Sanjeev Sethi vs Union Of India And Ors.
1991 Latest Caselaw 763 Del

JUDGMENT

B.N. Kirpal, J.

(1) The challenge in this writ petition is to the order passed under Section 269 UD(1) by the Appropriate Authority under the Income-tax Act (respondent No. 2), whereby it has decided to purchase the flat which was to be sold pursuant to a letter of allotment which had been issued by M/s Ansal Propel ties and Industries Ltd. (respondent No. 4) in favor of the petitioner.

(2) Briefly stated the facts are that one Smt. Satyawanti Dhawan (respondent No. 5) is the owner of plot No. 6, Jantar Mantar Road, New Delhi. On 4th September, 1979 she entered into an agreement with M/s Competent Builders. As per the terms of the said agreement M/s Competent Builders was to develop this property and construct a multi-storeyed residential building. According to the terms of the agreement the entire building was to be constructed by M/s Competent Builders out of its own resources and 35% of the saleable area on all the floors was to be allotted to the owner. The balance area could be sold by Competent Builders. Both the parties to the agreement were free to sell their respective shares and Clause 24 of the said agreement provided that the owner had to execute an irrevocable power of attorney in favor of the builder to do all necessary acts and things required for approaching the public and all Govt., and local authorities for sanction of the plans etc. and also "for execution of sale agreements in favor of the purchasers of the flats or their assigns or nominees and to do all necessary acts, and things on behalf of the owners.'

(3) One Navneet Sethi, brother of the petitioner, applied for allotment of a flat. On 1st December, 1979 a letter of allotment was issued in favor of Navneet Sethi whereby flat No. 308 was allotted to him. The approximate covered area of this was 1050 sq. ft. and in the recital of the letter of allotment it was stated that Competent Builders had entered into an agreement dated 4th September, 1979 with the owner and it was by virtue of this agreement and the general power of attorney executed by the owner which had empowered the Competent Builders to sell space on ownership basis in the proposed multistoreyed building in favor of different persons including Navneet Sethi. The allotment so made was called provisional but this was done because the clause of the allotment letter stated that there could be changes made by the sanctioning authorities or the architects or the builders, and, therefore, there could be variation in the area or even the price. It was further stated that in case of deletion of the flat from the sanctioned plan, no claim would be made in respect of any interest and the amount received would be refunded by Competent Builders.

(4) It seems that dispute arose between the owner and Competent Builders which was subsequently compromised on 29th August, 1984. By this agreement Competent Builders agreed to construct the building within two years from the date of starting of construction. Ameeting of the flat buyers including Navneet Sethi was called by Competent Builders who sought to increase the price of the flat. The flat buyers agreed to pay further Rs. 4507- per sq. ft. The result of this was that the total rate agreed io bepaid by the buyers was Rs. 700.00 per sq. ft. An Association called Dhawan Building Association of Buyers/Allottees of flats was also formed in the year 1989. M/s Competent Builders was a partnership firm and disputes arose amougst its partners. A suit for dissolution of partnership being Suit No. 80/90 was filed in this Court by one partner against the other. The buyers/allottees association filed an application for intervention and sought appointment of a receiver/administrator so as to carry out the construction of the building at 6, Jantar Mantar Road, New Delhi.

(5) During the pendency of this suit a compromise was arrived at. This resulted in a tripartite agreement daied 13th June, 1990. Parties to this agreement were Smt. Satyawati Dhawan, M/s Competent Builders and M/s Ansal Properties and Industries Ltd. (respondent No. 4) (hereinafter referred to as Ansals) By this agreement Ansals stepped into the shoes of Competent Builders and undertook to complete the project. M/s Competent Builders walked out of the project by receiving Rs. 1.20 crores from the owner. The agreement further postulated the allotment of 35% of the built up area in favor of the owner. With regard to the buyers, like the petitioner, clause l(d) provided that the liability to refund the amount collected from various flat buyers by Competent Builders was to be that of the owner Smt. Satyawati Dhawan. Competent Builders agreed to keep the owner indemnified against any loss or damages other than loss or damages which may be suffered by the owner as a result of allotment of flats to the various allottees. The result of this was that the liability to pay the allottees was taken over by the owner.

