, Sub-clause (xiii) is not attracted.
*****
(b) Contravention of the Urban Land (Ceiling and Regulation) Act, 1976, and the exemption thereunder :
***** We are, therefore, not inclined to accept the contention that there is any violation of the exemption order under the Urban Land (Ceiling and Regulation) Act or the conditions stipulated therein.
* * * * * * * * (c) Contravention oj the provisions of the Maharashtra Regional and Town Planning Act, 1966. *****
We agree with the contention of the respondents that, because the Bombay Municipal Corporation failed to take over the land, the validity of the sanction for the building plans of the sixth and the ninth respon-
dents would not be affected. The contention that the sanctioned building plans could never have been extended is, therefore, of no substance and fails.
*****
(d) Violation of the sanctioned development plan :
***** In other words, the State Government maintained the reservation for garden in respect of all other areas even after due consideration of the fact that there were hutments on the said plot of land. We are, therefore, satisfied that the sanction gTanted by the State Government to the development plan was not vitiated on account of non-application of mind as contended. The contention must, therefore, fail for that reason also.
(e) Challenge to decision of (he Ministry of Environment and Forests, Government of India :
***** It appears to us that, after considering the matter in detail, in the light of the clarifications given by the State Government, the Ministry of Environment and Forests reconsidered its stand and granted the sanction. We see nothing wrong in that. At any rate, it is not for us to sit in appeal over the decision of the Ministry of Environment and Forest while exercising writ jurisdiction. The contention, therefore, fails.
(f) Challenge to the corrigendum notification, dated November 22, 1996 :
***** Development Control Regulation 11(4), in terms, empowers the Commissioner to shift/interchange the designation/reservation provided the actual area on which the designation or reservation is made is not altered. This exercise of power by the Commissioner or by the State Government does not amount to a modification of the sanctioned Development Plan requiring the following of the prescribed procedure of inviting objections, considering them and sanctioning the plan. We are, therefore, not impressed by this contention and reject it.
(g) Challenge to sanctioned Development Plan :
***** We are of the view that the contention is not required to be decided, as it is not material at this stage.
(h) Challenge to permission granted by the State Pollution Control Board :
***** The ninth respondent applied to the State Pollution Control Board and obtained its permission subject to certain restrictions which it is bound to comply with. in these circumstances, we feel there is no substance in the challenge to the permission granted to the sixth and the ninth respondents by the State Pollution Control Board.
(i) Contravention of the provisions of the Maharashtra Regional and Town Planning Act, 1966, and the Development Control Regulations for Greater Bombay, 1991 :
***** The Bombay Municipal Corporation having followed consistently the practice of extending the development permission from time to time if the initial construction commenced within a period of one year of the first grant of development permission, the development permission extended from time to time in the case of the sixth and the ninth respondents cannot be said to be illegal on that count.
(j) Contravention of the Development Control Regulation No. 59 :
***** Thus, looked at from West or East, it cannot be held that the height restriction in the Development Control Regulation No. 59 would apply or that the planning authority erred in not making the height restriction applicable. The planning authority was justified in looking at the development pian while considering the application for development permission made by the sixth and the ninth respondents. Looked at from this point of view also, there was no error in granting development permission to the sixth and the ninth respondents.
(k) Amalgamation of sixth and ninth respondents fraudulent, illegat and intended to circumvent law :
We have already noticed that, by the order of the company court dated February 3, 1993, made in Company Petition No. 442 of 1992. and Company Petition No. 443 of 1992, the sixth respondent was amalgamated with the ninth respondent with effect from August 1. 1992, and the undertaking of the sixth respondent including all assets and liabilities stood vested in the ninth respondent, and that the Government of Maharashtra had, by an order dated February 7, 1990, issued no objection for transferring the exempted vacant land to the ninth respondent on amalgamation of the sixth respondent with the ninth respondent subject to certain stipulations as to the continuation of the shareholding ratio. It is contended by the petitioners that the amalgamation of the sixth respondent with the ninth respondent was intended to circumvent the provisions of Chapter XX-C of the Income-tax Act, 1961, and must be treated as invalid. Itis also urged that the amalgamation order was obtained by false representations to and by playing a fraud upon the company court. Consequently, it is contended that the amalgamation order obtained by fraud must be held ab initio bad and no legal consequence could arise therefrom. in view of the seriousness of the allegations, we have examined them meticulously by summoning the record of the company court in Company Petition No. 442 of 1992 and Company Petition No. 443 of 1992 and scrutinising them in the light of the legal submissions made.
31. The fifth respondent (appropriate authority under Chapter XX-C of the Income-tax Act, 1961) has filed an affidavit dated October 17, 1994, of one Prayag Jha, Deputy Commissioner of Income-tax, and supported the contention of the petitioners that the order sanctioning" the amalgamation scheme has been obtained by playing a fraud on the company court. The contention of the petitioners, and the fifth respondent, in support of the allegation of fraud is :
(a) the sixth and ninth respondents deliberately misrepresented to the company court that only 7,227 shares of Rs. 100 each (valued at Rs. 7,22,700) would be issued on amalgamation, and
(b) the sixth and ninth respondents deliberately suppressed from the company court that the value of shares to be issued on amalgamation would exceed Rs. 10 lakhs.
32. Hence, the company court was deliberately misled into sanctioning a fraudulent scheme of amalgamation.
33. In view of the seriousness of the allegation, we have extensively heard Mr. Sethna, learned counsel who appeared for the fifth respondent-appropriate authority, on the issue, apart from counsel for the petitioners and the sixth and the ninth respondents.
34. We may straightaway dispose of the contention that the amalgamation was intended to circumvent the provisions of Chapter XX-C of the Income-tax Act. Amalgamation of the sixth respondent with the ninth respondent was mooted for the first time in the year 1979 in the tetter dated September 17, 1979, by which the sixth respondent applied for permission of the Government of Maharashtra to amalgamate with the ninth respondent. The Government of Maharashtra made an order on February 7, 1980, indi-eating its no objection to the transfer of the land, which was exempted by the Government's order dated July 26, 1970, to the ninth respondent consequent upon the amalgamation provided that the shareholders of the sixth respondent continued to hold shares in the same proportion in the ninth respondent company as they held prior to the amalgamation. A further stipulation was made that, under no circumstances should the shareholding of the shareholders of the sixth respondent fall below 26 per cent, of the total subscribed or paid-up equity capital in the ninth respondent, failing which the exemption order was liable to be revoked. Chapter XX-C of the Income-tax Act, was enacted and brought into force for the first time in the year 1986. Thus, the contention that the amalgamation was intended to circumvent the provisions of Chapter XX-C must obviously fail since the intention to amalgamate was mooted way back in the year 1979.
