Mumbai-400 004 v. The Commissioner Of Income

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION (L) NO.2324 OF 2007 Plaza Diamond Properties Pvt.Ltd.,) a Private Limited Company ) incorporated under the Companies ) Act, 1956 and having its ) registered office at Diamond Plaza) 391, Dr.D.Bhadkamkar Marg, ) Mumbai-400 004. )..Petitioner Versus 1) The Commissioner of Income ) Tax-II, Mumbai, having his ) office at Room No.321, Aaykar ) Bhavan, M.K.Road, Mumbai-400 020) 2) Appropriate Authority ) Income Tax Department ) Mittal Court, A-Wing, 3rd floor) Nariman Point, Mumbai-400 021 ) 3) Union of India ) through the Ministry of Finance) Aaykar Bhavan, M.K.Road ) Mmbai-400 020 ) 4) Swastik India Pvt.Ltd., ) A Company incorporated under ) the Companies Act, 1956 having ) its last known address at 391 ) Dr.D.B.Marg, Bombay-400 004 ) And having the address of its ) shareholders at the Commissioner) of Income Tax-II, Mmbai ) having his office at Room No.321) Aayakar Bhavan, M.K.Road, ) Mumbai-400 020 ) 5) M/s.G.S.P.Buildwell Pvt.Ltd., ) Having their address at 2, ) Ivanhoe, Ground Floor, 139, ) G.T.Bhosale Marg, Opposite ) Sachivalaya Gymkhana, Nariman ) Point, Mumbai-400 021. )..Respondents ---- Mr.J.Reis with Mr.J.Mitra and Mr.M.Merchant for the petitioners. Mr.R.Ashokan with Mr.P.S.Sahadevan for respondent nos.1 to 4. Mr.Jitendra Jain i/by Shah & Sanghvi for respondent no.5. Coram : F.I.Rebello & Coram : F.I.Rebello & R.S.Mohite,JJ R.S.Mohite,JJ Date : 6.2.2008. : 2 : Judgment :- ( Per : R.S.Mohite,J) Judgment :- ( Per : R.S.Mohite,J) 1. This is a petition filed by Plaza Diamond Properties Pvt.Ltd., (Hereinafter referred to as the "petitioner") seeking to quash and set aside an auction notice dated 3.9.2007 published by the Chief Commissioner of Income Tax-II in the ‘Times of India’ dated 10th September 2007. By the impugned notice the income tax department seeks inter alia to sell an immovable property located at 391, Dr.D.B.Marg, Mumbai-400 004. The petitioner claims to be the company which owns the aforesaid property consisting of a cinema hall on the ground floor and mezzanine floor and a balcony with a screen and projector room above the mezzanine floor, in the building known as "Swastik Cinema Building" together with land underneath admeasuring about 821.74 sqr.mtrs., being C.S.No.1266 in Girgaum division. This property in respect of which the petitioner claims to be the owner is more particularly described in Exh.A to the petition and is hereinafter referred to as the "suit property". 2. The chronology of the facts which lead to the filing of the present petition are as under :- (a) The petitioner company acquired free hold rights in respect of the suit premises pursuant to a : 3 : consent decree dated 3.8.1983 passed by this Court in Suit No.810/1983. At the time of the purchase, a company by name "Sharma Properties Pvt.Ltd.," held lease hold rights and they had sub-let the suit premises in favour of another company by name of "Swastik India Pvt.Ltd." The Consent decree dated 3.8.1983 therefore, provided that the sale was subject to the indenture of sub-lease dated 30.4.1982 and also subject to another agreement dated 30.4.1982 entered into between Sharma Properties Pvt.Ltd., and the sub-lessee Swastik India (Pvt) Ltd., inter alia for construction of the foyer for the said Swastik India Pvt.Ltd. A copy of the consent decree under which the petitioner obtained ownership rights in respect of the suit premises is annexed at Exh.B to the petition. The copy of the indenture of sublease dated 30.4.1982 between Sharma Properties Pvt.Ltd. and Swastik lease hold rights and they had sub-let the suit premises in favour of another company by name of "Swastik India Pvt.Ltd." The Consent decree dated 3.8.1983 therefore, provided that the sale was subject to the indenture of sub-lease dated 30.4.1982 and also subject to another agreement dated 30.4.1982 entered into between Sharma Properties Pvt.Ltd., and the sub-lessee Swastik India (Pvt) Ltd., inter alia for construction of the foyer for the said Swastik India Pvt.Ltd. A copy of the consent decree under which the petitioner obtained ownership rights in respect of the suit premises is annexed at Exh.B to the petition. The copy of the indenture of sublease dated 30.4.1982 between Sharma Properties Pvt.Ltd. and Swastik India Pvt. Ltd., is annexed at Exh.C to the petition. (b) That after the petitioner obtained ownership rights, by an Indenture of modification dated 19.2.1986 executed between the petitioner and the aforesaid sub-lessee (Swastik India Pvt.Ltd.), the rights of Swastik India Pvt.Ltd., were modified and their right of 9 renewals w.e.f.30.4.1982 was changed and reduced to only 1 renewal for a period of 10 years. The relevant portion of clause-2 in : 4 : the indenture of modification dated 30.4.1982 which pertains to