http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 10  

PETITIONER: ASGAR S.  PATEL & ORS.

       Vs.

RESPONDENT: U.O.I.  & ORS.

DATE OF JUDGMENT:       25/04/2000

BENCH: R.C.Lahoti, S.R.Babu

JUDGMENT:

R.C.  Lahoti, J.

     Flat  No.201,  2nd Floor, New Jaldarshan, Perry  Cross Road,  Bandra (West), Bombay was owned by one Hemant  Chawla (hereinafter  the Transferor, for short).  On 1.5.1994 the transferor  entered into an agreement to sell the said  flat for  a consideration of Rs.45,50,000/- in favour of the  six appellants   herein   (hereinafter  referred   to   as   the Transferees,  for short).  An amount of Rs.4,55,000/-  was paid  by the transferees to the transferor on 1.5.1994, i.e. the  date  of the execution of the agreement.   The  balance consideration of Rs.41 lakhs was to be paid on completion of sale  within  30  days  from the receipt  of  no  objection certificate  from  the Appropriate Authority.  On  6.5.1994 the transferor and the transferees jointly filed a statement in  Form  37-I under Section 269 UC of the  Income-tax  Act, 1961  (hereinafter  the  Act, for short).  A copy  of  the agreement was annexed with Form 37-I as statutorily required and  as  per the proforma the names of the  six  transferees were mentioned in column No.4 of Form 37-I.

     On  12.8.1994 the Appropriate Authority issued  notice under  Section 269 UD (IA) of the Act to the transferor  and the transferees in view of its having formed an opinion that there  was  significant under valuation of the property  and calling  upon  the  transferor and the transferees  to  show cause  why  an  order  of  compulsory  purchase  by  Central Government  be  not  made.  Vide para 6 of  the  notice  the Appropriate  Authority  noted  that  out of  the  amount  of consideration  agreed  upon  between   the  parties  to  the agreement  dated  1.5.1994, an amount of  Rs.4,55,000/-  was paid  by  way  of  earnest money on  the  execution  of  the agreement  and the balance amount was payable within 30 days from the receipt of NOC from the Appropriate Authority.  The transferor  and the transferees filed responses to the  show cause  notice disputing the grounds for compulsory  purchase by the Central Government.

     On 30.8.1994 the Appropriate Authority passed an order directing  compulsory  purchase  in favour  of  the  Central Government  for a discounted value of Rs.44,25,680/-.   Vide paras 8 & 9 of its order, the Appropriate Authority directed that  out  of  the  consideration  payable  by  the  Central Government,  the encumbrance as mentioned in Clause 3 of the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 10  

agreement,  should be satisfied by the transferor and in the meantime the amount shall be deposited in the account of the appropriate  authority.  Vide Clause 9 of the agreement, the vendor  was to bear 50% transfer fee payable to the  Society which liability amounted to Rs.22,000/-.  The order directed this amount also to be retained by the Appropriate Authority towards  the vendors liability for payment of transfer fee. Clause  (3)  of the agreement referred to the  flat  forming subject  matter  of sale having been offered as security  to Indian   Overseas  Bank  in  connection   with  a  loan   of Rs.36,50,878/-  taken by the transferor.  There was also  an order  of  attachment before  judgment-cum-garnishing  order dated  13.9.1994  secured  by  one   Chandrakant  &  Co.,  a partnership  firm,  creating an encumbrance to the  tune  of Rs.6,00,800/- on the flat.

