Karnataka High Court
Shantha Bai Prabhu vs Shahul Hameed on 26 October, 1990
Equivalent citations: ILR1990KAR4407
JUDGMENT Murlidher Rao, J.
1. The appellants, respondents 2 and 3 are the legal representatives of the original defendant Matti Ranganatha Prabhu, in O.S.No.9/1981 on the file of the Civil Judge at Mangalore. First respondent is the plaintiff.
2. Plaintiff and the late Matti Ranganatha Prabhu entered into an agreement on 2-9-1980 under which the deceased agreed to sell suit schedule property to the plaintiff for Rs. 1,09,000/-; on the date of agreement Rs. 30,000/- was paid by the plaintiff to the defendant, leaving a balance of Rs. 70,000/-. It is averred by the plaintiff that on 29-9-1980, he was put in possession of item No.2 of the 'A' schedule property in part performance of the contract. Plaintiff issued a notice on 1-10-1980 calling upon the defendant to execute the sale deed. This was followed by yet another notice on 24-11-1980. Regarding his readiness to perform his part of the contract plaintiff stated thus: in his plaint:
"7. That the plaintiff approached the defendant several times and requested him to execute the sale deed and receive the balance price as agreed upon.
8. That the plaintiff has been and is throughout ready and willing to pay the balance price as stipulates in the agreement and to purchase the property.
9. That on 1-10-1980 the defendant promised to execute the sale deed but postponed the execution of the sale deed on false grounds."
3. Defendant admitted the execution of the agreement and the receipt of Rs. 30,000/-. He stated that he never intended to alienate the property. He was coerced to sign the document. He was willing to refund Rs. 30,000/- with interest. He contended that the property in question was a mulgeni land wherein his wife and children have interest by birth.
4. On these pleadings Court below framed following issues: -
1. Whether the plaintiff proves that the defendant has agreed to sell the 'A' schedule property for Rs. 1,09,000/- on 2-9-1980 and received an advance of Rs. 30,000/-.
2. Whether the plaintiff further proves that he was put in possession of a portion of that property on 29-9-1980 in part performance of the agreement?
3. Whether the defendant proves that he was coerced to sign certain papers without knowing the contents?
4. Whether the defendant proves that the suit specific performance is not maintainable in view of the provisions of the prevention of Fragmentation and Consolidation of Holdings Act, the Karnataka Land Reforms Act?
5. Whether the plaintiff proves that he was and is ready and willing to perform his part of the contract?
6. Whether the plaintiff is entitled for the specific performance of contract?
7. In case, if the contract cannot be specifically enforced, whether the plaintiff is entitled for refund of Rs. 30,000/- with interest at 20% p.a.?
8. Whether the defendant proves that he offered to pay Rs. 30,000/- several times but plaintiff refused to receive it, and hence not liable to pay interest?
9. Whether the suit is bad for non-joinder of necessary parties?
10. What order or decree?
5. The Court after recording evidence, decreed the suit. Hence this appeal.
6. Mr. Shevgoor learned Counsel for appellant contended that the notice dated 1-10-1980 is a concocted document; the plea of part performance on the allegation that the plaintiff is put In possession of a portion of the property is factually incorrect; in the circumstances, in which the defendant was placed, there was no necessity or need to conceive of the idea of alienating the property; lastly greater hardship would be caused to the present appellants, hence discretion exercised by Court below is unjust. He vehemently urged that plaintiff was not ready and willing to perform his part of contract, the fact that he had not furnished the draft of the sale deed enabling the defendant to obtain Income Tax clearance certificate to comply with Section 230A of the Income Tax Act shows that he was neither keen nor anxious to purchase the property. He pleaded for dismissal of suit.
7. The points that emerge for consideration are:
(1) Whether the plaintiff was ready and willing to perform his part of the contract?
(2) Whether the discretion exercised by the Court below is just and proper?
8. Point No. 1:
Apart from the assertion in the plaint extracted above, in the notices dated 1-10-1980 (Ex.P-2) and dated 24-11-1980 (Ex.P-4) the plaintiff has reiterated that he was ready and willing to perform his part of the contract. He has called upon the defendant to inform the date so that he could pay the balance, which is with him, and complete the sale. In the reply notice dated 15th October 1980 (Ex.P-3) the defendant contended that the agreement was not valid and was unenforceable. While denying the fact of handing over possession he stated he is not bound to execute the sale deed. He pleaded that as it is a 'mulgeni' property; he, alone has no saleable interest. He volunteered to refund Rs. 3.0,000/-. The reply was a demonstration of evasion of contract. The defendant never doubted or suspected the solvency of the plaintiff. As per the terms of agreement Ex.P-1 except paying the balance of consideration, plaintiff was not required to do anything else. On the material, this part of the contention has no substance.
