Delhi High Court

Dr. Anand Prakash vs The Appropriate Authority Under ... on 7 July, 2011

Author: Sanjiv Khanna

                                       REPORTABLE
*          IN THE HIGH COURT OF DELHI AT NEW DELHI

+          WRIT PETITION (CIVIL) NO. 771 OF 1995

                                          Reserved on : 25th March, 2011
%                                         Date of Decision 7th July, 2011

DR. ANAND PRAKASH                                           ....Petitioner
                Through                         Mr. Saurabh Prakash and Mr.
                                                Siddharth Yadav, Advocates.

                                   VERSUS

THE APPROPRIATE AUTHORITY UNDER THE I.T.
                                        ....Respondents

                 Through    Mr. Sanjeev Sabharwal,
                            Advocate.
CORAM:

HON'BLE MR. JUSTICE DIPAK MISRA, THE CHIEF JUSTICE HON'BLE MR. JUSTICE SANJIV KHANNA

1. Whether Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not ? Yes.

3. Whether the judgment should be reported in the Digest ? Yes.

SANJIV KHANNA, J.:

This writ petition was disposed of vide order dated 7th July,

2006. By the said order, the two orders dated 29th November, 1994

passed by the appropriate authority under Section 269UD in the

Chapter XX C of the Income Tax Act, 1961 (Act, for short) for

compulsory acquisition of two commercial flats bearing No.512 and

512A, Hemkunt Tower (for brevity "the property/properties") was

quashed. However, the Court did not grant any relief in the nature of

damages as claimed by the petitioner and the parties were left to bear

their own costs. The respondent did not challenge the said order, but

the petitioner preferred an SLP in the Supreme Court being SLP (Civil)

No.20544/2006. This SLP was disposed of on 15th December, 2006

with the following order:-

"The High Court has not gone into the question as to whether the petitioner was entitle to compensation or not. The petitioner may file appropriate application for the High Court. The Special Leave Petition is dismissed."

2. Thereafter, the petitioner filed Review Petition No.63/2007,

which was allowed vide order dated 23rd October, 2009 with the

following directions:-

"In view of the submissions made by the learned counsel for the Petitioner as well as the order passed by the Supreme Court on 15th December, 2006 the review application is allowed to the limited extent that the only question that remains to be determined is whether the Petitioner is entitled to any compensation and if so, the amount thereof if it can be quantified. R.A. is disposed of."

3. Therefore, we have to only decide the question whether or not

the petitioner is entitled to any compensation. To decide the aforesaid

question, the relevant facts may be noticed.

4. The petitioner was owner of the two properties and had entered

into agreements with third parties for sale of the properties @

Rs.2,800/- square feet for the super area plus 50% of the transfer

charges vide agreements to sell dated 21st June, 1994 and 5th July,

1994. This was followed by two other agreements to sell dated 25 th

July, 1994 and 1st August, 1994.

5. On 29th November, 1994, the respondents invoked their power

under Section 269UD of the Act and exercised their pre-emptive right

to purchase the two properties vide orders passed on date. Possession

of the two properties was also taken. As per the provisions of Chapter

XX C, the respondents were liable to pay sale consideration of

Rs.11,51,400/- and Rs.13,02,450/- representing the sale consideration

of the two flats within one month from the month in which the order

under Section 269UD was passed. As the said order was passed on 29th

November, 1994, the aforesaid payment was to be made/tendered on or

before 31st December, 1994.

6. The case set up by the respondent in the counter affidavit is that

vide letter dated 13th December, 1994, the petitioner was asked to

produce receipts for payment of taxes, original sale deed/lease deed

etc. to enable the Chief Commissioner to tender payment, but no reply

was received. By letter dated 24th December, 1994, some information

was furnished regarding payment of taxes, but original title deeds were

not surrendered/furnished. The respondent has stated that the apparent

sale consideration of the two flats was deposited with the appropriate

authority as per the provisions of Section 269UG of the Act. For the

sake of convenience, Section 269 UG is reproduced herein below:-

"Section 269UG- Payment or Deposit of consideration

"(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 269UF, 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 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 such amount has been deposited or as near thereto as may be."