the right of renewal was as under :- " ..............TO HOLD the demises premises unto the Lessee for the term of 10 years commencing from the 30th day of April, 1982 with an option to the Lessee to renew the Lease for a further period of ten years by giving notice as hereinafter provided......................" (c) It is the case of the petitioner that in view of the Indenture of modification referred to herein above, the indenture of sub-lease dated 30.4.1982 came to an end by afflux of time on 30.4.1982. That even though the sub-lessee i.e. Swastik (India) Private Limited had the right of one further renewal of 10 years, they did not exercise such right. Further there was no document, either registered or unregistered, extending the lease for a further period of 10 years after the expiry of the term of 10 years on 30.4.1992. The said lessee i.e.Swastik (India) Private Limited however, continued in illegal and unlawful possession and paid monthly compensation till 30.6.1997. (d) That, without the knowledge and consent of the petitioner, shareholders of Swastik (India) Private Limited agreed to sell their shareholding to a company name "Film Waves Enterprises" for a sum of Rs.4 crores and by their letter dated 30.3.1997 they notified the income tax authorities by filing Form : 5 : 37-I, as required under Chapter XX-C of the Income Tax Act. Thereupon the Income tax department appointed a valuer for the valuation of the suit premises and the valuer valued the suit premises at Rs.10,65,67,580/-. (e) Consequently, the Income tax authorities decided to exercise their right of pre-emptive acquisition of the shares of Swastik (India) Private Limited and accordingly, by an order dated 27.6.1997, passed under Section 269 UD of the Income tax Act, the Central Government exercised the option to purchase the shareholding of Swastik India Private Ltd., from the shareholders of Swastik India Private Ltd., for the consideration of Rs.4.00 crores. (f) Consequent to the aforesaid order dated 27.6.1997, on 7.7.1997 then shareholders of Swastik India Pvt.Ltd., handed over physical possession of the suit premises to the Income-tax department and obtained a receipt as evidence of having handed over the possession. (g) That, after the passing of the order under Section 269 UD the Income tax authorities learnt about Indenture of modification dated 19.2.1986 and realised that Swastik India Pvt.Ltd., did not have any right, title and interest in the suit premises. Central Government exercised the option to purchase the shareholding of Swastik India Private Ltd., from the shareholders of Swastik India Private Ltd., for the consideration of Rs.4.00 crores. (f) Consequent to the aforesaid order dated 27.6.1997, on 7.7.1997 then shareholders of Swastik India Pvt.Ltd., handed over physical possession of the suit premises to the Income-tax department and obtained a receipt as evidence of having handed over the possession. (g) That, after the passing of the order under Section 269 UD the Income tax authorities learnt about Indenture of modification dated 19.2.1986 and realised that Swastik India Pvt.Ltd., did not have any right, title and interest in the suit premises. They, therefore, stopped the payment of the cheques : 6 : amounting to Rs.4 crores which they had issued in favour of the shareholders of Swastik India Private Limited. (h) On the payment of Rs.4.00 crores being stopped as aforesaid, the shareholders of Swastik India Pvt.Ltd. filed a Writ petition being Writ Petition No.1887 of 1997. During the pendency of this petition, by an order dated 12.12.1997 the Court directed the appropriate authorities to deposit with the Prothonotary & Senior Master Rs.4.00 crores and the amount was invested in a nationalised bank. Further, pending the petition the appropriate authority was restrained from taking further steps in the matter. On 24.12.1997 the appropriate authority (Income-tax Department) passed an order under Section 269 UJ of the Income Tax Act 1961 withdrawing from the acquisition on the ground that on expiry of the lease on 30.4.1992, there was no renewal by a registered deed. (i) Later, by yet another order dated 12.2.1998 the appropriate authority vacated its earlier order passed under Section 269 UJ, when the interim order of this Court was pointed out to them. Thus the acquisition was revalidated. (j) Writ petition No.1887 of 1997 came to be heard and finally disposed off by this Court, by its : 7 : judgment and order dated 21.10.2002. This Court held that nothing had prevented the appropriate authority from passing fresh orders withdrawing from the acquisition after obtaining permission from the Court. It was also held that the point raised by the department i.e. that the lease was less than 12 years required adjudication under Section 269 UJ and without any such adjudication the Court