Holding

Vesting of the property in the Central Government does not defeat the purchasers' statutory charge, but the purchasers are not entitled to writ relief; their remedy is to recover the earnest money from the vendor as per the agreement.

Summary

The appellants, six purchasers of a flat, paid Rs 4,55,000 as earnest money under a sale agreement and later faced a compulsory purchase of the property by the Central Government under Chapter XX‑C of the Income‑Tax Act, 1961. The Appropriate Authority released the consideration to the vendor and retained amounts to satisfy mortgages and other encumbrances, ignoring the purchasers' claim for refund of the earnest money. The purchasers filed a writ petition under Article 226 seeking the amount, which the High Court dismissed, holding that their remedy lay against the vendor. On appeal, the Supreme Court examined the effect of Sections 269‑UF, 269‑UG and 269‑UE of the Income‑Tax Act and Section 55(6)(b) of the Transfer of Property Act, concluding that vesting in the Government does not extinguish the purchasers' statutory charge, but the contract expressly provided that any unpaid earnest money could be recovered only from the vendor. Consequently, the Court declined to grant writ relief and directed that the purchasers pursue their remedy against the vendor. The appeal was dismissed.

Issues considered

The scope of Section 269‑UG of the Income‑Tax Act regarding who is entitled to the consideration when a property is compulsorily purchased.
Whether vesting of the property in the Central Government defeats the purchaser's lien under Section 55(6)(b) of the Transfer of Property Act.
Whether a writ of mandamus can be issued directing the Central Government to pay the earnest money to the purchasers despite the contractual provision that they may recover it from the vendor.
The power of the Appropriate Authority to annul encumbrances before vesting the property free of encumbrances.

Legislation cited

Income Tax Act, 1961s. 269-UC, s. 269-UD, s. 269-UE, s. 269-UF, s. 269-UG, s. 269-UH
Transfer of Property Act, 1882s. 55(4)(b), s. 55(6)(b)

Subjects

Income Tax ActCompulsory purchaseSection 55(6)(b) chargeWrit jurisdictionArticle 226Pre‑emptive purchaseEarnest moneyStatutory chargeContractual rightsAppropriate Authority

Judgment

. - ASGAR S. PATEL AND ORS.
v.
A

UNION OF INDIA AND ORS.

APRIL 25, 2000

[S. RAJENDRA BABU AND R.C. LAHOTI, JJ.] B

Income Tax Act, 1961: ss. 269-UC, 269-UD, 269-UE, 269-UF, 269-UG
and 269-UH-Transfer of Property Act, 1882-S. 55(6)(b) and 55(4)(b)-
Vesting of property in Central Government-Pre-paid purchase money by
transferees-Recovery of-Agreement between the parties clearly stipulating c
that if transferees were not refunded pre-paid purchase money by Appropriate
Authority, they would be entitled to claim the same from transferor-Writ
... petition by transferees claiming nfundfrom Appropria;e Authority-Validity
• of-Held, vesting of property in Central Govemment cannot defeat the
transferees' lien under S. 55(6)(b) of T.P. Act-Vesting not free from encum-
brance unless annulled by Appropriate Authority-However, in the instant D
case since the parties have entered into clear and express contract creating
mutual rights and obligations, they are bound by it-Thus, transferees not
entitled to claim any relief under the writ jurisdiction-However they were at
liberty to seek their remedy against the transferor under the agreement-
Constitution of India, 1950: Article 226. E
Under an agreement to sell immovable property, appellant-transfer-
ees paid part of purchase money to transferor and agreed to pay the
balance consideration of completion of sale. It was specifically agreed
between the parties that in the event of compulsory purchase of property
by Central Government and if transferees were not refunded the pre-paid F
purchase money by Appropriate Authority, then they would be entitled to
recover the same from transferor. Appropriate Authority passed an order
for compulsory purchase of property in favour of Central Government and
distributed the amount of consideration to transferor after paying dues to
the bank to satisfy the encumbrance of mortgage. Appellant-transferees' G
representation claiming refund of pre-paid purchase money was not con-
,...t sidered by the Appropriate Authority. Appellants' writ petition and writ
petition and writ appeal were also dismissed by High Court. Hence the
present appeal.

