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Petitioner: CHAMUNDI HOTELS (PVT.) LTD. and another VS Respondent: APPROPRIATE AUTHORITY and JUDGMENT
Court Name: karnataka High Court Judge(s): G. C. Bharuka Title:CHAMUNDI HOTELS (PVT.) LTD. and another vs APPROPRIATE AUTHORITY and
JUDGMENT
Reported As: 1999 PTD 641 Result: Petition dismissed Judgment JUDGMENT This writ petition has been filed by the petitioners for quashing the order, dated October 28, 1994, passed by the appropriate authority (respondent No,1) by which it has treated the statement filed in the prescribed Form No,37-I as required under section 269-UC of the Income Tax Act, 1961, as non-est in law and has thereby refused to exercise its powers under Chapter XX-C either to purchase the property in question or to issue a no objection certificate under section 269-UL(3) of the said Act. There is a further prayer for issuance of a writ of mandamus directing the first respondent to issue the statutory no objection certificate forthwith. The first petitioner is a private limited company registered under the provisions of the Companies Act, 1956. The second petitioner is one of its shareholders. According to them, the petitioner- company is the absolute owner of 45 acres of land with superstructures standing thereon being a part of the property, known as "the Bangalore Palace Property" having an extent more or less of 454 acres. According to the petitioners, as disclosed in the writ petition, in the course of business, the third respondent-company, which is engaged in the business of development of properties- company, entered into an agreement, dated July 6, 1994, with the first petitioner for developing 35 acres of land out of the said 45 acres by constructing residential complexes thereon with support facilities, such as club house, school, shopping center, community hall, etc. As per the petitioners, under the said agreement, in consideration of the petitioners agreeing to transfer/convey their undivided 50 per cent. share in their property to the third respondent developer, the latter has agreed to build and deliver to the first petitioner 50 per cent. of the total built-up area of the building to be constructed on the said land.
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The petitioners have further stated that in the said agreement between them and the third respondent, it has been mentioned that the first petitioner as the owner is in quiet enjoyment of the Schedule-A property and they did not possess the property in excess of the ceiling limit as contemplated under the Urban Land (Ceiling and Regulation) Act, 1976 (hereinafter, for brevity, "the Ceiling Act"); and that they shall obtain requisite orders/endorsements from the competent authorities to redevelop and sell the said properties and also obtain requisite orders for change of land use/classification to "residential use". A copy of the agreement has been filed at Annexure "A" to the writ petition. It has further been stated by the petitioners that on having arrived at the said agreement, the petitioners and the third respondent filed a joint statement in Form No,37-I as required under section 269-UC of the Income-tax Act; but the same has been rejected by the impugned order as noticed above. According to the petitioners, keeping in view the judicial pronouncements referred to in paragraph 7 of the writ petition, since the respondent-appropriate authority has failed to exercise its option, to purchase as vested in it under section 269-UD(1) of the Income-tax Act within three months from the end of the month in which statement under Form No,37-I was received by the said authority, it is bound to issue a certificate as contemplated under section 269-UL of the Income-tax Act, to the extent that "it has no objection to transfer of such property for an amount equal to the apparent consideration therefor as stated in the agreement for transfer of the immovable property in respect of which it has received the statement under subsection (3) of section 269-UC". According to Mr. Naik, learned counsel for the petitioners, the reasons which have prevailed with the respondent-appropriate authority for passing the impugned order declaring the statement in Form No,37-I as ab initio void and non-est in the eye of law, are wholly irrelevant and extraneous since the appropriate authority constituted under Chapter XX-C of the Income-tax Act cannot delve in to the questions pertaining to the Urban Land (Ceiling and Regulation) Act, 1976, having a bearing on the alienable right of the owner of the land. From one of the replies, dated September 26, 1994 (Annexure "D"), given by the petitioner- company to the appropriate authority it transpired that Writ Petition No,19793 of 1992 is pending consideration before this Court in relation to the land in question. Accordingly, I called for the records of the said writ petition, from which it transpired that by order, dated July 27, 1989, the competent authority under the Ceiling Act had declared the entire land over and above 1,000 square meters in the possession of the present first petitioner as excess vacant land keeping in view section 4(1)(b) of the Ceiling Act. Paragraph 7 of this order of the competent authority which is relevant for the present purpose reads thus: "Chamundi Hotels (P.) Ltd. Bangalore, is deemed to hold to an extent of 3,87,138 sq. mtrs., of vacant land, after deducting the built area and the appurtenant land, roads, tanks, etc. The details of the