Delhi High Court
Shri Rajesh Aggarwal vs Shri Balbir Singh And Another on 24 August, 1994
ORDER
1. This is an application under Order 39, Rules 1 and 2 read with Sec. 151, C.P.C. filed on behalf of the plaintiff. This application was filed along with suit and this Court on 3-8-89 restrained the defendants by ex parte injunction from alienating, creating any lease or parting with possession of the property in dispute.
2. Defendant No. 1 entered into an agreement to sell with the plaintiff in relation to property bearing No. 33, West Avenue Road, Punjabi Bagh, New Delhi built over a plot measuring 637.33 sq. yds., for a total sale consideration of Rs. 46 lakhs. Defendant No. 1 received Rs. 1 lakh at the time of the agreement on 7-4-89 (Rupees Fifty thousand in cash and Rs. Fifty thousand by cheque).
3. It is the case of the plaintiff that plaintiff made several efforts to persuade defendant No. 1 to obtain no objection and Income-tax Clearance Certificate from the concerned authorities for the purposes of registration and execution of the sale deed but the defendant put off the plaintiff. After long correspondence between the parties, defendant No. 1 revoked the agreement to sell dated 7-4-89 vide registered A/D notice dated 15-7-89. Some of the clauses, which would require consideration for disposal of this application, are reproduced hereunder:--
"Clause 2: That it has been specifically agreed that the second party shall pay a sum of Rs. 5,00,000/- (Rupees five lakhs only) to the first party after three months hereof and the first party on the receipt of said amount shall hand over the vacant and peaceful possession of one room and the roof of the aforesaid premises/property to the second party.
Clause 3: That the first party shall obtain necessary N.O.C./Income-tax Clearance Certificate etc. from the competent authorities within the above stipulated period for the sale and transfer of said property in favor of the second party of his nominee or his nominees."
4. The case of the plaintiff is that before the expiry of three months from execution of the Agreement to sell dated 7-4-1989, a telegram was received, sent On behalf of the defendant through his Advocate to the following effect :-
"You manipulated signatures of my illiterate client Balbir Singh in respect of the sale of property 33, West Avenue Road, Punjabi Bagh, Delhi -- obtained invalid documents by fraud -- Agreement improper -- you also not fulfillled conditions -- Agreement revoked."
5. The telegram was dated 7-7-1989. The case of the plaintiff is that on 22-6-1989 the plaintiff wrote to defendant No. 1 that subject to defendant's producing N. O. C. and Income-tax Clearance Certificate plaintiff was prepared to pay Rs. 5 lakhs in terms of Clause 2 of the Agreement. According to the plaintiff, the defendant again wrote on 15-7-1989 taking certain excuses inter alia that the defendant was not in a position to get the Income-tax Clearance Certificate from the appropriate authorities and as the plaintiff has failed to pay a sum of Rs. 5 lakhs in terms of Clause 2 of the said Agreement within 3 months from the date of execution of the said Agreement, therefore Agreement to sell dated 7-4-1989 stood revoked and earnest money of Rs. 1 lakh forfeited.
6. Mr. Ishwar Sahai, learned counsel for the defendants, has vehemently argued that the Agreement dated 7-4-1989 cannot be enforced in view of Section 269UC of the Income-tax Act. Section 269UC is as under:--
"(1) Notwithstanding anything contained in the Transfer of Property Act, 1882 (4 of 1882), or in any ther law of the time being in force, no transfer of any immovable property of such value exceeding five lakh rupees as may be prescribed, shall be effected except after an agreement for transfer is entered into between the person who intends transferring the immovable property (hereinafter, referred to as the transferee) in accordance with the provisions of sub-section (2) at least (four) months before the intended date of transfer.
(2) The agreement referred to in sub-section (1) shall be reduced to writing in the form of a statement by each of the parties to such transfer or by any of the parties to such transfer acting on behalf of himself and on behalf of the other parties.
(3) Every statement referred to in subsection, (2) shall, --
(i) be in the prescribed form;
(ii) set forth such particulars as may be prescribed; and
(iii) be verified in the prescribed manner, and shall be furnished to the appropriate authority in such manner and within such time as may prescribed, by each of the parties to such transaction or by any of the parties to such transaction acting on behalf of himself and on behalf of the other parties."
7. According to Mr. Sahai, no transfer of any immovable property of the value exceeding Rs. 10 lakhs (from Rs. 5 lakhs changed to Rs. 10 lakhs by amendment) can be effected except after an Agreement of transfer is entered into between the transferor and the transferee in accordance with the provisions of sub-section (2) of Section 269UC at least 4 months before the intended date of transfer.
8. Sub-section (2) of Section 269UC provides that agreement referred in sub-section (1) shall be reduced in writing in the form of statement by each of the parties to such transfer and sub-section (3) further provides that such statement shall be in prescribed form with particulars to be verified in the prescribed manner and the statement has to be furnished to the appropriate authorities in such manner and within such time.
