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1997 DIGILAW 496 (MAD)

Devanathan v. Raghunandan

1997-04-10

K.SAMPATH

body1997
Judgment :- 1. This is an application for amendment of plaint by inserting two additional paragraphs as 6-A and 6-B and for adding a certain prayer before para 9(a) of the plaint. 2. The allegations in the affidavit in support of the application for amendment of the plaint are as follows: The suit is for specific performance of the agreement between the parties dated 7-2-1991. The defence in main is that the suit is barred under the provisions of Section 269-UC of the Income-tax Act, that the agreement entered into for the sale of the suit property is unenforcable under law, that the defendants represented their inability to follow the statutory procedure prescribed under Section 269-UC and that the deponent of the affidavit is aware of the serious lacuna. No such representation was made and the sequence of events set out in the plaint would show that such allegations are not true. Since the suit is defended on the ground of noncompliance of Section 269-UC of the Income-tax Act, the plaint has to be properly amended. The prayer, as already stated, is for introduction of certain paragraphs as 6-A and 6-B and for adding before para 9(a) certain additional prayer. 2.1. The application is opposed. The first respondent has filed a counter stating that the aid of the Court cannot be sought to effect the compliance with the provisions of the Income-tax Act, 196 f with reference to the suit agreement. The applicant cannot be allowed to rewrite or amend the provisions of Chapter XX-C of the Income-tax Act, 1961. The suit agreement dated 7-2-1991 is void from the beginning because knowingly or unknowingly the parties failed to comply with Chapter XX-C which over-rides all other laws and the proposed amendment of the plaint cannot breathe any life into it. The preliminary objection regarding the maintainability of the suit had been raised by the respondent and in order to get over the preliminary issue, the applicant has belatedly filed the present application seeking amendment of the plaint. There can be no direction to the Income-tax Department particularly when it is not party to the suit. 3. The point for consideration is whether the amendment prayed for should be allowed. 4. The suit, as already stated, is for specific performance. There can be no direction to the Income-tax Department particularly when it is not party to the suit. 3. The point for consideration is whether the amendment prayed for should be allowed. 4. The suit, as already stated, is for specific performance. The amendment prayed for is as follows: “6-A. It is submitted that the non compliance of the provisions of the Income-tax Act particularly 269-UC will not be a bar to the prayer made for specific performance and further this Honble Court has got ample power to direct the parties to comply with the said provision. Even though it is not contemplated in exact words under the agreement in question, it is an implied contract that all law prevailing as on the date of agreement shall be adhered to by the parties to make the sale and the registration of the sale deed effective and in accordance with the law. Hence it is absolutely essential that the defendant should be directed to sign along with the plaintiff in the statement to be prepared in accordance with Sec. 269-UC read with Rule 48-L and Form No. 37-I as provided under Section 269-UC(3) of the Income-tax Act and present the same along with the plaint before the appropriate authority constituted under the provisions of Section 269-UC sub clause (3) of the Act. There is every likelihood that the defendants may not comply with the directions of this Honble Court in doing the same and hence in default of the defendants doing so, the Honble Court may permit the plaintiff to sign on behalf of the plaintiff and on behalf of the defendants also the said statement and permit the plaintiff to present the same before the appropriate authority as aforesaid. 