land held by Chamundi Hotels (P.) Ltd., Bangalore, the built area, non-vacant area and the appurtenant area are furnished in Annexure "B". After allowing a share of 1,000 sq. mtrs., in accordance with section 4(1)(b) of the Act, there is an excess vacant land of 3,86,138 Sq. Mtrs., held by Chamundi Hotels (P.) Ltd., Bangalore." It appears that similar orders were passed in respect of seven other declarants and all of them including the petitioner-company had filed appeals under section 33 of the Ceiling Act before the Karnataka Appellate Tribunal. The Tribunal by its order, dated May 11, 1992, dismissed all the appeals thereby confirming the order of the competent Authority. It also appears that the orders of the competent Authority and the Tribunal have been challenged in this Court by only one of the declarants, namely, Sri Srikanta Datta Narasimharaja Wadiyar, and has obtained an interim order by filing the aforesaid Writ Petition No,19793 of 1992. There was no whisper in the entire present writ petition as to whether the petitioners had also challenged the said orders appearing against them
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having a direct bearing on their right to transfer or alienate the property in question in any manner. It also transpires from the order of the Tribunal that during the pendency of the appeal before it, some orders had been passed by this Court in the civil litigations between the parties regarding the right of share or ownership of the contenders including the petitioner-company. The petitioners had nowhere whispered about the said civil litigation or the orders passed by this Court or as to whether they have also assailed the order of the competent Authority and the Tribunal passed under the Ceiling Act by filing any writ petition in this Court or by any other available remedy, and, if they had done so, what was the outcome thereof. Since, in my opinion, for determining the question as to whether the appropriate authority under the Income-tax Act had erred in refusing to exercise its option under Chapter XX-C of the said Act, by order, dated December, 13, 1995, I directed the petitioners to place on record--- (i) The order passed by this Court determining the respective rights and claims of the parties including the petitioner-company in relation to the property in question; (ii) The order passed by the competent Authority and the Tribunal under the Ceiling Act referred to above; and (iii) An affidavit statement of the petitioner as to whether it has challenged the orders of the competent authority and the Tribunal before any higher forum, and, if so, to set out the details thereof with the order passed therein, and the present status of those proceedings. Accordingly, on December 19, 1995, a supplementary affidavit was filed enclosing the order, dated July 26, 1990, passed by this Court in O.S. As. Nos.10 to 13 of 1989 (Annexure "L") and the order, dated July 1, 1994, passed in O.S.A. No,10 of 1989 (Annexure "M"). As per the certificate issued by the Corporation of the City of Bangalore, the Khata of the land stand in the name of the petitioner- company (Annexure "N"). The order passed by the Additional Special Deputy Commissioner on July 27, 1989, declaring 3,86,138 square meters of land as in excess of the ceiling limit in the hands of the petitioner-company, as already referred to above, has now been placed a Annexure "P". By a subsequent memo, the petitioner has also brought on record that the petitioner has now also filed a writ petition being W.P. No,2390 of 1996 challenging the order of the competent Authority under the Ceiling Act and of the Tribunal in which further the proceedings have been stayed. From the documents now brought on record it transpires that the petitioner is not only guilty of suppressing material facts but has also indulged in falsehood by asserting that he is the absolute owner of 45 acres of land in question. From the order, dated July 26, 1990 (Annexure "L"), passed by this Court in O.S. As. Nos.10 to 13 of 1989, the material facts to the extent those are relevant for the present purpose may be noticed in brief. The family of the Maharaja of Mysore owned 454 acres of land situate on the Bangalore-Bellary Road. On portions of this land several buildings/structures as also the palace of the Maharaja also stood. Sri Jayachamarajendra Wadiyar was the last Ruler of the Mysore State who died on September 23, 1974. Sri. A. Chamaraju who was a rich building contractor and businessman had become a personal friend of the said Maharaja. These two persons evolved a scheme for exploitation of the said 454 acres of land by promoting and establishing two private companies-- one of those being the present first petitioner for starting a hotel business and the second one for doing estate business under the name and style "Venkateshwara Real Estate Enterprises Limited". On December 11, 1970, an agreement was entered into between the late Maharaja and the petitioner-company for sale of 110 acres of land for a consideration of Rs,1,25,00,000. Out of the said amount Rs,7,00,000 was paid by a cheque and Rs,18,00,000 was purported to have been paid in cash as advance, but that was actually not paid. It appears that subsequent to the death of the Maharaja, the members of the two families plunged into various litigations which were, subsequently, brought to rest by this Court by its order, dated July 26, 1990 (Annexure "L"), passed under section 402 of the Companies Act, 1956.