35. We had directed the ninth respondent to file a detailed affidavit of one of its officers to explain specifically the issue of fraud alleged against it. One Pesi D. Colabawalla, director of the ninth respondent, has filed an affidavit dated July 28, 1998, in which this issue has been specifically dealt with. in paragraph 7 of the said affidavit, the chronology of the events leading to the amalgamation have been set out. Itis pointed out that, prior to the amalgamation scheme being formulated, Gautam Joshi and Associates, chartered accountants, were requested to value the shares of the sixth and the ninth respondents and make a report on the fair share exchange ratio. The chartered accountants made a report dated July 10, 1992, recommending the exchange ratio of 7,227 shares of the transferee-company (i.e., the ninth respondent) for every one share of the transferor-company (i.e. the sixth respondent) and noting the need to increase the authorised share capital of the ninth respondent as proposed. This report of Gautam Joshi and Associates was placed before the board of directors of both the companies who accepted the said report including the suggested share exchange ratio as set out therein. The shareholders of both the sixth and ninth respondents acted on the basis that the scheme for amalgamation would provide for a share exchange ratio of 7,227 shares of the ninth respondent for every one share of the sixth respondent of Rs. 100 each. Itis on this basis that the shareholders of both the companies approved the proposed scheme of amalgamation and empowered the two companies to take steps in law for implementing the proposed scheme of amalgamation on the aforesaid basis. Clause (11) of the scheme reads as under :
"(11) in consideration of the transfer of assets and liabilities of the transferor-company in favour of the transferee-company in terms of this scheme, the transferee-company will issue and allot 7,227 (seven thousand two hundred twenty-seven only) equity shares of Rs. 100 (rupees one hundred only) each at par and credited as fully paid up to the members of the transferor-company whose names are recorded in the register of members, or their respective heirs, executors, administrators, legal representatives or successors as may be recognised by the board of directors of the transferee-company on a date, to be fixed by the directors of the transferee-company."
36. While printing Clause (11) of the scheme of amalgamation, the share exchange ratio was not mentioned therein. Itis explained in the affidavit of Colabawalla that the words "for every one share of the transferor-company" were accidentally omitted by the typist operating the computer who followed the method of cut and paste and, since the same computer file was used, wherever the Clause 11 of the scheme was retyped and printed out, the same error continued and was not noticed by any one. The amalgamation petitions, i.e., Company Petition No. 442 of 1992 and Company Petition No. 443 of 1992, however, contained prayer (f) which was in the following terms :
"(f) that the amalgamation of the petitioner-company with the transferee-company be made on the basis that holders of 1,000 existing issued, subscribed and paid up equity shares of Rs. 100 each of the petitioner-com-
pany be entitled to equity shares of Rs. 100 each of the transferee-company in the proportion of 7,227 equity shares in the transferee-company of the face value of Rs. 100 each for every one equity share of Rs. 100 each of the petitioner-company as provided in Clause (11) of the scheme of amalgamation exhibit 'E' hereto."
37. It is explained by the said Colabawalla that the reference to Clause (11) in the prayer clause of both the company petitions was made in the bona fide belief that Clause (11) of the scheme reflected the share exchange ratio as clearly brought out in the prayer clauses in the two company petitions. As required by Section 394A of the Companies Act, 1956, the Government of India in the Ministry of Law, Justice and Company Affairs, was served with copies of the two company petitions with the prayers as set out hereinabove and the schemes also containing the omission. The Department of Company Affairs addressed a letter dated September 25, 1992, to the advocates of the two companies seeking particulars in connection with the said proposed scheme of amalgamation. Paragraph (viii) of the said letter is significant and specifically raised the query, "Exchange ratio postulated in the scheme should be clarified. Whether the transferee-company will issue 7,227 shares only against all of the 1,000 shares held in the transferee-company or the number of shares to be issued will be 72,27,000. in case the number will be 72,27,000, please intimate whether the transferee-company has increased its authorised share capital." A copy of this letter dated September 25, 1992, is annexed as exhibit "1" to the said affidavit of Colabawalla. This query raised by the Department of Company Affairs was answered by Wadia Ghandy and Co., advocates of the sixth and the ninth respondents. Wadia Ghandy and Co., forwarded three copies of the valuation reports of the shares of both the companies as also the share, exchange ratio. Further, in paragraph (viii) of their letter, Wadia Ghandy and Co., specifically stated "The exchange ratio is 7,227 equity shares of Rs. 100 each to be issued as fully paid-up by the transferee-company (i.e., Enjay Hotels Private Limited) for one equity share of Rs. 100 each fully paid of the transferor-company (i.e., Enjay Estates Private Limited). Also, the transferee-company has not increased its authorised share capital. The existing authorised share capital of the transferee-company is Rs. 5,00,00,000 divided into 5,00,000 equity shares of Rs. 100 each and upon the scheme of amalgamation being approved by the Bombay High Court necessary increase in authorised share capital shall be made." This letter is annexed at exhibit "2" to the said affidavit of Colabawalla. Thus, even before the company petitions came up for consideration before the court, the position regarding the share exchange ratio was clearly placed on record and intimated to the Department of Company Affairs by the sixth and the ninth respondents. It is, therefore, contended by the said respondents that there were no mala fides or intention to misrepresent facts or play a fraud upon the company court as contended, since the share exchange ratio was clearly spelt out in the communication addressed to the Regional Director of Company Affairs much before the company petitions were taken up for consideration by the company court.
38. When the two company petitions came up for consideration before the company court, both counsel for the Regional Director of Company Affairs and official liquidator had appeared before the court. Neither of them raised any objection on (he lines as contended by the petitioners, nor were any allegations of fraud or misrepresentations made by either of them. The company judge heard and disposed of the two company petitions by an order dated February 3, 1993, by which he sanctioned the scheme of amalgamation. The order made by the company judge is in the following terms :
"This court doth further order that the amalgamation of the transferor-company with the transferee-company be made on the basis that holders of 1,000 existing issued, subscribed and paid up equity shares of Rs. 100 each of the transferor-company be entitled to equity shares of Rs. 100 each of the transferee-company in the proportion of 7,227 equity shares in the transferee-company of the face value of Rs. 100 each for every one equity share held of Rs. 100 each of the transferor-company as provided in Clause (11) of the scheme of amalgamation."
39. Pursuant to the order of amalgamation made on February 3, 1993, in the two company petitions, the advocates for the sixth and the ninth respondents prepared draft of the drawn up order and submitted it to the office of the Company Registrar-of this court for approval. Due notices thereof along with a copy of the drawn up order were served on the official liquidator and the Regional Director of Company Affairs calling upon them to attend the meeting for settlement of the draft drawn up order, approval and sealing by the office of this court. Pursuant to such meeting being held, the drawn up order was prepared in accordance with the draft drawn up order, approved and sealed. in terms of the sanctioned scheme, the ninth respondent was required to issue 7,227 shares of Rs. 100 each for every one equity share of the sixth respondent. At the relevant time, the authorised capital of the ninth respondent was only Rs. 5,00,00,000 (rupees five crores only). Hence, it was necessary to increase the authorised capital of the ninth respondent beyond the sum of Rs. 72,27,00,000. This was specifically suggested by the chartered accountants in their report dated July 10, 1992, as well as by the Regional Director for Company Affairs in his letter dated September 25, 1992. The board of directors of the ninth respondent, by the resolution dated May 31, 1994, increased its authorised capital from Rs. 5,00,00,000 to Rs. 75,00,00,000 divided into 7,50,00,000 shares of Rs. 10 each by splitting its shares of Rs. 100 into 10 shares of the face value of Rs. 10 each. The ninth respondent thereafter submitted to the Registrar of Companies Form No. 5 and Form No. 23 on May 31, 1994, and paid the filing fees of Rs. 21,00,000 (rupees twenty one lakhs only) for registration of the said forms. Copies of the said forms are placed on record at exhibits "3" and "4" to the said affidavit of Colaba-walla. The ninth respondent then issued 7,22,70,000 equity shares of Rs. 10 each aggregating to Rs. 72,27,00,000 to the shareholders of the sixth respondent in accordance with the exchange ratio of 7,227 equity shares against one equity share of the sixth respondent held on the record date. A copy of the return of allotment under Section 75(1) of the Companies Act, 1956, dated July 18, 1994, in Form No. 2 filed with the Registrar of Companies evidencing the aforesaid fact is also placed on record at exhibit "5" to the said affidavit of Colabawalla. The contemporaneous documents all indicate that all steps have been taken by the two companies (i.e., sixth and ninth respondents) acting under the belief that the share exchange ratio would be 7,227 shares of the ninth respondent for every one share of the sixth respondent. In these circumstances, we are of the view that the omission in Clause (11) of the scheme for amalgamation is merely a matter of inadvertence and not intentional misrepresentation or misleading of the company court. We are also of the view that there was no fraud as alleged and the mistake was purely inadvertent. Even assuming that Clause (11) of the scheme contained a material omission, the company court always had power to sanction the scheme after modifying it in such manner as it deems fit. The amalgamation order made by the company court in any event clarifies that the ninth respondent would issue 7,227 shares for each share of the sixth respondent. The said order has become final and binding and has in fact been acted upon. The only persons who could have raised objections, namely, the shareholders of both the companies, the Central Government, the official liquidator and the two companies, are all bound by the said order. The petitioners, by a side wind in the name of public interest litigation, cannot challenge the amalgamation scheme which has been sanctioned and validly carried out in accordance with the provisions of the Companies Act.