     On  26.9.1994 the transferees made a representation to the  Appropriate  Authority  inviting the attention  of  the latter to the fact that they had paid a sum of Rs.4,55,000/- (as  mentioned  in  the  agreement)   and  another  sum   of Rs.50,000/-  after  signing of the said agreement  to  which they were entitled to be reimbursed under Clause 5(e) of the agreement.   They  prayed  that their lien on  the  flat  be honoured and the amount of Rs.5,05,000/- be released to them out  of the consideration proposed to be paid by the Central Government  to  the  transferor.  Ultimately the  amount  of consideration   payable  by  the   Central  Government   was distributed  as  follows.   An amount of  Rs.6,00,800/-  was deposited  in the Court on 30.9.1994 to honour the order  of attachment  made  in summary suit No.2012 of 1994  filed  by M/s.   A.  Chandrakant & Co.  against the transferor  Hemant Chawla.   An  amount  of Rs.36,50,878/- was paid  to  Indian Overseas  Bank,  Bandra Branch on 27.12.1994 to satisfy  the encumbrance  of  mortgage  existing in favour of  the  Bank. Retaining  an  amount  of Rs.22,000/- towards  transfer  fee payable  to the Society, the balance amount of Rs.1,52,002/- was  paid to transferor on 23rd December, 1994.  It is clear from  these  facts  that  in  so far as  the  claim  of  the transferees,  appellants  before  us, is  concerned  it  was neither  taken  note  of  nor honoured  by  the  Appropriate Authority.  On 25.1.1995 the transferees/appellants served a notice   demanding  payment  of   Rs.5,05,000/-   from   the Appropriate  Authority.   On  16.3.1995 they  filed  a  writ petition  in  the  High  Court of Bombay  seeking  the  same relief.   A learned Single Judge dismissed the writ petition summarily  forming  an  opinion  that   the  remedy  of  the appellants  was  to  sue the transferor for  return  of  the earnest  money  and  remedy  of   civil  writ  petition  was misconceived.   The appellants preferred a writ appeal which also  has  been  dismissed  by   the  Division  Bench.   The aggrieved  appellants  have  come up to this  Court  seeking special  leave  to  appeal which leave has been  granted  to them.

     The  controversy  arising for decision centers  around the  interpretation of Section 269 UG of the Act.  According to  the learned counsel for the appellants it was  statutory obligation  of  the Central Government to have  tendered  to them  the  amount claimed by them.  Their claim having  been brought  to  the  notice  of  the  Central  Government,  the Appropriate  Authority  was not justified in  releasing  the amount  to the transferor.  The transferees were the persons entitled/claiming   to   be  entitled  to  the   amount   of consideration  to the extent of Rs.5,05,000/- and in as much as  their entitlement was not disputed by the transferor  or

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 10  

anyone  else for that matter, there was no dispute as to the apportionment of the amount to the extent of the entitlement of the transferees.  In any case the amount should have been kept  in deposit by the Appropriate Authority and should not have   been  released  to   the  transferor.   The   Central Government  must  bear  the consequences  flowing  from  its default  by  non-compliance with the obligation  statutorily cast on it by the Act.

     Sections  269  UF & 269 UG of the Act read as  under:- Consideration  for purchase of immovable property by Central Government.   269UF.  (1) Where an order for the purchase of any  immovable  property by the Central Government  is  made under   sub-section(1)  of  section   269UD,   the   Central Government  shall  pay,  by way of  consideration  for  such purchase,  an  amount  equal to the amount of  the  apparent consideration.

     (2) Notwithstanding anything contained in sub- section (1),  where,  after  the agreement for the transfer  of  the immovable  property referred to in that sub-section has been made but before the property vests in the Central Government under   section  269UE,  the   property  has  been   damaged (otherwise  than  as a result of normal wear and tear),  the amount  of the consideration payable under that  sub-section shall  be reduced by such sum as the appropriate  authority, for  reasons  to  be  recorded  in  writing,  may  by  order determine.

     Payment  or deposit of consideration.  269UG.  (1) The amount  of  consideration  payable in  accordance  with  the provisions  of section 269UF shall be tendered to the person or  persons  entitled thereto, within a period of one  month from  the  end of the month in which the immovable  property concerned  becomes  vested in the Central  Government  under sub-section (1), or, as the case may be, sub-section (6), of section  269UE:  Provided that if any liability for any  tax or  any  other  sum remaining payable under  this  Act,  the Wealth-tax  Act,  1957 (27 of 1957), the Gift-tax Act,  1958 (18 of 1958), the Estate Duty Act, 1953 (34 of 1953), or the Companies  (Profits)  Surtax Act, 1964 (7 of 1964),  by  any person  entitled to the consideration payable under  section 269  UF,  the  appropriate  authority may, in  lieu  of  the payment  of the amount of consideration, set off the  amount of  consideration or any part thereof against such liability or  sum,  after giving an intimation in this behalf  to  the person entitled to the consideration.

