Calcutta High Court
Hari Krishna Kanoi And Anr. vs Appropriate Authority And Ors. on 11 September, 1992
Equivalent citations: [1994]207ITR743(CAL)
Author: Ruma Pal
Bench: Ruma Pal
JUDGMENT Ruma Pal, J.
1. The subject-matter of challenge in these proceedings is an order issued by the appropriate authority on June 5, 1987, under Section 269UD(1) of the Income-tax Act, 1961 (referred to as "the Act"), by which a portion of premises No. 2, Ballygange Park Road, Calcutta, has been ordered to be purchased by the Central Government for a sum of Rs. 72,25,086.
2. Premises No. 2, Ballygange Park Road, Calcutta, covers an area of approximately 52 kathas. The owner of the premises is respondent No. 6. The premises were requisitioned on June 17, 1971, for the occupation of the Ministry of External Affairs under Section 3(1) of the West Bengal Premises Requisition and Control (Temporary Provisions) Act, 1947. The Ministry of External Affairs, being respondent No. 5, is paying an amount of Rs. 1,300 per month to respondent No. 6 as occupation charges.
3. On March 20, 1987, an agreement was entered into between the petitioners and respondent No. 6 under which the petitioners agreed to purchase 40 kathas of the premises together with building and out-houses free from all encumbrances but subject to the requisition. The portion of the premises agreed to be purchased by the petitioners has been described as lot 'A' in the agreement and the portion of the premises retained by respondent No. 6 has been described as lot 'B'. The purpose of purchase of lot 'A' was to construct flats.
4. In terms of the agreement, the petitioners were required :
(1) to provide a common passage for free access to the portion of the premises retained by respondent No. 6 (lot B).
(2) to construct free of cost for respondent No. 6, a total constructed area of 5,000 sq. ft. in one building containing ground floor, first floor and second floor in lot B with all fixtures such as, doors, grills, sanitary fittings, electrical wirings, etc., within three years from the date of the sanction of the plan at a cost of Rs. 10 lakhs.
(3) to pay a sum of Rs. 73 lakhs by way of consideration ; Rs. 1 lakh simultaneously with the execution of the agreement, Rs. 31 lakhs within one month of the sanction of the plan and Rs. 41 lakhs on or before the registration of conveyance of lot A.
5. The agreement provided that the petitioners would be entitled to take advantage of the floor area ratio (F. A. R.) of the entire 52 kathas in making constructions on lot A. In addition, the agreement recorded that the agreement had materialised by reason of the good offices and endeavour of one Sandeep Kumar Bazaz and one Jyoti Kumar Poddar (referred to as "brokers"). The agreement provides :
"In recognition of the valuable services rendered by the said Sri Sandeep Kumar Bazaz and Sri Jyoti Kumar Poddar and, in lieu of their remuneration, it has been agreed by and between the parties hereto that the purchasers shall out of the F. A. R. available in lot 'A' construct two self-contained and independent flats or apartments measuring 1,500 sq. ft. each and shall allot and transfer the same in favour of the said Sri Sandeep Kumar Bazaz and Sri Jyoti Kumar Poddar one each free of any monetary consideration within two years from the date of sanction of the plan."
6. The agreement also contained different clauses in the event either party did not carry out its obligations under the agreement.
The petitioners have paid a sum of Rs. 1 lakh to respondent No. 6 as and by way of earnest money in terms of the agreement.
7. On April 2, 1987, a statement of transfer of immovable property was furnished to the appropriate authority under Section 269UC of the Act read with Rule 48L of the Income-tax Rules, in Form No. 37-I. The statement records :
"The total apparent consideration for the transfer of the above property is Rs. 73 lakhs (seventy-three lakhs) + 5,000 sq. ft. constructed area + 3,000 sq. ft. as brokerage (as per agreement)."
8. Again, under Clause 8 of the statement, it has been shown that what was being transferred was the ownership right to the property, that the transfer was by way of sale and that the consideration for the sale was Rs. 73,00,000 + 5,000 sq. ft. constructed area + 3,000 sq. ft. constructed as brokerage (as per agreement enclosed).
9. The statement has been signed by respondent No. 6 as the transferor and the petitioners as the transferees.
10. According to the petitioners, on June 12, 1987, they received the impugned order dated June 5, 1987. In the impugned order, the appropriate authority has held that the apparent consideration stated in the statement was not conclusive and that the brokerage did not form part of the apparent consideration. It was further held that the amount of Rs. 73 lakhs being payable in instalments over a number of years in real terms after discounting the value of future payment would amount to Rs. 62,25,086. The computation for arriving at the discounted value of the cash consideration has been set out in an annexure to the impugned order. It appears that a discounting rate of eight per cent. has been adopted. As far as the construction of 5,000 sq. ft. on lot 'B' was concerned, the appropriate authority have accepted the value put in the agreement on such construction, namely, Rs. 10 lakhs. The sum total of the effective consideration, according to the appropriate authority, therefore, worked out to Rs. 72,25,086.
11. It is recorded in the impugned order that the matter had been referred to the executive engineer to value lot 'A'. The executive engineer, upon a comparison with a transfer of 11 kathas of land with an old building thereon at 56, Gariahat Road, under an agreement dated February 2, 1987, for Rs. 56 lakhs came to the conclusion that the rate per katha of lot 'A' would be Rs. 3.20 lakhs per katha. The executive engineer, thereafter, made deductions on the value of the premises so worked out by reason of: (i) the requisition of the building on the premises, (ii) the fact that 3,000 sq. ft. would have to be delivered by way of brokerage, and (iii) a common passage would have to be provided. He ultimately arrived at a value of Rs. 92.45 lakhs in respect of lot 'A' of the premises.