6-B. Though Rule 48-L of the Income-tax Act prescribes a period of 15 days from the date of agreement for furnishing Form 37-1 of the appropriate authority, the appropriate authority has got ample powers to condone the delay in appropriate cases either applying the provisions of Section 5 of the Limitation Act or Section 148, C.P.C. It is exclusively within the domain of the appropriate authority and the interest of justice would be served if such a direction is given. Since under the provisions of Chapter XX-C of the Income-tax Act, the appropriate authority has only two options, i.e. either to purchase the property or issue No Objection Certificate, he had to necessarily do one of the two things and in case he exercises the option to purchase, the suit will stand dismissed and in case he acts otherwise, the plaintiff is entitled for a decree for specific performance. The defendants would in no way be prejudiced.” and for adding before para 9(a) “Directing the defendants to sign a statement along with the plaintiff as provided under Section 269-UC of the Income-tax Act read with Rule 48-L and Form 37-I and present the same along with the plaintiff to the appropriate authority as provided under Section 269-UC(3) by a date to be fixed by this Honble Court and in default of the defendants doing so, permitting the plaintiff to sign the statement as provided u/s 269-UC(2) read with Rule 48-L and Form 37-I and present the same before the appropriate authority as provided under Section 269-UC(3) by a date to be fixed by this Honble Court and in the event of the appropriate authority granting no objection Certificate.” 4.1. It is submitted by Mr. K. Chandrasekaran, learned Counsel for the plaintiff, that there is no reference in the agreement to Section 269-UC or Rule 48-L and that the parties are bound to apply jointly for the issue of No Objection Certificate by the appropriate authority. The learned Counsel referred to the decision in Commissioner of Income-tax v. Ajanta Electricals ((1995) 215 ITR 114) and submitted that Section 148 of the Code of Civil Procedure is applicable to proceedings under the Income-tax Act and the proviso enables the Income-tax Officer to extend the time for filing returns. The learned Counsel also relies on the decision in The Appropriate Authority v. Naresh M. Mehta (1992-1 M.L.J. 572) for the proposition that if an application is made under Section 269-UC and if no order is passed within the prescribed time under Section 269-UD(1), it automatically follows that a certificate under Section 269-UL(3) must be issued and there is no other third alternative. The learned counsel referred to the decision in T. Periasamy Nadar, etc. The learned counsel referred to the decision in T. Periasamy Nadar, etc. and others v. T.D. Ramasubramaniam (1992-2 L.W. 391) and contended that the contract between the parties is a contingent contract and it is not a condition precedent to obtain the permission from the appropriate authority for entering into the contract. There is a legal bar under the provisions of the Income-tax Act and that legal bar is sought to be removed by applying for permission. 5. The learned Counsel relied on the decision in Ajit Prasad Jain v. N.K. Widhani and others (AIR 1990 Delhi 42) and Rajesh Aggarwal v. Balbir Singh (AIR 1994 Delhi 345) and submitted that courts are empowered to grant permission to apply under Section 269-UC of the Income-tax Act. He referred to the decision in Vasantha Mills, etc. v. Industrial Reconstruction Bank of India, Calcutta (1995-2 L.W. 87) for the proposition that it is not for the court to find out whether the authorities had powers to grant any exemption. The learned Counsel also referred to the decisions in Prabhavathi Jain & 4 others v. The Government of Tamil Nadu etc. & 8 others (1995-2 L.W. 200) and T.K. Singaram v. The Urban Land Ceiling Tribunal, Chepauk (1992 Writ L.R. 389). Indeed, these two decisions lay down that when a particular enactment declares a transfer in contravention of the provisions of the enactment to be null and void, it would be a clear bar for the grant of a decree for specific performance in such cases. 6. The learned Counsel also referred to the decisions in Mrs. Chandnee Widya Vati Madan v. Dr. C.L. Katial and Others ( AIR 1964 S.C. 978 ) and Firm of Pratapchand Nopaji v. Firm of Kotrike Venkatta Setty & Sins Etc. ( AIR 1975 S.C. 1223 ). In the latter case the distinction between a void and unlawful contract has been pointed out. 7. Mr. K.C. Rajappa, learned Counsel for the respondents, submitted that the amendment is wholly misconceived, that there has been inordinate delay in taking out the application for amendment, that third partys rights have intervened and that if the amendment is allowed, the respondent will stand to lose. The time lag will also cause prejudice to the respondent. 