Sunshine Travels And Tours P. Ltd. ... vs Union Of India And Others
1994 Latest Caselaw 242 Del

JUDGMENT

K. Shivashankar Bhat, J.

1. The question involved in these two writ petitions pertains to the scope of Chapter XX-A and Chapter XX-C of the Income-tax Act, 1961. The petitioner in C.W.P. No. 2822 of 1986 is referred to hereinafter as "Sunshine Travels" and the petitioner in the Writ Petition No. 2777 of 1986 is referred to hereinafter as "P. P. Singh".

2. Sunshine Travels entered into an agreement on April 30, 1986, with anil Vasudeva and others, Anil Vasudeva and others were the co-owners of the property in question. They were constructing a residential building on the said property. They are referred to as the "sellers". The sellers agreed to sell a portion of the building to the purchaser, Sunshine Travels. The consideration shall have to be paid in the manner stated in the agreement out of which a sum of rs. 50,000 had already been paid under four cheques. The stages in which the balance shall have to be paid are narrated in the agreement. The following clause is quite relevant :

"That under no circumstances, whatsoever, the possession of any portion of the building herein agreed to be acquired by the purchaser shall be given by the seller until and unless all payments required to be made in terms of this agreement along with any interest have been fully made to the sellers."

3. Various other clauses as to how the building shall have to be maintained, how the taxes are to be paid and how the increased burden shall have to be borne by the parties are not necessary for us to consider. However, clause 15 of the agreement stated that the portion of the building agreed to be acquired by Sunshine travels shall be transferred in their favor or in favor of their nominees within a period of three years from the date of the agreement on payment of the balance sum of Rs. 1 lakh agreed to be paid to the sellers under the agreement at the time of transfer.

4. According to the Revenue, the transfer of the building in favor of Sunshine Travels could take place only when this clause is satisfied, in other words, when the entire amount is paid and the sale deed is registered.

5. On May 1, 1986, From No. 37EE under section 269AB(2) of the Act was filed. This was under Chapter XX-A. On October 1, 1986, Chapter XX-C was brought into force in Delhi. On the basis of the new chapter XX-C, an order was made on December 15, 1986, acquiring the property in question. The petitioner immediately approached this court by filing the present writ petition on December 24, 1986. The petitioner questioned the validity of the relevant provisions of Chapter XX-C. The petitioner also sought the quashing of the order dated December 15, 1986, made under Chapter XX-C. The petitioner also sought the quashing of rule 48L of the Income-tax Rules Because it purports to make the provisions retrospective even though the Act (Chapter XX-C) did not declare its provisions retrospective.

6. The validity of Chapter XX-C has been substantially upheld by the Supreme Court in C. B. Gautam's case [1993] 199 ITR 530. Therefore, the petitioner confined the arguments as to the application of the provisions of chapter XX-C to the transaction in question. The petitioner contended that Chapter XX-C was not retrospective and did not apply to the agreements entered into prior to the date of its application to an area. Since the relevant agreement involved in the writ petition was entered into on April 30, 1986, the transaction would come within the provisions of Chapter XX-A of the Act.

7. Before considering the question of law it is necessary to note the effect of the agreement dated April 30, 1986. The sellers/owners agreed to sell a portion of the building put up by them to the petitioner, Sunshine Travels. The sale consideration shall have to be paid on various dates. However, the purchaser shall be entitled to have the building transferred in favor of the purchaser on payment of the entire sale consideration. This transfer referred to in clause 15 is the transfer as normally understood for the purpose of registration, i.e., to say a transfer effected by way of a sale deed; that is clear from a reading of the entire clause 15 which refers to the several formalities to be completed and the payment of transfer charges, registration expenses and stamp duty, etc. However, the agreement proceeds on the assumption that the purchaser will be entitled to possession of the portion of the building agreed to be sold to the purchaser of payment of the entire sums referred in the agreement. In other words, the agreement created a right in the purchaser with respect to the building put up and this right had the effect of enabling the enjoyment of the property. At any rate the agreement certainly has the effect of transferring or enabling the enjoyment of the right with respect to the building to be put up. This aspect shall have to be borne in mind while considering the various provisions of Chapters XX-A and XX-C.