9. Mr. Sahai has further contended that the statement furnished under Section 269UC(3) has to be in consonance with Rule 48 (L) of the Income-tax Rules, 1961, Rule 48 (L) is as follows:--
"(1) The statement required to be furnished to the appropriate authority under subsection (3) of Section 269UC shall be in Form No. 37-I and shall be signed and verified in the manner indicated therein by each of the parties to the transfer referred to in subsection (1) of that section or by any of the parties to such transfer acting on behalf of himself and on behalf of the other parties.
(2) The statement in Form No. 37-1 shall be furnished, in duplicate, to the appropriate authority -
(a) before the 30th day of October, 1987, in a case where the agreement for transfer is entered into before the coming into force of Chapter XXC in the areas comprised in the "Bangalore Metropolitan Region", and "Ahmedabad Urban Development Area" and the areas comprised in the city of Ahmedabad; as referred to in the notification of the Government of India in the Department of Revenue No. S.O. 835(E), dated 21-9-1987.
(b) before the expiry of 15 days from the date on which the provisions of Chapter XXC come into force in any areas, other than the areas referred to in clause (a) where the agreement for transfer is entered into before such date; and
(c) before the expiry of 15 days from the date on which the agreement for transfer is entered into, in cases not covered by clauses (a) and (b)."
10. On the basis of these rules. Mr. Sahai has contended that statement which is required to be furnished under sub-section (3) of Section 269UC shall be in Form No. 37-I and shall be singed and verified in the manner indicated in the Form by each of the parties to the transfer, the statement in Form No. 37-I shall be furnished to the appropriate authorities before the expiry of 15 days from the date on which the agreement for transfer is entered into. On the basis of the provisions of Income-tax Act, Mr. Sahai has argued that (due to) non-compliance of provisions of Section 269UC and Rule 48 (L) the Agreement is illegal and cannot be acted upon. He has argued that in the absence of any permission no sale could be effected as it would be hit by the relevant provisions of Income-tax Act and rules framed there under. In his support he has cited the case of Universal Plast Ltd. v. Santosh Kumar Gupta, . I am in respectful agreement with the proposition of law laid down in Universal Plast Ltd. (supra). There cannot be any doubt as to where there is an absolute prohibition in law that an agreement to contrary cannot be enforced by the Court as held in the case of Universal Plast Ltd, (supra) in this case prohibition against sale of spindles was absolute in view of the Control Order issued by the Textile Commissioner.
11. The Supreme Court had the occasion to deal with the contract which can be enforced and others which cannot be enforced on account of certain statutory bar in the matter of Firm of Pratapchand Nopaji v. Firm of Kotrike Venkata Setty & Sons, observed as under at Page 1228:--
"If an agreement is merely collateral to another or constitutes an aid facilitating the carrying out of the object of the other agreement which, though void, is not in itself prohibited, within the meaning of Section 23 of the Contract Act, it may be enforced as a collateral agreement. If on the other hand, it is part of a mechanism meant to defeat what the law has actually prohibited, the Courts will not countenance a claim based upon the agreement because it will be tainted with an illegality of the object sought to be achieved which is hit by Section 23 of the Contract Act. It is well established that the object of an agreement cannot be said to be forbidden or unlawful merely because the agreement results in what is known as a "void contract". A void agreement, when coupled with other facts, may become part of a transaction which creates legal rights, but this is not so if the object is prohibited or "mala in se." Therefore, the real question before us is: Is the agreement between the parties in each case, which was to be carried out in Bombay, so connected with the execution of an object prohibited by either a law applicable in Bombay or a law more widely application so as to be hit by Section 23 of the Contract Act?"
After discussion the Supreme Court gave answer to the question posted in para 19 of the judgment as under:--
"The result is that we think that he objects of contracts set up by the plaintiff cannot be carried out by merely entering into them outside Bombay or engaging third parties as sub-agents, or in any other capacity, to execute them. The provisions of the Control Order arc applicable throughout India and are not confined to forward contracts entered into or meant to be carried out in any particular part of India. Their violation is a criminal offence. A claim for indemnification, under Section 222 Contract Act, is only maintainable if the Acts, which the agent is employed to do, are lawful. Agreements to commit criminal acts are expressly and specifically excluded, by Section 224 of the Contract Act, from the scope of any right to an indemnity."
12. Mr. Sahai has further argued that in view of the provisions of Section 269UC no Registering Officer appointed under the Registration Act shall register any document which purports to transfer until and unless that transfer has complied with the provisions of Section 269UC and a certificate from the appropriate authority to such transfer has been obtained.
