Agreement to purchase does not create property interest, so agreement-holders cannot invoke sale-setting-aside relief under the Second Schedule.

A mere agreement to purchase immovable property does not create an interest in the property or a charge on it under section 54 of the Transfer of Property Act. In the context of rules 16, 48, 60 and 61 of the Second Schedule to the Income-tax Act, an agreement-holder who entered into the contract after the statutory recovery process had begun had only a pecuniary expectation, not a legally protected interest. Such a person was therefore not one whose interests were affected by the sale, lacked locus to seek setting aside of the auction sale under rule 61, and could not maintain a writ challenge to the rejection of that application.

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Issues: (i) whether an agreement-holder who has paid advance sale consideration is a person whose interests are affected by the sale for the purpose of rule 61 of the Second Schedule to the Income-tax Act, 1961; (ii) whether the application to set aside the sale under rule 61 was maintainable; and (iii) whether the writ petitions challenging the rejection of that application could be entertained.

Issue (i): whether an agreement-holder who has paid advance sale consideration is a person whose interests are affected by the sale for the purpose of rule 61 of the Second Schedule to the Income-tax Act, 1961.

Analysis: The expression "persons whose interests are affected" was construed in the context of the scheme of the Second Schedule, especially rules 16, 48, 60 and 61, and in light of section 54 of the Transfer of Property Act, 1882. A mere contract for sale does not create any interest in or charge on immovable property. Since the agreement was entered into after the statutory proceedings had commenced and was hit by the prohibitory scheme governing transfers by the defaulter, the petitioners acquired only a pecuniary expectation and not a legal interest in the property.

Conclusion: The petitioners were not persons whose interests were affected by the sale, and the issue was decided against them.

Issue (ii): whether the application to set aside the sale under rule 61 was maintainable.

Analysis: Rule 61 can be invoked only by the defaulter or a person whose interests are affected by the sale. As the petitioners, being agreement-holders, had no legally cognisable interest in the property and had not satisfied the statutory basis for invoking the rule, they lacked locus standi to seek annulment of the sale on that footing. The rejection by the authorities was therefore sustained.

Conclusion: The application under rule 61 was not maintainable, and the issue was decided against the petitioners.

Issue (iii): whether the writ petitions challenging the rejection of that application could be entertained.

Analysis: Once the petitioners were found to lack the requisite interest under rule 61, their challenge to the rejection order could not survive independently. The confirmed auction sale also remained undisturbed on the facts found by the Court.

Conclusion: The writ petitions were not entertainable on the merits and were rejected against the petitioners.

Final Conclusion: The statutory bar against private dealing by the defaulter and the absence of any transferable interest in favour of the agreement-holders meant that they could not invoke the sale-setting-aside remedy under the Second Schedule.

Ratio Decidendi: A mere agreement to purchase immovable property does not create an interest in the property, and a person claiming only under such an agreement is not a person whose interests are affected by the sale for invoking rule 61 of the Second Schedule to the Income-tax Act, 1961.

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