Oriental Longman Ltd vs Uoi Etc
2011 Latest Caselaw 5211 Del

$~10.
*IN THE HIGH COURT OF DELHI AT NEW DELHI


+                      WRIT PETITION(CIVIL) NO.40/1991


        ORIENTAL LONGMAN LTD           ..... Petitioner
                    Through Mr. Mayank Negi, Advocate.

                         versus

        UOI ETC.                                    ..... Respondent
                              Through Mr. Sanjeev Sabharwal,
                              Advocate.

         CORAM:
         HON'BLE MR. JUSTICE SANJIV KHANNA
         HON'BLE MR. JUSTICE G.P.MITTAL

                       ORDER

% 24.10.2011

The petitioner, a company, has challenged the order dated

20th December, 1990 passed by the Appropriate Authority under

Chapter XXC of the Income Tax Act, 1961 (Act, for short). The

impugned order states that by virtue of power vested, the

Appropriate Authority under Section 269UD(1) the Central

Government had exercised it's right to purchase immovable

property consisting of 1100 square feet on the 2nd floor in the

building at 6, Jantar Mantar Road, New Delhi.

2. Learned counsel for the petitioner submits that the

impugned order deserves to be set aside and quashed on two

grounds, namely, that it is a non-speaking order and does not

set out and give any reasons and secondly, Chapter XXC is not

applicable to the transaction in question between the petitioner

and respondent Nos. 4 and 5, namely, Ansal Properties and

Industries Limited and Satyawati Dhawan.

3. The first contention is factually correct. However, we would

like to dispose of the present writ petition on the second

contention but keep in mind the first contention and the effect

thereof on the second aspect. It may be noted that in the

counter affidavit also the respondents have not tried to justify the

purchase with reference to comparable or similar cases and

show under valuation with reference to the factual matrix

relatable to the present case.

4. The respondent No. 5 had entered into an agreement with

Competent Builders dated 4th September, 1979. As per the said

agreement, the aforesaid builder was to construct a multi-

storeyed building which was to be sold to third parties as per the

terms and conditions set out therein. The petitioner herein

applied for allotment of space in the proposed building and was

issued allotment letter dated 6th May, 1980 on the price stated.

The original allotment letter has been placed on record and

stipulated that at the time of booking the allottee shall pay 20%

price at the rate per square feet mentioned in the allotment

letter. The allotment letter had prescribed a schedule of

payment by the allottee, which was dependent upon the stage of

construction. There were various other clauses in the allotment

letter but these are not relevant for the purpose of the present

adjudication.

5. Disputes arose between Competent Builders and the

respondent No. 5 and subsequently, inter se, disputes arose

between the partners of Competent Builders. Ultimately, a

tripartite agreement dated 13th June, 1990 was arrived at

between the Competent Builders, the respondent No. 5 and the

respondent No. 4. The respondent No. 4 stepped in as a builder

with right to carry out construction on the plot in question. This

agreement is detailed and sets out various clauses.

6. The petitioner being an original allottee in terms of the

letter of allotment dated 6th May, 1980, was issued a fresh

allotment letter dated 15th October, 1990. The said letter of

allotment records the past history and the terms and conditions,

which were agreed between the parties.

7. Chapter XXC of the Act was introduced with effect from 1st

October, 1986. The second contention raised by the petitioner

is that the said Chapter will not apply to the transaction in

question. The contention of the petitioner is that the said

Chapter is not applicable as the agreement to sell/the allotment

letter was issued in the year 1980, whereas the case of the

Revenue-respondents is that the said Chapter will apply as there

is a tripartite subsequent agreement dated 13th June, 1990 and

the petitioner was issued a fresh allotment letter in terms of the

said agreement on 15th October, 1990.

8. A similar issue had arisen before this Court in the case of

Capt. Sanjeev Sethi versus Union of India & Others, reported

in [1992] 195 ITR 338. The facts of the said case are identical

as it pertain to allotment of another flat on the same plot and a

question had arisen whether in view of the subsequent tripartite

agreement dated 13th June, 1990 and a fresh allotment letter,

provisions of Chapter XXC were applicable. A Division Bench of

this Court in it's decision dated 4th December, 1991 after

interpreting the earlier agreement dated 4th September, 1997

and consequent tripartite agreement dated 13th June, 1990, had

observed as under:-

" From the facts stated hereinabove it is clear that the property in question is owned

by Smt. Satyawati Dhawan. The land and the super-structure thereon are 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 favour of somebody else. It is precisely for this reason that the agreement between Satyawati Dhawan and Competent Builders clearly provided for the execution of a power of attorney in favour of Competent Builders specifically empowering Competent Builders to effect sale to 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 the entire investment in the construction of the immovable property was at the expense of Competent Builders, nevertheless, when any immovable property is erected on land, the ownership there-after 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.

In the allotment letters issued by Competent Builders, there is a specific reference to the agreement dated September 4, 1979, between Smt. Satyawati Dhawan and Competent Builders and, in addition thereto, there is also a reference to the power of attorney executed by Smt. Satyawati Dhawan in favour 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 a principal

to principal contract between the flat-buyers and Competent Builders but nevertheless Competent Builders were not more than an agent of Smt. Satyawati Dhawan.

Competent Builders did not own any immovable property.

After Competent Builders walked out of the project, it is the Ansals who stepped into their shoes. The execution of the tripartite agreement clearly shows the taking over of the rights and liabilities of Competent Builders by Ansals. The rights of Smt. Satyawati Dhawan 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 postulate 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. She, 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 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 realising that the commitment in favour of the flat- owners had to be honoured, 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 per sq. ft. The other difference was with regard to an area of 1,050 sq. ft. which was specified in the

case of the petitioner. What Ansals agreed to was that the petitioner would get a super area of 1,050 sq. ft. Therefore, the letter of allotment including supplementary demand by Ansals on December 10, 1990, had the effect of increasing the rate from Rs. 750 to Rs. 850 per sq. ft. and reducing the area from 1,050 sq. ft. to 1,050 sq. ft. of super area.

XXXXX

9. It was further observed:-

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 favour by Smt. Satyawati Dhawan just as, at an earlier point of time, Competent Builders had issued allotment letters on the basis of the power of attorney executed in their favour by Suit. Satyawati Dhawan. Without a valid power of attorney in their favour, 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 flats continued to exist notwith- standing 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 memorandum of understanding was entered into. It is difficult to imagine that an experienced builder like Ansals would have agreed to sell large areas of built up property at a rate of Rs. 850 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 favour and that Smt. Satyawati Dhawan could not defeat their right by changing the builder.

We are unable to agree with Shri Rajendra that Competent Builders or Ansals were not the agents of Smt. Satyawati Dhawan. The two builders, apart from being financiers, had powers of attorney executed in their favour and a power of attorney is always regarded as an agent of the principal. The attorney is empowered to have dealings with third parties but 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 October 10, 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 October 10, 1990, amounted to novation of the contract. Novation of contract, in its very nature, postulates the extinguishment of an earlier contract and the 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 specially with regard to the rate and the area, it 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. In 1988, this was agreed to be increased to Rs. 700. This agreement was with Competent Builders. It is two years thereafter that there was an increase from Rs. 700 per sq. ft. to Rs. 850 per sq. ft.

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."

10. In view of the aforesaid decision, which is binding on us,

we allow the present writ petition and a writ of certiorari is issued

quashing the order dated 20th December, 1990. It may be noted

that the petitioner is in possession of the property. No further

orders are required.

SANJIV KHANNA, J.

G.P. MITTAL, J.

OCTOBER 24, 2011 VKR