8. In the writ petition filed by P. P. Singh and others there was an agreement dated August 9, 1985. P. P. Singh was the vendor under the agreement, Sushil Kumar Vohra and others were collectively called the "vendee". The vendor agreed to convey the perpetual leasehold rights in the plot of land in question along with the ownership rights in the superstructure constructed thereon. Vacant physical possession of the property was to be handed over to the vendee at the time of execution and registration of the sale deed. Thirdly, thereafter the entire consideration was paid by the vendee to the vendor and possession was handed over to the vendee. A supplementary agreement was executed on August 12, 1985, and all the payments were made by pay orders and the petitioner has produced the certificate of the bank also, the substantiate the assertion that the sale consideration has been paid in terms of the supplementary agreement. The possession, as already noted, was handed over to the vendee in August 1985. Having regard to the material on record, there can be no doubt that this supplementary agreement was a bona fide agreement entered into by the parties and the payments have been made in full and possession has been obtained by the vendee on August 12, 1985, itself. However, the appropriate authority held that the transfer was not complete and the transfer was to take place only after August 1, 1986, when Chapter XX-C came into force. He made an order on December 15, 1986, ordering the purchase of the property by he Central Government at an amount equal to the apparent consideration for the transfer of the property in question. Immediately, the petitioners approached this court.

9. The short question is whether the transfer for the purposes of Chapter XX-A and Chapter XX-C took place prior to October 1, 1986, or thereafter.

10. Having regard to the agreement and the supplementary agreement there can be in doubt that the possession of the property has been handed over to the vendee and he has been in enjoyment of the same. The agreement created a right in the vendee to enjoy the property. Even assuming that there was only a part performance of the contract, the said part performance was clearly the one falling within section 53A of the transfer of Property Act. In the circumstances, it was contended that the case of the petitioner came squarely within the provisions of section 269AB in Chapter XX-A of the Act.

11. The concept of "transfer" is defined in section 269A(h), in chapter XX-A, as also in section 269UA(f) in chapter XX-C. For the purpose of these Chapters, allowing possession of a property to be taken or retained in part performance of a contract of the nature referred in section 53A of the Transfer of Property Act, also is considered as a transfer. The Revenue, however, contends that the transfer should be a real transfer and a mere agreement to sell is not a transfer and if the agreement has not fructified in the execution of a sale deed before October 1, 1986, section 269UC will be attracted.

12. In both the writ petitions on the facts, we are of the view that the agreements in question have enabled the vendees to enjoy the respective properties or at any rate they have enabled the vendees to enjoy certain rights with respect to the properties in question and those rights are deemed to be immovable properties both under chapters XX-A and XX-C.

13. To understand the concept of immovable property as well as the concept of transfer it is necessary to refer to a few provisions. However, we have confined our discussions to one aspect of the right created under a transaction referred in section 269AB (1) (b).

14. Section 269A(e) defines the term "immovable properties". Its sub-clause (i) refers to the tangible immovable properties such as land or building. Sub-clause (ii) refers to certain rights which are brought into the scope of the term "immovable properties"; in other words, the rights referred to in sub-clause (ii) are also immovable properties for purposes of Chapter XX-A of the Act. To understand the said rights referred to in sub-clause (ii), one has to refer to section 269AB(1)(b) as the section is worded. In other words, certain rights are to be considered as immovable properties by reading section 269A(e)(ii) and section 269AB(1) (b) together and these rights are covered by section 269(2)(h)(ii).

15. As per section 269AB(1)(b), inter alia, every transaction whereby a person acquires any rights in or with respect to any building which is to be constructed not being a transaction by way of sale, exchange or lease of such building or part of a holding which is required to be registered under the Registration Act, 1908, should be reduced to writing, etc., and be registered with the competent authority. While clause (a) of section 269AB(1) covers a transaction involving possession, as referred to in section 53A of Transfer of Property Act, clause (b) spreads its net wider, to cover other kinds of transactions out of which, one transaction is a transaction whereby a person acquires any right with respect to a building to be constructed. This right with respect to a building to be constructed, is also "immovable property", as this right is referred it in the definition of the said term in section 269A(e)(ii). For the sake of convenience, we have limited the reference to the words in section 269AB(1)(b) to the extent of their relevance to the facts before us. Therefore, if under a transaction (other than the transactions referred in the words bricketed) a person acquires any right with respect to a building to be constructed, that right is to be considered on par with the right created by an agreement covered by section 53A of the Transfer of Property Act, because section 269AB(1)(a) ropes in transactions to which section 53A of the Transfer of Property Act applies.