(6) It seems that though the liability to pay to the allottees was that of the owner but the said agreement in clause 13 provided that Ansals were to pay a sum not exceeding Rs. 43,32,627.00 to the owner which was the sum to be refunded by the owner to the various allottees. This clause further stated that, on the request of the owner, the actual refund would be made to the buyers directly by Ansals on behalf of the owner. There are other clauses in the agreement which are not very material except that it says the market price of flats as on that date when the tripartite agreement was entered into was Rs. 1500.00 per sq. ft. because it is at this rate the owner bad agreed to transfer an area of 8000 sq. ft. in favor of Ansals.

(7) The last material clause in this agreement, as was there earlier in the agreement with Competent Builders was that the owner had agreed to execute a power of attorney authorising Ansals to execute documents for effecting transfer of built up area falling to the share of Ansals to the prospective buyers including undivided interest in land. This has relevance to the area which was allotted to the Ansals who were free to sell it in the manner they deemed fit and proper.

(8) On 27th June, 1990 Ansals filed an application for the grant of permission in Form 37-1 in respect of this tripartite agreement dated 13th June, 1990. On 6th August, 1990 No Objection Certificate was issued by the Appropriate Authority. In the meantime a writen document being memorandum of understanding dated 25th July, 1990 was entered into at the instance of the buyers association between the owner and the Ansals. This memorandum of understanding, inter alia, stated that Ansals would honour all the agreements which bad been entered into between Competent Builders and the buyers but the basic price payable by the flat buyers shall be Rs. 850.00 per sq. ft. of super area. It was further provided that the amounts already paid by flat buyers to Competent Builders shall be adjusted by Ansals even though Ansals had not received those amounts from Gompetent Builders. If any flat buyer did not want to retain the entitlement of the flat, Ansals were to refund the money along with interest. "ANOTHERimportant clause was Clause 10 w hich was to the effect That after the fresh continuation Allotment Letters have been signed with majority of the flat buyers the application filed by the said Association in the said suit No. 80 of 1990 shall be withdrawn by the Association."

(9) As a result of the aforesaid memorandum of understanding fresh letters of allotment were issued on 10th October, 1990 by Ansals to various buyers. In respect of the petitioner it appears that Navneet Sethi had written for the substitution of the petitioner's name in his place. Vide letter dated 9th October, 1990 Ansals agreed to the request and the petitioner's name was substituted in place of his brother Navneet Sethi. Along with the allotment letter which was in a standard form issued by Ansals to all the buyers, was a supplement which was attached. The supplement stated "The attached letter of allotment stands modified to the extent of the following paragraphs in respect of the previous buyers of flats. "According to the supplement 30ø/o of Rs. 850.00 per sq. ft. was to be paid in two Installments. The first Installment was to be paid on or before 15th October, 1990 and the second Installment on or before 30th November, 1990. There were a number of other clauses in the said supplementary letter and it is not necessary to reproduce them in any great detail except to note it that was specifically provided therein that these clauses in the supplement "will be applicable only to the original previous buyers of flats or where the flats have been transferred to immediate relatives as defined above."

(10) On 26th October, 1990 the petitioner, being advised that the consideration of the flat may exceed Rs. 10.00 lakhs, applied for permission in Form 37-1 to the appropriate authority. On 20th December, 1990 respondent No. 2 passed an order under Section 269UD(1) ordering the purchase of the flat by the Central Government for a total apparent consideration of Rs. 11, 39, 500.00 . This sum was arrived at by calculating the price @ Rs 850.00 per sq. ft. and included the price of the flat plus the price of car parking space plus the charges payable to the L&DO office and other miscellaneous charges.

(11) After the issuance of the order under Section 269UD(1) on 20th December, 1990 the present writ petition was filed. During the pendency of the wiit petition an application being Cm 2417/91 was filed by the buyers association through its President Shri H.D. Shourie. In the said application the prayer was that the Association should be allowed to intervene and they should be imp leaded as a party petitioner in the above writ petition. Vide order dated 7th October, 1991 this application was allowed and Mr. H.D. Shourie addressed arguments on behalf of the said Association.