9. Another limb of this argument revolves round the scope of Section 230A of the Income Tax Act-Mr. Shevgoor without there being a pleadeng or anty issue, constructed an argument that the plaintiff, being a purchaser, was required to furnish the draft sale deed to enable the vendor to obtain Income Tax clearance certificate. He placed reliance on Section 230A Income Tax Act. The said Section reads thus:
"230A. Restrictions on registration of transfers of immovable property in certain cases - (1) Notwithstanding anything contained in any other law for the time being in force, where any document required to be registered under the provisions of Clause (a) to Clause (e) of Sub-section (1) of Section 17 of the Indian Registration Act, 1908 (16 of 1908), purports to transfer, assign, limit or extinguish the right, title or interest of any person to or in any property (...) valued at more than fifty thousand rupees, no registering officer appointed under that Act shall register any such document, unless the Income Tax Officer certifies that -
(a) such person has either paid or made satisfactory provision for payment of all existing liabilities under this Act, the Excess Profits Tax Act, 1940 (15 of 1940), the Business Profits Tax Act, 1947 (21 of 1947), the Indian Income Tax Act, 1922 (11 of 1922), the Wealth Tax Act, 1957 (27 of 1957), the Expenditure Tax Act, 1957 (29 of 1957), the Gift Tax Act, 1958 (18 of 1958), the Super Profits Tax Act, 1963 (14 of 1963) and the Companies (Profit) Surtax Act, 1964 (7 of 1964); or
(b) the registration of the document will not prejudicially affect the recovery of any existing liability under any of the aforesaid Acts.
(2) The application for the certificate required under Sub-section (1) shall be made by the person referred to in that sub-section and shall be in such form and shall contain such particulars as may be prescribed.
(3) The provisions of Sub-section (1) shall not apply in a case where the person referred to in that sub-section is any such institution association or body, or belongs to any such class of institutions, associations or bodies, as the Board may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette.
Notifications:- The Board has notified that the provisions of Sub-section (1) of Section 230A shall not apply to;
(i) an authority referred to in Section 10(20A) of the Act; Notification No. SO 143/ 21-5-1974: (1976) 102 ITR (St) 63;
(ii) a banking company as defined in Section 5(c) of the Banking Regulation Act, 1949;
(iii) the State Bank of India;
(iv) a subsidiary bank as defined in Section 2(k) of the State Bank of India (subsidiary Banks) Act, 1959;
(v) a corresponding new bank constituted under Section 3 of the Banking Companies (Acquisition and Transfer of , Undertakings) Act, 1970: Notification No.SO 144/9-7-1974: (1976) 102 (ITR) 63;
(vi) a Government company as defined in Section 61A of the Companies Act, 1956 (1 of 1956);
(vii) a Corporation established by or under a Central State or Provincial Act: Notification No.SO 1534/24-3-1977: (1976) 104 ITR (St) 1; and
(viii) cases in which the Government is a transferor: Circular No.191/4-3-1976: Indian Tax Laws (1977), Pt III, page 148: (1977) 109 ITR (St) 115.
Rules - Refer to Rules 44A arid 44B and Forms 34A of the I.T. Rules, 1962."
10. The Rules framed under this Act have prescribed a form of application (Form No. 34A). There is no column pertaining to the purchaser nor is he required to sign the Form. The Section also does not require the purchaser to do any act or complete any formality. The application is to be filed by the transferor and with reference to his assessment returns, the certificate, is issued.
11. Clause (a) of Section 230A makes it clear that it is intended to examine whether the existing liabilities of the transferor under the Income Tax Act, the Excess Profits Tax Act, the Business Profits Tax Act, the Indian Wealth Tax Act, the Gift Tax Act, the Expenditure Tax Act, the Super Profits Tax Act and Companies Profits Tax Act 1964 have been cleared by the assessee. The prescribed form requires the transferor to submit the application in duplicate to be accompanied by the copy of the document which has to be registered. Such copy need not be signed by the purchaser. This certificate is required to be produced before the registering authority as a condition precedent for registration of document. The right, title and interest gets conveyed after the registration of document. In a suit for specific performance the decree requires the Judgment Debtor to execute the sale deed, failing which on his behalf the Court executes the deed and gets it registered. Therefore, there is no legal impediment for passing a decree for specific performance. It is well settled that in such contracts it is implicit, that the vendor shall do all such acts which are necessary for conveying perfect title.