could not permit the department to raise the point in the Writ Petition, particularly there was no order passed by the department under Section 269 UJ. That, if the department, after having permission, had passed any fresh order under Section 269 UJ withdrawing from the acquisition, the petitioners could have challenged the same. It was further recorded in the judgment that there was no suppression of material facts from the Income-tax authorities. All relevant documents were produced before the appropriate authority. Even the valuation report indicated that the lease subsisted on expiry of 10 years. This Court thus allowed the Writ petition and directed the respondents to forthwith pay amount of Rs.4.00 crores to the petitioners. A direction was given to the Prothonotary & Senior Master to encash the F.D. and pay the entire amount including interest upto the date of encashment to the petitioners. We are informed that this amount has already been handed over to the petitioners in Writ Petition No.1887 of 1997. It would be appropriate to note that the : 8 : present petitioners were not parties to the aforesaid Writ petition No.1887 of 1997. (k) In 2005, the petitioners filed a Writ petition being Writ petition No.3154 of 2005 in this Court for a direction against the respondents to hand over the lease subsisted on expiry of 10 years. This Court thus allowed the Writ petition and directed the respondents to forthwith pay amount of Rs.4.00 crores to the petitioners. A direction was given to the Prothonotary & Senior Master to encash the F.D. and pay the entire amount including interest upto the date of encashment to the petitioners. We are informed that this amount has already been handed over to the petitioners in Writ Petition No.1887 of 1997. It would be appropriate to note that the : 8 : present petitioners were not parties to the aforesaid Writ petition No.1887 of 1997. (k) In 2005, the petitioners filed a Writ petition being Writ petition No.3154 of 2005 in this Court for a direction against the respondents to hand over possession of the suit premises to the petitioners. By its judgment and order dated 21.3.2006, a Division Bench of this Court dismissed the petitioners’ Writ petition after observing that the proper course would be to take recourse to take appropriate remedy in civil law. (l) Subsequently, by their notice dated 10.10.2006 the petitioners to the respondents, called upon the respondents to hand over vacant and peaceful possession of the said property and since this was not done, we are informed that a suit for eviction has been filed byy the petitioners in the Court of Small Causes against the respondents for recovery of the suit premises. (m) The record also indicates that being aggrieved by the judgment and order of this Court dated 21.10.2002, the Income-tax authorities filed a review petition (being Review Petition (L) No.4 of 2006), but by an order dated 7.12.2006, this Court was pleased to dismiss the Notice of Motion for condoning the delay in filing the review petition : 9 : and also dismissed the review petition simultaneously by making certain observations on merits thereby confirming the order dated 25.10.2002. (n) In this background, on 3.9.2007 the impugned notice for sale of the suit premises came to be published in Times of India dated 10.9.2007 at the behest of the Income-tax authorities and this has given rise in the filing of the present petition. 3. On perusing the record and in the aforesaid circumstances, we find that the petitioners have clearly acquired right of ownership in respect of the suit premises. When this right was acquired, Swastik India (P) Ltd. who is respondent no.4 in this petition, was the sub-lessee. The rights of Swastik India (P) Ltd., were modified by the Indenture of modification dated 19.2.1986. The order under Section 269 UD related to the acquisition of the shareholding of Swastik India (P) Ltd. and thus the Union of India stands in the shoes of "Swastik India (P) Ltd. i.e. respondent no.4. The impugned notice however, seeks to sell the suit premises which are of the ownership of the petitioners. In our view, this cannot be permitted as respondent nos.1, 2, & 3 were never the owners of the suit premises. : 10 : 4. In the circumstances, petition will have to be allowed and the same stands allowed in terms of prayer clause-(a). 5. We, however, make it clear that the Income-tax authorities will be at liberty to take any proceedings or steps in relation to their acquired assets and rights in accordance with law. We also make it clear that any observations made in the judgment and order is only for the purpose of deciding this Writ petition and will not be taken into account by the Small Causes Court while deciding the pending suit on its own merits. (R.S.Mohite,J) (F.I.Rebello,J) (R.S.Mohite,J) (F.I.Rebello,J)