Holding

Acquisition under Chapter XX‑A includes tenancy rights, and upon a final order the property vests in the Central Government free of all encumbrances; a tenant is only entitled to a share of compensation, not to retain possession.

Summary

The appellants, tenants of a three‑storeyed building, continued to occupy the premises after the owner sold it to the respondents. The Central Government, under Chapter XX‑A of the Income Tax Act, 1961, initiated acquisition proceedings, issued notices to the tenants, and eventually ordered acquisition, directing the tenants to surrender possession. The tenants challenged the constitutional validity of the acquisition provisions, arguing that their statutory tenancy was not an encumbrance and that they were entitled to remain in possession under the Rent Act and Articles 19(1)(f) and 31 of the Constitution. The Supreme Court held that the scheme of Chapter XX‑A expressly includes both proprietary and possessory rights, including tenancy rights, and that upon a final acquisition order the property vests absolutely in the Central Government free of all encumbrances. A tenant is entitled only to a share of the compensation payable, not to continue possession. Consequently, the appeal was dismissed.

Issues considered

The extent to which tenancy rights survive acquisition of immovable property under Chapter XX‑A of the Income Tax Act, 1961.
Whether a statutory or contractual tenant is entitled to continue possession after acquisition and whether compensation is payable for tenancy rights.
The constitutional validity of the provisions of Chapter XX‑A relating to acquisition and eviction of occupants.

Legislation cited

Bombay Rents, Hotel and Lodging House Rates Control Act, 1947
Income Tax Act, 1961s. 2690, s. 269-1, s. 269AB, s. 269D(2)(a), s. 269E, s. 269F(6), s. 269G, s. 269H, s. 269J, s. 269K

Subjects

Income Tax ActChapter XX‑AAcquisition of immovable propertyTenancy rightsCompensationConstitutional lawArticle 19(1)(f)Article 31Rent ActCentral GovernmentPossessionEviction

Judgment

A RAMBAI MANJANATH NAYAK AND ORS.
v.
. ,•;. .:;.~ "' ·UNION OF INDIA AND ORS.
- t".; .: ;, : r. ~'
•• · - =: •..
NOVEMBER 17, 1992

B •'·[M.H. KANIA, CJ. J.S. VERMA, S.C. AGRAWAL,
YOGESHWAR.DAYAL AND DR. AS. ANAND,JJ.]

Income Tax Act, 1961 : Chapter XX-A, Sections 269F(6), 269 I, 269 J,
269AB~cq~tisition of it11movable property under the Aci.:...;_Right of tenant to
C c01itinue in possession of acqiiired properly-Held does not survive after pass-
ing o/ final order wider section 269F(6)--Right surviving with occupant is only
to Ctaini share in compensation against the transferer.

Words and Phrase's-Meaning of 'Person in occupation of the
prope'rty'-Sectiol1 269D(2)(a) /;1co;ne Tax Act, 1961.
D .
The appellants for their business had taken on rent a 3-storeyed
building from its owner on a monthly rent of Rs. 1500. The owner, a
company incurred huge debts for the repayment of which it executed a
Composition Deed in favour of a Committee formed by the creditors for
the . purpose of management and disposal of the debtor's property. A
E
registered sale deed was executed on December 27, 1973 conveying the
building to respondent Nos. 5 to 10 for a consideration of Rs. 4,50,001 paid
by two cheques, one dated July 12, 1973 for Rs. 50,001 and another dated
February 4, 1974 for Rs. 4,00,000. According to the recital in the sale deed
the purchasers were given constructive possession and the existing tenant
F was to attorn in favour of the purchaser. By a letter dated February 5, 1974
the company informed the appellants of the sale; and required them to
attorn to the purchasers-respondent Nos. 5 to 10.

The competent authority under Section 2698 of the Income Tax Act,
1961 initiated proceedings for acquisition of the said property u~der
G Chapter XX-A of the Act by a notice dated August 31, 1974 under Section
2690(1).·This notice was also served on the appellants as the persons in
occupation of the property in accordance with Section 2690(2) of the Act.
The appellants did not make any objection to the acquisition proceeding,
and an order of acquisition of the said property was made under Section
H 269F(6) on December 12, 1975, and that order became final on January 27,
56
•
RAMBAI NAYAK. v. U.O.I. 57

1976. A
The competent authority made an order under Section 269-I(l)
which was served on the appellants on February 5, 1976 directing them to
deliver possession. of the property to the Central Government within 30
days. On February 7, 1976 the Inspecting Assistant Commissioner of
Income Tax served an order on the appellants wherein also a direction was B
given asking them to hand over the possession of the property within the
specified period.