     (2) Notwithstanding anything contained in sub- section (1),  if  any dispute arises as to the apportionment of  the amount  of  consideration  amongst persons  claiming  to  be entitled  thereto, the Central Government shall deposit with the  appropriate  authority  the   amount  of  consideration required  to  be tendered under sub-section (1)  within  the period specified therein.

     (3) Notwithstanding anything contained in sub- section (1),  if the person entitled to the amount of  consideration does  not consent to receive it, or if there is any  dispute as  to the title to receive the amount of consideration, the Central  Government  shall  deposit   with  the  appropriate authority  the  amount  of   consideration  required  to  be tendered  under sub-section (1) within the period  specified therein:   Provided  that  nothing  herein  contained  shall affect the liability of any person who may receive the whole

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 10  

or any part of the amount of consideration for any immovable property vested in the Central Government under this Chapter to pay the same to the person lawfully entitled thereto.

     (4)  Where  any  amount  of  consideration  has   been deposited with the appropriate authority under this section, the  appropriate authority may, either of its own motion  or on  an  application  made  by or on  behalf  of  any  person interested  or  claiming  to be interested in  such  amount, order  the  same to be invested in such Government or  other securities  as  it  may  think proper, and  may  direct  the interest  or  other  proceeds of any such investment  to  be accumulated and paid in such manner as will, in its opinion, give  the  parties  interested  therein  the  same  benefits therefrom as they might have had from the immovable property in  respect whereof of such amount has been deposited or  as near thereto as may be.

     (emphasis supplied)

     We   will  shortly  revert   back  to  the  above-said provisions.   Immediately let us examine what is the  nature of the right of the transferees/appellants under the law and their  status under Chapter XX-C insofar as the  controversy arising  for decision before us is concerned.  The scheme as to purchase by Central Government of immovable properties in certain cases of transfer as is envisaged by Chapter XX-C of the  Income-tax  Act,  1971  came to be  introduced  by  the Finance  Act,  1986  in place of earlier  Chapter  XX-A  and applies  to  transactions effected after 1st October,  1986. Once the Appropriate Authority has, after the receipt of the statement under sub-section (3) of Section 269 UC in respect of any immovable property, made up its mind to make an order for  the  purchase  by  the Central Government  of  such  an immovable  property  at  an amount equal to  the  amount  of apparent  consideration as defined in clause (b) of  Section 269  UA, such property shall on the date of such order  vest in  the  Central  Government in terms of the  agreement  for transfer  referred to in sub- section (1) of Section 269 UC. Section  269  UE,  as  it  originally  stood  prior  to  its amendment  by  the  Finance  Act,   1993  with  effect  from 17.11.1992,   provided  for  the   vesting  in  the  Central Government  of  such  immovable   property  free  from  all encumbrances.   In C.B.  Gautam Vs.  Union of India &  Ors. -  1993 (1) SCC 78, a Constitution Bench of this Court  held the employment of expression free from all encumbrances in sub-section  (1)  to  be  violative of  Article  14  of  the Constitution  and therefore directed the said expression  to be  quashed and struck down from the language of Section 269 UE  (1).   Vide para 36, this Court has held :-  36.In the  result  the expression free from all encumbrances  in sub-section  (1)  of  Section  269-UE  is  struck  down  and sub-section  (1) of Section 269-UE must be read without  the expression  free from all encumbrances with the result the property  in  question would vest in the Central  Government subject  to such encumbrances and leasehold interests as are subsisting  thereon except for such of them as are agreed to be   discharged   by  the  vendor   before   the   sale   is completedThe  provisions  of sub- section  (6)  of that  section  do  not present any  difficulty  because  the vesting  in the Central Government would be subject to  such encumbrances and leasehold rights as stated earlier.

     A purchase under the provisions of Chapter XX-C may be

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 10  

called  a  compulsory  purchase or a  pre-emptive  purchase. Sub-section  (1)  of  Section  269 UF  obliges  the  Central Government   to  pay  an  amount   equal  to  the   apparent consideration  by  way of consideration for  such  purchase. Sub-section (1) of Section 269 UG provides for the person or persons  to whom the amount of apparent consideration is  to be  tendered by the Central Government.  Without cataloguing or  categorising  the person or persons to whom  the  amount shall  be  tendered the Parliament has chosen to employ  the expression   the person or persons entitled thereto.  The expression  is  not defined in Chapter XX-C or elsewhere  in the  Act.   We  have to go by the ordinary  meaning  of  the expression  and the context in which it has been used.   The word  entitle means to give a claim, right, or title  to; to  give  a  right  to demand or receive,  to  furnish  with grounds for claiming (The Law Lexicon, P.  Ramanatha Aiyar, 2nd Edition, page 642).

