D.A. Mehta, J.
1. The petitioner, a Private Limited Company, engaged in the business of construction activity, purchased at a public auction, property situated at final plot No. 607-A, SP No. 1, TPS No. 3, Near Law Garden, Ahmedabad, being open plot of land admeasuring 1424 sq. yds. along with plinth level construction of 278 sq. mtrs. (out of which 181 sq.yds. to be surrendered for passage and road alignment entitling the purchaser to additional floor space) for a sum of Rs. 1,40,00,000/-. The auction was held on 27th December,2000 in the following circumstances.
2. It appears that Smt. Jayshreeben Vadilal Mehta and Smt. Chandra Devi Chandulal Mehta Agrawal (Transferors) agreed to transfer the property in the name of Shri N.G. Patel representing the Law Garden Shops & Office Complex Owners Association (Transferee) by an agreement entered into on 12th September,1989.Appropriate Authority acting under the provisions of Chapter XXC of the Income Tax Act,1961 (the Act), made an order under Section 269UD(1) of the Act on 25th November,1989. Accordingly in terms of provisions of Section 269UE of the Act, the property vested in the Central Government and the transferors were directed to surrender the possession within fifteen days of passing of the order.
3. Respondent No. 6 - SBI preferred Civil Suit No. 3917 of 1990 before the City Civil Court at Ahmedabad against one M/s. Aarvy Power Tools Ltd. and others. It is the say of respondent No. 6 that one of the transferors viz. Smt. Jayshreeben Vadilal Mehta was the owner of the property in question and the said property had been placed with SBI by the said transferor by way of equitable mortgage by deposit of title deeds of the property in question. SBI appears to have obtained an injunction on 10th August,1990 against sale of the said property. Thereafter, Income Tax Department was impleaded in the said Civil Suit as one of the defendants and the original injunction operating since 10th August,1990 was modified and made operative qua the newly added defendant. It is an admitted position that the said Civil Suit came to be transferred before Debt Recovery Tribunal.
4. On 1st November,1999 SBI moved an application being Exhibit A/107 seeking modification of the injunction order in light of the meeting held on 19th November,1997 in the Chamber of Commissioner of Income Tax (Appropriate Authority). Debt Recovery Tribunal (DRT) after hearing the learned Advocates of the respective parties before it passed the following order:
'It is further submitted that a meeting was held on 19th November,1997 in the chamber of the Commissioner of Income tax, (Appropriate Authority) and it was agreed that the applicant bank would file appropriate application before this Tribunal praying for modification of injunction and further praying that the said immovable and equitable mortgaged property be allowed to be disposed off by the Income Tax Department subject to the condition that the sale proceeds realised therefrom shall be deposited with the applicant bank in interest bearing deposit and the sale proceeds as well as the interest accrued thereon shall be subject to the final order to be passed by this Tribunal. The learned Advocate for the respondent No. 5 and 6 states that the appropriate authority of the Income Tax Department has filed their reply to the application. The affidavit is duly sworn by the Dy. Commissioner of the Income Tax Department in which it is stated that in the meeting held on 19.11.1997, it was decided that State Bank of India will move an application for modification of injunction order to enable the Income Tax Department to auction the property. It was further decided that the sale proceeds of the property shall be deposited with the bank in interest bearing deposits. The amount of sale proceeds and interest thereon will be appropriated after and according to the adjudication of claims of the State Bank of India.
Under these circumstances, the application exh.A/107 is allowed, the injunction order passed by the City Civil Court dated 10th August,1990 is modified to the extent that property described in para 2(b) i.e.
'All those pieces and parcel of the land situated at Mouje Kochrab, Taluka City Ahmedabad, District and sub District, Ahmedabad, Ellisbridge, Town Planning Scheme No. 3 bearing plot No. 603 admeasuring 2748 sq.yds. and the super structure standing thereon as per the plan owned and held by Smt. Jayshreeben R. Shah'.
will be auctioned by the Income Tax Department. The sale proceed of the property shall be deposited with the applicant bank in interest bearing deposit. The amount sale proceed and interest thereon will be appropriated after and according to the adjudication of claims and rights of the State Bank of India by this Tribunal. Under these circumstances, the application is disposed off with no order as to costs'.
