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Civil Appeal No. 6437 of 2011 (Arising out of Special Leave Petition (C) No. 28251/2008) and Civil Appeal No. 6438 of 2011 (Arising out of Special Leave Petition (C) No. 31269/2008). Case: 1. Citadel Fine Pharmaceuticals, 2. Ramaniyam Real Estates P. Ltd. Vs 1. Ramaniyam Real Estates P. Ltd. and Anr., 2. Citadel Fine Pharmaceuticals and Anr.. Supreme Court (India)

Judgment Cited in 6 Precedent Map Related
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Case NumberCivil Appeal No. 6437 of 2011 (Arising out of Special Leave Petition (C) No. 28251/2008) and Civil Appeal No. 6438 of 2011 (Arising out of Special Leave Petition (C) No. 31269/2008)
CounselFor Appellant: Abhishek Manu Singhvi, Sr. Adv., Prashant Mehta, R. Venkatverdhan, Rishi Agrawala, Amit Kumar Sharma and E.C. Agrawala, Advs. and For Respondents: Jayanth Muth Raj and Sundaresan, Advs.
JudgesG.S. Singhvi and Asok Kumar Ganguly, JJ.
IssueCompanies Act, 1956; Tamil Nadu Urban Land (Ceiling and Regulations) Act, 1978 - Sections 5, 6, 7, 9(5), 11(1), 11(3), 12, 13, 14, l5, 15B, 16 and 21; Income Tax Act, 1961 - Section 269UC; Tamil Nadu Urban Land (Ceiling and Regulation) Repeal Act, 1999 - Sections 3 and 4; Indian Contract Act, 1872 - Section 55; Specific Relief Act, 1963 - ...
CitationAIR 2011 SC 3351, 2011 (5) AWC 4861 SC, 2011 (6) CTC 112, 2011 (4) RCR 894 (Civil), JT 2011 (9) SC 265, 2011 (8) SCALE 301
Judgement DateAugust 08, 2011
CourtSupreme Court (India)

Judgment:

Asok Kumar Ganguly, J.

  1. Leave is granted in both the special leave petitions.

  2. These appeals have been preferred from the judgment and final order dated 2nd September, 2008 passed in O.S.A. No. 332/2007 and C.M.P. No. 1/2007 by the Division Bench of the Madras High Court.

  3. The controversy arose out of a suit of specific performance. M/s. Citadel Fine Pharmaceuticals (Defendant No. 1), a partnership firm, owned 66 cents of agricultural land (hereinafter 'the suit property'), forming a part of total of 2.87 acres of agricultural land in survey Nos. 363, 364, 366/1 of Velachery village, Mamblam, Guindy Taluk, Registration District of Madras, and entered into an agreement for sale of the suit property (hereinafter 'the agreement') for a consideration of Rs. 1,00,00,000/- with M/s. Ramaniyam Real Estates Private Limited (Plaintiff), which was a company incorporated under the Companies Act, 1956 and engaged in the business of constructing buildings.

  4. The agreement dated 7th July, 1995 was the subject matter of suit between the above parties. As per the agreement, Rs. 10,00,000/- of the sale consideration was to be paid upfront as earnest money, and the remainder of Rs. 90,00,000/- was to be paid at the time of the registration of the sale deed. At the time of agreement, the suit property was encumbered by way of security with M/s. State Bank of India, Guindy Branch (Defendant No. 2) and therefore one of the conditions of the agreement was that Defendant No. 1 would get the suit property released from such encumbrance before the final payment of Rs. 90,00,000/- was to be made. Apart from this encumbrance, it was stated in the agreement, the suit property was to be without any other encumbrance; vide clauses 2 and 6 of the agreement.

  5. Of the said 66 cents, however, 19 cents were considered excess urban vacant land under the Tamil Nadu Urban Land (Ceiling and Regulations) Act (24 of 1978), (hereinafter 'the Tamil Nadu Act'). As per Clause 7 of the agreement, it was for the Plaintiff to have the land cleared for sale from the urban land ceiling authorities. Under clauses 8, 10 and 11 of the agreement, the sale was made time bound. Clause 10 stated that time was the essence of this contract. Clause 8 mandated that under all circumstances, the sale had to materialize within a year from the date of the agreement. In terms of Clause 9, if the sale failed on account of lapses on Plaintiff's part, the sale was to stand completely cancelled, and the earnest money of Rs. 10,00,000/- was to be returned. As per Clause 11, however, if the sale failed because of Defendant No. 1, the Plaintiff was at liberty to sue for specific performance of the contract.

  6. In pursuance to the agreement, the earnest money was paid by the Plaintiff and received by Defendant No. 1. The Plaintiff then preferred an application in Form 37-I prescribed under Rule 48L of the Income Tax Rules, 1962, before the Appropriate Authority for the clearance of the suit property for sale vide Section 269UC in Chapter XX of the Income Tax Act, 1961.