The appellants apprehending their eviction filed a Writ Petition in
the High Court on ~'ebruary 24, 1976 challenging the constitutional validity C
of certain provisions of Chapter XX-A of the l_ncome Tax Act, 1961 and
consequently the order under Section 269F(6) of the Act together with the
consequential notices dated February 5, 1976 and February 7, 1976 issued
to them.

The High Court held that the tenants in occupation of the property D
acquired under Chapter XX-A of the Income Tax Act, 1961 are liable to be
evicted therefrom under Section 269-1 of the Act with a view to vest it
absolutely in the Central Government free from all encumbrances, and
dismissed the writ petition. A certificate of fitness to a11peal to this Court
under Article 133(1) of the Constitution was however granted i.n view of
the question of law involved being of general importance.
E

In the appeal to this Court it was contended on behalf of the
appellants that the statutory tenancy not being an encumbrance on the
property does not get extinguished on acquisition of the property and,
therefore, the right of the statutory tenant to continue in occupation F
remains unimpaired even after the acquisition made under Chapter XX-A
of the Income Tax Act; and that the tenancy, whether monthly or statutory,
is property within the meaning of Articles 19(1)(t) and 31 of the Constitu-
tion on account of which there can be no acquisition of the tenancy rights
without payment cf compensation.
G
The respondents contested the appeal by contending that there is no
acquisition of the tenancy rights and therefore, the question of payment of
compensation for the tenancy rights does not arise; that the right of a
statut('ry tenant to continue in possession and enjoy the protection against
eviction by virtue of the provisions of the Rent Act do not clothe the H
58 SUPREME COURT REPORTS [1992] SUPP. 3 S.C.R.

A statutory tenant with a right of the kind claimed by the appellants, that
the liability of the tenant in occupation of an acquired property to deliver
possession by virtue of the provisions in Chapter XX-A of the Income Tax
Act and d~privation of the protection of th~ Rent Act is a consequence of
the statutory provisions govern,ng propertks owned by the Central
Government.
B
On the que~tio~ : whether immovable property would vest in the
Central Government free from all encumbrances under Section 269-1,
upon a final order being made under Section 269F(6), and consequently
whether a tenant gover~ed by the Bombay Rents, and Lodging House Rates
c co'ritrol Act, 1947 could be evi~ted
~ ' .. from such property.
.

Dismissing the Appeal, this Court

HELD : 1. The scheme of Chapter XX-A clearly shows that the
D acquisition is not merely of the proprietory rights hi an acquired property
but also of the possessory rights therein which would undoubtedly include
the tenancy rights. This is also supported by .section 269AB which was
inserted subsequently. [67-F]

2. The requirement of notice to the perso-n in occupation of the
E property and every person interested in the property is obviously for the
reason that all such ~ersons including those having interest merely in
possession are considered to be persons interested in the acquisition
proceeding. Section 269E enables all such persons to niake objections
against the acquisition of the !m~ovable property on publication of the
F notice and the competent atithority is required by Sec~ion ~69E to hear
and decide those objections on merite, stati'ng reasons for the decision in
writing, before .making the final order for acquisition of th~ pr~pei:fy.
Obviously, a tenant iri p6s~essio~ of wha.iever natu~e, has this. opportunify.
[68-D-E]
G 3. An appeal to the Appellate Tribunal is provided by_ section 269G
which has to be decided on merits. A further appeal then lies to the High
Court under Section 269H. A person iriterested ·only in possession· of the
properly also has tlie opportunity' to show cause-against the acquisition of
that property. ·The order of acquisition made -by the competen.t authority
H ~under Section 269F(6) becomes fitial only thereafter on conclusion of this
RAMBAI NAYAK. v. U.O.I. 59

process wherein all legitimate objections are adjudicated on merits. A
[68-F]
4. Section 269J provides that on acquisition of, the immovable
property, the Central Government shall pay compensation. The proceed·
ings are therefore akin to those of acquisition unde.r the Land Acquisition
Act. [69-DJ B

5. A tenant in possession is at best entitled only to a share in the
compensation amount but has no right to continue in possession after the
order of acquisition made und,er Section 269F(6) has become final, since
he is bound to deliver possession of the property to the Central Govern- C
ment in accordance with Section 269-1. It is also clear from the proviso to
sub-section (4) of Section 269-1 that any person claiming any encumbrance
on the property which may survive against the transferee or any other
. person, not being the Central Government, can enforce the same only
against the transferee or such other person and that too by a suit· for
demages alone. [69-H, 70-A] D