Dismissing the appeal, the Court H
483
484 SUPREME COURT REPORTS (2000] 3 S.C.R.
A HELD : 1. Vesting of the property in the Central Government under
the order of compulsory purchase cannot defeat the transferees' lien under
Section 55(6)(b) of the Transfer of Property Act. A charge under Section
55(6)(b) of T.P. Act was created soon on payment of purchase money. Just
as the seller has a charge on the property for the unpaid price under S.
55(4)(b) of the T.P. Act, the buyer has a charge for price pre-paid. Thus the
B
amount of any purchase, money property paid by the buyer in anticipation
of the delivery and also the earnest money where the buyer had justifica-
tion for declining to accept the delivery constitutes a charge on the property
forming subject matter of sale to the extent of seller's interest in the
property and thus would be an encumbrance on the property. Thus, vesting
c of property in Central Government cannot be free from encumbrance
unless the Appropriate Authority has exercised the power conferred by the
proviso to sub-section (1) of S. 269-UE of the Income Tax Act and annulled
the encumbrance. [495-E; 493-G; 492-D; 493-A-B]
C.B. Gautam v. Union of India & Ors. , [1993) 1 SCC 78; Delhi
D Development Authority v. Skipper Construction (P) Ltd., (2000) AIR SCW
113, relied on.
Saidum Nessa Hoque & Ors. v. Calcutta '\.yapar Pratishtan Ltd., AIR
(1978) Cal. 285, approved.

E 2.1. If there is no dispute between the buyer and the seller or a third
person as to the amount of purchase money to be paid or as to the appor-
tionment of the amount forming part of the purchase money then the
amount must be tendered by the Centra~ Government to the person or
persons entitled thereto. However, if there be any dispute raised as to the
apportionment of the amount by more then one person staking claims
F
seeking payment of the amount resulting into a dispute as to the apportion·
ment of the amount of consideration, in that case the Central Government
shall deposit so much part of the apparent consideration as is the subject
matter of dispute with the Appropriate Authority as provided by Sub-
section (2) of Section 269-UG. Failure to make such tender shall result in
G the pre-emptory purchase being abrogated and the immovable property
shall stand re-vested in the transferor as provided by sub-section (1) of
Section 269-UH. [494-F-H; 495-A]
2.2. However, in the instant case, the appellants were not seeking re-
vesting of the property in the transferor; and were only seeking enforce-
H ment of the statutory charge in their favour for the amount of purchase
ASGAR S. PATEL v. U.0.1. 485
+- money paid by them. Thus, the question of testing whether for failure of the A
Central Government to tender the amount consistently with the provisions
of sub-section (1) of Section 69-UG the order of compulsory purchase in
favour of the Central Government shall stand abrogated and the property
shall stand revested to the transferor does not arise. (496-A-B]
B
3.1. In the instant case, it is clearly stipulated in the agreement
between the parties that in the event of the Appropriate Authority not
paying the amount to the transferees, the transferees shall be entitled to
recover the amount from the vendor. Thus, there is no reason why the
rights and obligations of the parties should not be worked out by reference
to the recitals of the agreement governing their relationship. In the event of c
the Appropriate Authority the Central Government failing in discharging

- its statutory obligation the only right reserved to the transferees under the
agreement is to recover the amount from the transferor. When the parties
enter into a clear, unambiguous and express contract creating natural
rights and obligations, the parties are bound by it and the extraordinary
D
jurisdiction of the High Court under Article 226 of the Constitution which
is of a discretionary nature cannot be allowed to be utilised for enforcing an
obligation in departure from the terms of the agreement. (497-E-H; 498-A]

3.2. Moreover, even if the High Court were to exercise its discretion-
ary writ jurisdiction in favour of the transferee-appellants by directing E
payment of purchase money from the Central Government to the appel-
lants, the direction should be one binding on the transferor as well so that
the Central Government, in its turn, could have recovered the amount from
the transferor. Strangely enough the transferee-appellants have not
impleaded the transferor as party to the writ petition. As the amount left F
available with the Central Government was less than the amount of pur·
chase money paid by the transferees to the transferor, if full amount was
~ directed to be paid by the Central Government to the transferee-appellants
than a corresponding reduction was required to be made from the amount
paid to the persons who were not joined as parties to the petition. Thus, the
transferee-appellants were not entitled to any relief in the present proceed- G
ings. However, they are still at liberty to have their remedy against the
transferor and seek refund of the money paid by the transferor under the
agreement. (498-B-E]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6329of1998. H
486 SUPREME COURT REPORTS [2000] 3 S.C.R.
A From the Judgment and Order dated 26.9.95 of the Bombay High Court
--+--
in A. No. 649195 in W.P. No. 714 of 1995.