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It has been noticed by this Court in the said order that though in respect of the properties belonging to the ex-Ruler' s family of the former State of Mysore, there was an unalienable clause, on November 22, 1993, it was declared in Rajya Sabha that after the abolition of privy purses, the un-inalienable clause did not apply to private properties of former Rulers. It was after this declaration that between February 11, 1974, and April 17, 1976, there were a number of suits filed by the only son of the late Maharaja Srikantha Datta Narasimharaja Wadiyar questioning the right of alienation of the Maharaja and claiming some other reliefs. As noticed above, the Maharaja died on September 23, 1974. Subsequently, on March 26, 1978, there was a first compromise between the said two promoter families and two companies floated by them one of which was the petitioner- company. It was, inter alia, agreed that the sale of property in favour of the two companies had to be done after the properties were exempted from the operation of the Ceiling Act and the Karnataka Land Reforms Act, which appears to have created some hurdles in retention of such a vast extent of land by the Maharaja's family. But this settlement could not resolve the disputes between the parties. In June, 1987, Sri Srikantha Datta Narasimharaja Wadiyar, the son of the late Maharaja, filed Company Petitions Nos.2 of 1986 and 67 of 1987 under sections 397 and 398 of the Companies Act. Company Petition No,50 of 1987 also came to be filed under section 433(f) of the Companies Act praying for winding up of the company. Subsequent to the dismissal of the said petitions, O.S.As. Nos.12 and 13 of 1989 were filed by Sri S.N. Wadiyar which were disposed of with other appeals on July 26, 1990, as noticed above 110 acres of land which was intended to be sold to the petitioner-company form part of Schedule-B of the property and was delineated in the annexed plan with red and blue with all buildings and structures thereon, etc. Certain directions made in the aforesaid order, dated July 26, 1990, which are relevant for the present purpose, read as under: "(8) The appellant and Sri A. Chandrasekhar Raju representing the respondents shall make joint efforts for pursuing the proceedings for grant of exemption of the land in Bangalore Palace Property, from the restrictive provisions of the Urban Land (Ceiling and Regulation) Act, 1976, regarding ceiling in respect of which can application has been made before the State Government under section 20 thereof on the ground of undue hardship because of the huge tax and other liabilities of the late Maharaja, for clearing of which also the lands were sought to be developed by promoting the two companies. As both the parties are equally interested in securing the exemption, either of the parties may pursue the remedies to secure such exemption, informing and/or impleading the other party, as a party in such proceedings. (9) If pursuant to such efforts exemption from the provisions of the Urban Land (Ceiling and Regulation) Act, 1976, is secured in respect of 110 acres of land, earmarked in the "B" Schedule, then the extent of 45 acres out of the portion marked red therein in the plan attached to the agreement with the easementary right of way from the Palace Road through the Palace main gate through the said portion shall vest in favour of Chamundi Hotels Private Limited or the Chamaraju group, absolutely free of all encumbrances, at the expense of the said company or the Chamaraju group. The appellant shall execute all necessary documents, deeds and/or instruments as may be required by Chamundi Hotels (Private) Limited or the Chamaraju group in this behalf at their expense. (25) Neither of the parties by themselves or through Chamundi Hotels Private Limited shall directly or indirectly alienate, sell, mortgage, lease, encumber or otherwise transfer any interest in any part of any portion of the property included in Schedule B." Subsequently, a joint memo. was filed by the parties in the said appeals whereupon on July 1, 1994, the following order was passed by a Bench of this Court: "These appeals were disposed of by consent of parties on July 26, 1990, by a Division Bench of this Court and certain directions were issued as agreed to between the parties. In those directions