- 6. The scheme of Chapter XX-A clearly envisages that no one in
possession of the immovable property or any part of it, in whatever
character, can retain or continue in possession after the order for acquisi-
tion of the immovable property made under sub-section (6) of Section 269F
has become final, the right to immediate possession of the property being
E

from that time only in the Central Government and none else. [70-B-C]

7. The net result of sub-sections (1) and (4) of Section 269-1 read
with the other provisions of Chapter XX-A is that once the order of
F
acquisition of any immovable property made under sub-section (6) of
Section 269F has become final, the 'transferor, the transferee or any other
occupant of the property has to deliver possession thereof to the competent
authority and on the possession being so obtained, by virtue of the sub-
section (4) .of Section 269-1, the property shall vest absolutely in the
Central Government free from all encumbrances. There is no other situa- G
tion visualised in the scheme of Chapter XX-A and no person including
any tenant in occupation of the immovable property has any surviving
right to continue in possession. [70-H, 71-A-B]

8. The expression 'person in occupation of' the property' in Section H
60 SUPREME COURT REPORTS (1992} SUPP. 3 S.C.R.

A 269D(2)(a) includes every person including a contractual or a statutory
tenant. The provision for sharing the compensation amo.unt in .Section
269K and that of enforcement of any right under a surviving encumbrance,
if any, against the transferee oi: any other person, excluding the Central
Government, by a suit for damages takes care of the interest, if any, of an
occupant of the immovable property. [71-C]
B
9. The Rent Acts ordinarily exclude properties owned by the Central
Government from operation of those Acts. The Scheme envisaged by
of
Chapter XX-A the Income Tax Act is in conformity therewith. [71-FJ~ ·

C CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3119 of
1983.

From the JUdgment dated 12.1.1983 of tlie Gujarat High Court in
Special Civil Application No. 310 of 1976.

D R. Karanja~vala, Mrs. Aditi Chaudhary and Mrs. Nandini Gore (For
Mrs. M. Karanjawala) for the Appellants.

G. Ramaswamy,· Attorney General, Dipankar Gupta, Solicitor
General, Dr: Gauri Shankai, J. Ramamurti, Ranbir Chandra, C.V.S. Rao
and. " Parmeswaran for the Respondents.
E ' .
.The Ju~gment of the Court was delivered by·.

VERMA, ·J..This appeal is against the judgment of Gujarat High
Court dated January 12, 1983 dismissing the appellants' writ petition
challenging the constiturional validity of Chapter XX-A of the Income-tax
F Act, 1961 wherein the question raised was whether immovable property
would vest in the Central Government free from all encumbrances under
Section 269-1, upo~· a final order being made under Section 269F(6) and
consyquently whether· a tenant governed by the Bombay Rents, Hotel and
Lodging House. Rates Control Act, 1947 can be evicted from such property.
G The appellants _constitute a partnership in the name and style of Mis
Satkar Hotel ~nd Restaurant and for their business had taken on rent the
3-storeyed Shamalaji Kripa. building. 'in Sayajigunj, Vadodara from. its
owner Mis S.S. Parshottamdas & Company on a monthly rent ofRs. 1,500.
The said M/s Parshottamdas '&Co. incurred huge debts for the repayinent
H of which· they executed a Composition Deed in favour. of a Committee
RAMBAl NAYAK. v. U.O.I. [VfRMA,J.] 61

formed by the creditors for the purpose of management and disposal of A
the debtor's property. A registered sale deed was executed on December
27, 1973 conveying the Shamlaji Kirpa building to respondent Nos. 5 to 10
for a consideration of Rs. 4,50,001 paid by a cheque dated July 12, 1973
for Rs. 50,001 and another cheque of Rs. 4 lakhs dated February 4, 1974.
According to the recital in the sale deed the purchasers were given B
constructive possession and the. existing tenant was to attorn in favour of
the purchaser. By a letter dated February 5, 1974 M/s S.S. Parshottamdas
& Co. informed the appellant of the sale requiring the appellant to attorn
to the purchasers - respondent Nos. 5 to 10.