K.N. Rawal, Additional Solicitor General, Dushyant Dave, Jay Savla,
Ms. Reen,a Bagga, Haris Beeran, Siddhartha Dave, C.V.S. Rao, Ms. Sushma
Suri, B. Krishna Prasad, K.N. Balgopal, A.P. Mukundan, Mahendra Singh,
B C.N. Shri Kumar, Tripurary Ray, Vmeet Kumar, Ranbir Chandra, Sanjay G.
Udesh and A.P. Mukundan for the appearing parties.

The Judgment of the Court was delivered by

R.C. LAHOTI, J. Flat No.201, 2nd Floor, New Jaldarshan, Perry Cross
c Road, Bandra (West), Bombay was owned by one Hemant Chawla (hereinafter
the 'Transferor', for short). On 1.5.1994 the transferor entered into an
agreement to sell the said flat for a consideration of Rs. 45,50,000 in favour
of the six appellants herein (hereinafter referred to as the 'Transferees', for F:'
~
short). An amount of Rs. 4,55,000 was paid by the transferees to the transferor
D on 1.5.1994, i.e. the date of the execution of the agreement. The balance
consideration of Rs. 41 lakhs was to be paid on completion of sale within 30
days from the receipt of 'no objection certificate' from the Appropriate
Authority. On 6.5.1994 the transferor and the transferees jointly filed a
statement in Form 37-1 under Section 269 UC of the· Income-tax Act, 1961
E
(hereinafter the 'Act', for short). A copy of the agreement was annexed with -.....
Form 37-1 as statutorily required and as per the proforma the names of the six
transferees were mentioned in column No.4 of Form 37-1.

On 12.8.1994 the Appropriate Authority issued notice under Section
269 UD (IA) of the Act to the transferor and the transferees in view of its
F having formed an opinion that there was significant under valuation of the
property and calling upon the transferor and the transferees to show cause why
an order of compulsory purchase by Central Government be not made. Vide
para 6 of the notice the Appropriate Authority noted that out of the amount
of consideration agreed upon between the parties to the agreement dated
1.5.1994, an amount of Rs. 4,55;ooo was paid by way of earnest money on
G the execution of the agreement and the balance amount was payable within 30
days from the receipt of NOC from the Appropriate Authority. The transferor
and the transferees filed responses to the show cause notice disputing the >..
grounds for compulsory purchase by the Central Government.