5. In pursuance of the aforesaid order Income Tax Department conducted public auction as per terms and conditions of auction sale, more particularly stated in Annexure-C. The petitioner emerged as the highest bidder at the said auction sale conducted on 28th June,2000 for a sum of Rs. 1,40,00,000/-. Accordingly on the said day over and above caution money of Rs. 25,000/-, the petitioner made payment of Rs. 14,00,000/- towards the purchase price. The petitioner made payment of subsequent instalments on 26th July,2000 and 26th September,2000 and thereafter called upon respondent No. 3 to issue possession letter/certificate in favour of the petitioner. The letter of 28th September,2000 was followed up by further letters dated 14th November,2000 and 24th November,2000. Ultimately on 27th December,2000 respondent No. 3 issued a certificate handing over possession of the property in question and on the same day petitioner confirmed having received the possession.
6. On 28th December,2000 the petitioner called upon respondent No. 3 to make arrangement to execute the conveyance deed in favour of the petitioner at the earliest. This communication was followed up by similar written request made on 2nd January,2001, 5th January,2001, 10th January,2001, 12th March,2001, 16th May,2001, 21st January,2002, 5th December,2002 and 12th June,2003.
7. In the meantime, on 24th January,2003 respondent No. 4 addressed a communication to its Counsel to the effect that SBI did not have any charge over the property in question and was unnecessarily delaying the execution of the sale-deed. Thereupon it appears that there was exchange of correspondence between the Income Tax Department, through its Counsel on the one hand and SBI on the other hand. The reason appears to be the fact that the original title deeds of the property in question were lying with SBI and SBI was not willing to part with the same. Ultimately on 18th September,2003 Income Tax Department moved an application before Debt Recovery Tribunal praying for a direction qua SBI to hand over the original title deeds of the property in question.
8. The petitioner, kept on approaching the Income Tax Department with personal visits as well as written requests to execute the final sale-deed considering the fact that the petitioner had already made payment of the entire sale price and abided by all the terms and conditions of the auction sale. Some of the communications are dated 27th February,2004, 3rd March,2004, 20th May,2004; and on 27th September,2004, the petitioner also applied before Debt Recovery Tribunal praying for similar direction for execution of the conveyance deed. It is an accepted position that application moved by the Income Tax Department and the petitioner before Debt Recovery Tribunal are yet pending.
9. Mr. B.D. Karia, learned Advocate for the petitioner appearing with Mr. R.K. Patel submitted that the sequence of events spoke for themselves and petitioner was being made to run from pillar to post without any fault of the petitioner. It was submitted that the petitioner had complied with all the requirements as per terms of the auction sale, paid up the entire sale consideration, was a bonafide third party purchaser and hence the delay on part of the Income Tax Department was not only hurting the petitioner financially but also amounted to harassment. It was submitted that the petitioner was in no way concerned with the disputes inter se between respondent Nos. 1 to 5 on the one hand and respondent No. 6 on the other hand. In terms of provisions of Section 269UE of the Act, the property had vested in the Central Government, the respondent authorities of the Income Tax Department had conducted the auction, the petitioner had made payment as per terms and conditions of the auction and in these circumstances the petitioner was entitled to a writ of mandamus directing the respondent authorities to execute the conveyance deed.
10. Mr. M.R. Bhatt, learned Standing Counsel appearing on behalf of respondent Nos. 1 to 5 i.e. Central Government and the Income Tax Department submitted that the Income Tax Department was ready and willing to execute the conveyance deed but for the non-cooperative attitude adopted by SBI in not parting with the original title deeds. That in the circumstances, the department was not in a position to execute conveyance deed with a clear title. Inviting attention to the Additional Affidavit-in-Reply dated 21st March,2005 it was submitted that the department was ready and willing to execute the sale-deed in favour of the petitioner 'on receipt of sale consideration in the ZAO (CBDT) Account'. It was contended that the aforesaid request was made in light of provisions of Section 269UE of the Act and similar prayer was made before Debt Recovery Tribunal by the department
11. Mr. Pranav G. Desai, learned Advocate appearing on behalf of respondent No. 6-SBI narrated the historical facts to explain in what circumstances the said respondent came into possession of the original title deeds. It was submitted that an injunction order made by a competent Civil Court continued to operate in favour of SBI and that the order made on 1st November,1999 by DRT did not lift the injunction but merely modified the same. That such modification was carried out by DRT only in light of the application moved by SBI in concurrence with the Income Tax Department. That at no point of time had SBI agreed to part with original title documents either in favour of Income Tax Department or any other person. Therefore, he contended that any insistence on part of the Income Tax Department or the petitioner that original title deeds should be handed over was not warranted in light of the fact that property in question was under equitable mortgage with SBI. He also invited attention to the Affidavit-in-Reply filed by the said respondent and submitted that respondent No. 6 - SBI, was entitled to retain possession of title deeds also in light of the fact that the said property was available for satisfaction of its debts qua two other concerns wherein Smt. Jayshreeben was involved. Alternatively, it was submitted by Mr. Desai that SBI was ready and willing to hand over the title deeds subject to entire sale consideration being made over to SBI in satisfaction of its debts, without prejudice to its right to pursue its remedy in accordance with law.