     Chapter  XX-C is not an encroachment or inroad on  the right of a citizen to hold property.  It merely modifies the contractual  relationship between the parties to the  extent superseded  by  the provisions of Chapter XX-C.  The  rights and  obligations of the parties to the contract are governed by  the ordinary law of the land including the provisions of the  Contract Act and the Transfer of Property Act.  Section 55 of the Transfer of Property Act, 1882 provides :-

     55.  In the absence of a contract to the contrary the buyer  and  seller  of immovable property  respectively  are subject  to the liabilities, and have the rights,  mentioned in  the  rules  next  following,  or such  of  them  as  are applicable to the property sold:

     xxx  xxx  xxx xxx xxx xxx (6) The buyer is entitled xxx xxx xxx

     (b)  unless  he  has  improperly  declined  to  accept delivery  of  the property, to a charge on the property,  as against  the seller and all persons claiming under  him,***, to  the extent of the sellers interest in the property, for the  amount of any purchase-money properly paid by the buyer in  anticipation  of the delivery and for interest  on  such amount;   and,  when  he  properly declines  to  accept  the delivery,  also  for the earnest (if any) and for the  costs (if  any)  awarded  to  him of a  suit  to  compel  specific performance  of  the contract or to obtain a decree for  its rescission.

     xxx xxx xxx

     xxx xxx xxx

     Just  as  the seller has a charge on the property  for unpaid  price  under  Section 55 (4) (b) of T.P.   Act,  the buyer  has a charge for price pre-paid.  Thus the amount  of any   purchase  money  properly  paid   by  the   buyer   in anticipation  of the delivery and also the earnest where the buyer had justification for declining to accept the delivery constitutes  a charge on the property forming subject-matter of  sale  to  the  extent of the sellers  interest  in  the property  and thus would be an encumbrance on the  property. Section  269  UE(1)  as  amended by the  Finance  Act,  1993 (w.e.f.  17.11.1992) reads as under:-

     Vesting  of  property in Central  Government.   269UE.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 10  

(1) Where an order under sub-section (1) of section 269UD is made by the appropriate authority in respect of an immovable property  referred  to  in sub-clause (I) of clause  (d)  of section  269UA,  such  property shall, on the date  of  such order,  vest  in  the Central Government [in  terms  of  the agreement  for  transfer referred to in sub- section (1)  of section  269UC]:   Provided  that   where  the   appropriate authority, after giving an opportunity of being heard to the transferor,  the  transferee or other persons interested  in the  said property, under sub-section (1A) of section 269UD, is  of  the opinion that any encumbrance on the property  or leasehold  interest specified in the aforesaid agreement for transfer  is  so  specified  with  a  view  to  defeat   the provisions  of this Chapter, it may, by order, declare  such encumbrance  or leasehold interest to be void and  thereupon the  aforesaid property shall vest in the Central Government free from such encumbrance or leasehold interest.]

     In  view of C.B.  Gautams case (supra) the vesting of the  property in the Central Government cannot be free  from encumbrance  unless the Appropriate Authority has  exercised the power conferred by proviso to sub-section (1) of Section 269  UE  and  annulled  the encumbrance  after  recording  a finding  and following the procedure as contemplated by  the proviso  whereupon  only  the  property shall  vest  in  the Central  Government  free from such encumbrance;   else  the encumbrance shall run with the property.