The competent authority under Section 269B of the Income Tax Act, C
1961 initiated proceedings for acquisition of the said property under Chap-
ter XX-A of the Act. by a notice dated August 31, 1974 under Section
2690(1) to that effect published in the Gazette of India dated November
16, 1974. This notice was also served on the appellants as the persons in
occupation of the property in accordance with Section 269D(2) of the Act. D
The appellants did not make any objection to the acquisition proceeding.
An order of acquisition of the said property was made under Section
269F(6) on December 12, 1975 and that order became final on January 27,
1976.

·An order under Section' 269-I(l) made by the competent authority E
was served on the appellants on February 5, 1976 directing them to deliver
possession of the said property to the Central Government within 30 days.
On February 7, 1976, the Inspecting Assistant Commissioner of Income
Tax, Range II, Baroda served an order on the appellants wherein also a
direction was given to hand over possession of the property in question p
within the specified period. In these circumstances, apprehending their
eviction, the appellants filed a writ petition in the Gujarat High Court on
February 24, 1976 challenging the constitutiqnal validity of certain
provisions of Chapter XX-A of the Income Tax Act, 1961 and consequently
the order under Section 269F(6) of the Act together with consequential
notices dated February 5, 1976 and February 7, 1976 issued to the appel- G
lants. The Gujarat High Court dismissed the appellants' writ petition and
other connected matters. The High Court however, granted a certificate of
fitness to appeal to the Supreme Court under Article 133(1) of the Con-
stitution, in view of the question of law involved being of general impor-
tance. This gives rise to the present appeal. H
62 ~UPREME COURT REPORTS [1992] SUPP. 3 s.c.R.

A The contention of Shri Karanjawala, learned counsel for the. appel-
lants, in substance, is that the statut~;y tehancy not be~~g an encumbrance
on the property does not get extipguished on acquisition of the property
and, therefore, the right of the stahitofy tenant to continue in occupation
remains unimpaired even after the acquisition· made under Chapter XX-A
of the Income Tax Act. The learned counsel also- submitted tha.t tenancy,
B whether monthly or statutory, is property within the; meaning o,f Article
19(1)(f) and Article 31 of the Constitution on account of which there can
be 'no acquisition of the tenancy rights without payment of c:ompensation.
The submission of the iearned counsel for the appellants is that ii statutory
tenant under the ·Rent Act, in occupation of the· acquired property con·
.C tinues as a ter,tant of the Central Government and the order of acquisition
made under Chapter XX-A of the Act does not p~rmit taking possession
fr°"' the tenant by virtue of the other provisions in that Chapter enabling
recovery of possession from the occupant of the property. The appeal is
confined only to·these submissions. In reply Dr. Gauri Shankar submitted
that there is no acquisition of the tenancy rights and, therefore, the ques-
,p tion of payment of compensation for the tenancy rights does not arise. The
learned counsel for the respondents submitted that the right of a statutory
tenant to continue in possess.ion and enjoy the protection against eviction
by virtue of the provisions of the Rent Act does not clothe the statutory
tenant with a right of the kind claimed by the appellants. It. was further
E submitted that the liability of the tenant in occupation of an acquired
property to deliver possession by virtue of the provisions in Chapter XX-A
a
of the Act and deprivation of the protection of the Rent Act is conse-
quence of the statutory provisions governing properties o\vned by the
Central Government. On this basis, it was urg~d by the learned counsel for
the ·respondents that the appellants as tenants in occupation of the ac-
F
quired prope~ty have no basis to make this challe~ge. Alternatively, it was
urged, the compensation awarded is for acqu~ition· of !i:H rights in ·the
a
0

property nd', therefore, the right, if any, of_ the tenant is merely to claim
his shar~ in the' compensation amount. '. .

0 · ·· · · The judgme~t of the -Gujarat' High Court uncler appeal. is ~eported
in (1983) _142 I.T.R. 211. Jh.e High Court held .that the tenants in •occupa~
tion of the property a,cquired under Chapt~r: XX-A of the Income.Tax Act,
, .. . .therefrom
1961 are liable to. be,. eVicted . . under
" Section
~ ,
269-1 of the Act with
~

a view to vest it absolutely in t~e ·.Central Gqvernment free from all
~ encumbra~ces. The l~gislative h~story leading to th~ insertion; rif Chapter
.. RAMBAINAYAK. v. U.O.I.[VERMA,J.]