12. Mr. Anip A. Gandhi, learned Advocate appearing on behalf of newly added respondent No. 7 viz. the Asset Reconstruction Company (India) Ltd. (ARCIL) submitted that it had stepped into the shoes of respondent No. 6 SBI as per terms of deed of assignment dated 29th March,2004 and accordingly the Account of M/s. Aarvy Power Tools was taken over from SBI. The title deeds in question lying with SBI are required to be delivered to ARCIL but same have not been delivered by SBI. He submitted that ARCIL was ready and willing to deliver the title deeds in question for execution of deed of conveyance as and when the title deeds are available with ARCIL. This statement was made without prejudice to right of ARCIL to effect the recovery taking into consideration its rights in the proceedings pending before DRT. Further submission was also made that the charge was over the property in question and despite the sale by the Income Tax Department the charge would go with the property. Lastly it was submitted that ARCIL must be made a confirming party in light of equitable mortgage created in favour of ARCIL (SBI).
13. As the facts stated hereinbefore show the petitioner, who is admittedly a bonafide third party purchaser without notice has been deprived of enjoying property, which it purchased at a public auction for a period of more than four years, without any rhyme or reason. All the learned Advocates appearing on behalf of respondents are agreed that the petitioner is in no way concerned with the proceedings pending before DRT; the petitioner is in no way concerned with either the original owners of the property viz. mortgagors nor is linked with the said parties in any manner whatsoever. Once this factual position is accepted, the legal consequence flowing therefrom must follow as a natural corollary and that is : the petitioner is entitled to obtain a final conveyance in its favour without any cloud over the property in question.
14. Section 269UE of the Act as was operative upto 16th November,1992 reads as under :
'Vesting of property in Central Government. 269UE.(1) Where an order under sub-section (1) of section 269UD is made by the appropriate authority in respect of an immovable property referred to in sub-clause (i) of clause (d) of section 269UA, such property shall, on the date of such order, vest in the Central Government free from all encumbrances'.
On a plain reading of the provision it is apparent that once an order under Section 269UD(1) of the Act is made by the Appropriate Authority in respect of immovable property, as defined under section 269UA(d)(i) of the Act, such property shall vest in the Central Government free from all encumbrances on the date of such order. In other words, the property in question, which admittedly falls within the definition of immovable property under Section 269UA(d)(i) of the Act vested in the Central Government free from all encumbrances on 25th November,1989, the date on which order under Section 269UD(1) of the Act came to be passed by the Appropriate Authority. It is necessary to note that on the said date no injunction was operating even against Smt. Jayshreeben, the original owner. The order of injunction came to be made only on 10th August,1990. In the circumstances, even if SBI had impleaded Income Tax Department in the pending Civil Suit it was admittedly much later in point of time. It is not necessary for this Court to render any opinion as to validity of such injunction order, but at the same time the Court cannot lose sight of the position of law as obtaining on the date when the order under Section 269UD(1) of the Act came to be made. It is not necessary to emphasise the legal position : effect of statutory provision has to be taken into consideration by a Court, regardless of the fact as to whether the attention of the Court was invited to the provision or not. The Court cannot ignore the consequence of a legal provision. Therefore, at the cost of repetition, it requires to be noted that when order of preemptive purchase came to be made by the Appropriate Authority on 25th November,1989 the property in question vested in Central Government free from all encumbrances, that even otherwise on the said day no injunction was operating either against the original holders of the property or the Income Tax Department, the Income Tax Department having not even been impleaded in the said proceedings on the said day i.e. 25th November,1989. It is not known as to whether the Civil Suit was even filed on the said day i.e. 25th November,1989.