7. Mr. K.C. Rajappa, learned Counsel for the respondents, submitted that the amendment is wholly misconceived, that there has been inordinate delay in taking out the application for amendment, that third partys rights have intervened and that if the amendment is allowed, the respondent will stand to lose. The time lag will also cause prejudice to the respondent. According to the learned Counsel, having regard to the provisions of the Contract Act Section 2(h) and Section 65, the contract entered into between the parties is not an enforceable contract and for an agreement between the two parties to be valid, it has to satisfy all the requirements of law. In the submission of the learned Counsel, Chapter XX-C was there even on the date of agreement and the parties cannot plead ignorance and the application for amendment has therefore to be rejected. The learned Counsel also referred to the decision in Kuju Collieries Ltd. v. Jharkhand Mines Ltd. & others ( AIR 1974 S.C. 1892 ) for the proposition that a contract entered into contrary to the provisions of the Contract Act and the Income-tax Act is void from the very beginning and no relief can be given to the party. 8. The learned Counsel Mr. Chandrasekaran wants to distinguish the decision in Kuju Colleries Ltd. ( AIR 1974 S.C. 1892 ) by submitting that the contract subject matter of the decision was an illegal contract from the very beginning and the contract subject matter of the present proceedings is not in any way prohibited by law. 9. From the records it is seen that in A No. 814/92 initially interim injunction restraining the respondents from dealing with the property was granted. However, after the respondents entered appearance and filed their objections, Govardhan, J. by order dated 17-8-1993 dismissed the application for injunction holding that clearance under Section 269-UC had not been obtained. While dismissing the application, the learned Judge referred to the submission on behalf of the respondents that the consideration being more than Rs. However, after the respondents entered appearance and filed their objections, Govardhan, J. by order dated 17-8-1993 dismissed the application for injunction holding that clearance under Section 269-UC had not been obtained. While dismissing the application, the learned Judge referred to the submission on behalf of the respondents that the consideration being more than Rs. 10 lakhs both parties to the agreement of sale should necessarily apply for income-tax clearance certificate form the authorities and the parties not having applied for income-tax clearance certificate, there was no possibility of the sale deed being executed in favour of the applicant and therefore there was no scope for passing a decree in favour of the applicant/plaintiff and on that ground itself the application was liable to be rejected. According to the learned Judge, having parted with a sum of Rs. 1 lakh the applicants/plaintiffs ought to have insisted upon the respondents to jointly apply to the authorities under the Income-tax Act to give an Income-tax Clearance Certificate in their favour, but they have not done so. In the absence of any such overt act on the part of the plaintiffs in insisting upon the defendants to jointly apply for Income-tax Clearance Certificate that they are always willing and ready to perform their part of the contract, cannot be given any credence, since no sale could be executed in their favour if the consideration is more than Rs. 10 lakhs, according to the Income-tax Act. The learned Judge also accepted the contention of the respondents that they cannot wait indefinitely for the plaintiffs to join with them to apply for Income-tax Clearance Certificate. 10. In Commissioner of Income-tax v. Ajanta Electricals ((1995) 215 ITR 114) relied on by the learned Counsel for the applicant, the Supreme Court, while dealing with extension of time for filing income-tax returns, held that the question whether a particular thing could be done or not in the absence of a specific provision to that effect, would depend upon the object of that provision and other relevant factors like the consequences which may follow if it is held that it cannot be done. The Supreme Court observed that if Section 139(2) of the Income-tax Act, 1961 was read with Rule 13 and Form No. 6, it would be clear that an application for extension could be made even after the period allowed originally or as a result of extension granted had expired. The Supreme Court further observed that for doing justice to a party to the proceeding, Section 148 of the Code of Civil Procedure, which provides that where any period is fixed or granted by the Court for the doing of any act prescribed or allowed by the Code, could be called in aid and the court may in its discretion, from time to time, enlarge such period even though the period originally fixed or granted may have expired. 11. In The Appropriate Authority, Government of India v. Naresh M. Mehta ((1992) I M.L.J. 572) the question arose under Article 226 of the Constitution of India. This decision is relied on for the proposition that if an application is made under Section 269-UC and if no order is passed within the prescribed time, under Section 269-UC it automatically follows that a certificate under Section 269-UL(3) must be issued and there is no other third alternative. 