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liberty was reserved to the parties to seek necessary clarifications of these directions if there were to be any practical difficulties in their implementation and further directed that the matter be brought before the Court after 15 days for reporting the handing over the control of Venkateshwara Real Estate Enterprises Private Limited by the respondents to the appellant. That is how the matters were posted for being spoken to. Today a memo. has been filed by the parties and learned counsel for the parties, on instruction submit that all the directions contained in the aforesaid order of the Court have been complied with and this fact they wanted to place on record. The memo. duly signed by the parties and their counsel is kept on record. Therefore, all the directions contained in the aforesaid order are treated to have been complied with. No further orders are necessary. (Sd.) (S.B. Majmudar), Chief Justice (Sd.) (Tirath S. Thakur), Judge." The petitioner-company has also brought on record a certificate issued by the Corporation of the City of Bangalore, dated July 26, 1988 (Annexure "N"), wherefrom it transpires that the property No,1 on Bangalore Palace Compound Road falling in Division No,71 has been recorded in the Khata of the petitioner-company. I am to observe here that though the competent Authority under the Ceiling Act had already passed its order, dated July 27, 1989, under section 6(1) of the Ceiling Act declaring the entire land in question except 1,000 sq. mtrs. as excess, the same was possibly not brought to the notice of this Court. But, it may be relevant to notice here as to how the competent Authority treated the petitioner as a holder of the land in terms of section 2(1) of the Ceiling Act: "Sri Srikjanta Datta Narasimharaja Wadiyar holds this land as the legal heirs of late Sri Jayadharmaraj Wadeyar as the karta of the Hindu undivided family, whereas the two companies possess the lands in Bangalore Palace property as 'owner'. The Explanation furnished for this definition protects the interest of both Sri Srikanta Datta Narasimharaja Wadeyar as well as Chamundi Hotels (P.) Ltd., Bangalore, and Sri Venkateswara Real Estate Enterprises (P.) Ltd., Bangalore. The Explanation makes it clear that where the same vacant land is held by the person in one capacity and another person in another capacity for the purpose of this Act, such land shall be deemed to be held by both such persons herein this case Sri Srikanta Datta Narasimharaja Wadeyar and the four sisters and the legal heirs Smt. Gayathrideviyavaru are holding these lands in the capacity of 'the owner' and they come within the definition in section 2(1)(i) of the Act and Chamundi Hotels (P.) Ltd., Bangalore, and Sri Venkateswara Real Estate Enterprises (P.) Ltd., Bangalore, fall in section 2(1)(ii) of the Act, i,e,, to possess such land as owner." Section 2(1) of the Ceiling Act reads as under: "'to hold' with its grammatical variations, in relation to any vacant land, means-- (i) to own such land; or (ii) to possess such land as owner or as tenant or as mortgage or under an irrevocable power of attorney or under a hire-purchase agreement or partly in one of the said capacities and partly in any other of the said capacity or capacities. Explanation:--Where the same vacant land is held by one person in one capacity and by another person in another capacity, then, for the purposes of this Act, such land shall be deemed to be held by both such persons." The facts so far placed on record do not show that the title in the land at any point of time was transferred in favour of the petitioner. Therefore, it cannot be said that the petitioner is the owner of the land. Further, no doubt, it had come into possession of the land pursuant to the same
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agreement for sale but the said possession cannot be justified as of an owner or as a tenant or as a mortgagee or under an irrevocable power of attorney or under a hire purchase agreement, and, therefore, there is hardly any occasion to apply the Explanation appended to the aforesaid definition of "to hold". It is this aspect, though it is not very relevant for the present purposes, which amazes me as to how the competent Authority has treated the petitioner-company as a holder of the land even for the restricted purpose of the Ceiling Act. Irrespective of the said consideration, what is more material and has to ultimately clinch the issue is that admittedly the petitioner- company is not the owner of the land in question, and to this extent the petitioners have made a blatantly false statement before this Court and possibly also before the appropriate authority under Chapter XX-C of the Income-tax Act representing that petitioner-company is the absolute owner of the land in question. At the cost of repetition, I am constrained to hold that neither at any point of time was the title in the land in question transferred in favour of the petitioner-company nor in law could it have been transferred because of the statutory bar contained under the Ceiling Act. It may be further