7. Thus, the stand taken by the respondent was that the petitioner

was not ready and willing to accept the apparent consideration.

8. The petitioner filed the writ petition on or about 2nd March,

1995. On the first date i.e. 7th March, 1995, notice was issued for 9th

May, 1995 and it was directed that in the meanwhile there shall be

status quo. The stand of the petitioner was that the respondent had not

tendered the apparent consideration within the stipulated time limit i.e.

by 31st December, 1994. The order dated 7th March, 1995 records:-

"C.W.771/95 Two properties of the petitioner, bearing Nos.512 and 512-A, Hemkunt Tower, 98, Nehru Place, New Delhi were subject matter of the acquisition proceedings under Section 269 UD of the Income Tax Act. The order is dated 29.11.94. Submission is that under Section 269 UG (1) the amount of consideration should have been tendered to the petitioner, the seller, by 31.12.94 and that the same has not so far been tendered. Notice to show cause as to why rule nisi be not issued, returnable on 9th May, 1995.

C.M.1398/95 Notice for 9th May, 1995. Meanwhile, there shall be status quo regarding the aforesaid property.

Mr. Rajendra accepts notice. He may be given complete set of two paper books.

Answer to show cause notice and reply shall be filed within four weeks. Rejoinder if any thereto, before the date fixed."

(emphasis supplied)

9. The interim order continued to operate till 22nd November, 2001,

when the following order came to be passed:-

"Counsel for the petitioner confines the controversy in the present petition to the claim for interest and damages. He further submits that the petitioner does not want to claim the property as such. In view of this statement made on behalf of the petitioner, the counsel for respondents submits that since the acquisition order as such is not challenged except the question of interest and damages which is being raised, the respondents have no objection to pay the principal amount to the petitioners forthwith without prejudice to the

controversy regarding claim for interest and damages. He further clarifies that on the principal amount being paid, the respondents should be left free to deal with the property in any manner they want to. Counsel for the petitioner has no objection to this.

Without prejudice to the controversy regarding claim for interest and damages, the respondents will pay to the petitioner the principal amount within four weeks and thereafter will be free to deal with the property in any manner they decide to do it."

(emphasis supplied)

10. Thereafter, on an application filed by the petitioner being

C.M.No.13369/2001, vide order dated 21st December, 2001, it was

clarified as under:-

"Learned counsel for the applicant submits that order of this Court dated 22nd November, 2001 may be clarified to the extent that the submission rendered by him was restricted only to claim for interest and damages and not in relation to acquisition itself which he may raise/question. The statement of the learned counsel for the appellant are recorded in the order dated 22nd November, 2001 and is clarified accordingly. CM stands disposed of."

(emphasis supplied)

11. Pursuant to the aforesaid order, Rs.11,51,400/- and

Rs.13,02,450/- representing the apparent consideration for the two flats

was paid to the petitioner on 15.2.2002, who is now represented by his

legal representative. In other words, the petitioner had stated that she

had no objection to the respondent being left free to deal with the two

properties in any manner they want to, but she nevertheless intended to

challenge the acquisition order itself but for limited purpose and on the

aspect of interest and damages. It was contended that she has to show

and establish that the order itself was illegal to claim interest/damages.

12. The Revenue filed an application being C.M.No.13638/2003 for

clarification/recall of the order dated 21st December, 2001 and to

restore the earlier order dated 22nd November, 2001. Other reliefs were

also prayed for. Notice of this application was issued, but the same

remained pending.

13. On 19th August, 2004, the petitioner made a change in her stand

and stated that she wanted to challenge the acquisition itself in its

entirety. In view of the aforesaid statement, the following order was

passed on 19th August, 2004:-

"The petitioner, who is present in the Court as well as the counsel for the petitioner, state that the petitioner would now like to challenge the acquisition itself in its entirety. In view of this, the petitioner shall return the principle amount within a period of one week to the revenue. Mr. Jolly submitted that the amount which the petitioner has enjoyed for all these years, must be deposited with interest. We will examine this aspect at the time of hearing the matter."

