V. Govinda Chetty v. Sub-Registrar and Others — 1995 DIGILAW 666 (MAD)

Judgment :- S. S. SUBRAMANI J. This is an application by the applicants (third party) to direct the Sub-Registrar, Mylapore (first respondent herein), to register the sale deed executed by the third respondent-official assignee, without insisting on a no objection certificate from the second respondent-appropriate authority, Income-tax Department The material averments as stated in the affidavit filed in support of the application are as follows One Thiagarajan and Nagarathinammal were declared insolvents, and their properties vested with the third respondent herein. One item of property which the official assignee took possession was Door No. 18 (Plot No. 12-A/2), School View Road, Ramakrishna Nagar, Raja Annamalai puram, Madras. By orders of court, a public auction was conducted on September 11, 1993, by the official assignee, and in that auction, the applicants were declared as successful bidders for a sum of Rs. 10, 03, 000 and they were declared as such. The entire amount was deposited by them with the third respondent who executed the sale deed on December 9, 1993, in their favour Under section 115 of the Presidency Towns Insolvency Act, the sale deed executed by the official assignee is exempted from stamp duty and other duties whatsoever. It is further averred in the affidavit that the sale deed dated December 9, 1993, executed in their favour by the official assignee is also exempted from stamp duty. When they produced the sale deed before the first respondent for registration, he wrote to the second respondent seeking a clarification as to whether no objection certificate was required under Chapter XX-C of the Income-tax Act as the value of the property exceeded Rs. 10 lakhs. The second respondent, by his letter dated June 14, 1994, informed the first respondent that the sale by the third respondent-official assignee was not exempted from registration even though exempted from payment of stamp duty, and that no objection certificate is required under Chapter XX-C of the Income-tax Act, 1961. Further, it was informed that the applicants should comply with the provisions on Chapter XX-C of the Act. According to the applicants, the insistence of no objection certificate is not proper. They would submit that the sale by an official assignee, that too in a public auction, will not come within the purview of Chapter XX-C of the Income-tax Act and so there is no requirement of no objection certificate. According to the applicants, the insistence of no objection certificate is not proper. They would submit that the sale by an official assignee, that too in a public auction, will not come within the purview of Chapter XX-C of the Income-tax Act and so there is no requirement of no objection certificate. According to the applicants, even as per the Act, it is the vendor who has to apply to the appropriate authority with a copy of the agreement to sell and not for the purchaser to obtain the said certificate. Besides that, an auction sale is not pursuant to any agreement but is decided on an open auction where any one can participate. It is further stated that Chapter XX-C of the Act was incorporated in the Income-tax Act only to check undervaluation of the property, and in this case, the question of black money or unaccounted money does not arise. It is further stated that the applicants requested the third respondent to intimate the second respondent about the non-requirement of a no objection certificate. The official assignee, on November 20, 1994, wrote to the second respondent that such a certificate is not required for the purpose of registration, and that he must inform accordingly the concerned Sub-Registrar, with an advice to register the document. On the date of application, more than one and a half years have elapsed since the deed was executed. But since the authorities are insisting on a no objection certificate, the applicants have filed the present application for necessary direction from this courtA counter-affidavit has been filed on behalf of the appropriate authority, who is the second respondent herein, wherein it is stated that under section 269UL of the Income-tax Act, a restriction has been placed on the registering authority from registering any document which purports to transfer any immovable property exceeding the value of Rs. 10 lakhs unless a certificate from this respondent is produced certifying that this respondent has no objection to the transfer of the property for an amount equal to the apparent consideration for which the property has been agreed to be sold. It is further stated that a reading of Chapter XX-C will clearly show that the sale by the official assignee of an immovable property in public auction is not exempt from the application of the said Chapter as claimed by the applicants. It is further stated that a reading of Chapter XX-C will clearly show that the sale by the official assignee of an immovable property in public auction is not exempt from the application of the said Chapter as claimed by the applicants. It is also stated that under section 269UC, a statement will have to be filed. A joint application signed by the vendor and the applicants will have to be filed before the appropriate authority in respect of the immovable property that is sought to be sold. It is said that in the instant case, the vendor is the official assignee representing the estate of the insolvent and the purchasers are the applicants, and hence, a statement will have to be signed and filed by them jointly. It is stated that in view of the various sections of Chapter XX-C, the Central Government has a right of pre-emptive purchase in respect of all the properties that are sold for a consideration of over Rs. 10 lakhs in contrast with the provisions of Chapter XX-A which ceased to have effect in respect of transfers of immovable properties made after September 30, 1986. In view of the above contentions, the appropriate authority stated that without a no objection certificate from him, the document is not liable to be registeredThe official assignee has also filed a report and, according to him, it is not a case which requires a no objection certificate from the second respondent I heard learned counsel for all parties with respect to this application Section 269UC reads thus "269UC. Restrictions on transfer of immovable property.