12. The appropriate authority rejected the valuation of the executive engineer and held that the fair value of the property would be Rs. 110 lakhs. Accordingly, the appropriate authority ordered that the property which was the subject-matter of the agreement be purchased by the Central Government for the sum of Rs. 72,25,086 being the amount equivalent to the amount of the total effective apparent consideration.
13. This writ application was filed on June 24, 1987, and on June 8, 1987, a rule nisi was issued and an interim order was passed restraining the respondents from giving any effect to or taking any step pursuant to the impugned order.
14. On December 16, 1987, respondent No. 6 moved an application for direction on the petitioners to pay a sum of Rs. 73 lakhs being the balance consideration payable under the agreement dated March 20, 1987, within a stipulated period, in default of which the interim order would stand vacated. This application was disposed of by an order dated August 23, 1989, by M.R. Mallik J. By the order dated August 23, 1989, liberty was granted to respondent No. 6 to enter into an agreement for sale of the premises with any other purchaser, but that such sale would abide by the result of the writ petition. Being aggrieved by the order dated August 23, 1989, the income-tax authorities preferred an appeal. The appeal was disposed of on November 30, 1989. By consent of the parties, the order dated August 23, 1989, was set aside and liberty was granted to respondent No. 6 to seek appropriate relief, if available in law, in any appropriate forum.
15. A second application was moved on December 18, 1989, by respondent No. 6 for the same relief. Affidavits have been filed in this application as well.
16. On May 2, 1991, the brokers referred to earlier, filed a writ application challenging the constitutionality of the provisions of Chapter XX-C of the Act and also challenging the impugned order dated June 5, 1987, issued by the appropriate authority under Section 269UD(1) of the Act.
17. All the applications have been heard and are being disposed of by this judgment.
18. Two preliminary objections have been raised by the respondent authorities.
19. It has been stated by them that 59 writ petitions had been filed challenging various purchase orders passed earlier by the appropriate authority in Bombay, Calcutta, Delhi and Madras. All 59 cases were transferred to the Supreme Court of India which passed the following order in Civil Writ Petition No. 2821 of 1986 : Union of India v. C.B. Gautam on May 4, 1987 :
"Having regard to the other cases pending in the different High Courts, we do not think it is necessary to transfer these cases to this court. We think the purpose will be served if the final disposal of those cases is stayed. The High Courts will be at liberty to dispose of any interlocutory application filed before them."
20. It has been urged by the respondent authorities that, in view of the order of the Supreme Court, the application could not be entertained by this court. It is also submitted that the disposal of the application of the petitioners as well as of the brokers will be contrary to the order passed by the Supreme Court. It has also been submitted that the writ should not be heard piecemeal as the order would have to be drawn up under Rules 42 and 43 of the Rules relating to Article 226 of the Constitution of India. It has also been contended that the points urged could not be decided without determining the constitutional validity of Chapter XX-C of the Act.
21. The second preliminary objection raised is that the petitioners had no locus standi to move the writ application. They merely entered into an agreement with respondent No. 6 in respect of lot 'A'. No interest in the property had been created by such agreement. No legal right of the petitioners had been infringed. Reliance has been placed on the following decisions in this connection : State of Orissa v. Ram Chandra Dev, ; Corporation of Calcutta v. Dhirendra Nath Sen ; Narandas Karsondas v. S.A. Kamtam, ; Rusi Jehangir Jeejeebhoy v. O.D. Mohindra and a decision of the Karnataka High Court in Rajata Trust v. Chief CIT [1992] 193 ITR 220.
22. As far as the first objection of the respondent authorities is concerned, I do not think that, by the order in the matter of Union of India v. C.B. Gautam, the Supreme Court had intended to stay even those proceedings relating to Section 269UD which could be disposed of without reference to the constitutional validity of Chapter XX-C of the Act. There is no dispute that the transfer of the 59 petitions took place because of the common challenge in those petitions to the constitutional validity of the provisions of Chapter XX-C of the Act and more particularly of Section 269UD. Although the language of the stay order passed by the Supreme Court in C.B. Gautam's case is widely worded, in my view, what the Supreme Court intended was that the High Courts should not concurrently proceed with the consideration of the validity of the provisions which were to be pronounced upon by the Supreme Court. The Supreme Court itself clarified in a similar stay order in Vinodchandra Chimanlal Shah v. Union of India, , by permitting the High Courts to determine the writ petitions pending before them on the merits of contentions other than the ground of constitutional invalidity of the provisions.
23. That the stay order in C.B. Gautam's case does not debar High Courts from a consideration of petitions on ground other than the constitutional validity of Chapter XX-C is also borne out by the decisions of the various High Courts and the Supreme Court itself.
24. In the case of Rusi Jehangir Jeejeebhoy v. O.D. Mohindra , a Division Bench of the Bombay High Court determined a writ application filed by persons claiming to be in occupation of premises in respect of which an order had been passed under Section 269UD(1) of the Act. The Division Bench dismissed the application on the ground that the writ petitioners had no right to the premises. In disposing of the application, the Division Bench observed (at page 637) :
"Reliance was placed by Mr. Dwarkadas on the fact that some petitions challenging the aforesaid provisions are at present pending in the Supreme Court. Since we have come to the conclusion that the petitioners, on their own showing, have no rights in the suit premises, the pendency of the petitions in the Supreme Court on the question of the validity of the said provisions of the Act has no bearing on the facts of the present case." .
25. It is clear, therefore, that the Bombay High Court had understood the stay order passed by the Supreme Court as being limited to the question of the validity of the provisions of Chapter XX-C of the Act.
26. Similarly, a Division Bench of the Delhi High Court, in the case of Tanvi Trading and Credits P. Ltd. v. Appropriate Authority , considered the correctness of an order under Section 269UD of the Act without going into the question of the vires of those provisions. The Delhi High Court held that the order passed under Section 269UD of the Act by the appropriate authority was beyond the scope of the section and accordingly set aside the order. On an appeal filed by the appropriate authority from the decision of the Delhi High Court, the Supreme Court, by an order dated April 23, 1991 (Appropriate Authority v. Tanvi Trading and Credits P. Ltd. ), upheld the decision of the Delhi High Court and dismissed the appeal.