14. The petitioner thereafter filed a review application being

R.P.No.443/2004. It was her contention that she had not stated what

was recorded in the order dated 19th August, 2004. In paragraph 15 of

the review application it was stated as under:-

"That accordingly the petitioner is hereby moving the present application praying that her statement be correctly recorded and considered. In the event that there was any confusion as to what the petitioner had stated that day and that has led this Hon'ble Court to pass the said order, the said confusion be cleared and an appropriate order passed. In order to avoid any confusion or ambiguity, the petitioner hereby stated once again that she agrees to remain bound by her statement as contained in order dated 22.11.2001 as modified on 21.12.2001. The petitioner further stated that she had not given any undertaking that she was withdrawing her challenge to the impugned orders. The petitioner states that she is paid the principal sums she will challenge the said order only for the limited purpose of making out her case for interest and damages. In that event she will not claim the property and the Respondents can do with it as they please. However, if the Respondents are agreeable to paying her the principal sums alongwith interest thereon as agreed, then the petitioner would withdraw the present petition in its entirety."

15. Reference to interest made in the said paragraph is on account of

the correspondence exchanged between the petitioner and the Income

Tax Department prior to the order dated 22nd November, 2001. This is

of significance and relevant when we examine whether or not the

petitioner is entitled to damages and interest, if so, at what rate/amount.

It may be noted that the petitioner had tendered or refunded

Rs.11,51,400/- and Rs.13,02,450/- on 26th August, 2004. This review

application was dismissed as withdrawn on 20th January, 2006.

16. The writ petition was partly allowed vide order dated 7 th July,

2006 on the ground that the order of pre-emptive/compulsory purchase

was passed in violation of principles of natural justice, which had

vitiated the order. The authorities had relied upon material, which was

not disclosed and the hearing granted to the petitioner was a mere ritual

and was not meaningful and effective. However, the matter was not

remanded to the appropriate authority for a fresh decision keeping in

view the nature of the controversy. It was noticed that the alleged

under valuation was to the extent of 22% in comparison with a flat in

another building which was constructed subsequently. The petitioner

had contended that the two buildings were not comparable. It was

noticed that the chapter XX C relating to compulsory acquisition had

been deleted/omitted from the statute.

17. From the facts stated above, the following aspects have to be

taken into consideration to decide whether or not the petitioner is

entitled to compensation or interest, if so, at what rate/amount.

(i) The order of compulsory acquisition was quashed on the ground

of non-compliance of principles of natural justice, but the matter was

not remitted for fresh adjudication as the order of acquisition was

passed in 1994 and was quashed in 2006. The intervening period had

resulted in change in situation, which have been highlighted and

noticed in the order dated 7th July, 2006. Some other aspects were also

noticed.

(ii) The property remained in possession of the respondent from

November/December 1994 till 7th July, 2006 when the writ petition

was disposed of.

(iii) The apparent sale consideration of Rs.11,51,400/- and

Rs.13,02,450/- was deposited with the appropriate authority and was

kept in a fixed deposit in December, 1994 and earned interest. After

the statement was made by the respondent as recorded in the order

dated 22nd November, 2001, the principal amount was paid to the

petitioner on 15th February, 2002 and remained with the petitioner till

the order dated 19th August, 2004, when the petitioner made payment

of the said amount on 26th August, 2004.

18. On the question of payment of damages/interest, the following

reasons/grounds, which are in favour of the petitioner, may be noticed.

(a) The petitioner was deprived use and occupation of the property

from December, 1994 till 7th July, 2006. Earlier the petitioner had

rented out the property to a Government of India undertaking @

Rs. 16/- per square feet super area in the year 1986-87 with periodic

increase of 20% in rent after every three years. The premises were

vacated by the tenant after litigation on 31st December, 1993.