We are of the view that the amalgamation, which has become final and binding, cannot be permitted to be challenged by the petitioners, without locus standi, in a collateral proceeding in the present writ petition. An amalgamation order can only be challenged under the Companies Act by an appeal under Section 391(7) by any one of the parties, but no such appeal was ever filed. From 1993 onwards, no one (except the writ petitioners by the present writ petition) has complained that the amalgamation order was vitiated for any reason whatsoever. It is also of interest to note that the appropriate authority under Chapter XX-C of the Income-tax Act (i.e., the fifth respondent) had also sought clarifications from the ninth respondent which were forwarded by the letters dated June 2, 1994, June 9, 1994 and June 14, 1994, written by K. K. Ramani and Co., chartered accountants, on behalf of the ninth respondent. The appropriate authority had also called the ninth respondent for a hearing which was held some time in June, 1994. Even in the affidavit of Prayag Jha dated October 17, 1994, in which the omission in Clause (11) of the amalgamation scheme has been highlighted and detailed reference has been made to the order of the company court, issuance of shares by the ninth respondent and so on, there is no prayer made that the order of amalgamation be set aside or reviewed or recalled, nor were any steps taken by the fifth respondent to set aside the amalgamation order on the ground of misrepresentation, suppression of facts or fraud, as contended before this court.
It is contended by learned counsel for the sixth and the ninth respondents that neither the appropriate authority (fifth respondent) nor any one else could challenge the order dated February 3, 1993, at this point of time. In the alternative, it is contended that the appropriate authority is estopped from doing so since it had taken no step at any point earlier and allowed the shareholders to alter their position to their detriment. The reliance placed on the judgment of this court in J. K. (Bombay) Pvt. Ltd. v. New Kaiser-J-Hind Spinning and Weaving Co. Ltd. [1967] 2 Comp LJ 272 appears justified.
The contention of Mr. Tulzapurkar, learned counsel for the sixth and the ninth respondents, that the amalgamation order cannot he challenged in collateral proceedings--appears to be well founded. The fasciculus of Sections 391 to 394 of the Companies Act constitutes a complete code on the subject of amalgamation, (see in this connection, PMP Auto Industries Ltd., In re [1994] 80 Comp Cas 289 ; (1995) 5 Comp LJ 598 (Bom) and Vasant Investment Corporation Ltd. v. Official Liquidator [1981] 51 Comp Cas 20 (Bom)). Section 391(7) of the Companies Act, 1956, specifically gives a right of appeal from any order passed under the said section. The Central Government or the appropriate authority or any one interested could have filed an appeal under Sub-section (7) of section 391 of the Companies Act. But, as a matter of fact, no one filed such an appeal. Thus, the order has become final and binding under section 391 of the Companies Act. In the hierarchy of courts, this court has no special jurisdiction under Article 226 to sit in appeal over an order made under Section 391 of the Companies Act, 1956, which has become final, binding and conclusive. The sixth and the ninth respondents placed reliance on the judgment of the Calcutta High Court in Krishna Nath v. DinajpurLoan Office [1938] 8 Comp Cas 152, and the judgment of the Supreme Court in S. V. Kondashar v. V. M. Desh-pande and Aast. CITv. A. K. Menon . In our view, these judgments do support the contention canvassed by Mr. Tulzapurkar that it is not open to this court while exercising writ jurisdiction in a public interest litigation to sit in judgment over the correct-
ness of an order made under Section 391 by the company court which has become final, conclusive and binding".
Finally, Mr. Tulzapurkar contended that even assuming this court were to hold that the amalgamation order was bad, it would make no difference to the construction already put up on the concerned plot for several reasons. First, if the amalgamation were to be set aside by this court, then the sixth respondent-company would be deemed to be in existence with all its assets and liabilities and rights and obligations and the status quo ante as existing immediately prior to the amalgamation order would stand restored. This would mean that the sixth respondent would continue to be the owner of the property and entitled to exercise the benefits on all terms already granted to it. There would be no question of considering the impact of Chapter XX-C of the Income-tax Act, 1961, since there would be no amalgamation and no transfer. Thus, the end result would continue to be the same, namely, that the construction on the concerned plot would be valid if it was not otherwise invalid. Looked at from any point of view, the validity of the amalgamation order is, therefore, wholly immaterial and irrelevant in the submission of learned counsel. We are inclined to agree. Though we have examined the issue at length, from the material on record, it is not possible to hold that the amalgamation order dated February 3, 1993, was in any way vitiated. Much less are we in a position to say that the construction put upon the concerned plot by the sixth and the ninth respondents is illegal for the said reason.
(1) Application of Chapter XX-C of the Income-tax Act, 1961 :
The petitioners have by an amendment to the writ petition made on November 16, 1992, prayed that the fifth respondent (appropriate authority under Chapter XX-C of the Income-tax Act, 1961) be directed to take appropriate measures against the sixth and the ninth respondents for violation of the provisions of Chapter XX-C of the Income-tax Act, 1961. Though the plea is somewhat vaguely taken in the writ petition, it was supported and amplified by the fifth respondent in the affidavit of Prayag Jha, Deputy Commissioner of Incorne-tax, dated October 17, 1994, and the further affidavit of A. Kumar, Assistant Commissioner in the appropriate authority in the Income-tax Department dated July 24, 1998.