  7. However, the Income Tax Authority refused such clearance on the ground that as per Section 6 of the Tamil Nadu Act, agreement to sell a piece of urban land declared excess vacant land, or a piece of land, part of which had been declared excess vacant urban land, was deemed as null and void.

  8. From the Statement and Objects and Reasons of the Tamil Nadu Act it appears that it was enacted to impose a ceiling on the quantum of land that could be held or owned within an urban agglomeration. The object of the Act was to prevent concentration of ownership of urban land in the hands of a few, and to regulate the construction of buildings on such lands, speculative trading of urban land and illegal profiteering. Under the Act, the ceiling limit had been fixed by Section 5. Section 6 of the Act prevented transfer of such excess vacant urban land by its owner to any other person. Section 6 is set out:

  9. Transfer of vacant land. - No person holding in excess of the ceiling limit immediately before the commencement of this Act, vacant land, shall transfer any such land or part thereof by way of sale, mortgage, gift, lease or otherwise until he has furnished a statement under Section 7 and a notification regarding the excess vacant land held by him has been published under Sub-section (1) of Section 11; and any such transfer made in contravention of this provision shall be deemed to be null and void.

  10. The section thus enjoined that landowners holding excess vacant land are to furnish a statement under Section 7. In this case, 19 cents were considered excess urban vacant land vide case No. R.C.6160/86 and Defendant No. 1 filed its statement under Section 7.

  11. Section 9 provided for preparation of a draft statement as regards the excess vacant land. Under Clause (5) of Section 9, the Competent Authority, so designated under the Tamil Nadu Act, was to consider objections preferred by a land owner, and then pass orders with respect to the question of excess land. Defendant No. 1 preferred its objections before the Competent Authority. The objections however were dismissed. The Defendant No. 1 then preferred an appeal before the Special Commissioner (Land Reforms), Madras and the appeal was kept pending.

  12. In accordance with Section 11(1), a notification regarding the 19 cents being excess vacant land was published and any transfer made in contravention of this provision was deemed to be null and void. Section 11 provided for acquisition of such vacant urban land by the State Government.

  13. Defendant No. 1 also preferred an application for exemption of that 19 cents of land under the provisions of Section 21. Section 21 empowered the State Government to exempt a piece of vacant excess land from acquisition mentioned above.

  14. That application was also dismissed. Defendant No. 1 then preferred Writ Petition No. 13906/2008 before the High Court challenging the declaration in R.C. 6160/86. In the writ petition, Defendant No. 1 prayed for a stay of the proceedings and which was allowed. However, during the pendency of this writ petition the Tamil Nadu Act was repealed on 16th June, 1999 by the Tamil Nadu Urban Land (Ceiling and Regulation) Repeal Act, 1999 (20 of 1999) (hereinafter 'the Repealing Act'). Under Section 4 of the repealing Act, all proceedings relating to any order made or purported to be made under the Principal Act, that is the Tamil Nadu Act, shall abate. Section 4 of the Repealing Act is as follows:

  15. Abatement of legal proceedings. - All proceedings relating to any order made or purported to be made under the Principal Act pending immediately before the commencement of this Act before any court, tribunal or any authority shall abate.

    Provided that this section shall not apply to the proceedings relating to Sections 12, 13, 14, l5, 15-B and 16 of the Principal Act in so far as such proceedings are relatable to the land, possession of which has been taken over by the State Government of any person duly authorised by the State Government in this behalf or by the competent authority.

  16. Admittedly, possession of 19 cents of land, in respect of which proceeding was pending, was not taken over by the Government. So the pending proceeding in respect of that land under the Principal Act, that is the Tamil Nadu Act, shall abate in view of Section 4 of the Repealing Act.

  17. However, Income Tax authorities, as noted above, had refused to process Form 37-I in view of the proceedings initiated under the Tamil Nadu Act. Having referred to Section 6 of the Act, the appropriate authority, while rejecting form 37-I stated:

    ...In column 8, it has been mentioned that an extent of 19 cents has been declared as excess vacant land under Section 9(5) of Tamil Nadu Urban Land (Ceiling and Regulations) Act, 1978 that an appeal is pending before the Special Commissioner (Land Reforms), Madras and that the transferor has also applied to the State Government for exemption under Section 21 of the said Act but the same has been rejected and the matter is pending in W. P. No. 13906/1988, before the High Court, Madras.

  18. It transpires, therefore, that the transferor intends to transfer the entire extent of 66 cents, inclusive of the 19 cents of land which is declared as excess vacant land by the Competent Authority under the Urban Land Ceiling Act, which is prohibited by Section 6 of the Tamil Nadu Urban Land (Ceiling and...

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