12. In T. Periasamy Nadar, etc. and others v. T.D. Ramasubramaniam (1992-2 L.W. 391) the agreement between the parties provided that permission to sell the property must be obtained from the Urban Land Ceiling Authority. The Authority refused to give permission. The plaintiffs claim for specific performance was negatived by the courts. It was held that the contract was a contingent contract and because of the refusal by the Authority for permission to sell, the contract had become void and unenforceable. However, it was held in that case that the contract was not illegal. 13. In Ajit Prashad Jain v. N. K. Widhani and others (AIR 1990 Delhi 42) it was held that the permission from Land and Development Office was not a condition precedent for grant of decree for specific performance. One of the conditions in the agreement was that a particular sum of money was payable after the prospective vendor obtained permission of Land and Development Officer, New Delhi, and communicated to the prospective purchaser. In coming to the conclusion, the learned Judge of the Delhi High Court referred to the decision in Mrs. Chandnee Widya Vati Madden v. Dr. One of the conditions in the agreement was that a particular sum of money was payable after the prospective vendor obtained permission of Land and Development Officer, New Delhi, and communicated to the prospective purchaser. In coming to the conclusion, the learned Judge of the Delhi High Court referred to the decision in Mrs. Chandnee Widya Vati Madden v. Dr. C.L. Katial (AIR 1965 SC 978) where the Supreme Court confirmed the decision of the Punjab High Court holding that if the Chief Commissioner ultimately refused to grant the sanction to the sale the plaintiff may not be able to enforce the decree for specific performance of the contract, but that was no bar to the Court passing a decree for that relief. 14. In Sri Rajesh Aggarwal v. Balbit Singh (AIR 1994 Delhi 345) it was held that in the absence of clearance no sale could be effective. However, the agreement to sell would not become illegal and in a given case the Court is empowered to give suitable directions regarding obtaining of permission from the Appropriate Authority. It was also observed that filing of statement in terms of Rule 48-L of the Income-tax Rules is an independent exercise by the parties not connected with the agreement to sell. The object of the agreement was not prohibited by law. 15. In The Vasantha Mills Ltd. v. Industrial Reconstruction Bank of India, Calcutta (1995-2 L.W. 87) it was held that it is not for the Court to find out whether the proposal to sell certain portions of lands of the Mill would violate the provisions of the Tamil Nadu Urban Land Ceiling Act. It is for the said Authorities to consider the same and pass appropriate orders. In Mrs. Chandnee Widya Vati Madden v. Dr. C.L. Katial and others ( AIR 1964 S.C. 978 ) one of the terms of the contract between the parties was that the prospective vendor should obtain necessary permission from the Government for sale of the land. The suit for specific performance was decreed holding that the contract was not a contingent contract and that the parties had agreed to bind themselves by the terms of the documents executed by them. The Court had power to enforce the terms of the contract and to enjoin upon the vendor to make the necessary application for permission. The suit for specific performance was decreed holding that the contract was not a contingent contract and that the parties had agreed to bind themselves by the terms of the documents executed by them. The Court had power to enforce the terms of the contract and to enjoin upon the vendor to make the necessary application for permission. No doubt, in K. Raheja Constructions Ltd. , v. Alliance Ministries ( AIR 1995 S.C. 1768 - 1995 Suppl(3) SCC 17 = 1996-1-L.W. 143) an application for amendment was filed seven years after filing of the suit seeking to amend the plaint for grant of specific performance of the contract on the ground that it was subsequently discovered that Charity Commissioner had granted permission for sale of the property and therefore they were entitled to decree of specific performance. It was held that the limitation period of three years under Article 54 of the Schedule to the Limitation Act having elapsed grant of amendment would defeat the valuable right of limitation accrued to the respondent. 