27. The decision of the Delhi High Court was dated November 28, 1990, i.e., subsequent to the date of the order in Union of India v. C.B. Gautam. In affirming the decision of the Delhi High Court, the Supreme Court must be taken to have approved the action of the Delhi High Court in disposing of the writ petition even though it related to proceedings under Section 269UD of the Act.
28. In a subsequent decision of the Delhi High Court in Mrs. Satwant Narang v. Appropriate Authority , the order of the appropriate authority was set aside on a ground similar to that in the case of Tanvi Trading and Credits P. Ltd. . This decision is dated December 14, 1990, and is subsequent to the order passed in Union of India v. C.B. Gautam.
29. A learned single judge of the Madras High Court also set aside an order of the appropriate authority in Naresh M. Mehta v. Appropriate Authority on January 10, 1991, on the ground that the order of the appropriate authority was not justified under the provisions of Chapter XX-C of the Act.
30. Finally, in the decision relied upon by the respondent authorities in connection with the second preliminary point and which will be considered later in this judgment (Rajata Trust v. Chief CIT [1992) 193 ITR 220), a Division Bench of the Karnataka High Court dismissed the writ application challenging an order of the appropriate authority under Section 269UD on the ground that the writ petitioner had no locus standi to question the order of the appropriate authority made under Section 269UD(1) of the Act. This decision was rendered on June 20, 1991.
31. For the reasons aforesaid, I hold that there is no bar to this court disposing of the writ application relating to the proceedings under Section 269UD(1) of the Act without going into the question of the constitutional validity of the provisions in Chapter XX-C of the Act.
32. The contention of the respondent authorities to the effect that the determination of the grounds of challenge not arising out of the vires of the provisions of Chapter XX-C would lead to an impossible situation by reason of the provisions of Rules 41 to 43 and 48 of the Rules of this High Court relating to applications under Article 226 of the Constitution does not bear scrutiny. If the writ application is allowed on the basis of the limited grounds raised, the rule nisi would be made absolute as prayed for in terms of Rule 42. If, on the other hand, the court is not satisfied with the merits of the petitioners' contentions, the court will disallow the writ petition on the grounds stated and adjourn the matter until the disposal of the case of Union of India v. C.B. Gautam. No possible prejudice would be caused to any of the parties if the matter is heard and the issues, at least to the limited extent available, decided. In any event, the petitioners have raised substantial issues on the merits which will have to be considered, even if the constitutional validity of the provisions of Chapter XX-C is upheld.
33. As far as the second preliminary objection is concerned, the same is also not accepted by this court.
34. Except for the decision of the Karnataka High Court in Rajata Trust's case [1992] 193 ITR 220, which is directly on the point, the other decisions relied upon by the respondent authorities in this connection are not really apposite. The first decision cited in this connection is the decision in State of Orissa v. Ram Chandra Dev, . In that decision, the writ petitioner had claimed a right based on title. The Supreme Court held that the question of title cannot be tried in writ proceedings. It was in that context that the Supreme Court found that the application under Article 226 was not maintainable.
35. In this case, the writ petitioners are not claiming to have any title to the property. Their claim arises out of and under an agreement for sale. It may be said that they are seeking to protect their right to acquire the title to the property. This is far from saying that a disputed question of title will have to be determined in disposing of this writ application.
36. The second decision cited by the respondents is the case of Narandas Karsondas v. S.A. Kamtam, . This case did not consider the question of locus standi at all but is an authority for the proposition that a contract of sale in view of Section 54 of the Transfer of Property Act, 1882, does not by itself create any interest in, or charge on, the property. The question here, however, is not of an interest in property but whether the writ petitioners are interested in the property. That interest may, for the sake of convenience, be described as a concern in the property. I must not be understood as holding that anyone having a passing or tenuous concern in the property would be able to maintain an application under Article 226 in respect of the property. The right of the writ petitioners in connection with the property is not tenuous or ephemeral, but arises out of an agreement which has not been challenged as being invalid. The writ petitioners have a right -in respect of the property although they may not have a right in the property.
37. The next two decisions cited by the respondent authorities, namely, Corporation of Calcutta v. Dhirendra Nath Sen, and Rusi Jehangir Jeejeebhoy v. O.D. Mohindra , also do not deal with the question of locus standi to file a writ petition. Both the decisions turned on the finding that the writ petitioners did not have the right claimed.
38. This brings us to the decision in Rajata Trust's case [1992] 193 ITR 220, in which the Karnataka High Court appears to have held that the transferee could not challenge the order of the appropriate authority for purchase of the immovable property by the Central Government under Section 269UD. The facts of that case are somewhat different from those which are being considered by me. An agreement had been entered into with respondent No. 3 in that case by which the writ petitioner was to purchase immovable property. Out of the total consideration for the purchase, namely, Rs. 1,55,00,000, Rs. 50,00,000 had been paid by the transferee. A statement in Form No. 37-I was filed with the appropriate authority. The appropriate authority passed an order directing the Central Government to purchase the property. The Chief Commissioner of Income-tax had been authorised by the transferor to pay a sum of Rs. 50,00,000 to the transferee. It was the common case before the court that the sum of Rs. 50,00,000 was received by the transferee without demur.
39. The transferee then filed a writ application challenging the order of the appropriate authority. The court held that the transferee had no locus standi on the basis of the definition of "persons interested" under Section 269UA. The definition was held to be exhaustive. It was held that "a mere agreement holder (sic) for the purchase of property" did not fall within the definition. The court also considered Section 54 of the Transfer of Property Act, 1882, and held that no interest in the property had been created by the agreement between the transferor and the transferee. The court held that the right to obtain a conveyance of immovable property fell within the expression "property of any kind" used in Section 2(14) of the Act and was consequently a capital asset within the meaning of Section 2(14) of the Act, but differentiated between such a right and an interest in property. Finally, the court held that the petitioner had acquiesced in the order under Section 269UD(1) by accepting the payment of Rs. 50,000 from the Commissioner of Income-tax without demur.
