Karnataka High Court
Streamline Finvest vs Chief Commissioner Of Income Tax on 9 December, 2005
Equivalent citations: (2006)200CTR(KAR)537, [2006]281ITR276(KAR), [2006]281ITR276(KARN), 2006 (2) AIR KAR R 285, 2006 (2) AIR KAR R 286
Author: D.V. Shylendra Kumar
Bench: D.V. Shylendra Kumar
ORDER D.V. Shylendra Kumar, J.
1. These writ petitions (are) by a person who was the highest bidder in an auction sale conducted by the IT authorities who had put up for sale several parcels of properties they had acquired by pre-emptive purchase under Chapter XX-C of the IT Act, 1961. In terms of public auction notice published in the Sunday Times of India on 28th July, 1996 indicating the sale of nine items of the properties mentioned therein to take place on 21st Aug., 1996 at conference hall, 2nd Floor, C.R. Buildings, Queens Road, Bangalore-1, amongst nine properties for sale on that day, the petitioner herein was the highest bidder in respect of the property figuring at serial Nos. 5 and 9. The petitioner had offered highest price participating in the auction bid in terms of the sale conditions which has been indicated in the notification.
2. It is the plea of the petitioner that the petitioner had in respect of these two properties namely, No. 4/2-B, Hoodi Village, Mahadevapura Hobli, Bangalore South Taluk and Sl. Nos. 35 to 39 (Old No. 100), Mayamgutta, B. Narayanapura K.R. Pura Hobli, Bangalore, had deposited a sum of Rs. 9,80,300 on 24th Aug., 1996 and Rs. 82,94,000 on 9th Oct., 1996 corresponding with WP No. 39252/2002 with reference to property at SI. No. 9 of Annex. B of this writ petition and with reference to property at SI. No. 5 i.e., Sy. No. 4/2-B, Hoodi Village, Mahadevapura Hobli, Bangalore South Taluk subject-matter of WP No. 8931/2003. It is also averred that the petitioner did not deposit any further amounts thereafter i.e., did not remit the balance sale price as was required in terms of auction sale conditions and even otherwise, as a buyer at an auction sale is required to deposit after having bid the amount offered the highest price and having so eliminated the other bidders from competition.
3. It is thereafter, several developments have taken place which began as a consequence of non-deposit of balance sale consideration by the petitioner.
4. The version of the petitioner is that the properties which were sought to be conveyed to the petitioner were not precisely in terms of the description as was found in the auction sale publication and thereafter, the petitioner was not willing to deposit/pay the balance sale consideration, as they found that the petitioner was not getting the property in terms of the description as had been indicated in the auction sale publicity notice and further the pamphlet that had been issued by the Chief CIT, Bangalore, vide Annex. C which had given the details of the properties and the terms and conditions which had been strictly adhered to by the respondent. It is averred that for this reason the petitioner had every justification in not paying the balance amount and, therefore, had withheld the balance amount as the respondent was not in a position to convey the very property for which the petitioner had bid.
5. Nevertheless, in view of the non-deposit of the balance sale consideration, the respondent invoking terms and conditions, issued notice dt. 17th Nov., 1997 proposing the forfeiture of the amount that the petitioner had deposited till then and the petitioner promptly questioned the legality of this notice by filing petitions in WP Nos. 34198-99/1997. The writ petitions came to be disposed of on 16th June, 1998, whereupon the petitioner pursued matter in Writ Appeal Nos. 2673 and 2674 of 1998 which were also dismissed in terms of the order dt. 4th Jan., 2002 inter alia, observing that it is open to the petitioner to approach the authorities/civil Court and (it is) not necessary for the Court to decide such disputed facts, etc.
6. However, this Court observed that it is open to the petitioner to give representation to the respondents who may consider the same.
7. The petitioners did give such representation on 22nd Feb., 2002 and the CIT on consideration of the same, rejected the representation in terms of the order dt. 21st March, 2002, copy at Annex. J. This was followed up by forfeiture order dt. 1st May, 2002 forfeiting the total amounts of Rs. 9,80,300 and Rs. 82,94,000 which were deposited by the petitioner in respect of two properties for violation of terms of sale conditions and for non-payment of the balance sale consideration, etc. Aggrieved by the forfeiture order, these present writ petitions are filed.