In MOTILAL AND ORS. v. NANHELAL AND ANR., AIR 1930 PC 287 it was observed thus:
"There was an implied covenant on his part to do all things necessary to effect such transfer, which would include an application to the Revenue Officer to sanction the transfer."
Following the above decision in MRS. CHANDNEE WIDYA VATI v. C.L. KATIAL, AIR 1964 SC 979. Their Lordship of the Supreme Court have observed thus:
"The main ground of attack on this appeal is that the contract is not enforceable being of a contingent nature and the contingency not having been fulfilled. In our opinion, there is no substance in their contention. So far as the parties to the contract are concerned, they had agreed to bind themselves by the terms of the document executed between them. Under that document it was for the defendant-vendor to make the necessary application for the permission to the Chief Commissioner. She had as a matter of fact made such an application but for reasons of her own decided to withdraw the same. On the findings that the plaintiffs have always been ready and willing to perform their part of the contract and that it was the defendant who wilfully refused to perform her part of the contract and that time Court has got to enforce the terms of the contract and to enjoin upon the defendant-appellant to make the necessary application to the Chief Commissioner."
12. Therefore, it follows that the responsibility of the production of Income Tax clearance Certificate is on the Vendor. The statute does not require that purchaser as a part of contract, should furnish the draft sale deed to the vendor. Failure on his part will not preclude the vendor from drafting the sale deed and producing it before the authorities, to secure Income Tax clearance certificate, which has a reference to his Income Tax. In the instant case, neither the agreement nor the reply notice mentions this fact. Therefore, this contention is rejected. The conclusion is irresistible that the plaintiff was ready and willing to perform his part of the contract. Such is the interpretation of Section 230A is supported by two decisions of this Court. The scope of this Section was considered by Sri K.S. Puttaswamy, J. in SRIMATHI INDIRA v. I.T.O., TUMKUR CIRCLE, 1984 ITR 351. The learned Judge held thus:
"The words "such person" occurring in the Section refers to the transferor or the person creating interest in favour of another. In the context, the words "such person" cannot be read as any and every person comprehending both the "transferor" and the "transferee". For reasons that are not far to seek, this Section requires the ITO to issue a certificate only to the person that proposes to transfer or create an interest in favour of another and to no other person. If the Legislature in its wisdom creates a right on the "transferor" only, the Court cannot create that right in favour of the "transferee" also. Any such attempt will really amount to legislation in the guise of interpretation, which is impermissible."
This Judgment was followed in Smt. FOUZIA SHAHI NAZIR v. SRI B.K. LINGAPPA & ORS., W.P. No. 7498 of 1989 DD 5-1-1990 by Sri M.P. Chandrakantaraj Urs, J.
13. We are inclined to agree with the view expressed by Sri K.S. Puttaswamy, J. We hold that decree for specific performance cannot be refused on the ground that the Purchaser has not furnished the draft Sale Deed. In our view, it is open to the Vendor to move the I.T.O. with the Sale Deed, based on agreement of sale and secure the Income Tax clearance certificate.
14. PointNo.2"
This point deals with the exercise of discretion. On facts it is difficult to say that it is unjudicious or improper exercise. The properties in question are part of non-agricultural lands with certain structures. It is not shown that consideration agreed was inadequate nor is it established that eventually they would be exposed to miseries which outweigh the plaintiff's owning the property. In the light of the untenable pleas taken by the defendant in his reply notice and in the written statement and the unacceptable offer, of refund of Rs. 30,000/- the discretion must necessarily lean towards the purchaser, particularly when the contract is irrevocable. Clause 9 of the agreement (Ex.P-1) provides that-
"if either of the parties default - keeping to the terms the agreement shall be enforced through the process of the Court at the cost of the defaulting party."
Enforcement of the contract being the intention of both the parties, the plaintiff is entitled to ask for specific performance because the circumstances establish that defendant is a defaulting party. For the aforesaid reasons we are inclined to hold that the discretion is properly exercised and does not warrant interference.
15. For the aforesaid reasons this appeal fails. It is dismissed.
At the instance of the appellants notices were issued to respondents and he is represented. The records have been called for and interim stay had been obtained. Therefore, the appellants should pay costs to the respondent-1.
Appeal dismissed with costs.