XX-A in the Income Tax Act, 1961 and the scheme of the Chapter have
been referred to, at length.
63

A

The Government of India appointed the Direct Taxes Inquiry Com-
mittee under the Chairmansliip of Justice K.N. Wanchoo, former Chief
Justice of India in 1970 to recommend concrete and effective measures ·
inter alia to unearth black money and prevent its. proliferation through
B
further .evasion; to check avoidance of tax. through various legal devices,
including the formation of trusts; and to reduce tax arrears. Pursuant to
•
I
some rcommendations of the Committee, the Taxation Laws (Amendment)
Act, 1972 was enacted incorporating those suggestions whereby Chapter
XX-A was inserted in the Act with effect from November 15, 1972. The c
Statement of Objects and Reasons for its enactment mentioned that it was
to counter evasion of tax through under-statement of the value of immov-
able property in sale deeds and also to check circulation of black money
by empowering the Central Government to acquire immovable properties,
including agricultural lands, at· prices which correspond to those recorded D
in the sale deeds; to improve the present arrangement for valuation for the
purposes of income-tax etc. and other ancillary matters. The provisions
contained in the newly inserted Chapter XX-A of. the Act have to be
understood in this background. Obviously, the legislation was enacted and
the provision for acquisition of property made therein for a public purpose.
We may here mention that subsequently Chapter XX-C was inserted by E
the Finance Act, 1986 with effect from October 1, ·1986 providing for
purchase by Central Government of immovable properties in certain cases
of transfer and, therefore, Chapter XX-A relating to acquisition of immov-
able properties in certain cases ceased to operate in respect of transfer of
immovable property made after September 30, 1986. The validity of certain
F
provisions of Chapter'XX-C of the Act is the subject matter of challenge
in some other matters decided separately and, therefore, no further men-
tion of Chapter XX-C is required to be made in t.he present context.

A brief reference to the scheme of Chapter XX-A and the· provisiom.
therein may now be made. Chapter XX-A was inserted to provide for G
acquisition of immovable properties in certain cases of transfer to
counteract evasion of tax. In the said Chapter, ·as originally enacted, by
Income-tax (Amendment) Act, 1981, Section 269AB was inserted with
effect from 1st .July1 1982 and Section 269RR was inserted by Finance Act,
1986 with effect from 1st October, 1986. H
.
64 SUPREME COURT REPORTS [1992) SUPP. 3 S;C.R.

A Section 269A contains the definition of expn~ssions used in the
different provi~ions in the Chapter. Section 269AB provides for registration
.of certain transactions requiring that such transactions shall be reduced to
writing in the prescribed manner and registered with the competent
authority. The specified transactions are those which allow the possession
of any immovable property to be taken or retained and whereby a person
B acquires any right in or with respect to any building or part -thereof which.
has been constructed or which is to be constructed, not being a transaction
required to be registered under the Registration Act, 1908. Section 269B
provides for appo~tment of competent authority for the purpose of the
Chapter. Section 269C empowers the competent authority to initiate
c proceedings for the acquisition of immovable property transferred for an
apparent consideration which is less than the fair market value of that' .
property and the consideration had not been truly stated in the instrument
of transfer with the object of facilitating the reduction or evasion of th'e tax
liability of the transferor or facilitating the concealment of any income
D which ought to be disclosed by the transferee for the purpose· of the
taxation laws. The Section also provides certain safeguards prescribing the
manner in Which the power has to be exercised by the competent authority.
Section 269D provides that th,e competent authority shall initiate proceed-
ings for the acquisition under this Chapter of any immovable property
referred to in Section 269C by notice to that effect published in the Official
E Gazette. It also requires such notice to be served on the transferor, the
transferee, the person in occupation of the property and every other.person
known to be Interested in the property. There is restriction a'.gainst initia-
tion of the acquisition proceeding after the expiration of nine months from
the: end of the month in which the instrument of transfer of the.'property
F is registered under .the Registration Act or, as the case may be, under
Section 269AB. Section 269E permits objections to be made by the trans-
feror, the transferee or any other person interested in the property to
whom notice is required to be given. Section 269F provides for hearing of ·
the objections against acquisition of the immovable property and decision
by the competent authority. Section 269.G provides an appeal before the
G Appellate Tribunal against the order for acquisition of any immovable
property which is required to be decided after giving an opportunity of
hearing. A further appeal to the High Court is provided by Section 269H,
at the instance of the Commissioner or any person aggrieved by the order
of the Appellate Tribunal made under Section 269G. Section 269-1 then
H provides for vesting of the property in the Central Government when the
RAMBAINAYAK. v. U.0.1.[VERMA,J.] 65