8. Notices had been issued to the respondent whereupon the respondent has entered appearance through his standing counsel. The respondent has also filed the statement of objections denying the petition averments and sought for dismissal of the writ petitions in terms of the statement of objections dt. 16th Oct., 2003 supported by an affidavit of the Addl. CIT.
9. Several contentions have been raised on behalf of the petitioner by Sri K.G. Raghavan and Sri Promod Nair, learned counsel appearing for the petitioner.
10. It is firstly contended that the forfeiture order is blatant arbitrary action on the part of the respondent, that it is. an order without jurisdiction, that the respondent has no statutory or other power to pass orders of this nature, that the order is a typical example of unfair action on the part of the State; that in the facts and circumstances of the case, the orders also result in unjust richment in favour of the State at the cost of the petitioner particularly as the properties were subsequently sold again through the public auction sale having fetched higher amount than the amounts tendered by the petitioner. It is, therefore, urged that the respondents having realised better amount than what had been offered by the petitioner, the impugned order is not sustainable; that legally there is no justification for forfeiting the huge amount like this, that the petitioner was fully justified in not paying the sale price as the respondent was not in a position to convey the very properties which had been advertised for sale and based on which the petitioner offered its bids. It is further urged that the auction sale having not resulted in any contract, the respondents could not have possibly called in aid the authorisation issued in its favour by the President of India, for the purpose of Article 329 of the Constitution of India and there being no concluded contract as between the petitioner and the State, the respondent could not have passed an order of forfeiture for which they have no other authority to fall back on; that the impugned orders of forfeiture being in the nature of penalty is in violation of law and when such is the legal position of law, the conduct and action on the part of the State is most unfair and at any rate, the State should not be permitted to take advantage of an unfair sale condition assuming that it was so notified as part of sale conditions that the State cannot gain for itself at the cost of the persons like the petitioner and, therefore, the orders require to be quashed by this Court even in exercise of writ jurisdiction under Articles 226 and 227 of the Constitution of India and the writ petition should be allowed and the respondent is directed to refund the amount after deducting incidental charges that the respondent might have incurred for conducting the sale, etc.
11. In support of such submissions, the learned counsel for the petitioner has placed reliance on the decisions of the Supreme Court in the case of Bikraj Jaipuria v. Union of India , in the case of K.P. Chowdury v. State of Madhya Pradesh and Ors. , and AlR 1962 SC 118. It is contended that the CIT has no power to pass an order like the forfeiture order under the provisions of Chapter, XX-C of the IT Act, 1961, nor the said power can be attributed to any other statutory provision, having regard to the ratio laid down by the Supreme Court in the case of Bikraj Jaipuna vs. Union of India (supra); the power cannot also be attributed to Article 329 particularly as there was no concluded contract in terms of provisions of Article 329 of the Constitution of India in the absence of there being no written contract, the contract having been not signed by either of the parties and also not a contract in the name of President of India.
12. In support of the submission that there was no concluded contract and in the absence of contract, no adverse action could have been taken against the petitioner as one of passing forfeiture orders, the learned counsel for the petitioner has placed reliance on these decisions of the Supreme Court and submitted that the power for passing the order cannot be inferred on the premise that there was an implied contract between the petitioner and the respondent in view of the terms and conditions of the sale as had been notified and there cannot be a contract by inference for the purpose of Article 329 of the Constitution of India and if this is legal and constitutional position, then there is no contract in the eye of law and in the absence of a contract in the eye of law in terms of the provisions of Article 329 of the Constitution of India, the CIT purporting to be an agent or representative of President, could not have passed any order much less the order of forfeiture which is impugned in these writ petitions.
13. The respondents have in their counter pointed out that the entire action on the part of the respondent starting from the auction sale notice upto the point of passing the forfeiture order, is fully in accordance with the terms and conditions which were fully to the knowledge of the petitioner; that the petitioner having participated in the auction sale, accepting the terms and conditions as indicated, being aware of the same and having defaulted, the forfeiture order is only consequential to such fault and they cannot turn round and complain or avoid such consequences as the petitioner himself is the cause for the same and that no fault can be placed at the doors of the respondents; that for a default committed by the petitioner itself, the petitioner cannot question the legality of the forfeiture order either as an order in violation of Article 14 or as one without authority of law. Mr. Seshachala, learned counsel for the respondent, argued that the present writ petition is on the other hand not tenable nor merited. That the petitioner though was in fact highest bidder, failed to deposit amount and has indulged in initiating litigation instead and, therefore, the petitions deserve to be dismissed.