(12) The main contention of the learned counsel for the petitioner is that the provisions of Chapter xx-c of the Income-tax Act are not applicable in the present case. The submission of Mr. Syali is that in the instant case a valid agreement had been entered into between the petitioner (which expression will include his predecessor in interest viz, his brother Navneet Sethi) and the other flat buyers on the one hand and Competent Builders en the other. This agreement was entered into prior to 1st October, 1986 w.e.f, which date Chapter xx-c was incorporated in the Income tax Act, 1961. It is submitted that the said agreement was covered by the provisions of Chapter xx-A and according to Section 269RR the provisions of this Chapter were to be applicable in relation to the transfer of any immovable property made before 30th September, 1986. The word 'transfer' is defined in Section 269-A(h) and the same has to be read with the definition of the word immovable property occurring in sub-clause (e) which includes any rights of the na.ture referred to in clause (b) of sub-section (1) of Section 269(AB). The provisions of Section 269Ab inter alia, refer to a transaction by way of an agreement whereby any person acquires any right in respect of any building which has been constructed or is to be constructed even if that right is not by way of transaction of sale, exchange or lease etc. In other words the letters of allotment whicli were issued by Competent Builders in favor of the petitioner and the other flat buyers would admittedly fall within the ambit of Chapter xx-A of the said Act. This being so, the contention of Shri Rajendra, on behalf of the respondents was that original agreement between the buyers and Competent Builders had come to an end and there was a fresh agreement which bad been entered into between the buyers and the Ansals when the letters of allotment were issued in 1990. Shri Rajendra further submits that in the fresh letter of allotment which has been issued, there is no reference to the earlier agreement which had been entered into with Competent Builders and nor were the earlier agreements registered under the provisions of Rule 48L of the Income-tax Rules. He further submitted that, in any case, the petitioner Sanjeev Sethi was not a party to the original agreement of 1979 and, therefore, the cannot be regarded as being one of the original allottees/buyers and his case an any case will be covered by the provisions of Chapter xx-c.

(13) We have, therefore, to essentially see, in the present case, whether there is a fresh agreement which has come into existence with the issuance of the letters of allotment in 1990 or whether it is case of continuation of the: earlier agreement which had been entered into in 1979.

(14) Looking at the totality of the circumstances and after taking the various clauses of different agreements into consideration, we are of the firm opinion that this is a case where the earlier agreements of 1^79 are being honoured and given effect to.

(15) From the facts stated hereinabove it is clear that the property in question is owned by Smt. Satyawaii Dhawan. The land and the super structure thereon arc registered in her name. In law it is only she, being the registered owner, who can effect transfer of immovable property. It is only she who can create an interest in immovable property in favor of somebody else. It is. precisely for this reason that agreement between Satyawati Dhawan and Competent Builders clearly provided for the execution of a power of attorney in favor of Competent Builders specifically empowering Competent Builders to effect sale to the outsiders like the petitioner and other flat buyers. Competent Builders could effect sales and create interest only in the name and -on behalf of Smt. Satyawati Dhawan. Though entire investment in the construction of the immovable property was at the expense of Competent Builders nevertheless when any immovable properly is erected on land, the ownership thereafter necessarily vests in the owner of the land. It is for this reason that Smt: Satyawati' Dhawan specifically empowered and authorised Competent Builders to execute sale deeds or issue allotment letters as the attorney of Smt. Satyawati Dhawan.

(16) In the allotment letters issued by Competent Builders there is specific reference to the agreement dated 4th September, 1979 between Smt. Satyawati Dbawan and Competent Builders and, in addition thereto, there is also reference to the power of attorney executed by Smt. Satyawati Dhawan in favor of Competent Builders. The letter of allotment clearly shows that Competent Builders had derived their authority to effect such sale only by reason of these two documents. It is clear, therefore, that in law. Competent Builders were acting as an agent of a disclosed principal. It may be that there was principal to principal contract between the flat buyers and Competent Builders but nevertheless Competent Builders were not more than an agent of Smt. Satyawati Dbawan. Competent Builders did not own any immovable property.