order of acquisition of any immovable property becomes final. Further A

.
reference to this Section would be made later. Section 269J provides for
payment of compensation by the Central Government for acquisition of the
immovable property which amount is a sum equal· to the aggregate of the
amount of the apparent consideration for its transfer and fifteen per cent
of the said amount. Section 269K requires tender of the compensation B
amount to the person or persons entitled thereto, as soon as may be, after
the property becomes vested in the Central Government under sub-section
(4) of Section 269-1. It also provides for adjudication of dispute relating to
apportionment of compensation amongst persons claiming to be entitled
thereto after deposit of the compensation amount by the Central Govern-
ment in the Court and for other ancillary matters. Section 269L provides C
for assistance by Valuation Officers to enable the competent authority to
properly discharge its functions. Section 2690 exempts transfer of immov-
able property made by a person to his relative on account of natural love
and affection for a consideration which is less than its fair market value if
a recital to that effect is made in the instrument o~transfer. Section 269RR
inserted with effect from 1.10.1986 provides that the provisions· of this D
Chapter shall not apply to, or in relation to the transfer of any immovable
property made after the 30th day of September, 1986, in view of Chapter
XX-C being inserted with effect from October 1, 1986. The remaining
provisions of Chapter XX-A are not material for our purpose.
E
The main provisions of Chapter XX-A with reference to which the
arguments advanced in the present case have to be considered are parts
of Section 2690 and Section 269-1. The material parts of these two Sections
as they were at the relevant time are as under :-

"Preliminary notice. F

2690. (1) The competent authority shall initiat~ proceed-
ings for the acquisition, under this Chapter, of any immov-
able property referred to in section 269C by notice to that
effect published in the Official Gazette: G

xxx xxx xxx xxx

(2) The competent authority shall -

(a) cause a notice under sub-section (1) in respect of any H
66 SUPREME COURT REPORTS [1992] SUPP. 3 S.C.R.

A immovable property to be served on the transferor, the
transferee, the person in occupation of the property, if the
transferee is not in occupation thereof, and on every
person whom the competent authority knows to be inter-
ested in the property;
...
B (b) cause such notice to be published-

(i) in his office by affixing a copy thereof to a conspicuous
place;

(ii) in the locality in which the immovable property to
c which it relates is situate, by affixing a copy thereof to a
conspicuous part of the property and also by making
known in such manner as may be prescribed the substance
of such notice at convenient places in the said locality."

D "Vesting of property in Central Government.

269-I. (1) As soon as may be after the order for acquisition
of any immovable property made under sub-section (6) of
section 269F becomes final, the competent authority may,
by notice in writing, order any person who may be in
E possession of the immovable property to surrender or
deliver possession thereof to the competent authority or
any other person duly authorised in writing by. the com-
petent authority in this behalf, within thirty days of the
date of the service of the notice.
F xxx xxx xxx

(2) If any person refuses or fails to comply with the notice
Linder sub-section (1), the competent authority or other
person duly authorised by the competent authority under
G that sub-section may take possession of the immovable
property and may, for that purpose, use such force as may
be necessary.

xxx xxx xxx

H (4) When the possession of the immovable property is
RAMBA1NAYAK. v. U.0.1.[VERMA,J.] 67

surrendered or delivered under sub-section (1) to the A
competent auJ:hority or a person duly authorised by him
in that behalf or, as the case may be, when the possession
thereof is taken under sub-section (2) or sub-section (3)
by such auihority or person, the property shall vest ab-
solutely in the Central Government free from all en-
B
~umbrances :

Provided that nothing in this sub-section shall operate to
discharge the transferee or any other person (not being
the Central Government) from liability in respect of such
encumbrances and, notwithstanding anything contained in c
any other law, such liability may be enforced against the
tr an sferee or such other person by a suit for damages."

The main submission of learned counsel for the appellant is that .the
tenancy right of the tenant in occupation of the acquired property is not
acquired and such a tenant continues in occupation as the tenant of the D
Central Government till evicted in accordance with law. The submission is
that tenancy right not being an encumbrance on the acquired property, it
continues. To support this submission it has been urged that no compen-
sation is provided for acquisition of the tenancy right for this reason and
there can be no acquisition of a property right without award of some E
amount as-compensation.

