Bona fide tenant protection under compulsory purchase laws, while vacant possession terms can justify withholding balance consideration.

Section 269UE of the Income-tax Act, 1961 was read as not authorising summary surrender or forcible eviction of a bona fide tenant in lawful occupation who was not a party to the transfer agreement and had not consented to vacate. The tenancy was treated as surviving the compulsory purchase, with eviction left to proceedings under the Public Premises Act or other applicable law. Where the agreement required vacant possession at registration and the owner had represented that such possession would be delivered, the balance consideration could be withheld until that condition was met, with only the admitted partial amount payable immediately.

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Issues: (i) Whether a bona fide tenant in lawful occupation, who was not a party to the transfer agreement and had not consented to vacate, could be compelled to surrender possession under section 269UE(2) and forcibly evicted under section 269UE(3) of the Income-tax Act, 1961, after an order for compulsory purchase under section 269UD(1); (ii) Whether payment of the balance sale consideration to the owner could be withheld until vacant possession of the entire property was obtained, where the agreement required delivery of vacant possession at the time of sale.

Issue (i): Whether a bona fide tenant in lawful occupation, who was not a party to the transfer agreement and had not consented to vacate, could be compelled to surrender possession under section 269UE(2) and forcibly evicted under section 269UE(3) of the Income-tax Act, 1961, after an order for compulsory purchase under section 269UD(1).

Analysis: Chapter XX-C was construed in the light of the safeguard recognised in the earlier Supreme Court ruling that bona fide lessees and persons lawfully in possession are not intended to be stripped of their possession by a compulsory purchase order. The tenant's occupation was bona fide, the authority was aware of the tenancy, and no order had been made declaring the tenancy void as a device to defeat the Chapter. A contractual undertaking by the owner to deliver vacant possession could not bind a tenant who was not a party to that contract. The provisions for surrender and forcible possession under section 269UE were therefore read as applying to persons whose possession could lawfully be displaced under the agreement or who were put in possession to defeat the Chapter, not to a bona fide tenant whose tenancy survived the transfer.

Conclusion: The tenant was not liable to surrender possession under section 269UE(2) and could not be forcibly evicted under section 269UE(3). The tenancy continued after the purchase order, and eviction could be pursued only under the Public Premises Act or other applicable law.

Issue (ii): Whether payment of the balance sale consideration to the owner could be withheld until vacant possession of the entire property was obtained, where the agreement required delivery of vacant possession at the time of sale.

Analysis: The agreement expressly required vacant possession at the time of registration, and the owner had represented that vacant possession would be delivered. Since the Central Government, standing in the shoes of the purchaser, was entitled to receive the property only on the contractual terms accepted for the transfer, it was not bound to pay the balance price before receiving the agreed vacant possession. The delay and resulting hardship flowed from the owner's own inaccurate representation regarding possession, and equity did not justify shifting that burden to the purchaser or the tenant.

Conclusion: The balance sale consideration could be withheld until vacant possession of the entire premises was obtained; only the admitted partial amount was payable immediately.

Final Conclusion: The compulsory purchase order was sustained, but the tenant's possession was protected from summary eviction under Chapter XX-C, and the owner's entitlement to the balance consideration was made conditional upon delivery of vacant possession.

Ratio Decidendi: Section 269UE of the Income-tax Act, 1961 does not authorise summary eviction of a bona fide tenant whose lawful possession survives the transfer and who has not consented to vacate, and contractual delivery of vacant possession may justify withholding the balance purchase price until that condition is fulfilled.

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