H On 30.8.1994 the Appropriate Authority passed an order directing
ASGAR S. PATEL v. U.0.1. [R.C. LAHOTL J.] 487
compulsory purchase in favour of the Central Government for a discounted A
value of Rs. 44,25,680. Vide paras 8 & 9 of its order, the Appropriate
Authority directed that out of the consideration payable by the Central
Government, the encumbrance as mentioned in Clause 3 of the agreement,
should be satisfied by the transferor and in the meantime the amount shall be
deposited in the account of the appropriate authority. Vide Clause 9 of the
B
agreement, the vendor was to bear 50% transfer fee payable to the Society
which liability amounted to Rs. 22,000. The order directed this amount also
to be retained by the Appropriate Authority towards the vendor's liability for
payment of transfer fee. Clause (3) of the agreement referred to the flat
forming subject matter of sale having been offered as security to Indian
Overseas Bank in connection with a loan of Rs. 36,50,878 taken by the c
transferor. There was also an order of attachment before judgment-cum-
gamishing order dated 13.9.1994 secured by one Chandrakant & Co., a
partnership firm, creating an encumbrance to the tune of Rs. 6,00,800 on the
flat.
D
On 26.9.1994 the transferees made a representation to the Appropriate
Authority inviting the attention of the latter to the fact that they had paid a
sum of Rs. 4,55,000 (as mentioned in the agreement) and another sum of Rs.
50,000 after signing of the said agreement to which they were entitled to be
reimbursed under Clause 5(e) of the agreement. They prayed that their lien on
the flat be honoured and the amount of Rs. 5,05,000 be released to them out E
of the consideration proposed to be paid by the Central Government to the
transferor. Ultimately the amount of consideration payable by the Central
Government was distributed as follows. An amount of Rs. 6,00,800 was
deposited in the Court on 30.9.1994 to honour the order of attachment made
in summary suit No.2012of1994 filed by Mis. A. Chandrakant & Co. against F
the transferor Hemant Chawla. An amount of Rs. 36,50, 878 was paid to Indian
Overseas Bank, Bandra Branch on 27.12.1994 to satisfy the encumbrance of
mortgage existing in favour of the Bank. Retaining an amount of Rs. 22,000
towards transfer fee payable to the Society, the balance amount of Rs. 1,52,002
was paid to transferor on 23rd December, 1994. It is clear from these facts that
insofar as the claim of the transferees, appellants before us, is concerned it was G
neither taken note of nor honoured by the Appropriate Authority. On 25 .1.1995
the transferees/appellants served a notice demanding payment of Rs. 5,05,000
_from the Appropriate Authority. On 16.3.1995 they filed a writ petition in the
High Court of Bombay seeking the same relief. A learned Single Judge
dismissed the writ petition summarily forming an opinion that the remedy of H
488 SUPREME COURT REPORTS [2000] 3 S.C.R.
A the appellants was to sue the transferor for return of the earnest money and
remedy of civil writ petition was misconceived. The appellants preferred a writ
appeal which also has been dismissed by the Division Bench. The aggrieved
appellants have come up to this Court seeking special leave to appeal which
leave has been granted to them.

B The controversy arising for decision centers around the interpretation of
Section 269 UG of the Act. According to the learned counsel for the appellants
it was statutory obligation of the Central Government to have tendered to them
the amount claimed by them. Their claim having been brought to the notice
of the Central Government, the Appropriate Authority was not justified in
c releasing the amount to the transferor. The transferees were the persons
entitlecVclaiming to be entitled to the amount of consideration to the extent of
Rs. 5,05,000 and inasmuch as their entitlement was not disputed by the
transferor or anyone else for that matter, there was no dispute as to the
apportionment of the amount to the extent of the entitlement of the transferees.
In any case the amount should have been kept in deposit by the Appropriate
D Authority and should not have been released to the transferor. The Central
Government must bear the consequences flowing from its default by non-
compliance with the obligation statutorily cast on it by the Act.

Sections 269 UF & 269 UG of the Act read as under:-
E
Consideration for purchase of immovable property by Central Gov-
ernment. 269UF. (1) Where an order for the purchase of any
immovable property by the Central Government is made under sub-
section(!) of section 269UD, the Central Government shall pay, by
way of consideration for such. purchase, an amount equal to the
F amount of the apparent consideration.

(2) Notwithstanding anything contained in sub-section (1), where,
after the agreement for the transfer of the immovable property
referred to in that sub-section has been made but before the property
vests in the Central Government under section 269UE, the property
G has been damaged (otherwise than as a result of normal wear and
tear), the amount of the consideration payable under that sub-section
shall be reduced by such sum as the appropriate authority, for reasons
to be recorded in writing, may by order determine.

H Payment or deposit of considemtion. 269UG.
ASGAR S. PATEL v. U.0.1. [R.C. LAHOTI, J.] 489
(1) The amount of consideration payable in accordance with the A
provisions of section 269UF shall be tendered to the person or
persons entitled thereto, within a period of one month from the end
of the month in which the immovable property concerned becomes
vested in the Central Government under sub-section (1), or, as the
case may be, sub-section (6), of section 269UE: Provided that if any
B
liability for any tax or any other sum remaining payable under this.
Act, the Wealth-tax Act, 1957 (27 of 1957), the Gift-tax Act, 1958
(18 of 1958), the Estate Duty Act, 1953 (34 of 1953), or the
Companies (Profits) Surtax Act, 1964 (7 of 1964), by any person
entitled to the consideration payable under section 269 UF, the
appropriate authority may, in lieu of the payment of the amount of c
consideration, set off the amount of consideration or any part thereof
against such liability or sum, after giving an intimation in this behalf
to the person entitled to the consideration.