(b) The respondents had kept the principal amount of Rs.11,51,400/-

and Rs.13,02,450/- in a fixed deposit. The respondent in their letter

dated 24th April, 2000 have admitted that interest of Rs.6,26,976/- and

Rs.7,09,230/- had accrued on the said amounts. It is also the contention

of the petitioner that at one stage the respondent had agreed and

decided to settle the matter by paying interest. The petitioner has relied

upon the cases in which when acquisition proceedings were quashed,

but the principal amount was directed to be refunded by the petitioner

therein to the Revenue without interest. No interest or damages was to

be paid by the petitioner in such cases. Reliance in this regard is placed

upon decisions in Mrs. Rajlakshmi Narayan vs. Mrs. Margret

Kathleen Gandhi and Ors. 201 (1993) ITR 681 SC, Nand Lal Tejmal

Kothari vs. Inspecting Assistant Commissioner of Income Tax and

Ors. 230 (1998) ITR 943 SC, Link International vs. UOI and Ors. 239

(1999) ITR 19 Del DB, Gurbux Gianchand Motwani vs. S.C. Prasad

and Ors. 225 (1997) ITR 134 Bom DB, Chakiat Agencies Pvt. Ltd. vs.

UOI and Ors. 210 (1994) ITR 383 Mad, Jaspal Kaur and Ors. 1999

(157) CTR 146 Del DB, R. Shanmunganathan and Ors. vs.

Appropriate Authority 242 (2000) ITR 652 Mad DB, Chandrika

Appts. Pvt. Ltd. vs. UOI and Ors. 1996 (130) CTR 414 Kar, Sterling

Horticulture and Research Ltd. vs. Appropriate Authority and Ors.

2001 (249) ITR 0149 Mad, Pradeep Raman Lal Sheth vs. UOI and

Ors. 1993 (204) ITR 0866 Guj, Appropriate Authority vs. Vyasya

Bank, 2000 (244) ITR 0318 Cal. Nirmal Laxmi Narayan Grover vs.

Appropriate Authority (1997) 223 ITR 572 Bom. DB and Appropriate

Authority vs. Sudha Patil (1999) 235 ITR 118.

19. The aforesaid contentions, however, are to be read along with

the oscillating stand of the petitioner. The petitioner, as recorded in the

order dated 22nd November, 2001/21st December, 2001, had virtually

given up the challenge to the acquisition, but had maintained that she

was entitled to challenge the acquisition to the limited extent that she

was entitled to interest and damages. The Revenue filed an application

seeking clarification of the order in 2003, but this application was

never disposed of. On 19th August, 2004, the petitioner changed her

stand and had stated that she wanted to challenge the acquisition in its

entirety. It is obvious that the challenge to the order of acquisition in

entirety was motivated for personal gains as one can take judicious

notice of the fact that there has been tremendous increase in the value

of immovable properties. The contention of the petitioner that the

respondent in spite of their best efforts could not sell the properties

during the period 2000-2004 in spite of their attempts to auction the

same, is incorrect. The respondent did try to sell the properties by

putting the same to auction but because of the stay order did not sell

the properties. Subsequently, they filed an application being

C.M.No.13638/2003 for review.

20. It may be noticed here that the petitioner herein is the owner of

the properties. The vendee did not challenge and question the

acquisition proceedings. After the property was released, the same was

rented out by the petitioner to third parties. The acquisition

proceedings were also challenged after more than three months of the

order dated 29th November, 1994 by this writ petition which was filed

on 2nd March, 1995. Most of the decisions relied upon by the petitioner

are cases where direction was given that the appropriate authority

would pay interest on the principal sum as the writ petition was

dismissed. In other cases, it was noticed that the payment was made to

vendor/vendee, but on acquisition proceedings being quashed, the

property was returned to the vendor or vendee. The parties concerned

were not directed to pay interest, but refund the money/consideration

paid by the Central Government.