16. The right with respect to a building to be constructed created under a transaction, as is referred to in section 269AB(1)(b) being an immovable property is dealt in section 269A(h)(ii); in relation to such a right (i.e., to say, in relation to such an immovable property), transfer means, inter alia, the doing of anything which has the effect of enabling the enjoyment of such property. In other words, if under an agreement, a rights is created with respect to a building to be constructed enabling the enjoyment of the said building, the agreement is considered a "transfer". They very doing of anything which has the effect of enabling the enjoyment of a building to be constructed, under a transaction, has been brought into the control of Chapter XX-A. The liability created by Chapter XX-A gets attached to such a transaction. The very transaction of that nature incurs the liability, which any other transfer incurs under Chapter XX-A.

17. Thus, the transaction which involves transfer of a right enabling the transferee to enjoy the building to be constructed becomes a statutory transfer for purposes of chapter XX-A and such a "transfer" is exposed to the statutory steps contemplated by section 269C. If there has been an under valuation of the apparent consideration, the competent authority may initiate proceedings for the acquisition of the property under Chapter XX-A. Section 269D provides for issuance of a preliminary notice, within nine months of the registration of the instrument of transfer under the Registration Act or under Section 269AB. After this period of nine months, power to initiate proceedings under Chapter XX-A ceases. Other provisions provide for the filing of objections to the notice and hearing of objections, making an order of acquisition, filing of an appeal and further appeal against the order, vesting of property in Central Government, etc. Chapter XX-A is a self- contained code governing these "transfers" as defined in section 269A(e).

18. The difficulty of understanding the concept of "transfer" as defined in section 269A(h), is the difficulty due to the abstract rights covered the statutory definitions. If the scope of Chapter XX-A becomes clearly and a transaction falls within its net, no argument is needed to conclude that Chapter XX-C would not governs such a transaction, provided the transaction is prior to the date of the coming into force of chapter XX-C.

19. The width of the relevant terms referred in these two Chapters, is almost the same. The term "immovable properties" is defined in section 269UA(d); sub-clause (ii) is on par with section 269A(e); similarly, the concept of "transfer" defined as per section 269UA(f) in chapter XX-C is broadly similar to the language employed by section 269UA(f) in Chapter XX-C is broadly similar to the language employed by section 269A(h) in Chapter XX-A. The law become more stringent under Chapter XX-C, as compared to the provisions of Chapter XX-A.

20. Any law which operates as a restriction on the rights of persons has to be confined to operate strictly within the area sought to be covered by the language of the said law. If, the time Chapter XX-C came into force, there has been already a transaction resulting in the "transfer" as defined, the court cannot bread Chapter XX-C so as to make it retrospective to operate on the said transaction or "transfer". The term "transfer" has to be considered in the light of the provisions operating at the time of the "transfer".

21. If a "transfer" falling under Chapter XX-A has not been subjected to any acquisition proceedings under the said Chapter, the immunity accrued to such a transfer under the statute cannot be easily defeated by enlarging the scope of subsequently enacted Chapter XX-C, when the wording of Chapter XX-C clearly and unambiguously does not purport to operate on the earlier transactions. Rights and liabilities created or incurred under a prior law is always considered as continuing to exist, unless the subsequent law has manifestly expressed a contrary intention. Learned counsel for the petitioners advanced a broader proposition to the effect that Chapter XX-C is not made retrospective so as to operate on all pre-existing agreements. We do not think it is necessary for us to consider this proposition, in view of our understanding of the statutory terms "transfer", as defined in the two Chapter XX-A and XX-C. If the transactions reflected by the two agreements before us are "transfers" as defined in Chapter XX-A, then the provisos of the said Chapter would have already operated on the two agreements, leaving nothing for the application of the provisions of Chapter XX-C. The main contention of the Revenue is that, there were no "transfers" earlier to the bringing into force of Chapter XX-C and the provisions of Chapter XX-C would govern all "transfers" that take place after the said Chapter came into force; on this there should not and cannot be any doubt, because section 269UC says that no "transfer" shall be effected except, as stated in the said provisions. But, if the "transfer" has already been effected, thus provisions cannot operate on it. As already found by us, the term "transfer" and referred to here, is not a transfer as ordinarily understood and this term is not confined to the "transfers" referred to in the Transfer of property Act. The term has a wider connotation-both under section 269UA(f) and section 269A(h), read with the relevant definitions.