     The  language of Section 269 UE(1) gives an indication that  on the passing of an order under Section 269 UD(1) the immovable  property vests in the Central Government in terms of the agreement for transfer referred to in sub-section (1) of  Section  269 UC.  The scheme of the provisions  suggests that  on the passing of the order of compulsory purchase the Central Government stands susbstituted in place of the buyer and  the apparent consideration stands substituted in  place of  the  agreed  consideration.   Further  in  view  of  the property  having  vested  in  the  Central  Government,  the agreement   need  not  be   performed  by  the   transferor. Ordinarily,  in  the event of the private agreement  between the  parties  falling  to the ground (i.e.  not  because  of intervention  of  Chapter XX-C proceedings)  the  transferor would  have  been  liable to refund the amount  of  purchase money  to the transferees and so long as the amount was  not returned  the  transferees  would have held a  lien  on  the property  to the extent of the sellers interest.   Recently in Delhi Development Authority Vs.  Skipper Construction Co. (P)  Ltd.    2000 AIR SCW 113 this Court has held that  the buyers  charge under Section 55(6)(b) of the T.P.  Act is a statutory charge and differs from a contractual charge which the  buyer  may  be  entitled  to  claim  under  a  separate contract.   The  charge is enforceable not only against  the seller but against all persons claiming under him.

     A  charge  under  Section 55 (6)(b) of  T.P.   Act  is created  soon on payment of purchase money.  It can be  lost on wrongful refusal to accept delivery of property.  As held in   Saidun  Nessa  Hoque  &  Ors.   Vs.   Calcutta   Vyapar Pratisthan  Ltd.   AIR  1978  Cal.285, with  which  we  find ourselves  in agreement, a charge under Section 55(6)(b) may not  be created if the parties expressly stipulate that  the purchase  money will not form the charge on the property  or it will be released from the charge on certain circumstances or   that   earnest  would  be   forfeited   under   certain

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 10  

circumstances.   In  the present case, the  property  having been  compulsorily purchased by the Central Government there was no occasion for the buyer to have improperly declined to accept  delivery  of the property.  The amount  of  purchase money was properly paid by the buyer and was in anticipation of  the  fulfilment  of  the contract  which  would  include delivery  of  the  property.   In   view  of  the  order  of compulsory  purchase having intervened the transferees  were excluded  from  accepting  delivery of  the  property.   The applicability  of  Section 55 (6)(b) of T.P.  Act was  fully attracted.

     During  the  course of the proceedings  under  Chapter XX-C   the  Appropriate  Authority   may,  subject  to   the principles  of  natural justice, record a finding  that  the purchase  money  which  purports to have been  paid  by  the transferees  to the transferor is being claimed to have been paid  only  with  a view to defeat the  provisions  of  this Chapter.    Then  the  Appropriate   Authority  may  make  a declaration avoiding the charge claimed to have been created for  the  purchase  money  paid.   Else,  the  charge  shall continue  to  exist and follow the property in the hands  of the Central Government.

     The only defence raised in the counter filed on behalf of  the  Appropriate Authority before the Court is that  the appellants did not file a consent letter from the transferor agreeing    to    payment   of    Rs.5,05,000/-    to    the transferees/appellants  and therefore the balance amount was released for payment in favour of the transferor.  According to   the   Appropriate   Authority    it   is   always   the transferor/vendor  alone  who  is entitled  to  receive  the consideration  payable under an order of compulsory purchase unless  otherwise agreed mutually and expressly between  the parties  and  consent  terms   filed  with  the  Appropriate Authority.  It is difficult to agree with the abovesaid plea raised  on behalf of the Appropriate Authority.  If there be no  dispute  between  the buyer and the seller  or  a  third person  as to the amount of purchase money having been  paid or as to the apportionment of the amount forming part of the purchase  money  then  the amount must be  tendered  by  the Central  Government  to  the   person  or  persons  entitled thereto.   If  there  be  any   dispute  raised  as  to  the apportionment  of the amount by more than one person staking claims  seeking  payment  of  the amount  resulting  into  a dispute   as  to  the  apportionment   of  the   amount   of consideration,  in  that case the Central  Government  shall deposit so much part of the apparent consideration as is the subject  matter of dispute with the appropriate authority as provided  by  sub-section (2) of Section 269 UG.  In  either case  the  compliance  must be made within a period  of  one month  from  the  end of the month in  which  the  immovable property concerned becomes vested in the Central Government. Failure  to make such tender shall result in the pre-emptory purchase  being  abrogated and the immovable property  shall stand re-vested in the transferor as provided by sub-section (1) of Section 269 UH.