to be noticed that even if the petitioner-company had acquired interest of any nature in the land, it was not competent on its part to effect transfer thereof in favour of the third respondent because of the specific bar laid by this Court in direction No,25 of its order, dated July 26, 1990, passed in O.S. As. Nos.10 to 13 of 1990 under section 402 of the Companies Act as reproduced above. The legal question that now arises for consideration 'is whether, in the background of the said hard facts, it can be held that the appropriate authority has erred in refusing to act upon the agreement-statement filed by the petitioner-company which was ex facie void and, thus, non-est in law. Before proceeding to adjudge the rival contentions, I find it essential to refer to the relevant statutory provisions contained in Chapter XX-C of the Act. They are--- "S.269-UA. In this Chapter, unless the context otherwise requires,-- (a) ' agreement for transfer' means an agreement, whether registered under the Registration Act, 1908 (16 of 1908), or not, for the transfer of any immovable property:... (d) immovable property' means--- (i) any land or any building or part of a building, and includes, where any land or any building or part of a building is to be transferred together with any machinery, plant, furniture, fittings or other things, such machinery, plant, furniture, fittings or other things also. Explanation. ---For the purposes of this sub-clause, 'land, building, part of a building, machinery, plant, furniture, fittings and other things' include any rights therein; (ii) any rights in or with respect to any land or any building or a part of a building (whether or not including any machinery, plant, furniture, fittings or other things therein) which has been constructed or which is to be constructed, accruing or arising from any transaction (whether by way of becoming a member of, or acquiring shares in, a cooperative society, company or other association of persons or by way of any agreement or any arrangement of whatever nature), not being a transaction by way of sale, exchange or lease of such land, building or part of a building; ... (f) 'transfer',--- (i) in relation to any immovable property referred to in sub-clause (i) of clause (d), means transfer of such property by way of sale or exchange or lease for a term of not less than twelve years, and includes allowing the possession of such property to be taken or retained in part performance of a contract of the nature referred to in section 53-A of the Transfer of Property Act, 1882 (4 of 1882): Explanation.---For the purposes of this sub-clause, a lease which provides for the extension of the term thereof by a further term or terms shall be deemed to be a lease for a term of not less than twelve years, if the aggregate of the term for which such lease is to be granted and the further term or terms for which it can be so extended is not less than twelve years;
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(ii) in relation to any immovable property of the nature referred to in sub-clause (ii) of clause (d), means the doing of anything (whether by way of admitting as a member of or by way of transfer of shares in a cooperative society or company or other association of persons or by way of any agreement or arrangement or in any other manner whatsoever) which has the effect of transferring, or enabling the enjoyment of, such properly." "Section 269-UC. (1) Notwithstanding anything contained in the Transfer of Property Act, 1882 (4 of 1882), or in any other law for the time being in force, no transfer of any immovable property in such area and of such value exceeding five lakhs rupees, as may be prescribed, shall be effected except after an agreement for transfer is entered into between the person who intends transferring the immovable property (hereinafter referred to as the transferor) and the person to whom it is proposed to be transferred (hereinafter referred to as the transferee) in accordance with the provisions of subsection (2) at least four months before the intended date of transfer. (2) The agreement referred to in subsection (1) shall be reduced to writing in the form of a statement by each of the parties to such transfer or by any of the parties to such transfer acting on behalf of himself and on behalf of the other parties. (3) Every statement referred to in subsection (2) shall,--- (i) be in the prescribed form; (ii) set forth such particulars as may be prescribed; and (iii) be verified in the prescribed manner, and shall be furnished to the appropriate authority in such manner and within such time as may be prescribed, by each of the parties to such transaction or by any of the…
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