--(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 of such value exceeding five lakh 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 sub-section (2) at least three months before the intended date of transfer (2) The agreement referred to in sub-section (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 sub-section (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 parties to such transaction acting on behalf of himself and on behalf of the other parties." Section 269UL of the Income-tax Act reads thus " Restrictions on registration, etc., of documents in respect of transfer of immovable property.--(1) Notwithstanding anything contained in any other law for the time being in force, no registering officer appointed under the Registration Act, 1908 (16 of 1908), shall register any document which purports to transfer immovable property exceeding the value prescribed under section 269UC unless a certificate from the appropriate authority that it has no objection to the 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 a statement under sub-section (3) of section 269UC, is furnished, along with such document(2) Notwithstanding anything contained in any other law for the time being in force, no person shall do anything or omit to do anything which will have the effect of transfer of any immovable property unless the appropriate authority certifies that it has no objection to the 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 a statement under sub-section (3) of section 269UC (3) In a case where the appropriate authority does not make an order under sub-section (1) of section 269UD for the purchase by the Central Government of an immovable property, or where the order made under sub-section (1) of section 269UD stands abrogated under sub-section (1) of section 269UH, the appropriate authority shall issue a certificate of no objection referred to in sub-section (1) or, as the case may be, sub-section (2) and deliver copies thereof to the transferor and the transferee." * It is not disputed that the sale in favour of the applicants was by public auction and not on the basis of any agreement entered into between them and the official assignee. From the typed set of papers, it is clear that the auction was conducted pursuant to a notification for the second sale approved by this court, where so many conditions have been incorporated in the auction notice, pursuant to which the auction was conducted. It is not on the basis of any agreement between the parties that the auction was conducted. It is also worthwhile to note that when the sale was originally conducted, the maximum amount for which the property was bid was only Rs. 10 lakhs. The court did not approve the sale since it felt that the property would fetch some more amount, and hence, the second auction was held, and in the second auction the petitioner purchased the property for Rs. 10, 03, 000 and the same was confirmed by this court. From the various provisions of the Presidency-Towns Insolvency Act and the Rules, it is clear that it is in the nature of a compulsory sale that takes place, By virtue of the provisions of the Presidency-Towns Insolvency Act, all the properties, both movable and immovable, vest in the official assignee, and it is by virtue of that power that he conducts the auction. He cannot be deemed to be a representative of the judgment-debtor. It is only to save the judgment-debtor that he conducts the sale so that all his assets could be proportionately distributed to all his creditors. It is pursuant to a statute, that the official assignee takes the property of the judgment-debtor, and not with his consentWhenever a sale is held, it is not through negotiation. It can only be by public auction so that any party can participate in the same provided he satisfies the conditions stipulated in the notice Further, the provisions of the Transfer of Property Act also have no application. The entire provisions of section 55 of the Transfer of Property Act may not have any application in the case of compulsory sale. There is no question of any disclosure by the official assignee, nor is he dutybound to disclose about any defect in the property. The principle of caveat emptor which is excluded by the provisions of the Transfer of Property Act applies in so far as a public auction is concerned. There is no question of any disclosure by the official assignee, nor is he dutybound to disclose about any defect in the property. The principle of caveat emptor which is excluded by the provisions of the Transfer of Property Act applies in so far as a public auction is concerned. It is just like a court auction the official assignee conducts the sale, There is no express covenant of title, nor is there any question of compensating the purchaser for any loss which he may sustain by purchasing the property in the auction. The price is also not fixed by the judgment-debtor or the insolvent, but by the court or its representative, the official assignee. Under these circumstances, the provisions of the Transfer of Property Act cannot have any application. It is in this view, that we have to consider the scope of section 269UC of the Income-tax Act. The said section contemplates that there cannot be any transfer of immovable property except after an agreement of transfer is entered into between the person who intends to transfer the immovable property and the person to whom it is proposed to be transferred. Till the auction is confirmed, there is no transferee. The official assignee will not be in a position to know who the proposed transferee is, and once the auction is confirmed, it is not on the basis of any agreement but by virtue of the auction, a title is conferred. There is no written agreement between the official assignee and the person in whose favour the sale is confirmed. Only if section 269UC of the Income-tax Act is applicable, there can be a prohibition for registering the document under section 269UL of the said ActLearned counsel for the appropriate authority brought to my notice section 269UO of the Act where certain exemptions have been provided. According to learned counsel, when