     An  absence  of  consent  or  express  willingness  to apportionment of the amount does not necessarily amount to a dispute  raised.  The action of the Appropriate Authority as evidenced  by  the  proceedings in the case at  hand  itself exposes  the  worth  of  the plea  so  raised.   Neither  A. Chandrakant  &  Co.   nor Indian Overseas Bank had  filed  a consent   letter   from  the    transferor.    Still   their

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 10  

encumbrances were discharged.  How the appellants could have been  treated  differently?  Form 37-I filed jointly by  the transferees  and the transferor stated purchase money to the extent  of Rs.4,55,000/- having been paid by the  appellants and  received by the transferor.  Nobody had questioned  the genuineness  of this payment.  The transferor never disputed having  received the said amount.  The factum of payment  of Rs.4,55,000/-  finding place in the agreement which was  the basis  of commencement of the proceedings and formed part of Form 37-I could not have been treated as a disputed payment. In  any  case, if the Appropriate Authority entertained  any doubt  about  the genuineness or otherwise of  such  payment then  the  Appropriate Authority should have said so in  its order  and  then  left  the   amount  in  deposit  with  the Appropriate  Authority.   That  having  not  been  done  the vesting  of the property in the Central Government under the order  of compulsory purchase cannot defeat the transferees lien under Section 55(6)(b) of the T.P.  Act.

     Though  a further amount of Rs.50,000/- is claimed  to have  been paid by the transferees to the transferor on  4th June,  1994 and this payment was also brought to the  notice of  the  Appropriate  Authority on 15th June,  1994  by  the transferees,  however,  the factum of such payment does  not find  mention  in any statement or document  jointly  signed before the Appropriate Authority or jointly submitted by the transferees and the transferor to the Appropriate Authority. An  intimation as to such claim does not also appear to have been  given to the transferor in the proceedings before  the Appropriate  Authority.   There  was  no  occasion  for  the transferor  to  have  admitted or disputed the claim  as  to payment  of  Rs.50,000/- to him.  No fault can therefore  be found  with  the Appropriate Authority having  not  tendered this amount of Rs.50,000/- to the transferee-appellants.

     During  the  course  of hearing, on a  specific  query raised  by  the  Court, the learned senior counsel  for  the appellants  stated  that  for non-tendering  the  amount  of Rs.5,05,000/-  or  Rs.4,55,000/-  the  appellants  were  not seeking  re-vesting of the property in the transferor;  they were  only  seeking enforcement of the statutory  charge  in their  favour for the amount of purchase money paid by them. In  view  of that statement made at the Bar the question  of testing  whether  for failure of the Central  Government  to tender  the  amount  consistently  with  the  provisions  of sub-section  (1)  of Section 269 UG the order of  compulsory purchase  in  favour of the Central Government  shall  stand abrogated  and  the  property shall stand  revested  in  the transferor   does   not  arise.    Besides,   the   property compulsorily  purchased  by the Central Government has  been put to auction once again and sold away with the result that the interests of a third party have intervened.

     The  question  which  now remains to  be  examined  is whether  in view of the law laid down hereinabove whether  a writ    of    mandamus    can     issue   in    favour    of transferees/appellants  commanding the Central Government to pay  the  amount of purchase money to the appellants to  the extent undisputedly paid by them.

     Here  it  will  be relevant to extract  and  reproduce Clause  5 of the agreement dated 1st May, 1994 entered  into between the parties.  It reads as under:-

     5.   Since  1st  October,  1986,  the  provisions  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 10  

Chapter  XX  C of the Income-tax Act, 1961, have  come  into force  and  in  view  thereof the parties  hereto  agree  as under:-

     a)  This agreement shall be treated as the  Memorandum of  Understanding between the parties hereto for the purpose of Section 269 UC of the Income-tax Act, 1961.

     b)  Within  15  days from the  execution  hereof,  the Vendor  and  the  Purchasers  shall file the  copy  of  this agreement  along  with  a statement in form 37-I,  with  the Appropriate   Authority  as  required  by  Section  269   UC Sub-Section (3) of the Income-tax Act, 1961.

     c)  In  the event the Appropriate Authority  makes  an order  for  purchase by the Central Government of  the  said property  under  Section 269 UD of the Income-tax Act,  1961 then in such an event.

     (i)  The Vendor shall be entitled to receive from  the Central  Government entire consideration and the  Purchasers hereby consents for the same.