14. It is also the submission of Mr. Seshachala on behalf of the respondent that in the light of the order that the petitioner had suffered in the earlier round of litigation particularly the order in the earlier writ petition as affirmed by the Division Bench in the writ appeal, the petitioner could question the order of this nature, if at all by filing a suit for such purpose and not by filing repeated writ petitions and that the earlier order precludes the petitioner from canvassing the same contentions yet again in these writ petitions. Learned standing counsel has also submitted that the act on the part of the CIT is well within the jurisdiction. The CIT who had been authorised by the President of India for not only entering into the contract of sale but also for conducting the sale and also the exercise of the power being for the purposes of the Act and being incidental to conducting a sale of this nature, the CIT is well within his jurisdiction in passing the orders of forfeitures as per the terms and conditions of sale and to protect the interest of the Revenue and that the entire proceedings having arisen in the context of the provision of Chapter XX-C of the Act, a provision which has been enacted by the legislature for preventing the evasion of tax liability under the provisions of the IT Act and all actions taken by the CIT being incidental and under such statutory provisions, it can never be said that the act on the part of the CIT including the order of forfeiture is without jurisdiction. The orders are well sustained by the power under the Act and also in terms of the authorisation issued by the President of India under Article 329.
15. Insofar as arguments of arbitrariness is concerned, learned standing counsel has submitted that the petitioner, being a person who had participated in auction, having bid knowing fully well the terms and conditions and consequences of non-deposit cannot now call in aid the ground of arbitrariness to cover up its own defaults, that if at all, the petitioner had any other grievance that could have been made the subject-matter of other proceedings and not by becoming defaulter. The petitioner being defaulter, it is not appropriate for this Court to examine the grievances of the petitioner as the petitioner himself had committed defaults. Such default cannot be made a ground for invalidating the order passed by the respondent which again are passed only in terms of the conditions stipulated earlier which was fully made known by the respondent and within the knowledge of the petitioner.
16. The petitioner is only a person who participated in an auction bid. A person like the petitioner who participates in auction sale, takes his chance. He has no special constitutional right or otherwise, the violation of which the petitioner can complain. Though the order is by a statutory authority like the CIT and under the provisions of IT Act and in terms of authorisation issued by the President of India under Article 329 of the Constitution of India, the terms and conditions governing the auction sale are only the terms and conditions as had been indicated and made known to all participants in the auction sale including the petitioner. The petitioner is not singled out for any unfavourable treatment. A person like the petitioner who participates in the auction sale of this nature and who bids for the properties in an auction sale which was made known to be sale on 'as is where is' condition, certainly takes his chances. The petitioner having bid the highest amount, fails to make good the amount, then the consequences necessarily follow unless it is held that any of the conditions by themselves are bad, illegal, unconstitutional. Insofar as the arguments of arbitrariness or lack of fairness in State action, it does not hold good for the simple reason that in the matter of administering the State largesse, what is needed is that the State should not pick or choose person or deny equal opportunity to any person. Since the petitioner emerged as the highest bidder, if the petitioner does not encash on being a successful bidder, the petitioner has to blame himself and there is nothing either arbitrary or unfair in the impugned orders as the orders are only in consequence with the terms and conditions of the sale. I do not find any substance in the argument for the purpose of characterizing the order either as blatantly arbitrary or as one under which unfair action can be attributed to the State.
17. Sri K.G. Raghavan, learned counsel for the petitioner, vehemently urged that the Court should see the injustice of the matter in the sense the petitioner is being deprived of the huge sum without any justification and, therefore, the reliefs could be extended by examining such question even in the writ jurisdiction. The amount being huge by itself cannot be a criterion for interference. A person doing a business on large scale definitely hazards or invests large amounts. Insofar as the petitioner is concerned, it is nothing but an activity of buying and selling. The forfeiture orders are if at all an incident to such activity of the petitioner and moreover being one attributable to the very conduct, inadequacies of the petitioner, I do not find any injustice in the impugned order. These aspects need not be examined any further.
18. Liberty as indicated in the earlier writ petitions is reserved to the petitioner to make good its case if it can lay a claim, to reclaim from the respondents any part of the forfeited amount, in a manner known to law. To that extent, the liberty is reserved.
19. In all other aspects, these writ petitions do not merit interference in exercise of writ jurisdiction. Accordingly, these writ petitions are dismissed.