13. I will advert to the facts of this case after dealing with the legal proposition enunciated by Mr. Sahai, Income-tax Act, as the name suggests is a tax, on the income of the assessed. The provisions of Section 269UC and collateral provisions and rules framed there under are enacted by Parliament keeping in view the fact that properties are sold not at the market value but less than the market value thereby depriving the exchequer its share from the gains which accrued to the transferor by transfer and as a deterrent aforesaid provisions were embedded in the taxation laws so that in cases where the appropriate authority, on data before it, derived from the statement filed by the transferor and transferee is of the opinion that the sale is undervalued, appropriate authority can refuse to give no objection certificate to the parties and at the undervalued price the State has an option to purchase the property Whether the provisions which are enacted for the purposes of streamlining transfer of properties in relation to its market value can be interpreted to hold good for an Agreement to sell simplicitor to oust the plaintiff at the thresh hold and on the plea that the Agreement to sell itself is void or illegal. It is well-settled principle of law that Agreement to sell is merely an agreement signifying the intention of the transferor to sell the property in question for a specified consideration on some specified date or on the happening of certain acts to be performed by the transferor or the transferee. By the Agreement to sell nothing is transferred or sold. At best it can be called a memorandum of understanding recorded in relation to sale which could be given effect to after conditions of the memorandum of understanding has been fulfillled and parties have performed their obligations under such agreement.
14. The basic fallacy in the arguments of Mr. Sahai is that the transferor, who is to transfer the property pursuant to an agreement to sell which is otherwise valid in law cannot seek a declaration from the Court for specific performance of that agreement, complete misreading of relevant provisions of Income-tax Act. What is forbidden under Section 269UC of the Income-tax Act and rules framed there under is No Objection Certificate from appropriate authority in relation to sale if there is a non-compliance of the provisions of Income-tax Act and rules framed there under followed by option given to the Government to buy the property on the valuation recorded in the statement and followed by penalty. No transfer can take place in the absence of non-compliance of the aforesaid provisions. But to argue that Agreement to sell is illegal, cannot be the impact of the language of Section 269UC and rules framed there under. Even otherwise the suit is for specific performance of Agreement. In a given case Court is empowered to give suitable directions regarding obtaining of permission from the appropriate authority. But can a party use the forum of Court at the thresh hold to wriggle out of its contractual The answer is in negative. At this stage while disposing of this application under Order 39, Rules 1 and 2 of the C.P.C., the Court is not precluded from directing defendants from maintaining status-quo in relation to the property in dispute. Prima facie, as I have observed earlier in a suit for specific performance if there is a valid agreement execution of which is not denied, receipt of earnest money is not disputed, can the plaintiff be non-suited because of the provisions of Section 269UC and other relevant provisions of Income-tax Act in this regard ? The answer is in negative. In my considered opinion, it is a matter of evidence in view of Clause 3 of the Agreement which postulates that it was the obligation of dependance to obtain Income-tax Clearance Certificate as to whether the defendants had requested the plaintiff to file a statement in terms of Section 269UC of the Income-tax Act read with Rule 48(L) of the Income-tax Rules or not. Moreover, it is the sale deed which cannot be registered until and unless the statutory provisions as contained in the Income-tax Act and rules framed there-under are complied with by the parties and necessary certificate is obtained from the appropriate authority. Even otherwise filing of statement in terms of Rule 48(L) of Income-tax Rules is an independent exercise by the parties not connected with the Agreement to sell. Even at this stage I may require the parties to file statements in terms of Rule 48(L) on Income-tax Rule to the appropriate authority but that is not the issue before me though the case cited before me by Mr. Sahai in Shri Rajan Kapoor v. Shri Yogesh Kumar, in IAs.6510/89, 58/90, 345/90, 1722/90 and 267/91 in Suit No.3112/88, the Court gave option to the plaintiff to deposit the whole of consideration in the Court and then the Court held that in that eventuality the Court may persuade the defendants to apply afresh for permission under Chapter XXC of the Income-tax Act.
15. But in the case before me, here is a transferor who executed the sale agreement on 7-4-1989, a letter is sent to him by the plaintiff, who is cautious of the provisions of Income-tax Act before the expiry of three months, stating that he is willing to pay Rs. 5 lakhs subject to defendant's producing N.O.C. and Income-tax Clearance Certificate. But just on the last date of expiry of three months a telegram was sent by the defendant revoking the Agreement altogether alleging fraud, which itself shows that may be defendant has made up his mind not to honour the Agreement which has been executed on 7-4-1989. Recalling the test laid down by Supreme Court in Firm Pratapchand Nopaji (supra) that real question is as to whether the agreement between parties is so connected with the execution of object which is prohibited by law. In the instant case the object of the Agreement to sell is not prohibited by law. I would not dwell much on the merits of the case as at this stage I am only concerned with prima facie view of the matter and nothing said earlier would be an expression of opinion on the case of either party. The plaintiff has also claimed damages in the suit in prayer clause if he fails to get a decree of specific relief. The balance of convenience is in maintaning and confirming the injunction which was granted earlier. Otherwise third party interest may, be created in the property in dispute which would unnecessarily give multiplicity to causes of action thus causing irreparable injury to the plaintiff.
16. In the aforesaid premises. I confirm the order passed by this Court on 3-8-1989, The injunction order shall continue till the disposal of the suit, Parties are left to bear their won costs.
17. IA stands disposed of.
18. List this matter before Joint Registrar for further proceedings on 3-10-1994.
19. Order accordingly.