(2) Notwithstanding anything contained in sub- section (1), if any
D
dispute arises as to the apportionment of the amount of consideration
amongst persons claiming to be entitled thereto, the Central Govern-
ment shall deposit with the appropriate authority the amount of
consideration required to be tendered under sub-section (1) within the
period specified therein.
E
(3) Notwithstanding anything contained in sub- section (1), if the
person entitled to the amount of consideration does not consent to
receive it, or if there is any dispute as to the title to receive the amount
of consideration, the Central Government shall deposit with the
appropriate authority the amount of consideration required to be F
tendered under sub-section (1) within the period specified therein:
Provided that nothing herein contained shall affect the liability of any
person who may receive the whole or any part of the amount of
consideration for any immovable property vested in the Central
Government under this Chapter to pay the same to the person lawfully
entitled thereto. G

(4) Where any amount of consideration has been deposited with the
appropriate authority under this section, the appropriate authority
may, either of its own motion or on an application made by or on
behalf of any person interested or claiming to be interested in such H
490 SUPREME COURT REPORTS [2000] 3 S.C.R.
A amount, order the same to be invested in such Government or other
securities as it may think proper, and may direct the interest or other
proceeds of any such investment to be accumulated and paid in such
manner as will, in its opinion, give the parties interested therein the
same benefits therefrom as tl1ey might have had from the immovable
property in respect whereof of such amount has been deposited or as
B
near thereto as may be.

(emphasis supplied)

We will shortly revert back to the above-said provisions. Immediately
c let us examine what is the nature of the right of the transferees/appellants
under the law and their status under Chapter XX-C insofar as the controversy
arising for decision before us is concerned. The scheme as to purchase by
Central Government of immovable properties in certain cases of transfer as is
envisaged by Chapter XX-C of the Income-tax Act, 1971 came to be
introduced by the Finance Act, 1986 in place of earlier Chapter XX-A and
D
applies to transactions effected after 1st October, 1986. Once the Appropriate
Authority has, after the receipt of the statement under sub-section (3) of
Section 269 UC in respect of any immovable property, made up its mind to
make an order for the purchase by the Central Government of such an
immovable property at an amount equal to the amount of apparent considera-
E tion as defined in clause (b) of Section 269 UA, 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 269 UC. Section 269 UE,
as it originally stood prior to its amendment by the Finance Act, 1993 with
effect from 17 .11.1992, provided for the vesting in the Central Government
F of such immovable property "free from all encumbrances". In C.B. Gautam
v. Union of India & Ors., [1993] 1 SCC 78, a Constitution Bench of this Court
held the employment of expression "free from all encumbrances" in sub-
section (1) to be violative of Article 14 of the Constitution and therefore
directed the said expression to be quashed and struck down from the language .
of Section 269 UE (1). Vide para 36, this Court has held :-
G
"36 ............... In the result the expression "free from all encumbrances"
in sub-section (1) of Section 269-UE is struck down and sub-section
(1) of Section 269-UE must be read without the expression "free from
all encumbrances" with the result the property in question would vest
H in the Central Government subject to such encumbrances and lease-
ASGAR S. PATEL v. U.O.I. [R.C. LAHOTI, J.] 491
hold interests as are subsisting thereon except for such of them as are A
agreed to be discharged by the vendor before the sale is
completed .............................. The provisions of sub-section (6) of that
section do not present any difficulty because the vesting in the Central
Government would be subject to such encumbrances and leasehold
rights as stated earlier."
B
A purchase under the provisions of Chapter XX-C may be called a
compulsory purchase or a pre-emptive purchase. Sub-section (1) of Section
269 UF obliges the Central Government to pay an amount equal to the
apparent consideration by way of consideration for such purchase. Sub-section
(1) of Section 269 UG provides for the person or persons to whom the amount C
of apparent consideration is to be tendered by the Central Government.
Without cataloguing or categorising the person or persons to whom the amount
shall be tendered the Parliament has chosen to employ the expression - "the
person or persons entitled thereto". The expression is not defined in Chapter
XX-C or elsewhere in the Act. We have to go by the ordinary meaning of the D
expression and the context in which it has been used. The word 'entitle' means
"to give a claim, right, or title to; to give a right to demand or receive, to
furnish with grounds for clai~ing" (The Law Lexicon, P. Rarnanatha Aiyar,
2nd Edition, page 642).