a specific exemption is provided under the statute, this court should not grant any other exemption, and hence, according to learned counsel, even in the case of a court auction sale or an auction by the official assignee, the provisions of Chapter XX-C of the Income-tax Act apply The argument, though attractive, is not correct, if we look into the purpose of the enactment and also the purpose of the exemption. Section 269UO of the Act also relates to transfer of property for which the provisions of the Transfer of Property Act apply. It comes within the Chapter "Gifts" provided in the Transfer of Property Act. If the transfer is not in accordance with the Transfer of Property Act, the entire Chapter XX-C of the Income-tax Act will have no application Chapter XX-C of the Act is intended to avoid tax evasion and also to prevent accumulation of unaccounted money. In the case of a court sale, or a sale by the receiver or official assignee, and that too by public auction, such a question can never arise. Such sales are distress sales and it is without the consent of the judgment-debtor. So, it can never be on the basis of any agreement In Abdus Samat Haji Adam Kantharia v. Union of India the Bombay High Court considered this question. There, the learned judge said that in the case of an auction the price for the transfer of a property cannot be by an agreement of the parties. It was further held in that case that where the consideration for the transfer was not by agreement between the transferor and the transferee, but the property was purchased in auction by the transferee, the provisions of section 269C of the Income-tax Act, 1961, have no applicationThis court also had occasion to consider the scope of section 269UC of the Income-tax Act in the decision reported in A. Harikrishnan v. Registrar. That was a case in respect of a court auction. While dealing with the same, the learned judge considered the scope of section 269UC of the Act and held thus (page 395) "In so far as section 269UC of the Act is concerned, it is clear that no transfer of any immovable property the value of which exceeds rupees ten lakhs shall be effected except after an agreement for transfer is entered into between the person who intends transferring the immovable property and the person to whom it is proposed to be transferred. In so far as this particular provision is concerned, the petitioner, being a judgment-debtor, cannot be construed as a person who intends transferring the immovable property ; nor is he a party to the agreement for transfer and further, unless the sale is confirmed in favour of the highest bidder, no one can contemplate as to who would be the proposed transferee It may also be considered that in a court auction sale, no one can contemplate that there would be an agreement of sale as contemplated under section 269UC of the Act. The judgment-debtor can never be an agreement holder by reason of the fact that his property is being compulsorily brought to sale by auction only at the instance of the decreeholder and that the judgment-debtor who is not a willing seller is not a party to any agreement and that there is no agreement at all in so far as the judgment-debtor is concerned. While so, the petitioner cannot have any apprehension with reference to the non-compliance with the provisions contained in Chapter XX-C of the Act On considering the provisions contained in section 269UC of the Act, it is hardly possible to follow the procedure prescribed in Chapter XX-C of the Act in so far as the court auction sale is concerned. While it is so, section 269UC of the Act, as it is, cannot be made applicable in so far as the court auction sale is concerned and section 269UL of the Act also will not apply in so far as the court auction sale is concerned." * In Hindustan Petroleum Corporation Ltd. v. Elite Optical Industries [1995] 1 LW 67 (Mad), the question that came up for consideration was, whether a tenant who is eligible to purchase the property under the City Tenants' Protection Act is bound by the provisions of section 269UC of the Income-tax Act. While considering the scope of that section, the learned judge said that the provisions under the Madras City Tenants' Protection Act and the Income-tax Act should be construed harmoniously. The right of pre-emptive purchase at the market price as determined by the court, conferred on the tenant under the State Act cannot be negated by the prescribed authority under Chapter XX-C of the Income-tax Act substituting the Central Government as the purchaser in the place of the tenant. The right of pre-emptive purchase at the market price as determined by the court, conferred on the tenant under the State Act cannot be negated by the prescribed authority under Chapter XX-C of the Income-tax Act substituting the Central Government as the purchaser in the place of the tenant. In paragraph 10, the learned judge says that where a tenant intends to purchase the property and has not entered into any agreement for sale with the landlord and the price is decided by the court and not by any agreement, Chapter XX-C of the Income-tax Act has no application. According to me, on the principles, when the official assignee auctions the property after fixing the upset price, any price that is offered by the bidder higher than the amount mentioned as the upset price, is being considered and in favour of the highest bidder the auction is confirmed. The insolvent has no say in the matter and the auction is not with his consent. Hence, there cannot be the question of any agreement between the owner and the purchaser. As stated earlier, if section 269UC of the Income-tax Act has no application to the facts of this case, naturally section 269UL of the Act also cannot have any application. The registering authority cannot object to the registering of the document. The objection raised by the appropriate authority under the Income-tax Act is, therefore, repelled. The first respondent, the Sub-Registrar, Mylapore, Madras, is directed to register the document produced by the applicants for registration without insisting on the no objection certificate by the appropriate authority, Income-tax Department, Madras, without any further delay. This application is ordered accordingly. No costs.