R. Padma and Others vs Appropriate Authority, Income Tax Department, Madras and Others

Sathiadev, J.—Respondents Nos. 5 to 8 in Writ Petition No. 4536 of 1988 are the appellants herein. Respondents Nos. 1 to 3 therein are

respondents Nos. 1 to 3 herein, and the writ petitioner is impleaded as the fourth respondent.

In the writ petition, the fourth respondent had claimed that along with his father, he entered into an agreement of sale dated January 28, 1988,

with the appellants herein and another, for purchase of a house property bearing door No. 6/104, 10th Main Block, Jaya Nagar, Bangalore, for

Rs. 20,00,000. In terms of section 269UC(1) of the Income Tax Act, 1961 (hereinafter referred to as ""the Act""), the prescribed statement was

filed, and on April 5, 1988, an order dated March 28, 1988, u/s 269UD(1) was served intimating that the Central Government would purchase

the property from the vendors for the consideration shown in the agreement. Hence, challenging the validity of section 269UD, he has filed the writ

petition. Reference is also made to other similar writ petitions filed in this court and also in the Supreme Court. Pending disposal of the writ petition,

he obtained stay of the order dated March 28, 1988. It is in the writ petition that Writ Miscellaneous Petition No. 8993 of 1988 was filed by the

appellants herein, claiming that by virtue of the interim order passed, they are put to considerable monetary loss, and that a member of the family is

getting married, and further, they are interested in purchasing a property in Madras, and when neither the purchaser nor the Department are likely

to pay them the sale consideration immediately, a direction may be issued to the Department to pay the balance of sale consideration to the owners

of the property pending disposal of the writ petition.

On the learned judge directing a sum of Rs. 7,50,000 to be paid after taking note of the fact that a sum of Rs. 5,00,000 having been already

received by way of advance, this writ appeal is filed, for recovering the balance amount of sale consideration from the Income Tax Department.

Reliance is placed on an earlier order in Tirath Kaur v. Shyam Investments represented by its partner (Writ Appeal No. 1637 of 1987 - dated 15-

10-1987).

Mr. P. S. Raman, learned counsel for the appellants, submits that, once an order u/s 269UD(1) is passed, the right, title and interest in the

property vest in the Central Government as found in section 269UE(1); and, therefore, the owners of the property are entitled to get the sale

consideration from the Central Government, viz., the price for which the property was agreed to be sold under the agreement of sale. He states

that irrespective of the fact whether the fourth respondent herein succeeds in the writ petition or not, the appellants are entitled to get the entire sale

consideration from the Central Government. When the owners have not been responsible for the litigation, they cannot be made to suffer. They

have no control over the prospective purchaser who had thoughtlessly gone to court.

It is not disputed by him that the constitutionality of Chapter XXC of the Act is pending consideration before various High Courts and the

Supreme Court. In the event of certain provisions being struck down, the vesting u/s 269UD would disappear, and in such event, the owners will

have to look to the purchaser for the sale consideration. The Act contemplates revesting of property under certain circumstances. Therefore, even

though contingent vesting of the property had taken place u/s 269UE, when the Central Government had been prevented from paying the

consideration u/s 269UF at the instance of the purchaser, there is considerable risk in directing the Government to pay the entire sale

consideration. If the writ petition is allowed, the vesting disappears, and the ownership will be with the appellants. No owner of property could

ever ask for payment of sale consideration before transfer of title in immovable property. It is stated that the appellants will undertake to return the

amount if circumstances so warrant. Already in the affidavit sworn to first appellant has stated that appellants are in dire need of funds for

celebrating the marriage of one of their family members; and also for investing money in a property at Madras. Hence, it will become next to

impossible for the Government to recover the amount of Rs. 20,00,000 from such parties. It will be highly inappropriate to direct public funds to

be parted with especially when the Central Government is prevented from implementing the provisions of the Act.

It is also claimed that the property forms a sufficient security for the amount, if any, disbursed. It is common knowledge as to how difficult it is

for the Government to realise amounts by sale of immovable property, in spite of success in the writ petition, the fourth respondent may thereafter

commit a breach of the contract. It would be unwise to subject the Government to part with public funds and thereafter face litigation, and in doing

so, it would be spending more funds to succeed in those matters.

While entering into the agreement, the appellants having known about the existence of Chapter XXC in the Act, ought to have stipulated terms

and conditions which would not involve an order being passed u/s 269UD(1). Having entered into an agreement of sale, which is one that cannot

be permitted under Chapter XXC of the Act, it is the appellants who will have to be blamed in the manner in which they have stipulated the terms

and conditions therein. Therefore, no owner of property can ever ask the Government to pay any portion of the sale consideration, unless and until

the proceedings in the court are dispossessed of. If any loss is occasioned because of the conduct of the fourth respondent, it is for the appellants

to take such proceedings as are available to them in law against him for indulging in litigation. Public funds cannot be taken away by an owner of

property when the agreement-holder resorts to litigation of this nature.

As for reliance placed on the decision in W.A. No. 1637 of 1987, even in the said order, it has been made clear that the directions given therein

were confined to the facts of that case. Therefore, the said order could have no relevance to the claims made by the appellants herein.

Hence, in matters of this nature, whenever a stay order is obtained at the instance of any of the parties to the agreement of sale and if there is

any interdiction by the court preventing the authorities from pursuing further steps consequent to the issue of an order u/s 269UD(1), then there

would be no directive from the court to the Income Tax Department to pay the sale consideration during the pendency of proceedings in court.

Hence, this appeal is dismissed.