21. The question of damages or interest when proceedings are

pending in Court cannot be put in a strait jacket. Each case has to be

decided on its own merits keeping in view conduct of the parties,

equities and reasons for quashing the order. In this regard, it may be

appropriate to reproduce the following observations of a Division

Bench of this Court in Dr. A.K. Garg and Another Vs. Kailash Nath

and Associates and Others (2002) 256 ITR 662, which reads as

follows:-

"Having given our thoughtful consideration to the rival submissions, we are of the view that it would not be fair and proper to lay any fault on either of the three parties. So far as the appropriate authority is concerned, we have no reason to doubt its bona fides. It was acting in the discharge of its statutory duties and could not be blamed for passing order for pre-emptive purchase of the property by the Central Government. Merely because its order was ultimately set aside, it cannot be said that its action was mala fide. So far as the vendor is concerned, it again cannot be held liable for payment of any interest to the appropriate authority inasmuch as it had to receive total consideration for the property in terms of the agreement to sell dated June 25, 1991. Since as per sub-section (2) of section 269UE, the vendor had to surrender or deliver possession of the property to the appropriate authority and no complaint in this respect was made by the appropriate authority warranting coercive action in terms of sub-sections (3) and (4) thereof, there was no reason why the vendor should

not have received the balance sale consideration. Furthermore, if the vendor is now called upon to pay interest as demanded by the appropriate authority, for no fault of theirs, a substantial part of the sale consideration would be lost to the vendor. Similarly, in our view, the vendees cannot be blamed for protecting their interest in the property by taking recourse to their legal right to challenge the order of pre-emptive purchase by the Central Government. In fact, they ultimately succeeded in getting the order quashed. Indeed, but for their action in getting the auction stayed, the property would have gone out of their hands, or in any case third party's rights would have emerged. At best, the vendees could, perhaps, have derived some benefit in the bargain for not parting with the balance sale consideration which remained with them and presumably they could have earned some interest on it. We feel that the deprivation of the use and fruits of the property to the vendees was a greater loss to them as compared to the amount of interest which they could have earned. As observed by the apex court in Rajalakshmi Narayanan v. Margaret Kathleen Gandhi [1993] 201 ITR 681, the question of grant of interest has to be decided on the facts and circumstances of a particular case, considering the equities of the matter. In our view, in the facts on hand, equity does not warrant to call upon the vendees to pay interest to the appropriate authority. Under these circumstances, we are of the opinion that the prayer of the appropriate authority (C. M. No. 12908 of 2001) for direction to the vendor or the vendees to pay interest cannot be granted. As regards the apprehension of the vendor that the vendees are trying to take possession of the property in question without paying the dues, we do not consider it necessary to deal with the same inasmuch as the order passed under section 269UD(1) having been declared as abrogated and the property having re-vested in the vendor, in terms of section 269UH, there is no impediment left in now giving full effect to the agreement to sell dated June 25, 1991. However, to avoid any further dispute it may be clarified that since the vendors had received

the balance sale consideration from the appropriate authority, they will not be entitled to charge any interest on the said amount for the period the order passed by the appropriate authority under section 269UD(1) remained subjudice either before this court or the Supreme Court. The order of pre-emptive purchase made under section 269UD(1) of the Act having abrogated, all restrictions imposed by Chapter XX-C of the Act, will disappear and the rights and liabilities of the vendor and the vendees shall obviously be governed by the agreement of sale entered into by them. Both the applications stand disposed of. Order dated October 5, 2001, is modified to the extent that the appropriate authority shall issue the requisite declaration under section 269UH(2) of the Act, and deliver or cause to be delivered possession of the property in question to the vendor within eight weeks from date of this order. On the appropriate authority complying with these directions, the vendor will take appropriate steps to deliver physical possession of the immovable property to the vendees in terms of the said agreement to sell."

22. Keeping in view the aforesaid aspects, we feel that the petitioner

should be paid simple interest @ 6% per annum on the principal sum

from the period 1st January, 1995 till the order dated 22nd November,

2001 was passed. On this date, the petitioner had given up his

challenge to the acquisition except for the purpose of claiming interest

and damages. We have reduced the rate of interest in view of the

subsequent change in the stand and stance of the petitioner as is

reflected from the order dated 19th August, 2004. We have also while

computing the interest taken into consideration the reasons given in the

order dated 7th July, 2006 for quashing the proceedings under chapter

XX C and not remitting the matter for fresh adjudication. We are not

inclined to award interest from the period after 21st November, 2001