40. A special leave petition was filed against the decision of the Karnataka High Court. The special leave petition was dismissed in limine by the Supreme Court (see [1991] 192 ITR (St.) 139).
41. Before considering the purport of the Karnataka High Court decision, it is necessary to clear the ground regarding the effect of the dismissal of the special leave petition from the decision of the Karnataka High Court.
42. The Supreme Court has repeatedly held that the dismissal of a special leave petition in limine by a non-speaking order does not justify any inference that, by necessary implication, the merits of the case before the High Court had either been accepted or rejected. Such a dismissal is only to be taken as meaning that the matter was not a fit case where special leave should be granted, (see Indian Oil Corporation Ltd. v. State of Bihar , CED v. Pratap Singhji Ramsinghji and Nawab Sir Mir Osman Ali Khan v. CWT .
43. Shorn of the imprimatur of the Supreme Court, the decision of the Division Bench in the case of Rajata Trust [1992] 193 ITR 220 (Kar) is merely of persuasive value as far as this court is concerned. The reasoning in Rajata Trust's case [1992] 193 ITR 220 (Kar), however, does not persuade me to hold that a transferee of property sought to be purchased under Section 269UD does not have any right to move an application under Article 226 challenging the order under Section 269UD. At the outset, the ground that the transferee had acquiesced in the order under Section 269UD and thus had no locus standi to challenge the order under Section 269UD, is not available in this case and, to that extent, the decision in Rajata Trust's case [1992] 193 ITR 220 (Kar) is distinguishable.
44. Before considering the remaining reasons of the Karnataka High Court, it is necessary to consider the law relating to the question as to who can apply under Article 226.
45. In the case of Calcutta Gas Co. (Proprietary) Ltd. v. State of West Bengal, , the High Court at Calcutta had rejected the writ petition filed by the Calcutta Gas Co. The writ petitioner had challenged the constitutional validity of the Oriental Gas Co. Act, 1960, by which the right of the Calcutta Gas Co. to carry on the management of the Oriental Gas Co. was terminated. The High Court had held that the Calcutta Gas Co. had no legal right to maintain the petition as no fundamental right of the Calcutta Gas Co. had been infringed.
46. On an appeal filed by the Calcutta Gas Co., , the Supreme Court held (at page 1047) :
"The first question that falls to be considered is whether the appellant has locus standi to file the petition under Article 226 of the Constitution. The argument of learned counsel for the respondents is that the appellant was only managing the industry and it had no proprietary right therein and, therefore, it could not maintain the application. Article 226 confers a very wide power on the High Court to issue directions and writs of the nature mentioned therein for the enforcement of any of the rights conferred by Part III or for any other purpose. It is, therefore, clear that persons other than those claiming fundamental rights can also approach the court seeking a relief thereunder. The article in terms does not describe the classes of persons entitled to apply thereunder ; but it is implicit in the exercise of the extraordinary jurisdiction that the relief asked for must be one to enforce a legal right."
47. Later on in the judgment, the Supreme Court went on to say (at page 1048) :
"Whatever may be its character, by reason of Section 4 of the impugned Act, it was deprived of certain legal rights it possessed under the agreement. Under the agreement, the appellant had the right to manage the Oriental Gas Company for a period of 20 years and to receive remuneration for the same. But under Section 4 of the impugned Act, it was deprived of that right for a period of five years. There was certainly a legal right accruing to the appellant under the agreement and that was abridged, if not destroyed, by the impugned Act. It is, therefore, impossible to say that the legal right of the appellant was not infringed by the provisions of the impugned Act. In the circumstances, as the appellant's personal right to manage the company and to receive remuneration therefor had been infringed by the provisions of the statute, it had locus standi to file the petition under Article 226 of the Constitution."
(See also Bombay Dyeing and Manufacturing Co. Ltd. v. State of Bombay, ).
48. The following observations of the Supreme Court in Gadde Venkateswara Rao v. Govt. of Andhra Pradesh, , are also apposite (at page 833) :
". . . . the petitioner who seeks to file an application under Article 226 of the Constitution should be one who has a personal or individual right in the subject-matter of the petition. A personal right need not be in respect of a proprietary interest." .
49. The principle which emerges from these decisions is that the existence of a legal right is the foundation of the exercise of jurisdiction under Article 226. The legal right must be directly and substantially invaded or be in imminent danger of being so invaded before the writ petitioner can approach the court. But such a legal right need not necessarily be a legal right in property. The writ petitioner may not have any right in the property but may yet have a right which is affected for the purpose of maintaining an application under Article 226. The salient point of enquiry is what is the nature of the right which is being claimed.
50. The concept of locus standi is therefore much wider than the concept of a person having an interest in property. To sum up : Judicial precedents have laid down that all that is required for clothing a person with the right to move an application under Article 226 is that the relief asked for must be to enforce a legal right. It is to be emphasised that a legal right does not necessarily mean a fundamental right or a proprietary right.
51. In this background of the law, I cannot agree with the equation of the concept of a person aggrieved under Article 226 with "person interested" under Section 269A(g). The petitioners have relied upon the meaning of "person interested" in the Land Acquisition Act, 1894, as well as in the decisions of the Supreme Court in Sunderlal v. Paramsukhdas, and Himalaya Tiles and Marble (P.) Ltd. v. Francis Victor Coutinho, , to contend that the interpretation of the Division Bench of the Karnataka High Court on the words "person interested" is contrary to the law laid down by the Supreme Court. It is not necessary to consider this aspect of the petitioners' argument. Suffice it to say that the definition of the phrase "person interested" applies in connection with and is limited to the utilisation of the phrase in the provisions of Chapter XX-C itself. The concept of locus standi under Article 226 cannot be so limited to the meaning of "person interested" given in Section 269A(g).