It is contended in the affidavit of Prayag Jha that the authority under Chapter XX-C had no role to play at the stage of admission of the writ petition and, therefore, the fifth respondent did not file any affidavit in reply to oppose the admission. It is also accepted that the fifth respondent adopted a policy of wait and watch with regard to the filing of declaration in Form No. 37-I. The stand of the fifth respondent is that, unless a declaration in Form No. 37-I is filed by the intending transferee/transferor in any transaction of immovable property in excess of rupees ten lakhs (at the relevant time), the fifth respondent had no jurisdiction. It is contended that the appropriate authority could not take further action suo motu since it had no jurisdiction for want of filing of a declaration in Form No. 37-I. The court having made no specific directions against it during the pendency of the writ petition, the appropriate authority could not have taken action under Section 276AB of Chapter XXII of the Income-tax Act. It is pointed out by the fifth respondent that, even while this writ petition was pending before this court, the petitioners had moved the Finance Minister, Government of India, requesting him to look into the matter of transfer of the concerned plot at Bandra Land's End, making serious allegations of fraud and contravention of law including the provisions of Chapter XX-C of the Income-tax Act. The Deputy Commissioner of Income-tax of the fifth respondent by his letter dated June 7, 1994, informed the petitioners that they may discuss the matter with the members of the appropriate authority. Pursuant to the discussions, the appropriate authority issued a letter dated May 23, 1994, and called upon the concerned parties, namely, Enjay Estates Private Limited, transferee (the sixth respondent) and Enjay Hotels Private Limited, transferor (the ninth respondent) for discussions. Written submissions were filed by the sixth and the ninth respondents through their auditors, K. K. Ramani and Co., on June 2, 1994, and June 17, 1994. Ramani and Co. also filed certain documents along with their submissions and by a letter dated June 17, 1994, Ramani and Co., had admitted that as on that date they were not in a position to submit the audited statements of accounts of the ninth respondent as the same had not been finalised. The fifth respondent urges that even a situation of amalgamation of one company with the other would result in transfer of immovable property within the meaning of Chapter XX-C and, therefore, such a transfer would require a no objection certificate from the appropriate authority under the provisions of Chapter XX-C since the value of the land in question exceeded rupees ten lakhs which stood transferred from the sixth respondent to the ninth respondent as a consequence of the amalgamation order. Though it is the contention of the fifth respondent that such a transfer would be covered by the provisions of Chapter XX-C, and that there was an obligation to file a declaration in Form No. 37-I as required thereunder, since no such declaration in Form No. 37-I had been filed, the fifth respondent felt that it had no jurisdiction to investigate the case and, therefore, was helpless in the matter, though the fifth respondent was satisfied that the amalgamation was a device for transfer of land from one owner to another and also that the situation was one of the transfer of shares in the company falling within the scope of Chapter XX-C of the Income-tax Act. Peculiarly, the fifth respondent contends in the affidavit that this was only a prima facie view and that a final view can be taken only after the procedure prescribed under Chapter XX-C was fulfilled (meaning thereby a declaration in Form No. 37-I was filed) and after hearing the interested parties. Thus, it appears that, despite the prima facie view that the transfer of the land in question from the sixth respondent to the ninth respondent pursuant to the amalgamation of the two companies attracted the provisions of Chapter XX-C of the Income-tax Act, 1961, the fifth respondent was unwilling or unable to take any action under Chapter XX-C of the Income-tax Act for want of a declaration filed in Form No. 37-I. On July 24, 1998, while the writ petition was being argued, an affidavit as directed by this court was filed by A. Kumar, Assistant Commissioner, in the office of the fifth respondent. After referring to the facts which were already pleaded in the earlier affidavit of Prayag Jha, the said A. Kumar pointed out that during the relevant period, i.e., 1992-93, the jurisdiction of the appropriate authority under Chapter XX-C would be attracted if the transferred property was of the value of rupees ten lakhs or above. It was contended that Clause (11) of the scheme of amalgamation presented to this court had, inter alia, recited that the transferee-company would issue and allot 7,227 equity shares of Rs. 100 each at par and credited as fully paid to the members of the transferror-company and a reading of the above clause induced him to believe that the transferee-company would issue and allot 7,227 equity shares of Rs. 100 each to the members of the transferor-company. Thus, in consideration of the transfer of assets and liabilities of the transferor-company, the transferee-company would issue 7,227 shares of Rs. 100 each against the total shareholding of 1,000 shares of different members of the transferor-company, meaning thereby that the entire asset's of the transferor-company would stand transferred to the transferee-company at the cost of Rs. 7,22,700. Since the substratum of the transferor-company was only one asset, which was its land holding, and since it was not carrying out any other substantive business, it would mean that the assets of the transferor-company stood transferred for a consideration of Rs. 7,22,700 to the transferee-company. Since the "apparent consideration" indicated in the amalgamation order was much below rupees ten lakhs, the authority thought that it had no jurisdiction to entertain the case. Consequently, there was no occasion for the sixth and the ninth respondents to point out to the company court while sanctioning the scheme of amalgamation under Section 394 of the Companies Act as to whether a no objection certificate had been obtained from the competent authority. The said A. Kumar also pointed out that, despite the misrepresentation in Clause (11) of the scheme, the sanctioning order of the company court dated February 3, 1993, makes it clear that the consideration amount for the transfer of land would work out to Rs. 72,27,00,000. He, therefore, contends that if this figure of Rs. 72 crores consideration was present to the mind of the company court, perhaps the company court itself would have sought a clarification from the sixth and the ninth respondents as to whether they had obtained a no objection from the appropriate authority. In other words, the appropriate authority pleads helplessness for want of filing" of the declaration in Form No. 37-I and on account of the amalgamation order already made by the company court.
In view of the serious allegations made that there was a deliberate attempt to circumvent the provisions of Chapter XX-C of the Income-tax Act, 1961, we directed the appropriate authority to make submissions through counsel and we have heard Mr. Sethna, learned senior counsel for the fifth respondent at great length on the legal issues, even though Mr. Tulzapurkar, learned counsel for the sixth and the ninth respondents, vehemently opposed this contention being permitted to be urged in this writ petition initiated as public interest litigation. Apart from dealing with the legal contentions revolving around the provisions of Chapter XX-C, learned counsel for the sixth and the ninth respondents strongly urged that this public interest litigation, which was initiated ostensibly to prevent building activity on land falling within CRZ area, contrary to the permissible development control regulations and other building laws, was now being used as an instrument of harassment of the sixth and the ninth respondents by raising the issue of applicability of Chapter XX-C. Without prejudice to the said general submission, Mr. Tulzapurkar also addressed us on the merits of the contention, which we shall consider.
The first contention urged on behalf of the sixth and the ninth respondents is that the petitioners are not entitled to raise this contention and no question of public interest arises, since this issue is alien to this public interest litigation which is primarily concerned with the implementation of the Environment (Protection) Act, the CRZ regulations and the development control regulations. We are, however, not inclined to shut out the arguments on the issue, despite the contentions of learned counsel for the sixth and the ninth respondents. We are aware that giving of overwide leeway in a public interest litigation might open up a Pandora's box, but, having regard to the chequered history and the meandering course of this litigation, we would prefer to exorcise this spectre once and for all instead of allowing it to haunt different courts from time to time. Hence, the extra effort on our part, overruling the preliminary contention of Mr. Tulzapurkar.
At the outset, we notice that there was no impediment in the way of the fifth respondent-appropriate authority from taking action under Chapter XX-C of the Income-tax Act, for no court had restrained it from acting. It is the firm belief of the fifth respondent that it gets no jurisdiction to act under Section 276AB, unless a declaration under Form No. 37-I was filed. Thus, the inhibition, if any, arose from the view of the statute taken by the appropriate authority and nol on account of any external circumstances.
It is urged for the sixth and ninth respondents that before a petition is entertained under Section 394 of the Companies Act for sanctioning the amalgamation of a scheme, the court under Section 394A of the Act is required to give notice of such application to the Central Government and take into consideration the representations, if any, made to it by the Government before passing any order. That such a notice under Section 394A had been issued to the Central Government before the petitions for amalgamation were entertained by the company court. Upon such notice being received, if at all any department of the Central Government had any objection to the scheme of amalgamation being sanctioned, on any ground whatsoever, it was the responsibility of such department to put forth its views before the company court. No such attempt was made by the appropriate authority under Chapter XX-C or by any one on behalf of the Central Government. Consequently, the order made sanctioning" the amalgamation would operate as res judicata and cannot now be reopened on the contention urged by the petitioners. It is contended that the principle of res judicata is applicable to public interest litigation also. The judgment of the Supreme Court in Forward Construction Co. v. Prabhat Man-dal (Regd.), , is cited in support.