22. The broader proposition advanced by learned counsel for the petitioners finds support from some of the observations made by a Bench of this court in Capt. Sanjeev Sethi v. Union of India [1992] 195 ITR 338. The owner of the property entered into an agreement in the year 1979 under which the developer had to put up a multi-storeyed residential building, in which, the owner was to be allotted 35 per cent. of the saleable area. A series of events, involving litigations took place subsequently. An order also came to be passed under section 269UD(1) under Chapter XX-C ordering the purchase of a flat by the Central Government; this was challenged before this court. This court held that, the sale of the flat leading to the impugned order under section 269UD was in effect, giving effect to the agreements of the year 1979 and, therefore, chapter XX-C was not applicable to the transaction. All the subsequent events happened after the year 1979 were traced to the agreement of the year 1979, though another builder had stepped into the shoes of the original builder, but the right to the allotment of the flats under the earlier agreement continued to exist. Further it was held that since chapter XX-C was not attracted, rule 48L also was not applicable and that the said rule had no retrospective operation and would not govern an agreement entered into prior to October 1, 1986 (the date when chapter XX-C came into force), "specially to such cases where the provisions of chapter XX-A were applicable like the present case".

23. Learned counsel for the Revenue sought to distinguish this decision by pointing out that the said decision was rendered prior to the decision of the Supreme court in C. B. Gautam's case [1993] 199 ITR 530 and that some of the observations of the Supreme court in C. B. Gautam's case [1993] 199 ITR 530 by necessary implication overrule the ratio of the decision of this court in Capt. Sanjeev Sethi's case [1992] 195 ITR 338.

24. We do not think so, as will be presently seen.

25. The decision of this court in Capt. Sanjeev Sethi's case [1992] 195 ITR 338 stood affirmed by the Supreme Court when the special leave petition No. 8451 of 1993 filed by the Revenue was rejected, on August 23, 1993. No doubt, dismissal of a special leave petition may not always operate as a binding precedent affirming the ratio of the decision of the High Court. By that time, the Supreme court had decided C. B. Gautam's case [1993] 199 ITR 530 on November 17 and 27, 1992.

26. Learned counsel for the Revenue laid great emphasis on the facts of C. B. Gautam's case . In the said case, the owner of the property had entered into an agreement to transfer the leasehold right on February 4, 1985 (prior to Chapter XX-C); a sum of Rs. 4.5 lakhs was paid as the advance price. These was also an agreement for the construction of a structure on the plot. On July 9, 1986, a fresh agreement to sell the residential house put up on the plot was executed between the parties, wherein the owner agreed to transfer to Gautam his leasehold rights along with the ownership of the construction : on October 1, 1986, Chapter XX-C was brought into force, and an order for purchase by the Central Government came to be passed under the said Chapter. This was challenged on many grounds, but at the time of the arguments, learned counsel confined the ground to attack based on the principles of natural justice. The Supreme court held that before an order of purchases is made under Chapter XX-C, it was necessary to hear the affected persons and the principles of natural justice are to be read into the procedural requirements (vide [1993] 199 ITR 530 at page 553). There was also an argument that the provisions of Chapter XX-C were invalid as they confer unfettered discretion on the authorities.

27. This challenge also failed (vide at page 551). However, the Supreme court struck down the last part of sub-section (1) of section 269UE in so far as it provided that the property in respect of which an order is made under section 269UE shall vest in the Central Government "free of all encumbrances" (vide at page 557). There are a few more observations, with which we are not concerned here.

28. Learned counsel for the Revenue argued that even though the agreement in question in C. B. Gautam's case was prior to October 1, 1986, the Supreme Court proceeded as if Chapter XX-C applied to the transaction; according to learned counsel, this is a clear indication that all transfers to be effected after October 1, 1986, in pursuance of an earlier agreement, are governed by chapter XX-C.

29. The contention of learned counsel for the Revenue assumes that no agreement can be considered as a "transfer" as defined in Chapter XX-A or Chapter XX-C. The argument overlooks the definition of the terms "transfer" and "immovable property". In Gautam's case , the agreement entered into prior to October 1, 1986, was not a "transfer" as defined in these two Chapters; the "transfer" took place only after October 1 1986. Obviously, there was no occasion for the court to apply the definition of the terms "transfer" and "immovable property".