52. The second reason given by the Karnataka High Court for denying the transferee the right to challenge an order under Section 269UD under Article 226 appears to proceed on a confusion between the concept of a person interested in property and a person having an interest in property. A person may be interested in the property without having an interest therein within the legal connotation of the phrase "interest in property".
53. I must confess that I have been unable to find the basis for the principle enunciated by the Division Bench that, unless one has an interest in property, one cannot file an application under Article 226. There seems to be a logical lacuna in the reasoning process. The following passage of the Division Bench is illustrative (at page 237 of 193 ITR) :
"Therefore, neither by reason of Section 269UD(2) nor Section 269UL(3) could a transferee contend that he has secured an interest in the immovable property contrary to the settled law as adumbrated under Section 54 of the Transfer of Property Act and various rulings of the Supreme Court. Thus, we conclude that the appellant has no locus standi."
54. The Division Bench has ignored the fact that there may be other rights which may be affected by an order under Section 269UD.
55. In this case, the writ petitioners have entered into an agreement with respondent No. 6. If the order of the appropriate authority impugned in these proceedings stands, the writ petitioners' agreement will stand culminated. The writ petitioners would be deprived of the valuable right of purchasing the property in question, a right which has been recognised and is protected under Section 40 of the Transfer of Property Act, 1882, and the Specific Relief Act, 1963.
56. That apart, Chapter XX-C itself recognises that the transferee may have an interest in the property. For example, under Section 269UD, the appropriate authority is required to cause a copy of its order under Sub-section (1) to be served on the transferor, the person in occupation, the transferee, and on every other person whom the appropriate authority knows to be interested in the property. The last category is descriptive of the first three. The statute also places various obligations on the transferee such as the filing of the statement under Section 269UC. Furthermore, if the order under Section 269UH is abrogated, the immovable property revests in the transferor and there can be no doubt that the transferee would then be able to sue for specific performance of its agreement with the transferor, (see proviso to Section 269UM).
57. For all these reasons, I respectfully disagree with the reasoning in Rajata Trust's case [1992] 193 ITR 220 (Kar), and I hold that the writ petitioners have the locus standi to file this writ application.
58. As far as the merits are concerned, the writ petitioners have contended :
(1) The transaction between respondent No. 6 and the writ petitioner was not one of sale or exchange but a transfer falling under Section 269UA(f)(ii) in respect of an immovable property of the kind referred to in Section 269UA(d)(ii). It is stated that the Central Government, in such a transaction, is placed in the same position as the transferee and is obliged to do whatever the transferee is obliged to do under the agreement dated May 20, 1987. The appropriate authority could not go behind the consideration for the transfer agreed to between the parties and specified as such in the agreement of transfer.
(2) The order of the appropriate authority has been passed in violation of the principles of natural justice. This ground was not pressed at this stage as it would involve going into the constitutional vires of Chapter XX-C of the Act.
(3) The computation of the value of the premises was incorrect.
59. The respondents have submitted :
(1) The writ petitioners are estopped from contending that the transaction was not one of sale. Both in the agreement as well as in the statement in Form No. 37-I, the transaction had been referred to as a sale. The agreement would show that the immovable property in question was land and there was no question of application of Section 269UA(d)(ii) or Section 269UA(f)(ii) or Section 269UA(d).
(2) Judicial review under Article 226 of the Constitution cannot be converted into an appeal. The decision is not to be scrutinised. What is to be scrutinised is the decision-making process. The petitioners were asking this court to sit in appeal on the decision of the appropriate authority. There is no error in the decision-making process warranting interference under Article 226. Reliance has been placed on the decision of Chief Constable of the North Wales Police v. Evans [1982] 3 All ER 141, 154-155 (HL) and State of U. P. v. Lucknow Development Authority AIR 1984 SC 997 (sic).
The deletion of the value of the construction to be made for the brokers by the appropriate authority from the apparent consideration was correct. In fact, respondent No. 6 had not challenged the order of the appropriate authority at all. Even at the hearing, respondent No. 6 had supported the order of the appropriate authority. Reliance has been placed on the decision in CIT v. Ganesh Builders in this connection.
(3) In any event, the method of calculation followed by the appropriate authority was correct.
(4) The right exercised by the appropriate authority was not a right of pre-emption. The law of pre-emption was limited to the right of an adjacent owner or a co-owner. In passing an order under Section 269UD(1) of the Act, the appropriate authority was merely acting in the manner prescribed to unearth black money and to discourage transactions relating to immovable property involving the use of black money.
60. The principles of judicial review have been enunciated with clarity in the well-known case of Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation [1947] 2 All ER 680 ; [1948] 1 KB 223 (CA) as follows (at page 685) :
". . . . that the court is entitled to investigate the action of the local authority with a view to seeing whether it has taken into account matters which it ought not to take into account, or, conversely, has refused to take into account or neglected to take into account matters which it ought to take into account. Once that question is answered in favour of the local authority, it may still be possible to say that the local authority, nevertheless, have come to a conclusion so unreasonable that no reasonable authority could ever have come to it. In such a case, again, I think the court can interfere. The power of the court to interfere in each case is not that of an appellate authority to override a decision of the local authority but is that of a judicial authority which is concerned, and concerned only, to see whether the local authority have contravened the law by acting in excess of the powers which Parliament has confided in it."
61. The principle was more succinctly stated by Brightman L. J. in the case of Chief Constable of the North Wales Police v. Evans [1982] 3 All ER 141 (HL), at page 154 of the report, that judicial review is concerned not with the decision, but with the decision-making process. This statement of the law was accepted and followed by the Supreme Court in the decision of State of U. P. v. Maharaja Dharmander Prasad Singh, .