(17) After Competent Builders walked out of the project it is the Ansals who stepped into their shoes. The execution of the tripartite agreement ciearly i shows the taking over of the rights and liabilities of the Competent Builders by Ansals. The rights of Smt. Satyawati Dbawan contained in the earlier agreement with Competent Builders were retained. The flat buyers were not a party to this tripartite agreement It is no doubt true that this tripartite agreement did not postualate that Ansals would honour the commitment towards the flat buyers. This agreement provided that it is the owner Smt. Satyawati Dhawan who would be responsible to pay the money of over Rs. 43 lakhs to. the flat buyers. Site, of course, had to be financed by Ansals for the payment of money, but, inter alia, the tripartite agreement took note of the fact that it was the responsibility of the owner to refund the money to the flat buyers. This is also a clear evidence of the fact that the original allotment in a way had indeed created rights and liabilities between the flat allottees and Mrs. Satyawati Dhawan. Possibly Realizing that the commitment in favor of the flat owners .had to be honoured that is why a memorandum of understanding was entered into between Smt. Satyawati Dhawan and Ansals. According to this Memorandum of Understanding Ansals agreed that the original flat buyers will be sold flats at an enhanced rate of Rs- 850.00 per sq. ft. The other difference was with regard to an area of 1050 sq. ft. which was specified in the case of the petitioner. What Ansals agreed was that the petitioner would get super area of 1050 sq. ft. Therefore, the letter of allotment including supplementary demand by Ansals on 10th December, 1990 bad the effect of increasing the rate from Rs. 750.00 to Rs. 850.00 per sq. ft. and reducing the area from 1050 sq. ft. to 1050 sq. ft. of super area.

(18) We are unable to agree with Mr. Rajendra when he states that in the agreement with Ansals there is no mention of the earlier allotment in favor of the flat buyers. It is no doubt true that in the tripartite agreement the flat buyers are not a party hut this agreement does recognise the existence of - the flat buyers because it provides that the flat buyers will be paid back the amount by Smt. Satyawati Dhawan. What is more important is that with the allotment of 10th October, 1990 there is a supplement which is attached thereto which supplement specifically deals with the allotment to the original flat buyers. It is not in dispute that the market rate of the flats was Rs. 1500.00 per sq. ft. It is at this rate that Smt. Satyawati Dhawan had agreed to transfer 8000 sq. ft. out of her share in favor of Ansals. Realizing the earlier commitment, and possibly the fate of the application which had been filed by the Association in the suit, it was agreed that the flats would be sold to the original flat buyers at the rate of Rs. 850.00 per sq. ft. There was, therefore, a concession of nearly Rs. 650.00 per sq. ft.

(19) It appears to us that in the present case the buyers and the seller have not changed. The buyers are the flat buyers like the petitioner and the seller in law, is Smt. Satyawati Dhawan. The only change which has occurred is that one builder has stepped into the shoes of another. The Ansals have taken over the project from Competent Builders. Ansals have acted pursuant to the power of attorney executed in their favor by Smt. Satyawati Dhawan just as, at an earlier point of time. Competent Builders had issued allotment letters on the basis of power of attorney executed in their favor by Smt. Satyawati Chawan. Without a valid power of attorney in their favor neither Competent Builders nor Ansals could have issued any letters of allotment. When the builder has changed that does not necessarily mean that the right of the original buyers stood extinguished. The right to allotment of flat continued to exist notwithstanding the walking out of the project by Competent Builders and stepping into their shoes by Ansals. Any tripartite agreement amongst the owner. Competent Builders and the Ansals could not adversely affect the rights of the flat buyers. It is precisely for this reason that the memoradum of understanding was entered into. It is difficult to imagine that an experienced builder like Ansals would have agreed to sell large area of built up property at a rate of Rs. 850.00 per sq- ft. unless and until it was advised, and in our opinion rightly so, that the flat buyers had a right to the allotment of flats in their favor and that Smt. Satyawati Dhawan could not defeat their right by changing the builder.