It is next contended that the question as to the applicability of Chapter XX-C should and ought to have been raised by the Central Government/ appropriate authority at the time of consideration of the amalgamation scheme, before the order sanctioning the scheme was made on February 3, 1993. Such a contention not having made at the appropriate time, should not now be permitted to be raised as otherwise it would reduce the notice required to be given under Section 394A to an empty ritualistic formality and rob the said section of its true purpose.
In order to appreciate the rival contentions, it is necessary to understand the scheme of Chapter XX-C. Section 269UC provides that, notwithstanding anything contained in the Transfer of Property Act, 1882, or any other law for the time being in force, no transfer of any immovable property in an area where the Chapter applies shall be effected if its value exceeds rupees ten lakhs, unless a written agreement for transfer is entered into between the transferor and transferee, in accordance with Sub-section (2), at least four months in advance of the intended date of transfer. The section also requires the agreement between the parties to be reduced to writing in the prescribed form, giving the particulars and verified in a prescribed manner and furnished to the appropriate authority within the prescribed time. The prescribed form of declaration is Form No. 37-I. Section 269UD of the Income-tax Act empowers the appropriate authority to make an order for the purchase by the Central Government of the immovable property involved. Upon such an order being passed, the property vests in the Central Government by virtue of Section 269UE. Failure to file a declaration in Form No. 37-I is declared to be an offence under Section 276AB. The efforts of the fifth respondent were concentrated on emphasising the term "apparent consideration" defined in Section 269UA. This expression, in relation to immovable property, is separately defined with respect to incidents of sale, exchange, lease, rent. The term "transfer" is also defined in Clause (f) of Section 269UA in wide and general terms. Put in a nutshell, the argument of the appropriate authority is that the transaction by which the two companies, namely, the sixth and the ninth respondents were amalgamated, amounted to a "transfer" within the meaning of Clause (f) of Section 269UA and that the "apparent consideration" for the transfer was the consideration indicated in Clause (11) of the scheme itself and it being far in excess of rupees ten lakhs, there was an obligation to file a declaration in Form No. 37-I, and by reason of failure to do so, the consequences of application of Chapter XX-C could not be avoided.
Mr. Tulzapurkar, learned counsel for the sixth and the ninth respondents, strongly urged that Chapter XX-C of the Income-tax Act, 1961, is not intended to apply to transfers effected under orders of a court pursuant to Sections 391 to 394 of the Companies Act, since the object of Chapter XX-C is to prevent evasion of tax or undervaluation of immovable property when it is transferred by act of parties. He cited the judgment of the Supreme Court in C. B. Gautam v. Union of India , wherein the Supreme Court has traced out the legislative history of Chapter XX-C. Though the Supreme Court was primarily concerned with the challenge to the constitutional validity of the provisions contained in Chapter XX-C, while upholding the constitutional validity, the Supreme Court pointed out that :
(a) the provisions of this Chapter are attracted only when there is a significant undervaluation of the property to be sold with the intention of evading tax ;
(b) the provision made for compulsory purchase can be effected only for reasons which are germane to the object of Chapter XX-C, namely, to overcome attempts at evasion of tax ; and
(c) the provisions of Chapter XX-C are not intended to affect parties unconnected with tax evasion.
It is contended that a situation of amalgamation takes place under the direct supervision of the company court, after notice to the Central Government, and, therefore, it is not a situation in which there could be any tax evasion. Consequently, it is urged that the provisions of Chapter XX-C would not be attracted.
It is next contended that the provisions of Chapter XX-C would apply only to cases of "tranfer" as defined by Clause (f) of Section 269UA. A scrutiny of the definitions of "apparent consideration" given in Clause (b) and "transfer" given in Clause (f) would unmistakably indicate that the trans-
fers to which the provisions of Chapter XX-C are intended to apply, are only transfers under agreements or contractual transfers and not statutory transfers or transfers effected by orders of the court or by operation of law. In a situation of amalgamation, the transfer is not by way of sale, exchange, lease or rent so as to fall within Section 269UA. Further, the process by which the land in question stood vested in the transferee-company by virtue of the amalgamation order, would not answer the description of "immovable property" within the meaning of Clause (d)(ii), nor does it answer the description of "transfer" as defined in Clause (f)(ii) of Section 269UA of the Income-tax Act. (See in this connection Sailendra Kumar Ray v. Bank of Calcutta Ltd. [1948] 18 Comp Cas 1 (Cal) and Suhti-yanidhi (Virudhunagar) Ltd. v. A.R.S. Subrahmanya Nadar [1951] 20 Comp Cas 214 (Mad) [FB] and Telesound India Ltd., In re [1983] 53 Comp Cas 926 (Delhi)). In Sailendra Kumar Ray's case [1948] 18 Comp Cas 1, the Calcutta High Court held that in a situation of amalgamation even if it can be said that there was a transfer of asset, the transfer was not by way of an assignment but by the order of the court backed up by the force of a statutory provision and by operation of law. In Sahayanidhi's case [1951] 20 Comp Cas 214 (Mad) [FB], the Madras High Court reiterated this proposition. In Telesound's case [1983] 53 Comp Cas 926 (Delhi), it is held that as amalgamation has its origin in a statute and is statutory in character, the transfer and vesting is by operation of law.and not an act of the transferor-company, nor an assignment by it, but is the result of a statutory instrument. In J. K. (Bombay) Pvt. Ltd. v. New Kaiser-I-Hind Spinning and Weaving Co. Ltd. [19671 2 Comp LJ 272, this court cited with approval the decision of the English Court in Re Garner Motors Ltd. [1937] 1 All ER 671 (Ch D) and held that a scheme of amalgamation has statutory operation when sanctioned by the company court under the relevant provisions of the Companies Act and is distinct and different from a mere agreement signed by the necessary parties. Even if the scheme is approved by all concerned parties by consensus, merely because it is so agreed upon, the court is not obliged to put its imprimatur on it. The court has the discretion and power to reject a scheme even if all the shareholders and creditors have agreed to it. But, once the scheme is scrutinised by the company court and sanctioned by an order made by it under Section 391 of the Companies Act, it ceases to retain the character of contract and operates by force of the statute. This judgment was considered by the Supreme Court in appeal in J. K. (Bombay) Pvt. Ltd. v. New Kaiser-I-Hind Spinning and Weaving Co. Ltd. [1970] 40 Comp Cas 689, and the Supreme Court reiterated that once a scheme becomes sanctioned by the court, it ceases to operate as a mere agreement between the parties and becomes binding on the company, the creditors and the shareholders and has statutory operation by virtue of the provisions of Section 391 of the Companies Act. Such a scheme sanctioned by the company court is statutorily binding even on the creditors and shareholders who might have dissented from it or who might have opposed its being sanctioned. It, therefore, has the statutory sanction in that sense. The Supreme Court also approved the observations in Re Garner Motors Ltd. 11937] 1 All ER 671 (Ch D), while coming to this conclusion. The observations of the Calcutta High Court in House of Labourers Ltd. v. Comilia Banking Corporation Ltd., AIR 1937 Cal 381, are to similar effect.