16. In the instant case, it is not for this Court to find out whether the authorities constituted under the Income-tax Act have powers to entertain applications after the time fixed under the provisions of the Act or the Rules framed thereunder. As has been pointed out in The Vasantha Mills Ltd. v. Industrial Reconstruction Bank of India, Calcutta (1995-2-L.W. 87) it is not for the Court to find out whether the proposal to sell certain portions of the land of the Mill, would violate the provisions of the Tamil Nadu Urban Land Ceiling Act. It is for the said authorities to consider the same and pass appropriate orders. 17. The decision in Kuju Collieries Ltd., v. Jharkhand Mines Ltd., & Ors. ( AIR 1974 SC 1892 ) relied on by the learned Counsel for the respondent relates to a case of mining lease entered into contrary to Mineral Regulations. The Apex Court held that the lease was void ab initio. The decision does not apply to the facts of the present case. 18. In this case, the contract is not void ab initio. In case the Court ultimately finds that the plaintiff is otherwise entitled to specific performance, it will always be open to the Court to give a direction to the defendant to comply with the requirements under Section 269-UC. 18. In this case, the contract is not void ab initio. In case the Court ultimately finds that the plaintiff is otherwise entitled to specific performance, it will always be open to the Court to give a direction to the defendant to comply with the requirements under Section 269-UC. At the same time, it will not be possible to direct the concerned authorities to condone the delay in filing the application. It will be entirely the province of the concerned authorities to find out whether they have the necessary powers to entertain the application after the statutory time limit fixed under the Act and the Rules. It will be wholly unnecessary to enter into a discussion whether Section 148 of the Code of Civil Procedure or Section 5 of the Limitation Act will apply to a joint application under section 269-UC. I am conscious of the fact that the respondent had raised this point so early in his written statement. Justice Govardhan, while dealing with A. No. 814/92 has referred to this aspect of the matter. It will also be a moot point whether the defendant can take advantage of his own fault and urge that knowingly or unknowingly the parties failed to comply with chapter XX-C of the Income-tax Act. “Ignorance of the law excuses no man; not that all men know the Law, but because it is an excuse, every man will plead and no man can tell how to confute him.” (John Selden) There has indeed been inordinate delay in applying for amendment. However, as already stated, if the plaintiff will be otherwise entitled to a decree for specific performance, the Court can give a direction to the defendant to comply with the requirements under Section 269-UC. By dismissing the application into to the suit will practically become infructuous. 19. In Jai. Jai Ram Manohar Lal v. National Building Material Supply ( AIR 1969 S.C. 1267 ) the Supreme Court held that relief cannot be refused for some mistake, negligence, inadvertence or event infraction of the rules of procedure. Interests of justice require that the amendment prayed for will have to be allowed though not in entirety. 20. In the result, I hold that paragraph 6-A sought to be introduced can be allowed to be introduced. Interests of justice require that the amendment prayed for will have to be allowed though not in entirety. 20. In the result, I hold that paragraph 6-A sought to be introduced can be allowed to be introduced. So far as paragraph 6-B is concerned, it contemplates in a veiled manner the giving of direction to the appropriate authority to apply the provisions of Section 5 of the Limitation Act or Section 148 of the Code of Civil Procedure and entertain the application under Section 269-UC of the Income-tax Act. This, as already stated, the Court cannot direct. In view of that, paragraph 6-B cannot be allowed to be introduced. So far as the prayer portion is concerned, that can be allowed as it is one for a direction to the defendant to sign a statement under Section 269-UC of the Act. 21. However, having regard to the fact that he applicant/plaintiff has been negligent, particularly when he was put on notice about the requirement under Section 269-UC of the Income tax Act, even assuming that he had no knowledge about the provisions of Section 269-UC, the applicant must be put on heavy terms as a condition for allowing the application for amendment. The applicant/plaintiff is directed to pay a sum of Rs. 3,500/- (Rupees three thousand and five hundred only) as and by way of costs to the Counsel for the respondent within a period of four weeks from today. On such payment, the application will stand allowed to the extent indicated above. 22. Call after four weeks.