62. In my view, the decision-making process would not only cover a situation relating to the exercise of discretionary power but also the exercise of power regulated by statute. In the first case, the courts would have to consider whether the authority had followed the principles of natural justice. In the second case, the court would have to consider whether the power has been exercised in terms of the statute. In both cases, the court would consider whether the authority had taken into consideration relevant matters and ignored extraneous considerations in arriving at the decision.
63. The petitioners' contention to the effect that the appropriate authority could not question the apparent consideration as set out in the agreement is a challenge to the decision-making process and only consequentially to the decision itself.
64. The petitioners have relied upon several decisions relating to the ambit of the court's powers of scrutiny under Article 226. The consideration of those decisions is not necessary as I find in the cases cited by the respondents sufficient support for the petitioners' contention.
65. Having settled the scope of enquiry, the facts of the case may be considered. The court will have to determine whether the appropriate authority has acted within the four corners of the statutory provisions in passing the impugned order under Section 269UD. The section required that the order for purchase must be at an amount equal to the amount of the apparent consideration. Broadly stated, the grievance of the petitioners is that the appropriate authority has wrongly determined the apparent consideration for the transfer.
"Transfer" has been defined in Section 269UA(f) as follows :
"'Transfer' -
(i) in relation to any immovable property referred to in Sub- Clause (i) of Clause (d), means transfer of such property by way of sale or exchange or lease for a term of not less than twelve years, and includes allowing the possession of such property to be taken or retained in part performance of a contract of the nature referred to in Section 53A of the Transfer of Property Act, 1882 (4 of 1882) ;
Explanation.--For the purposes of this sub-clause, a lease which provides for the extension of the term thereof by a further term or terms shall be deemed to be a lease for a term of not less than twelve years, if the aggregate of the terms for which such lease is to be granted and the further term or terms for which it can be so extended is not less than twelve years ;
(ii) in relation to any immovable property of the nature referred to in Sub-clause (ii) of Clause (d), means the doing of anything (whether by way of admitting as a member of or by way of transfer of shares in a co-operative society or company or other association of persons or by way of any agreement or arrangement or in any other manner whatsoever) which has the effect of transferring or enabling the enjoyment of such property."
In Section 269UA(b), "apparent consideration" has been defined with reference to the different modes of transfer, namely, sale, exchange, lease and the transfer referred to in Sub-clause (ii) of Clause (d) of that section. "Immovable property" has been defined in Section 269UA(d) as follows:
"'Immovable property' means,--
(i) any land or any building or part of a building, and includes, where any land or any building or part of a building is to be transferred together with any machinery, plant, furniture, fittings or other things, such machinery, plant, furniture, fittings or other things also ;
Explanation.--For the purposes of this Sub-clause, 'land, building, part of a building, machinery, plant, furniture, fittings and other things' include any rights therein :
(ii) any rights in or with respect to any land or any building or a part of a building (whether or not including any machinery, plant, furniture, fittings or other things therein) which has been constructed or which is to be constructed, accruing or arising from any transaction (whether by way of becoming a member of, or acquiring shares in, a cooperative society, company or other association of persons or by way of any agreement or any arrangement of whatever nature), not being a transaction by way of sale, exchange or lease of such land, building or part of a building."
66. Reading the provisions of Section 269UA, it would appear that the nature of the transfer of immovable property would involve a consideration of, firstly, the rights sought to be conveyed and, secondly, the consideration for such conveyance.
67. Keeping this principle in view, the nature of the transaction in this case will have to be considered. As already noted, there are four kinds of transfers recognised under the provisions of Chapter XX-C, namely, sale, exchange, lease and what may be termed anomalous transfers under Section 269UA(d)(ii). The transaction in question is certainly not a lease as it contemplates an absolute transfer of ownership of lot 'A'. The word "sale" has not been defined in the Act. In the Transfer of Property Act, 1882, a sale of immovable property has been defined in Section 54 as a transfer of ownership in exchange for a price paid or promised or part paid and part promised. The Supreme Court has, in the case of CIT v. Motors and General Stores (P.) Ltd. held (at page 695):
"The words 'sale' or 'sold' have not been defined in the Indian Income-tax Act, 1922. Consequently, these words have to be construed by reference to other enactments. Section 54 of the Transfer of Property Act defines 'sale' as a transfer of ownership in exchange for a price paid or promised or part paid and part promised. Section 54 of the Transfer of Property Act reads as follows :
" 'Sale" is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.' There is no definition of the word 'price' in this Act. But it is well-settled that the word 'price' is used in the same sense in this section as in Section 4 of the Sale of Goods Act, 1930."
68. The Supreme Court also held (at page 696) :
"Section 2(10) of the Sale of Goods Act defines 'price' as meaning the money consideration for a sale of goods. The presence of money consideration is therefore an essential element in a transaction of sale. If the consideration is not money but some other valuable consideration it may be an exchange or barter but not a sale. ..."
69. In this case, the consideration mentioned in the agreement of transfer relates to something more than money, namely, the construction to be made by the transferee for the benefit of the transferor. The transaction in question could not therefore come within the concept of "sale".
70. It cannot also be said that the transaction in question is an exchange, the second mode of transfer referred to in Chapter XX-C. "Exchange" has been defined in Section 118 of the Transfer of Property Act, 1882, as follows:
"When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money only, the transaction is called an 'exchange'."
71. The expression "transfer of ownership" in Section 118 of the Transfer of Property Act, 1882, assumes that the objects to be exchanged must be in existence when the transfer is effected. Under the agreement as it stands, there is no existing property which the transferee is to convey to the transferor in exchange for the transfer of lot 'A' of the premises to the transferee.