There is overwhelming authority of precedents suggesting that when an amalgamation takes place, the transfer of assets takes place by the force of the company court's order and/or by operation of law ; it ceases to be a contractual or a consensual transfer. The contention, therefore, is that Chapter XX-C is not attracted to such a transfer by operation of law. This contention has substance and needs to be upheld.
It is alternatively contended by counsel for the sixth and the ninth respondents that Section 269UA is not intended to apply to all types of transfers, but only to some particular types of transfers as there is no reference therein to a transfer consequent upon an amalgamation scheme. Hence, it is contended that a transfer consequent upon amalgamation falls outside the sweep of Section 269UA. In order to drive home this point, learned counsel drew our attention to Section 2(1B) of the Income-tax Act, 1961, which defines the expression "amalgamation". Sections 45 and 47 of the Income-tax Act which deal with capital gains arising upon a transfer of a capital asset, expressly exclude a situation of amalgamation for the purposes of capital gains. Similarly, Section 45 of the Gift-tax Act, 1958, provides that no gift-tax will be leviable in a situation of amalgamation. The term "amalgamation" under the provisions of the Gift-tax Act has the same meaning as in Section 2(1B) of the Income-tax Act. It is, therefore, contended that, in an amalgamation, there is neither any sale, nor any exchange of any immovable property, nor any lease thereof. (See in this connection CIT v. Rasiklal Maneklal (HUF) .
It is true that in a case of amalgamation there is a share exchange ratio prescribed according to which the shareholders of the transferor-company would be entitled to the shares of the transferee-company. This, however, does not make it a situation of exchange of immovable property, or relin-quishment of any right to immovable properly so as to make the transaction amenable to Section 269UA of the Income-tax Act. There is neither sale nor purchase in a case of amalgamation. Section 54 of the Transfer of Property Act defines "sale" as a transfer of ownership in exchange for a price, the "price" being defined in Section 2(10) of the Sale of Goods Act as any consideration paid for sale of the goods. In CIT v. Motors and General Stores (P.) Ltd. , it was pointed out by the Supreme Court that the presence of money consideration is an essential element in a transaction of sale. Tested by this yardstick, it would appear that in an amalgamation no consideration in any form-much less in the form of money--flows from the transferee-company to the transferor-company, which was the erstwhile owner of the assets. The shares are issued by the transferee-company, not to the transferor-company, but to the shareholders of the transferee-company, who must necessarily be treated as distinct from the transferor-company itself. The shareholders of the transferor-company could not be deemed in law to be the owners of the assets of the transferee-company, nor can they be said to have held any interest in the assets of the transferee-company. (See in this connection Bacha F. Guzdar v. CIT ). Right from the time of Salomon's case [1897] AC 22 (HL) a company has always been treated as a separate and distinct juristic person with a personality of its own different from that of its shareholders. No shareholder can legitimately claim to have an interest in any of the properties or assets held by the company. The judgment of the Supreme Court in Accountant and Secretarial Services Pvt. Ltd. v. Union of India, , was pressed into service to contend that a bank constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, though materially controlled by the Central Government, has a distinct personality of its own and its property cannot be said to be the property of the Union of India. Hence, it is contended that by the act of amalgamation, there was no sale of any assets by the transferor-company (the sixth respondent) to the transferee-company (the ninth respondent) in the amalgamation. Thus, it is urged that there being no sale or exchange or lease of immovable property in the case of amalgamation, the transfer of the assets of the sixth respondent to the ninth respondent does not fall within the ambit of Chapter XX-C of the Income-tax Act, 1961.
Mr. Tulzapurkar referred extensively to the provisions of Chapter XX-C of the Income-tax Act and pointed out that the transfer on an amalgamation cannot fall within the sweep of Section 269UA of the Income-tax Act even if we were to consider the extended definitions of "immovable property" within the meaning of Clause (d)(ii) and "transfer" as defined in Clause (f)(ii) of Section 269UA for the following reasons :
(a) there is no acquisition of shares by the transferee-company in the case of amalgamation and, therefore, neither is the case one of "immovable property" as defined in Clause (d)(ii) nor is it a situation of "transfer" as defined in Clause (f)(ii) ;
(b) in a situation of amalgamation, the transferee-company does not acquire any shares giving to it the right of enjoyment of any property. The shares, on the other hand, are issued by the transferee-company to the shareholders of the transferor-company ;
(c) acquisition of shares by the shareholders of the transferor-company does not enable them to acquire the assets of the amalgamated com-
pany, nor can they be said to enjoy any property or asset of the amalgamated company.
Hence, it is contended that a transfer of assets pursuant to a scheme of amalgamation sanctioned by the court, neither falls within the ambit of "immovable property" as defined in Clause (d)(ii) of Section 269UA, nor amounts to a "transfer" within the meaning of Clause (f)(ii) of Section 269UA of the Income-tax Act.
"Apparent consideration", as defined in Clause (b) of Section 269UA of the Income-tax Act, is an inalienable factor which must be reckoned within the application of Chapter XX-C for if the appropriate authority is satisfied that there is undervaluation, then it is empowered to purchase the property at the apparent consideration. In a situation of amalgamation, there is no consideration--apparent or otherwise--nor is it payable in respect of any specific immovable property. In Li Taka Pharmaceuticals Ltd. v. State of Maharashtra [1998] 91 Comp Cas 871, this court pointed out that when an amalgamation takes place what is transferred is a going concern and not the assets and liabilities separately. Consequently, while assessing stamp duty this court was of the view that the concerned authority has to levy duty only on the basis of the price of the shares allotted to the shareholders of the transferor-company, or other consideration if paid, and not by separately valuing the assets and the liabilities. Thus, when an amalgamation takes place, there is no sale or exchange of individual assets of one company for another. Consequently, it cannot be said that there is consideration paid for transfer of any particular asset of the transferor-company. Even if the assets of the transferor-company include items of immovable property, for the purposes of valuation and amalgamation, they must be treated as movable properties. In Malabar Fisheries Co. v. CIT , in a situation of dissolution of assets of the partnership firm, the Supreme Court held that there is no transfer of assets involved upon dissolution of the partnership and distribution of its assets. To similar effect is the view of the Supreme Court in CIT v. Dewas Cine Corporation and CIT v. Juggilal Kamalapat . In both the judgments, the Supreme Court has taken the view that the allotment of property of the firm upon its dissolution does not amount to sale. In Addanki Narayanappa v. Bhaskara Krishnappa, , the Supreme Court has specifically observed that even if the assets of the dissolved firm include immovable properties, for the purposes of their allotment amongst partners they must be treated as movable property. Thus, it is contended that an amalgamation falls outside the purview of Section 269UA of the Income-tax Act, 1961.
It is then urged that, in order to attract the provisions of Chapter XX-C of the Income-tax Act, there must exist an "agreement" within the meaning of Section 269UC of the Income-tax Act. Section 269UC speaks of an "agreement" as a final, concluded and binding agreement between the parties. The submission is that a scheme of amalgamation, even if agreed to unanimously by the shareholders and creditors, does not attain the character of a final, binding and concluded agreement as provided under Section 269UC of the Income-tax Act. The reason for this is simple for until sanctioned by the court, a scheme for amalgamation is inchoate and without effect. It becomes effective only upon sanction by the court and that too to the extent sanctioned by it. Thus, whatever might have been in the contemplation of the shareholders and creditors agreeing upon a scheme of amalgamation, what is enforceable in law is only that portion of the scheme which is sanctioned by the court. But for the sanction of the court, the scheme would remain wholly unenforceable, consequently, it does not answer the description of the expression "agreement" contemplated under Section 269UC of the Income-tax Act.