Chapter XX-C is not an encroachment or imoad on the right of a citizen E
to hold property. It merely modifies the contractual relationship between the
parties to the extent superseded by the provisions of Chapter XX-C. The rights
and obligations of the parties to the contract are governed by the ordinary law
of the land including the provisions of the Contract Act and the Transfer of
Property Act. Section 55 of the Transfer of Property Act, 1882 provides :- F
"55. In the absence of a contract to the contrary the buyer and
seller of immovable property respectively are subject to the liabilities,
and have the rights, mentioned in the rules next following, or such
of them as are applicable to the property sold:
G
xxx xxx xxx

(6) The buyer is entitled -

xxx xxx xxx H
492 SUPREME COURT REPORTS [2000] 3 S.C.R.
A (b) unless he has improperly declined to accept delivery of the
property, to a charge on the property, as against the seller and all
persons claiming under him,***, to the extent of the seller's interest
in the property, for the amount of any purchase-money properly paid
by the buyer in anticipation of the delivery and for interest on such
amount; and, when he properly declines to accept the delivery, also
B
for the earnest (if any) and for the costs (if any) awarded to him of
a suit to compel specific performance of the contract or to obtain a
decree for its rescission.

xxx xxx xxx
c
xxx xxx xxx

Just as the seller has a charge on the property for unpaid price under
Section 55 (4) (b) of T.P. Act, the buyer has a charge for p1ice pre-paid. Thus
the amount of any purchase money properly paid by the buyer in anticipation
D of the delivery and also the earnest where the buyer had justification for
declining to accept the delivery constitutes a charge on the property forming
subject-matter of sale to the extent of the seller's interest in the property and
thus would be an encumbrance on the property. Section 269 UE(l) as amended
by the Finance Act, 1993 (w.e.f. 17.11.1992) reads as under:-
E
Vesting of pivperty 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,
F 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 the appropriate authority, after giving an oppor-
tunity of being heard to the transferor, the transferee or other persons
G interested in the said property, under sub-section (IA) of section
269UD, is of the opinion that any encumbrance on the property or
leasehold interest specified in the aforesaid agreement for transfer 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
H void and thereupon the aforesaid prope1ty shall vest in the Central
ASGAR S. PATEL v. U.O.I. [R.C. LAHOTI, J.] 493
Government free from such encumbrance or leasehold interest.]" A

In view of C.B. Gautam's case (supra) the vesting of the property in the
Central Government cannot be free from encumbrance unless the Appropriate
Authority has exercised the power conferred by proviso to sub-section (1) of
Section 269 UE and annulled the encumbrance after recording a finding and
B
following the procedure as contemplated by the proviso whereupon only the
property shall vest in the Central Government free from such encumbrance;
else the encumbrance shall run with the property.

The language of Section 269 UE(l) gives an indication that on the
passing of an order under Section 269 UD(l) the immovable property vests c
in the Central Government in terms of the agreement for transfer referred to
in sub-section (1) of Section 269 UC. The scheme of the provisions suggests
that on the passing of the order of compulsory purchase the Central Govern-
ment stands susbstituted in place of the buyer and the apparent consideration
stands substituted in place of the agreed consideration. Further in view of the
D
property having vested in the Central Government, the agreement need not be
performed by the transferor. Ordinarily, in the event of the private agreement
between the parties falling to the ground (i.e. not because of intervention of
Chapter XX-C proceedings) the transferor would have been liable to refund
the amount of purchase money to the transferees and so long as the amount
was not returned the transferees would have held a lien on the property to the E
extent of the seller's interest. Recently in Delhi Development Authority v.
Skipper Construction Co. (P) /Jd., (2000) AIR SCW 113 this Court has held
that the buyer's charge under Section 55(6)(b) of the T.P. Act is a statutory
charge and differs from a contractual charge which the buyer may be entitled
to claim under a separate contract. The charge is enforceable not only against F
the seller but against all persons claiming under him.