     (ii)  The  Purchasers shall be entitled to claim  from the  Appropriate  Authority  the   refund  of  Rs.4,55,000/- (Rupees  Four  lakhs  fifty five thousand  only)  being  the earnest  money paid by the Purchasers to the Vendor.  In the event the Appropriate Authority does not pay the said sum of Rs.4,55,000/-  (Rupees Four lakhs fifty five thousand  only) to  the Purchasers then the Purchasers shall be entitled  to recover the said earnest money from the Vendor.

     d)  In  the event the Appropriate Authority  does  not make  any (sic  order?) for purchase by Central  Government of  the said property for a period of three months from  the date  of submitting the statement in form 37-I or grants its No  Objection  for  the sale of the said property  by  the Vendor to the Purchaser herein, the Vendor shall be bound to complete the sale.

     It is clear from the abovesaid Clause of the agreement that  the  parties  were  well aware of  the  provisions  of Chapter  XX-C  of  the  Act having come into  force  on  1st October,  1986.  In this background they had entered into  a specific  agreement  between  themselves  whereby  they  had agreed  in the event of the Appropriate Authority making  an order for purchase by the Central Government of the property forming subject matter of the agreement, firstly, the vendor is  the  person who shall be entitled to receive the  entire amount  of consideration and the purchasers were  consenting for  it.  The next sub-clause says that though the amount of Rs.4,55,000/-  shall  be  available  to be  claimed  by  the transferees  from the Appropriate Authority but the  parties were  also  clear  in their mind, and accordingly  they  had stipulated,  that in the event of the Appropriate  Authority not  paying the amount of Rs.4,55,000/- to the  transferees, the transferees shall be entitled to recover the amount from the  vendor.   There  is  no   reason  why  the  rights  and obligations  of  the  parties should not be  worked  out  by reference  to the recitals of the agreement governing  their relationship.  In the event of the Appropriate Authority/the Central  Government  failing  in discharging  its  statutory obligation  the only right reserved to the transferees under the  agreement is to recover the amount from the transferor. When the parties enter into a clear, unambiguous and express

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 10  

contract creating mutual rights and obligations, the parties are  bound  by it and the extraordinary jurisdiction of  the High Court under Article 226 of the Constitution which is of a  discretionary nature cannot be allowed to be utilized for enforcing  an obligation in departure from the terms of  the agreement.

     There  is yet another reason why the discretion cannot be  exercised in favour of the transferee-appellants.   Even if  the  High Court were to exercise its discretionary  writ jurisdiciton  in  favour  of the  transferee-petitioners  by directing  payment  of  purchase   money  from  the  Central Government  to the petitioners, the direction should be  one binding  on  the  transferor  as well so  that  the  Central Government,  in  its turn, could have recovered  the  amount from    the    transferor.        Strangely    enough    the transferee-petitioners  have not impleaded the transferor as party  to  the writ petition.  As the amount left  available with  the  Central  Government was less than the  amount  of purchase money paid by the transferees to the transferor, if full  amount of Rs.4,55,000/- was directed to be paid by the Central  Government  to  the transferee-petitioners  then  a corresponding  reduction  was required to be made  from  the amount  paid  to the Indian Overseas Bank and/or the  amount deposited  in the Court honouring the garnishing order/order of  attachment  in  favour of M/s.  A.  Chandrakant  &  Co.. Indian  Overseas  Bank and M/s.  A.Chandrakant &  Co.   were also  not  joined  as  parties to the  petition.   The  only persons  impleaded as respondents before the High Court were the  Union  of  India,  the Appropriate  Authority  and  the Commissioner  of  Income-tax.   The special  leave  petition before this Court was also filed with the said three parties only  impleaded  as  respondents.  During  the  pendency  of petition before this Court, on 25.1.1996 the transferor, the Bank  and  M/s  A.Chandrakant & Co.  were  permitted  to  be impleaded  as  respondents.  This was at too late  a  stage. They were noticed.  But they have chosen not to appear.

     For    the   foregoing    reasons,    we   hold    the transferee-petitioners  not entitled to any relief in  these proceedings.   Needless to say they are still at liberty  to have  their remedy against the transferor and seek return of the  money  paid  by  them  to  the  transferor  under   the agreement.  The appeal is dismissed though without any order as to the costs in the facts and circumstances of the case.