The High Court has dealt with the contention at length before
rejecting it and since we are in general agreement with the reasons given
by the High Court it is not necessary to reiterate the same at length.
F
The scheme of Chapter XX-A clearly shows that the acquisition is
not merely of the proprietary rights in an acquired property but also of the
possessory rights therein which would undoubtedly include the tenancy
rights. This also finds support fr_om Section 269AB which was inserted
subsequently. It requires registration of certain transactions which permit
possession of any immovable property to be taken or retained and whereby G
a person acquires any rights in or with respect to any building or part of
it, which has been constructed or which is to be constructed, not being a
transaction by way of sale, exchange or lease thereof which is required to

-- be registered under the Registration Act. This provision clearly indicates
that any transaction conferring .a right to take or retain possession of the H
68 SUPREME COURT REPORTS [1992) SUPP. 3 S.C.R.

A immovable property or whereby a person acquires any rights therein is also
governed by Chapter XX-A. Accordingly,· a lease which is not required to
be registered under the Registration Act is clearly included within its
ambit. In other words,· any transaction whereby a person acquires any right
to remain in possession of any immovable property is governed by the
..
provisions. A person. in possession under a monthly tenancy or continuing
B in possession as a statutory tenant by virtue of the protection against
eviction given by the Rent Act cannot be outside the ambit of Chapter XX-
A. Section. 269D requires preliminary notice to be given by the competent
authority to the transferor, the transferee and the person in occupation of
the property if the transferee is not in occupation thereof as well as to every
c other p-erson known to be interested in the property, in addition to publi-
cation of the notice in the Official Gazette for initiating proceedings for
acquisition of the immovable property. The requirement of notice to the
person in occupation of the property and every person interested in the
property is obviously for the reason that all such· persons including those
D having interest merely in possession are considered to be persons in!e·r-
ested in the acquisition proceeding. Section 269E enables all such persons
to make objections against the acquisition of the immovable property on
publication of the notice and the competent authority is required· by
Section 269F to hear and decide those objections on merits, stating the
reasons for the decision in writing, before making the final order for
E acquisition of the property. Obviously, a tenant in possession, of whatever
nature, has this opportunity. An appeal to the Appellate. Tribunal is
provided by Section 269G which has to be decided on me~its. A further
appeal then lies to the High Court under Section 269H. A person inter-
ested only i~ possession of the property also has the opportunity to show
cause against the acquisition of that property. The order of acquis!tion
F
made by the competent authority under Section 269F(6) becomes final only
thereafter on conclusion- of this process wherein all legitimate objections
are adjudicated on merits.

It is only after the order of acquisition of any immovable property
G made under. ~uh-section (6) of Section 269F becomes final that the com-
petent authority is empowered, to order any person who may be in posses-
sion of the immovable property to surrender or deliver possession thereof
within 30 days of the date of service of the notice given for this purpose in
acc~rdance-with sub-section (1) o(Section z690: Sub-section {2) of Section
H 269-1 empowers the competent authority to take possession of the itnmov-
RAMBAINAYAK. v. U.0.1.[VERMA,J.] 69

able property, if necessary by u·se of force if the person in possession A
refuses or faiis to comply with the notice under sub-section (1). Sub-section
(4) then provides that on possession of the immovable property being
obtained by the competent authority in this manner, 'the property shall vest
absolutely in the Central Government free from all encumbrances'.· The
proviso to sub-section (4) enacts that the transferee or any other person B
apart from the Central Government is however, not di~charged from
liability in respect of such encumbrances which liability may be enforced
against the transferee or such other person by a suit for damages. The
proviso also makes it clear that the vesting of the property in the Central
Government is absolutely free from all encumbrances on possession being
obtained by the competent authority, giving a complete discharge to the C
Central Government, the liability, if any, in respect of a surviving en-
cumbrance being only of the transferee or any other person not being the
Central Government; and that the person claiming to enforce such an
encumbrance can do so only against the transferee or such other person
merely by a suit for damages. Section 269J provides that on such acquisition D
of the immovable properly the Central Government shall pay as compen-
sation a sum equal to the aggregate of the amount of apparent considera-
tion for its transfer and 15% of the said amount. The additional 15% is in
the nature of solatium for compulsory acquisition of the property. The
proceedings are akin to those of acquisition under the Land Acquisition
Act and the compensation payable is quantified in this manner. Section E
269K requires the Central Government to tender the amount of compen-
sation so payable to the person or persons entitled thereto as soon as may
be after the property becomes vested in the Central Government under
sub-section (4) of Section 269-1 free from all encumbrances. Sub-section
(2) therein requires the Central Government to deposit the amount of F
compensation in the Court, if any dispute arises as to the apportionment
of the compensation amongst persons claiming to be entitled thereto and
refer such dispute for decision to the Court. It is, therefore, clear that this
compensation amount is to be shared between persons claiming to be
entitled thereto and in case of any dispute the amount so deposited is to
be apportioned according to the decision of the Court. G

These provisions make it clear that a tenant in possession is at best
entitled only to a share in the compensation amount but has no right to
continue in possession after the order of acquisition made under Section
269F(6) has become final, since he is bound to deliver possession of the H
70 SUPREME COURT REPORTS [1992] SUPP. 3S.C.R.