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15. However, aforesaid phrase 'free from all encumbrances' occurring in the latter portion of Section 269UE(1) of the Act came to be struck down by the Apex Court in the case of C.B. Gautam v. Union of India : [1993]199ITR530(SC) . The judgment was pronounced on 27th November,1992. The legislature stepped in and substituted the said expression 'free from all encumbrances' by the Finance Act, 1993 with retrospective effect from 17.11.1992 by the portion in parenthesis. Simultaneously, by the very same Finance Act and with retrospective effect from the said date i.e. 17th November,1992, Proviso to sub-section (1) of Section 269UE came to be inserted. The substituted provision and the Proviso read as under :
'269UE.(1) Where an order under sub-section (1) of Section 269UD is made by the appropriate authority in respect of an immovable property referred to in sub-clause (i) of clause (d) of section 269UA, such property shall, on the date of such order, vest in the Central Government [in terms of the agreement for transfer referred to in sub-section (1) of section 269UC] :
[Provided that where theappropriate authority, after giving an opportunity of being heard to the transferor, the transferee or other persons interested in the said property, under sub-section (1A) of section 269UD, is of the opinion that any encumbrance on the property or leasehold interest specified in the aforesaid agreement fortransfer is so specified with a view to defeat the provisions of this Chapter, it may, by order, declare such encumbrance or leasehold interest to be void and thereupon the aforesaid property shall vest in the Central Government free from such encumbrance or leasehold interest.'
The effect of the amendment in the main provision is that the vesting takes place in terms of the agreement for transfer which was entered into by the transferor and the transferee as referred to in Section 269UC(1) of the Act. As per Proviso, the Appropriate Authority is empowered to declare as void any encumbrance or leasehold interest which is mentioned in the agreement for transfer only with a view to defeat the provisions of Chapter XXC of the Act, and thereupon the property shall vest in the Central Government free from such encumbrance or leasehold interest.
16. At this stage and in this context, it is necessary to note the contention raised on behalf of respondent No. 6 - SBI to the effect that the Appropriate Authority ought to have informed SBI before the Appropriate Authority initiated any action under Proviso to Chapter XXC of the Act. This submission proceeds on the presumption that the encumbrance in question (which is in dispute) was mentioned in the agreement for transfer. SBI is not in a position to show that any such statement was made in the agreement for transfer. It is only in such eventuality that the question of hearing SBI as 'interested person' would arise. However, to satisfy itself the Court called upon the learned Standing Counsel for Revenue to place on record a copy of the declaration made in Form No. 37I along with copy of the agreement for transfer and the enclosure thereto, which were produced for the perusal of the Court from the record of the Income Tax Department.
17. On going through the said documents it is apparent that in Form No. 37I Column No. 4 pertaining to persons interested in the property only the name of the transferor is mentioned and no other interested person is mentioned. Similarly in the agreement for transfer, on the basis of which Form No. 37I had been filed, there is no mention of any encumbrance or leasehold interest in existence. In the said document vide paragraph No. 2 of the conditions it is stated that title to the property is as certified by M/s. H. Desai & Co., Solicitors, Advocates and Notary, Ahmedabad. The said certificate dated 24th June,1989 states that after having caused the necessary search to be taken with the Revenue and Sub-Registrar's records for a period of last about 40 years the title to the property is clear, marketable and free from all encumbrances and reasonable doubt subject to -
(i) Usual declaration,
(ii) Provisions of the Urban Land (Ceiling & Regulations) Act,
(iii) Variations, if any, in Town Planning Scheme.
In the circumstances, it is not possible to accept the contention on behalf of SBI that it was required to be heard as interested person or that any default had been committed by the Income Tax Department in not informing about the transaction between the transferor and transferee and the proceedings under Chapter XXC of the Act.
18. Hence, coming back to the provisions of Section 269UE(1) read with Proviso thereunder it is apparent that the property in question vested in the Central Government in terms of the agreement and the order made by the Appropriate Authority under Section 269UD(1) of the Act would result in the vesting being free from all encumbrances as per the documents available on record with the Income Tax Department.
19. Even otherwise, once respondent Nos. 1 to 5 on the one hand and respondent No. 6 on the other hand had agreed to put the property in question to auction sale moved an application in this regard before DRT, and obtained an order from DRT on these lines, it was incumbent upon said respondents to ensure that auction sale was completed in all respects including transfer of the property by executing a valid conveyance in accordance with law after the successful bidder had complied with all the terms and conditions of the auction sale. Admittedly, in the present case, it is an undisputed position that the petitioner has abided by the requirements of the terms and conditions of the auction sale, made the payment of full consideration and is thus entitled to obtain execution of conveyance deed in its favour accompanied by original title deeds of the property.
20. The contention raised on behalf of respondent Nos. 1 to 5 that the conveyance can be executed only on receipt of sale consideration in the ZAO (CBDT) Account requires to be stated only to be rejected. When DRT passed the order on 1st November,1999 granting application Exhibit A/107 a specific direction has been made that 'sale proceeds of the property shall be deposited with the applicant Bank in interest bearing deposit'. In these circumstances, there is no question of modifying order of DRT especially when DRT has further observed that amount of sale proceeds and interest thereon will be appropriated after and according to the adjudication of claims and rights of the State Bank of India by DRT. Respondent No. 3 is therefore directed to execute the final conveyance deed without insisting on any such condition.