It is contended that a scheme of amalgamation could not amount to an "agreement" within the meaning of Section 269UC of the Income-tax Act for another reason also. Under Section 269UC, once an agreement has been entered into in the prescribed form, i.e., Form No. 37-I, and is filed with the appropriate authority, no modification or alteration in any of its terms is permissible. Again, the agreement itself has to be filed within the period stipulated in Sub-section (1) of Section 269UC. In the case of an amalgamation scheme, it is not possible to postulate the date on which the transfer would become effective since the parties have no control on the date on which the sanctioning order would be made by the court. Thus, there is no way of complying with the period within which such a document is to be filed. Secondly, the scheme of amalgamation, though unanimously agreed to by the shareholders and creditors, may be rejected by the court or approved only in part while making the sanction order. If such a scheme of amalgamation were to be considered as an "agreement" within the meaning of Section 269UC, it would mean that, after the declaration has been filed in Form No. 37-I, it may cease to exist or may be varied in material particulars as a result of the sanction order. This situation strongly militates against a scheme being considered as an "agreement" within the meaning of Section 269UC in the submissions of learned counsel. It is urged that if at all the Legislature intended that Chapter XX-C of the Income-tax Act, 1961, should apply to an amalgamation scheme, then it would have made an express provision for such a situation. The absence of reference to an amalgamation scheme is not accidental, but intentional, since the Legislature did not intend an amalgamation scheme to be covered by the provisions of Chapter XX-C, even if there is consequential transfer of immovable property.
The valuation put on the shares cannot be treated as "apparent consideration" for the purposes of transfer. If the valuation of the shares pro-
posed to be issued upon amalgamation is below the stipulated limit, then obviously the provisions of Chapter XX-C would not apply. However, while sanctioning the scheme, the company court may modify the scheme and provide for issuance of a larger number of shares upon amalgamation. When this happens, then, for the first time, it would be the stage when the actual valuation or the consideration becomes known. Thus, the consideration would be known at the stage of sanctioning of the amalgamation scheme and it would be practically impossible for anyone to comply with the provisions of Section 269UC of filing the declaration in Form No. 37-I in advance, or for seeking" the no objection certificate from the appropriate authority.
Chapter XX-C contemplates payment of consideration by the transferee to the transferor. In a scheme of amalgamation, no consideration is paid by the transferee-company to the transferor-company, but shares are issued to the shareholders of the transferor-company who were not the legal or beneficial owners of the assets transferred to the transferee-company upon amalgamation. (See in this connection Bacha F. Guzdar v. CIT . This also militates against the contention advanced by the fifth respondent.
Chapter XX-C provides for compulsory purchase of immovable property sought to be transferred, in the event of undervaluation, at the price indicated as "apparent consideration". This also cannot be fulfilled in a case of amalgamation, since there being no transfer of individual assets for agreed consideration, it is not possible to stipulate as to what consideration, apparent or actual, was for transfer of any individual asset of the transferor-company. Thus, there is no way of knowing whether there is undervaluation, as contemplated by Chapter XX-C, in respect of a particular property.
Under the scheme of Chapter XX-C, payment at the rate of apparent consideration is to be paid in the event of compulsory purchase to the owner, i.e., the transferor. Once an amalgamation scheme is sanctioned by the court, the transferor-company ceases to exist from the date on which the scheme comes into force and loses its identity. (See in this connection Saraswati Industrial Syndicate Ltd. v. CIT ). Consequently, a situation of identifying the transferor and paying it the purchase price equivalent to the apparent consideration by the Government, can never arise.
There is no provision in Section 269UE(1) and (6) of the Income-tax Act for vesting of the property in the Central Government free from all liabilities and obligations. An elementary facet of the amalgamation scheme is that, along with the transfer of assets, all liabilities are also transferred to the amalgamated company or the transferor-company. It is difficult to take the view that the Central Government, in the event of its becoming a purchaser under Chapter XX-C, would have to meet and discharge all the obligations and liabilities of the transferor-company. That would be a situation which could arise if we accept the contention of the appropriate authority that an amalgamation is amenable to the provisions of Chapter XX-C of the Income-tax Act.
Section 269UE(6) of the Income-tax Act provides that when the Central Government makes an order for compulsory purchase of the rights referred to in Sub-clause (ii) of Clause (d) of Section 269UA, the immovable property shall vest in the Central Government and place the Central Government in the same position in relation to such rights as the person in whom such right would continue if such an order had not been made. The consequences in the case of an amalgamation are somewhat startling. This would mean that in respect of an immovable property as defined in Sub-Clause (ii) of Clause (d) of Section 269UA, the Central Government would step into the shoes of the transferee-company. This in turn means that the Central Government is required to discharge all obligations which the transferee-company would have to do. These may include obligations like issuing of shares to the shareholders of the transferor-company or taking over the transferor-company as a going concern including workers, their liabilities, contracts, obligations, movables and so on. For this reason also, a situation of amalgamation does not appear to be intended to be covered by Chapter XX-C of the Income-tax Act.
Thus, a conspectus of the provisions contained in Chapter XX-C of the Income-tax Act, 1961, and the probable consequences which might result if it were to be held that the Chapter applies to amalgamation schemes, are dissuasive enough not to accept the contention of the appropriate authority in this regard.
The contention urged by the petitioners as well as the fifth respondent, appropriate authority, that a no objection certificate under Chapter XX-C is a condition precedent to the company court considering the scheme for amalgamation also does not appear to be tenable for several reasons. First, whenever the Legislature wanted a sanction order to be subject to some condition precedent, the Legislature has so provided expressly. (See in this connection provisions of Sections 23 and 24 of the Monopolies and Restrictive Trade Practices Act prior to the deletion of these Sections from the Act by amendment of 1991). While interpreting a statute, the court has to consider the legislative habit. The legislative habit indicates that where the Legislature intended a sanction to an amalgamation scheme was subject to consent by another authority, it expressly provided so. There is no such provision either in Chapter XX-C or in any other provision of the Income-tax Act, 1961. This is a clear indicator of the negative intention. The sixth respondent has cited an unreported judgment of this court (per Tipnis J.) dated November 10, 1994, in Judges Summons No. 346 of 1994 in Com-
pany Application No. 118 of 1994, connected with Company Petition No. 370 of 1994, where the contention urged in opposition to an amalgamation scheme was that the court should not consider an amalgamation scheme which was likely to result in an unlawful assignment of tenanted premises of the transferor-company to the transferee-company. This court rejected the contention on the ground that whether the scheme of amalgamation in fact and in law results in an unlawful assignment, is a question which can only be determined after amalgamation before the appropriate forum in proper proceedings and does not arise for consideration by the company court at the stage of giving sanction to the scheme for amalgamation. (This order of the learned single judge was virtually affirmed since an appeal thereagainst was summarily dismissed on November 24, 1994, by the Division Bench of this court). To similar effect are the observations of the Supreme Court in General Radio and Appliances Co. Ltd. v. M. A. Khn-der [1986] 60 Comp Cas 1013. It is, therefore, contended that, by conjuring up consequences that may arise after amalgamation, it is not open to the company court, which is the forum constituted under a special Act, namely, the Companies Act, to reject or refuse to sanction a scheme of amalgamation by reckoning factors which are non-germane and irrelevant for consideration under the provisions of Sections 391 to 394 of the Companies Act. Hence, it is contended that a no objection certificate by the appropriate authority under Chapter XX-C is not a prescribed condition precedent under Section 391 of the Companies Act and, therefore, is a factor wholly irrelevant, immaterial and non-germane for consideration at the time of sanctioning of the amalgamation scheme. In these circumstances, we are of the view that the contention of the petitioner, that the company court was obliged to suo motu issue a notice to the appropriate authority and seek its no objection certificate under Chapter XX-C as a condition precedent to sanctioning the amalgamation scheme, has no statutory basis and cannot be accepted.