A property to the Central Government in accordance with Section 269-1. It
is also clear from the proviso to sub-section·(4) of Section 269-1 that any
person claiming any encumbrance on the property which may survive
against the transferee or any other person, not being the Central Govern-
ment, can enforce the same only against the transferee or such other person
and that too by a suit for damages alone. The scheme of Chapter XX-A
·B ·clearly envisages t4at no one in possession of the immovable property or
..
any part of it, in whatever character, can retain or continue in possession
after the order for acquisition of the immovable property made under
sub-section (6) of Section 269F has become final, the right to immediate
possession of the property being from that time only in the Central Govern-
c ment and none else. It is, therefore, futile to contend that a tenant in
possession under a contractual tenancy or a statutory tenant by virtue of
the protection granted under the Rent Act can continue in possession as
· tbe tenant of the Central Government with no obligation ~o deliver posses-
sion to the competent authority, in spite of the clear provision for delivery
of such possession under section 269-I of the Act.
D
Learned counsel for the appellants referred to decisions of this court
in Gian Devi Anand v. Jeevan Kumar and others, [1985) 2 SCC 683 and
Damadilal and others v. Parashram and others, [1976] 4 SCC 855. dealing
with the nature of right of a statutory tenant under the Rent Acts. These
E decisions are of no assistance to the appellants in the present context. They
were rendered in the context of protection against eviction available to a
statutory tenant or his heirs in accordance with the provisions of the Rent
Acts in view of the definition of 'tenant' therein. Even assuming a statutory
tenant can be said to have some right or interest in the property, which is
not merely a protection against eviction conferred by the Rent Acts, the
F
scheme of Chapter XX~A of the Income Tax Act provides for acquisition
of the property and its vesting in the Central Government free from all
encumbrances. The only surviving right of all persons having any interest
is
in the property at the time of acquisition to share in the compensation
amount and to enforce the right under a surviving encumbrance, if any,
G against the transferee or any such person, other than the Central Govern-
ment, by a suit for damages alone. On such acquisition all rights,
proprietary and possessory, vest in the Central Government which obvious-
ly eliminates the continuance of any tenancy rights.

H The net result of sub-sections (1) and (4) of Section 269-I read with
RAMBAl NAYAK. v. U.O.l. [VERMA,J.] 71

the other provisions of Chapter XX-A is that once the order of acquisition A
of any immovable property made under sub-section (6) of Section 269F h!'ts
become final, the transferor, the transferee or any other occupant of the
property has io deliver possession thereof to the competent authority and
on the possession being so obtained, by virtue of sub-section (4) of Section
269-1, the property shall vest absolutely in the Central Government free
from all encumbrances. There is no other situatioi:i visualised in the scheme
B
of Chapter XX-A and no person including any tenant in occupation of the
immovable property has any surviving right to continue in possession. The
expression 'person in occupation of the property' in Section 269D(2)(a)
includes every person including a contractual or a statutory tenant. The
provision for sharing the compensation amount in Section 269K and that c
of enforcement of any right under a surviving encumbrance, if any, against
the transferee or any other person, excluding the Central Government, by
a suit for damanges takes care of the interest, if any, of an occupant of the
immovable property. There is, thus no room for any doubt that the trans-
feror or the transferee in possession is bound to deliver possession of the D
property on its acquisition in this manner, and the right of a tenant
including a statuteiry tenant to continue in possession is also not saved by
the provisions in Chapter XX-A. The contention of the appellants that the
appellants' right as a tenant survives and continues in spite of the order for
acquisition of the immovable property having become final and the proper-
ty having vested in the Central Government free from all encumbrances is E
untenable. It is therefore, rejected.

It may also be mentioned that the Rent Acts ordinarily exclude
properties owned by the Central Government from operation of those
Acts. The scheme envisaged by Chapter XX-A of the Income Tax Act is
in conformity therewith. F
Consequently, the appeal fails and is dismissed. No costs.

N.V.K. Appeal dismissed.