21. Prayer made on behalf of respondent No. 7 - ARCIL that it should be impleaded as confirming party requires to be rejected for the simple reason that even if it has stepped into the shoes of respondent No. 6 - State Bank of India it is not the person who has sold the property or is selling the property in question. As per record and proceedings before DRT, SBI had merely moved an application seeking modification of injunction order dated 10th August,1990; there was no request before DRT by the said respondent viz. SBI (now its successor respondent No. 7) to the effect that it should be permitted to sell the property in question. It, in fact, could not have moved any such application as it was not in possession of the property. In these circumstances, the prayer made by ARCIL and supported by SBI to be joined as confirming parties stand rejected.
22. Before parting it is necessary to take note of the fact that this litigation could have been avoided if DRT had taken the minimum care which it is otherwise required to take, while dealing with properties wherein multiple and conflicting claims are made by different parties like Banks and the Income Tax Department etc. When the order came to be made on 1st November,1999 by DRT permitting the Income Tax Department to put up the property for auction sale it was necessary for DRT to first of all ascertain as to who was in possession of the title deeds of the property in question. Next step which it ought to have taken was obtain custody of the title deeds and retain them in its own custody. This would have ensured that a person, who is a third party bonafide purchaser without notice of the property at the auction would not have been put to rack in the manner the petitioner has been made to wait for execution of the conveyance deed for a period of more than four years despite the petitioner having made payment of the entire consideration in terms of the auction sale. On conclusion of the sale, DRT ought to have itself ensured that the sale which has otherwise taken place under its aegis in terms of the order made by it, is made effective by transfer of the title to the property in question in favour of the highest successful bidder at the auction. It is a sorry state of affairs that DRT has not been able to even ensure, despite applications having been moved before it by the Income Tax Department as well as the petitioner, that the auction sale which DRT had ordered is fruitfully completed in favour of the highest bidder. It is necessary for DRT to appreciate that it is a quasi judicial body which is entrusted with various powers under the Statute and in exercise of those powers it must ensure that not only proceedings before it are conducted in a proper and fair manner, but the orders made by it are complied not only by mere collection of monies but effective completion of the entire transaction resulting in a valid, legal and complete transfer which can be so only when the title to the property passes in favour of the purchaser. It is therefore expected that DRT shall evolve a mode and method so as to regulate the procedure in such circumstances qua all the transactions that may have to be undertaken hereinafter in future.
23. In the result, respondent No. 6 - State Bank of India is hereby directed to hand over the original title deeds to ARCIL i.e. respondent No. 7 under cover of forwarding letter within a period of seven days from today i.e. on or before 26th April,2004, with copy of such forwarding communication endorsed to the Income Tax Department, more particularly respondent No. 3.
24. Respondent No. 7- ARCIL is thereupon directed to forward the original title deeds of the property in question to the Income Tax Department, more particularly respondent No. 3, within a period of four days from the date of receipt of the original title deeds from respondent No. 6 - State Bank of India but not later than 30th April,2005 under cover of forwarding letter.
25. The Income Tax Department, more particularly respondent No. 3 is directed to ensure that the final deed of conveyance is executed in favour of the petitioner on or before 5th May,2005. The said respondent shall ensure that copies of the communication from respondent No. 6 State Bank of India to respondent No. 7 - ARCIL and from Respondent No. 7-ARCIL to respondent No. 3 are handed over to the petitioner at the time of execution of the deed of conveyance.
26. It is also necessary to take cognizance of the fact that the approach of the Income Tax Department as well as State Bank of India has left much to be desired. The officials concerned, in their desire to realise monies from sale of the property, failed to take care of the minimum requirement to ensure that a sale which is carried out by the department of Central Government jointly with premier Nationalised Bank does not leave a bad taste in the mouth of the successful bidder. The situation could have been avoided if the parties had taken care to ensure : whether the title deeds to the property in question are available, and if available, with whom, and what would be the stage at which the same would be handed over. SBI has shown absolutely callous and careless approach to the difficulties faced by a third party bonafide purchaser without even caring to think as to what would happen to a purchaser of a property in absence of title deeds to the property in question. In the circumstances, it is necessary that the said parties are visited with costs which are quantified at Rs. 5,000/payable by Income Tax Department i.e. respondent Nos. 1 to 5 and Rs. 10,000/payable by respondent No. 6 - SBI.
27. The petition is accordingly allowed in terms of the directions given hereinabove.
28. Rule made absolute accordingly.