72. If the transaction in question is neither a sale nor an exchange or a lease, the only alternative mode of transfer available is what has been termed by me as an anomalous transfer. In my view, what is sought to be transferred under the agreement are rights in lot 'A' not being a transaction by way of sale, exchange or lease of lot 'A', within the meaning of Section 269UA(d)(ii) of the Act. The decisions cited by the respondent authorities reported in Ram Sundar Saha v. Kali Narain Sen Choudhury ; Beni Madho v. Major A.U. John AIR 1947 All 110 ; Unnao Commercial Bank Ltd. v. Kailash Nath, , do not militate against this conclusion.
73. The respondent authorities have argued that the petitioner should not be permitted to contend that the transaction in question is not a sale on the ground that, in the statement filed in Form No. 37-I, a definite representation had been made that the transaction in question was in fact a sale.
74. The argument is unacceptable. The nature of the transaction cannot depend upon the manner in which it is described by any party to the transaction but will have to be determined on principles of law applicable to the facts existing. This is well-established. For example, if a party describes a transaction as hire purchase, the parties to the transaction are not estopped from proving that the real bargain was in fact a loan on the security of the goods, the true fact of the transaction being determined from the terms of the agreement considered in the light of the surrounding circumstances (see Sundaram Finance Ltd. v. State of Kerala, ). Similarly, whether a document creates a licence or a lease is a question of substance to be determined from the intention of the parties and not a matter of form. That is, irrespective of the terminology used, the transaction will have to be determined on a consideration of the intention of the parties upon an interpretation of the agreement, (see Konchada Ramamurty Subudhi v. Gopinath Naik, ). The petitioners are not, therefore, estopped from contending that the transaction in question fell into the category of anomalous transfers of immovable property under Section 269UA(d)(ii) to be dealt with under Section 269UA(b)(2). Incidentally, it may be noted that the appropriate authority itself has proceeded to consider the question of "apparent consideration" under Section 269UA(b)(2) as will appear from paragraphs 8-10 of the impugned order.
75. If the transfer is one under Section 269UA(f)(ii) of immovable property described in Section 269(d)(ii), the apparent consideration in relation to such immovable property would, in terms of Section 269UA(b)(2), be :
"(i) in a case, where the consideration for the transfer consists of a sum of money only, such sum ;
(ii) in a case where the consideration for the transfer consists of a thing or things only, the price that such thing or things would ordinarily fetch on sale in the open market on the date on which the agreement for transfer is made ;
(iii) in a case where the consideration for the transfer consists of a thing or things and a sum of money, the aggregate of the price that such thing or things would ordinarily fetch on sale in the open market on the date on which the agreement for transfer is made, and such sum, and where the whole or any part of the consideration for such transfer is payable on any date or dates falling after the date of such agreement for transfer, the value of the consideration payable after such date shall be deemed to be the discounted value of such consideration, as on the date of such agreement for transfer, determined by adopting such rate of interest as may be prescribed in this behalf ;"
76. One of the grounds for the petitioners contending that the appropriate authority has not determined the apparent consideration in terms of the agreement is that the appropriate authority should have taken the market value of the construction to be made by the petitioners on lot 'B'. It is submitted that Rs. 10 lakhs only represented the cost of construction. The objection must be sustained. The appropriate authority has treated the proposed construction as a "thing" within the meaning of Section 269UA(b)(2)(ii) and (iii). It should have addressed its mind to the market value of such construction on the date of the agreement. It has not.
77. The second contention of the writ petitioners in this connection is also of substance. Their complaint is that the appropriate authority has ignored the construction to be made for the brokers by the transferee on account of the transferor as part of the consideration. One of the relevant clauses in the agreement in this regard is Clause 13 which has been quoted earlier in this judgment. The other relevant clause is Clause 12 of the agreement, the opening words of which provide as follows :
"In addition to constructing a structure measuring a floor area of 5,000 sq. ft. as aforesaid at a cost of Rs. 10,00,000, the purchaser shall also pay monetary consideration being a total sum of Rs. 73 lakhs (rupees seventy-three lakhs only) to the vendor as consideration for the conveyance."
78. It was held by the appropriate authority that this would show that the brokerage was not part of the consideration because :
(a) The consideration must be such as to move from the transferee to the transferor. To quote the language of the appropriate authority, "when one talks of the consideration in the context of the sale of property, one has in mind what leaves the pocket of the buyer of the property and reaches the pocket of the seller".
(b) The consideration for a transfer covers only that taken by the transferor under the transfer and not that taken under the whole arrangement of which that transfer is a part.
(c) The agreement was not a tripartite agreement. The brokers had no legally enforceable right. The brokerage payable by the transferee could never form part of the apparent consideration for the transfer.
79. The reasoning of the appropriate authority proceeds upon a misconception of the law on the consideration. Section 2(d) of the Contract Act, 1872, which defines "consideration", does not require that the benefit of the action must go directly to the transferor. Consideration may also involve a benefit being conferred on a third party. This benefit conferred on the third party at the instance of the promisor is the consideration to support an agreement between the promisor and the promisee.
80. In the case of Keshub Mahindra v. CGT , the Division Bench of the Bombay High Court has considered this very question. In that case also, the question was whether a benefit conferred on a third party could amount to consideration. The court held :
". . . . there is nothing in the definition of 'consideration' in Section 2(d) to show that when 'the promisee has done or abstained from doing or does or abstains from doing, or promises to do or to abstain from doing, something', the benefit of that act or abstinence must 'directly' go to the promisor. A contract can arise even though the promisee does or abstains from doing something for the benefit of a third party--in this case the company--and the assessee can treat that benefit to a third party as a good consideration to him. This is clear upon the authorities. At page 91, Sir William Anson puts the principle thus :
"'The courts will not make bargains for the parties to a suit and, if a man gets what he contracted for, will not inquire whether it was an equivalent to the promise which he gave in return. The consideration may be of benefit to the promisor, or to a third party, or may be of no apparent benefit to anybody, but merely a detriment to the promisee'."