(20) We are unable to agree with Shri Rajendra that Competent Builders or Anials were not the agents of Smt. Satyawati Dhawan. The two builders, apart from being financers, had powers of attorney executed in their favor and a power of attorney is always regarded as an agent of the principal. The attorney is empowered to have dealings with third parties bat such dealings- are always for and on behalf of the principal. The principal and the third parties, in the present case, never changed and therefore, the letters of allotment which were issued on 10th October, 1990 were merely continuation of the earlier letters. The letters did change some of the terms and conditions of the earlier allotment but it is not possible for us to come to the conclusion that these letters of allotment of 10th October, 1990 amounted to novation of contract. Novation of con tract, in its very nature postulates the extinguishment of an- earlier contract and coming into existence of a fresh one. This is not the case here. The earlier agreement is being given effect to and merely because there is a change in some of the terms specifically with regard to the rate and the area, would not result in a new agreement coming into existence. Just as increasing the rent would not bring into existence a new tenancy, similarly increasing the rate would not bring about a new agreement. In fact, the original rate which was agreed to be paid by the flat buyers was only Rs. 250.00 . In 1988 this was agreed to be increased to Rs. 700.00 . This agreement was with Competent Builders. It is two years thereafter that there was an increase from Rs. 700.00 per sq. ft. to Rs. 850.00 per sq. ft.

(21) In our opinion therefore, the provisions of Chapter xx-c were not applicable to the present case and it is only the provisions of Chapter xx-A which were applicable.

(22) Before we conclude we must deal with the contention of Shri Rajendra to the effect that in this case Sanjeev Sethi is not the same person with whom an agreen.ent was entered into originally. It is not in dispute that the provisions of Chapter xx-c are not applicable in the case of transfer of property by a person to his relative on account of natural love and affection. In the present case it is oi.ly on 4th October, 1990 that letter was written by Navneet Sethi to Ansals to the effect that the allotment be transferred to the name of his brother Sanjeev Sethi. The right of Navneet Sethi to get the flat was recognised. It is this right which was transferred by Navneet Sethi to his brother Sanjeev Sethi. This was obviously a transfer on account ol natural love and affection and such a transfer would be exempt from the provisions of Chapter xx-c by virtue of the provisions of Section 269UO. Moreover in clause 24 of the agreement dated 4th September, 1^ 9 it was inter alie provided that the power of attorney would be executed in favor of Competent Builders so as to enable the Competent Builders to execute "sale agreements in favor of the purchasers or the flats or their assigns or nominees and............j . The said clause clearly provides that the purchasers could have their nominees or assigns and they would necessarily step into the shoes of the purchasers. This is precisely what has happened here. Sanjeev Sethi has) stepped into the shoes of his brother Navneet Sethi who was the original allottee. It is for this reason that no transfer charges were demanded by or paid to Ansals, even though the agreement postulates that in case of any transfer, such charges will have to be paid.

(23) With regard to the applicability of Rule 48L the conclusion is very simple. The said Rule will apply only if Chapter xx-c applies. For the view that we have taken, on the facts of the present case. Chapter xx-c does not apply. Therefore, the question of the said Rule becoming applicable does not arise. Furthermore, at the time when the Rule came into operation viz., 1st October, 1986, the price which had been agreed to be paid by title erstwhile buyers was less then Rs. 10 lakhs per flat. In the very nature of things Chapter xx-c was not applic"ble to the sale of immoveable property of value less than Rs. 10 lakhs. Therefore, there would be no occasion as at that point of time for any application of Rule 48L. The price was increased to beyond Rs. 10 lakhs only in 1990.

(24) Lastly the said Rule 48L has no retrospeclive operation and would not apply to an agreement entered into prior to 1st October, 1986 specially to such cases where the provisions of Chapter xx-A were applicable like in the present case.

(25) For the aforesaid reasons this writ petition is allowed. We issue a writ of mandamus quashing the impugned order dated 20th December, 1990 passed under Section 269 UD(1) and further issue a writ of mandamus directing the respondents to grant permission in Form 37-1 to the petitioner and other flat owners, in accordance with law and in the light of the observations made hereinabove.

(26) There will be no order as to costs.