Finally, it is urged on behalf of the sixth and the ninth respondents, that even assuming Chapter XX-C is held to apply to a transfer upon amalgamation, the transfer effected does not become void or non est merely for non-compliance with the provisions of Chapter XX-C, or Section 269UC in particular. There is no provision in the entire Chapter XX-C providing that a transfer becomes void or non-est for non-compliance with any of the provisions contained therein. If at all the Legislature had so intended, there would have been a specific provision as contained in Section 281 of the Income-tax Act. Thus, the only consequence of failure to file a declaration in Form No. 37-I would be a prosecution under Section 276AB and non-registration of a document by virtue of Section 269UL, of the Income-tax Act.
Even assuming that the petitioners are entitled to urge the contention that Chapter XX-C applies to the transfer of the concerned land as a consequence of the amalgamation scheme being sanctioned by the company court, upon careful consideration of the detailed provisions of Chapter XX-C of the Income-tax Act, we are inclined to take the view that Chapfer XX-C is not intended to apply to situations of transfer of immovable property consequent upon an amalgamation scheme being sanctioned by an order of the court. Once the scheme is sanctioned, it has the imprimatur of the court and operates by the combined force of the statute and the court's authority. The scheme as such ceases to be in the realm of an "agreement" as contemplated under Chapter XX-C of the Income-tax Act. We are, therefore, of the considered view that Chapter XX-C could not have applied to the transfer of the concerned plot at Bandra from the sixth respondent to the ninth respondent as a consequence of the scheme of amalgamation sanctioned by the company court by its order dated February 3, 1993.
The conclusions which we have arrived at on statutory interpretation also appear backed by the following practical considerations :
(a) It is significant that the appropriate authority has not bothered to take action under Section 276AB of the Income-tax Act, 1961. Nor has it initiated any other action in connection with the aforesaid transfer for over such a long period of time.
(b) We can take judicial notice that several schemes of transfer are sanctioned every day by the company judge and no one seems to have seriously suggested, argued or held that Chapter XX-C of the Income-tax Act, 1961, would apply to a situation of sanction of an amalgamation scheme. The authorities entrusted with the administration of the statute (i. e., the Income-tax Act) also do not appear to have interpreted the provisions of Chapter XX-C to mean what is being contended now before us. By the principle of contemporanea expositio, the practical manner in which the provisions of Chapter XX-C have been interpreted over a considerably long period need not be upset by this court, in our judgment (see in this connection Raymond Synthetics Ltd. v. Union of India [1992J 73 Comp Cas 762 (SC) and Suresh Nathan (N.) v. Union of India, .
(c) If this court were to accept the contention of the petitioners and interpret the provisions of Chapter XX-C in the manner suggested by the petitioners, a large number of innocent persons who have been parties to amalgamation schemes would stand exposed to criminal prosecutions under Section 276AB of the Income-tax Act. The appropriate authority has not placed any material before us that in any past case of sanction of an amalgamation scheme, they had insisted upon filing of a declaration in Form No. 37-I as required by the provisions of Section 269UC, nor have they placed any material to show that any such parties have been subjected to criminal prosecutions under Section 276AB for failure to do so.
Thus, we are of the considered view that the contention of the petitioners, which was enthusiastically echoed by the fifth respondent, appro-
priate authority, that the transfer of the concerned land from the sixth to the ninth respondent under the scheme of amalgamation would be covered by the provisions of Chapter XX-C, though novel and ingenious, must be rejected.
History of litigation :
Mr. Tulzapurkar, learned counsel for the sixth and the ninth respondents, urged that the history of the litigation spanning about twenty long years covering several writ petitions and appeals from this court to the Supreme Court, back and forth, the final decision of the Supreme Court in S. N. Rao's case, and the sword of Damocles hanging over this writ petition in which the petitioners have urged contention after contention, taken up by amendment after amendment, even though all contentions of the petitioners were rejected at all stages by all courts, indicates that there is utter lack of bona fides on the part of the petitioners who claim to be pursuing this litigation in public interest. He also urged that, pursuant to the sanctioned plans, whose validity was upheld by the Supreme Court in S. N. Rao's case, , the sixth and the ninth respondents have acted lawfully and in full compliance with all legal requirements and the applicable buildings rules and regulations. Obviously, this court did not injunct the said respondents from continuing with the construction which started in 1984, despite repeated clamour for injunction orders by the petitioners. Perhaps being possessed with the premonition that this writ petition has no substance, this court merely made an order that the sixth and the ninth respondents may continue the construction at their risk upon filing an undertaking that they would claim no equities in the matter if the construction was allowed to continue. Mr. Tulzapurkar urges that the construction is complete and has resulted in a multistoreyed seven star hotel, which was conceived way back when the plans were submitted for sanction and there is no reason whatsoever to interfere with its functioning. On the other hand, he urges that the history of litigation from 1974 onwards, the repeated contentions and challenges in all available fora by the petitioners, contentions urged as to the applicability of Chapter XX-C of the Income-tax Act, 1961, taken together, suggest that there may be "something more than what meets the eye" as observed by the Supreme Court in Sachindanan Pandey's case, .
There appears to be quite some legitimacy to the grievance made by learned counsel for the sixth and the ninth respondents. It appears to us that, what may have started as a bona fide public interest litigation, soon degenerated into a case of private witch-hunting. If at all the petitioners were interested in pursuing the litigation as a public interest litigation, after the observations of the Supreme Court in S'. N. Rao's case, which we have reproduced above, the matter should have been put to rest. The annoying persistence with which the petitioners have pursued this writ petition certainly gives credence to the contention of learned counsel for the sixth and the ninth respondents that this writ petition was intended only as a PIL meaning "persecution interest litigation" and not PIL meaning public interest litigation.
Though, this writ petition was seriously taken up for final hearing on June 30, 1998, and the hearing continued from July 1, 1998, to August 5, 1998, and the petition was finally reserved for judgment on August 6, 1998, the judgment could not be delivered earlier on account of several overriding reasons beyond our control. At one stage, following the dicta of the Supreme Court in Bhagwandas Fatechand Daswani v. H. P. A. International, , we even suggested to the parties and counsel that we may treat this matter as not part-heard and set it down for re-hearing. However, we are glad to note that the parties and their counsel reposed full faith in our ability to remember and decide the facts and the legal issues on the basis of our detailed notes supplemented by the efficient written submissions filed by the parties. At their request, we have decided the matter ourselves, though after a span of twenty-two months. While regretting the unavoidable delay in delivering our judgment, we express our gratitude to learned counsel on both sides who have with consummate skill rendered invaluable help in unravelling several knotty and complicated legal issues. At the end of the day, in our considered judgment, the writ petition has no merit and must fail.
In the result, the writ petition fails and is hereby dismissed. The petitioners shall pay a sum of Rs. 20,000 (rupees twenty thousands only) each to the first, second, fourth, sixth and ninth respondents as costs.
In view of the dismissal of the writ petition, all interim orders are vacated.
Issuance of certified copy expedited.