81. I respectfully concur with the view held by the Bombay High Court and hold that the appropriate authority has ignored this elementary principle.
82. Secondly, the appropriate authority was bound to consider the terms of the agreement for determining the apparent consideration.
83. The terms of any of the provisions of Chapter XX-C certainly do not support the view nor was it argued by the respondents that the appropriate authority could go behind the agreement to determine what was the apparent consideration. The authority can certainly interpret the agreement but cannot wish away the clauses contained therein.
84. There is no absolute principle in law, as held by the appropriate authority, that the brokerage can never be the liability of the transferor. A broker is an agent. In this particular case, the nature of the functions of the brokers is like an estate agent who, in connection with the acquisition or disposal of any land or other premises, brings together or take steps to bring together the person wishing to dispose of the land or other premises and a person prepared to acquire it and to negotiate as to the terms on behalf of either party. The issue would, therefore, be as to whose agent the broker was. No inquiry has been held by the appropriate authority in this connection. The appropriate authority proceeded on the assumption of a principle which is not warranted in law that, irrespective of any agreement between parties, the obligation to pay remuneration to the brokers lies on the transferee.
85. The decision of the Bombay High Court in CIT v. Ganesh Builders , is not an authority for the proposition that the brokerage can never form part of the consideration. In that case, what had been challenged was the determination of the fair market value of the premises sought to be sold under Chapter XX-A of the Act. The determination of the fair market value was found to exceed the stated consideration for the property by more than 15 per cent. It was contended in that case that, in determining the fair market value, allowance should have been made for the brokerage which would otherwise be payable by the transferee. This was negatived by the High Court, The point which is in controversy in this case was not before the court at all. The finding was arrived at on the submission made.
86. Looked at from a different point of view, the obligation on the part of the Central Government in exercising the right under Section 269UD would involve the purchase of the property at the stated consideration. The contention of the respondent authorities that the right of the Central Government was not a pre-emptive right is not accepted at all. The right of pre-emption is nothing other than the right of first purchase irrespective of the source of such right under contract, custom or statute. That this is so is evident from a construction of Section 269UD. The authorities also show that the right has been understood as a pre-emptive right (see Tamil Trading and Credits P. Ltd. v. Appropriate Authority ; Kelvin Jute Co. Ltd. v. Appropriate Authority and Naresh M. Mehta v. Appropriate Authority ).
87. In addition, the Finance Minister, in justifying the introduction of Chapter XX-C, in the long-term fiscal policy, has described the right of the Government as a pre-emptive right of purchase. This was followed by the budgetary speech at the time of introduction of the Finance Bill, 1986, containing the proposal to introduce Chapter XX-C in the Act, in which the Finance Minister has also referred to the right under that Chapter as a pre-emptive right to purchase properties. These speeches may be considered for the purpose of determining the scope of the power under Section 269UD. As held by the Supreme Court in the case of K.P. Varghese v. ITO (headnote) :
". . . . the speech made by the mover of the Bill explaining the reason for its introduction can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation is enacted. This is in accord with the recent trend in juristic thought not only in western countries but also in India, that interpretation of a statute being an exercise in the ascertainment of meaning, everything which is logically relevant should be admissible."
88. The appropriate authority ignored the intention of the parties in this case. The intention must be gathered from the document itself and the surrounding circumstances if the words of the agreement seem doubtful (see Vatsavaya Venkata Sabhadrayyamma v. Poosapati Venkatapati Raju AIR 1924 PC 162, 174). The construction of the flat for the brokers was agreed to between the parties and was to be made "in lieu of their remuneration". The word "agreed" would appear to suggest that the transferor was interested in the flats being constructed for the brokers by the transferee. If this were not so, there was no question of including such a clause in the agreement between the transferee and the transferor. If the obligation to pay the remuneration to the brokers was cast on the transferee, there was no need to include the clause in an agreement between the transferee and transferor. This fact would seem to indicate that the transferee was undertaking an obligation which was otherwise cast on the transferor. The construction of the flats for the brokers was therefore for the benefit of the transferor and for meeting a liability which was otherwise to be met by the transferor.
89. The statement filed in Form No. 37-I would show that the construction of the flats for the brokers formed part of the consideration. This would again indicate that the liability to pay the remuneration (and which was being shouldered by the transferee by constructing the flats) was that of the transferor.
90. If any confirmation were needed of the intention of the parties, the statements contained in the affidavit-in-opposition of the transferor would clearly show that the transferor accepted that the payment of the remuneration of the brokers by construction of the flats was a part of the consideration for the transfer of lot 'A' to the petitioners.
91. The appropriate authority has, therefore, travelled beyond the limits of the prescribed jurisdiction under Section 269UD for determining the apparent consideration in directing the purchase by the Central Government of lot 'A' at an amount which cannot be considered to be equal to the amount of the apparent consideration. The impugned order, therefore, cannot be sustained on this ground.
92. Other questions regarding the method of valuation followed, and the discount allowed cannot be gone into in this proceeding as they relate to the merits of the decision. It cannot be said that the procedure followed in arriving at such a decision was unreasonable or illegal.
93. The writ petition is, for the reasons stated, allowed and the impugned order dated June 5, 1987, is quashed. However, since this is not a case where the appropriate authority had failed to exercise the power vested in it within the time specified under the statute (as was the case in Tanvi Trading and Credits P. Ltd. , but a case where purchase has been directed on the apparent consideration being determined on a wrong appreciation of the law, the appropriate authority will be at liberty to reconsider Form No. 37-I afresh in accordance with law within a period of 60 days from the date of communication of this order and pass decision afresh either directing the Central Government to purchase the premises on the basis of the apparent consideration in the light of the observations made by this court or issue a "no objection certificate" under the provisions of Section 269UL(3) of the Act within the period specified.
94. In the facts of this case, there will be no order as to costs.