30. On the very day judgment in C. B. Gautam's case was rendered, the court had also pronounced its decision in another case, Rambai Manjanath Nayak v. Union of India [1993] 201 ITR 422. The court considered the scope of Chapter XX-A, and in so doing made the following observations at page 431 :

"The scheme of Chapter XX-A clearly shows that he acquisition is not merely of the proprietary rights in an acquired property but also of the possessory rights therein which would undoubtedly include the tenancy rights. This also finds support from section 269AB which was inserted subsequently. It requires registration of certain transactions which permit possession of any immovable property to be taken or retained and where by a person acquires any rights in or with respect to any building or part of it, which has been constructed or which is to be constructed, not being a transaction by way of sale, exchange or lease thereof which is required to be registered under the Registration Act. This provision clearly indicates that any transaction conferring a right to take or retain possession of the immovable property or whereby a person acquires any rights therein is also governed by Chapter XX-A."

31. These observations bring out the wide scope of section 269AB. The creation of any right enabling the taking of possession for enjoyment of a building to be put up, under a transaction, would, therefore, attract the application of Chapter XX-A, just like any other "transfer", including, a transfer involved in an agreement referred to in section 53A of the Transfer of Property Act.

32. Mr. Rajendra relied on a decision of a Division Bench of the Gujarat High Court in Shantivan Corporation v. Sub-Registrar [1991] 189 ITR 583. There, Chapter XX-C was made applicable with effect from June 1, 1989. The sale deed was executed on May 29, 1989, and it was lodged for registration on May 30, 1989. In spite of these facts, the court held that the transfer took place after June 1, 1989, as there was no registration of the sale deed till that date and, therefore, Chapter XX-C governed the transaction. It is necessary to note here that the notification applying Chapter XX-C to the area in question had been issued on May 8, 1989, itself. The court proceeded on the assumption that real "transfer" took place only after the registration of the sale deed (which was after June 1, 1989). The real basis for the findings is found at page 589, thus :

"It is thus clear from the above material terms of the document that the ownership in the said property was to be transferred only on the payment of the entire amount of consideration, i.e., when all the post-dated cheques including the last post-dated cheque were honoured. The terms of the document clearly show that the title in the property was not intended to be passed until the amount of consideration was fully received by the transferor. When the document which was executed on May 29, 1989, provides that the transaction was to be completed only on the payment of the entire amount of consideration and that, therefore, only the transferee was to be treated as owner of the property, it can never be said that there was transfer of ownership amounting to sale prior to June 1,1989. It is clear to us from the terms of the deed that the sale had not become effective before June 1, 1989, and, therefore, even apart from the question of the document not being registered, the terms of the deed negative the theory of any transfer of the property having been effected prior to June 1,1989. As per the terms of the deed, even possession was not to be transferred before the last payment was received towards the consideration amount. We, therefore hold that no transfer of property by way of sale had taken place prior to June 1, 1989. So as to make the provisions of Chapter XX-C of the Act inapplicable to the said property as contended by the petitioner."

33. We do not think it necessary for us to express our agreement or disagreement with this decision. The court found, as a fact that there was no "transfer" as defined in Chapter XX-A or XX-C, prior to the coming into force of the Chapter XX-C. If so, necessarily the ultimate conclusion has to be that Chapter XX-C governed the transfer.

34. The petitioners also rely on the decision of a learned judge of the Calcutta High Court in Writ Petition No. 2552 of 1986, decided on January 13, 1994 (Chandravadan Desai v. Appropriate Authority [1995] 213 ITR 744) and a decision of a learned judge of the Rajasthan High Court in Keshav Singh v. Valuation Officer [1992] 195 ITR 435.

35. In view of the statutory definitions of the relevant terms in Chapters XX-A and XX-C, we have no hesitation in holding that both the agreements in these two writ petitions enable the respective vendees to enjoy the houses to be constructed under the agreements and therefore constituted transfers prior to the enforcement of Chapter XX-C and that these "transfers" (agreements) were governed by the provisions of Chapter XX-A.

36. Consequently, these writ petitions are allowed. The orders made under Chapter XX-C for the purchase of the properties in question and consequential vesting in the Central Government are quashed.

37. Rule made absolute. No costs.