A charge under Section 55 (6)(b) of T.P. Act is created soon on payment
of purchase money. It can be lost on wrongful refusal to accept delivery of
property. As held in Saidun Nessa Hoque & Ors. v. Calcutta fyapar Pratisthan
Ltd, AIR (1978) Cal. 285, with which we find ourselves in agreement, a G
charge under Section 55(6)(b) may not be created if the parties expressly
stipulate that the purchase money will not form the charge on the property or
it will be released from the charge on certain circumstances or that earnest
would be forfeited under ce1tain circumstances. In the present case, the
property having been compulsorily purchased by the Central Government H
494 SUPREME COURT REPORTS [2000) 3 S.C.R.
A there was no occasion for the buyer to have improperly declined to accept
delivery of the property. The amount of purchase money was properly paid by
the buyer and was in anticipation of the fulfilment of the contract which would
include delivery of the property. In view of the order of compulsory purchase
having intervened the transferees were excluded from accepting delivery of
the property. The applicability of Section 55 (6)(b) of T.P. Act was fully
B
attracted.

During the course of the proceedings under Chapter XX-C the Appro-
priate Authority may, subject to the principles of natural justice, record a
finding that the purchase money which purports to have been paid by the
c transferees to the transferor is being claimed to have been p:lld only with a
view to defeat the provisions of this Chapter. Then the Appropriate Authority
may make a declaration avoiding the charge claimed to have been created for
the purchase money paid. Else, the charge shall continue to exist and follow
the prope1ty in the hands of the Central Government.
D
The only defence raised in the counter_ filed on behalf of the Appropriate
Authority before the Court is that the appellants did not file a consent letter
from the transferor agreeing to payment of Rs. 5,05,000 to the transferees/
appellants and therefore the balance amount was released for payment in
favour of the transferor. According to the Appropriate Authority it is always
E the transferor/vendor alone who is entitled to receive the consideration payable
under an order of compulsory purchase unless otherwise agreed mutually and
expressly between the parties and consent terms filed with the Appropriate
Authority. It is difficult to agree with the abovesaid plea raised on behalf of
the Appropriate Authority. If there be no dispute between the buyer and the
F seller or a third person as to the amount of purchase money having been paid
or as to the apportionment of the amount forming part of the purchase money
then the amount must be tendered by the Central Government to the person
or persons entitled thereto. If there be any dispute raised as to the apportion-
ment of the amount by more than one person staking claims seeking payment
of the amount resulting into a dispute as to the apportionment of the amotmt
G of consideration, in that case the Central Government shall deposit so much
part of the apparent consideration as is the subject matter of dispute with the
appropriate authority as provided by sub-section (2) of Section 269 UG. In
either case the compliance must be made within a period of one month from
the end of the month in which the immovable property concerned becomes
H vested in the Central Government. Failure to make such tender shall result in
-~

I

t
"
496 SUPREME COURT REPORTS (2000] 3 S.C.R.
A amount of Rs. 5,05,000 or Rs. 4,55,000 the appellants were not seeking re-
~
vesting of the property in the transferor; they were only seeking enforcement
of the statutory charge in their favour for the amount of purchase money paid
by them. In view of that statement made at the Bar the question of testing
whether for failure of the Central Government to tender the amount consist-
ently with the provisions of sub-section (1) of Section 269 UG the order of
B
compulsory purchase in favour of the Central Government shall stand abro-
gated and the property shall stand revested in the transferor does not arise.
Besides, the property compulsorily purchased by the Central Government has ).... '

been put to auction once again and sold away with the result that the interests
of a third party have intervened.
c
The question which now remains to be examined is whether in view of
the law laid down hereinabove whether a writ of mandamus can issue in
favour of transferees/appellants commanding the Central Government to pay
the amount of purchase money to the appellants to the extent undisputedly
paid by them.
D
Here it will be relevant to extract and reproduce Clause 5 of the
agreement dated 1st May, 1994 entered into between the parties. It reads as
under:-

E "5. Since 1st October, 1986, the provisions of Chapter XX C of the
Income-tax Act, 1961, have come iuto force and in view thereof the
parties hereto agree as under: -

(a) This agreement shall be treated as the Memorandum of Under-
standing between the parties hereto for the purpose of Section
F 269 UC of the Income-tax Act, 1961.

(b) Within 15 days from the execution hereof, the Vendor and the
• i-

Purchas~rs shall file the copy of this agreement along with a
statement in form 37-1, with the Appropriate Authority as
required by Section 269 UC Sub-Section (3) of the Income-tax
G
Act, 1961.

(c) In the event the Appropriate Authority makes an order for .A: ::-'---

purchase by the Central Government of the said property under
Section 269 UD of the Income-tax Act, 1961 then in such an
H event.

t-
ASGAR S. PATEL v. U.0.1. [R.C. LAHOTI, J.] 497
(i) The Vendor shaU be entitled to receive from the Central A
Government entire consideration and the Purchasers hereby
consents for the same.

(ii) The Purchasers shall be entitled to claim from the Appropriate
Authority the refund of Rs. 4,55,000 (Rupees Four lakhs fifty
B
five thousand only) being the earnest money paid by the
Purchasers to the Vendor. In the event the Appropriate Authority
does not pay the said sum of Rs. 4,55,000 (Rupees Four lakhs
fifty five thousand only) to the Purchasers then the Purchasers
shall be entitled to recover the said earnest money from the
~ndor. c
(d) In the event the Appropriate Authority does not make any (sic
... - order?) for purchase by Central Government of the said
property for a period of three months from the date of submit-
ting the statement in form 37-1 or grants its 'No Objection' for D
the sale of the said property by the Vendor to the Purchaser
herein, the Vendor shall be bound to complete the sale."

It is clear from the abovesaid Clause of the agreement that the parties .
were well aware of the provisions of Chapter :XX-C of the Act having come
into force on 1st October, 1986. In this background they had entered into a E
specific agreement between themselves whereby they had agreed in the event
of the Appropriate Authority making an order for purchase by the Central
Government of the property fqrming subject matter of the agreement, firstly,
the vendor is the person who shall be entitled to receive the entire amount of
consideration and the purchasers were consenting for it. The next sub-clause p
says that though the amount of Rs. 4,55,000 shall be available to be claimed
by the transferees from the Appropriate Authority but the parties were also
clear in their mind, and accordingly they had stipulated, that in the event of
the Appropriate Authority not paying the amount of Rs. 4,55,000 to the
transferees, the transferees shall be entitled to recover the amount from the
vendor. There is no reason why the rights and obligations of the parties should G
not be worked out by reference to the recitals of the agreement governing their
relationship. In the event of the Appropriate Authority/the Central Govern-
ment failing in discharging its statutory obligation the only right reserved to
the transferees under the agreement is to recover the amount from the
transferor. When the parties enter into a clear, unambiguous and express H
498 SUPREME COURT REPORTS (2000] 3 S.C.R.
A contract creating mutual rights and obligations, the parties are bound by it and
the extraordinary jurisdiction of the High Court under Article 226 of the
Constitution which is of a discretionary nature cannot be allowed to be utilized
for enforcing an obligation in departure from the terms of the agreement.

There is yet another reason why the discretion cannot be exercised in
B favour of the transferee-appellants. Even if the High Court were to exercise
its discretionary writ jurisdiciton in favour of the transferee-petitioners by
directing payment of purchase money from the Central Government to the
petitioners, the direction should be one binding on the transferor as well so
that the Central Government, in its tum, could have recovered the amount
c from the transferor. Strangely enough the transferee-petitioners have not
impleaded the transferor as party to the writ petition. As the amount left
available with the Central Government was less than the amount of purchase
money paid by the transferees to the transferor, if full amount of Rs. 4,55,000
was directed to be paid by the Central Government to the transferee-petitioners
then a corresponding reduction was required to be made from the amount paid
D to the Indian Overseas Bank and/or the amc:iunt deposited in the Court
honouring the garnishing order/order of attach.lnent in favour of Mis. A.
Chandrakant & Co., Indian Overseas Bank and Mis. A.Chandrakant & Co.
were also not joined as parties to the petition. The only persons impleaded as
respondents before the High Court were the Union of India, the Appropriate
E Authority and the Commissioner of Income-tax. The special leave petition
before this Court was also filed with the said three parties only impleaded as
respondents. During the pendency of petition before this Court, on 25. l .1996
the transferor, the Bank and Mis A.Chandrakant & Co. were permitted to be
impleaded as respondents. This was at too late a stage.
F For the foregoing reasons, we hold the transferee-petitioners not entitled
to any relief in these proceedings. Needless to say they are still at liberty to
have their remedy against the transferor and seek return of the money paid by
them to the transferor under the agreement. The appeal is dismissed though
without any order as to the costs in the facts and circumstances of the case.
G S.V.K. Appeal dismissed.