Bona fide dispute over entitlement to consideration can justify deposit with the Appropriate Authority and block revesting

A bona fide dispute as to entitlement to receive consideration can justify deposit of the amount with the Appropriate Authority under section 269UG(3), even without rival claimants, where the apparent recipient is itself challenging the acquisition provisions or vesting order. In that situation, tender is not mandatory and no revesting follows under section 269UH. Objections based on absence of probate, non-production of the original will, and the executors' authorisation were held unsustainable on the facts, because probate was not required, the will remained with the registering authority, and the executors acted under the will's authority.

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Issues: (i) Whether, in the facts of the case, the Central Government was justified in not tendering the consideration and in depositing it with the Appropriate Authority under section 269UG(3) of the Income-tax Act, 1961 on the ground of dispute as to the entitlement to receive the amount of consideration; (ii) Whether the reasons recorded in the deposit order, namely non-production of the original will, want of probate, and the nature of the executors' authorisation, were legally sustainable.

Issue (i): Whether, in the facts of the case, the Central Government was justified in not tendering the consideration and in depositing it with the Appropriate Authority under section 269UG(3) of the Income-tax Act, 1961 on the ground of dispute as to the entitlement to receive the amount of consideration.

Analysis: The expression "dispute as to the title to receive the amount of consideration" was construed broadly to include not merely a contest between rival claimants but also a genuine controversy as to the entitlement of the apparent vendor to receive the amount. The Court applied the analogous scheme under the Land Acquisition Act, 1894 and held that where the persons claiming consideration are themselves challenging the vires of the acquisition provisions or the vesting order, the Department is not bound to tender the amount under section 269UG(1). In such a situation, a deposit under section 269UG(3) is permissible because the claimant's entitlement is itself in dispute and payment during the pendency of the challenge may prejudice recovery.

Conclusion: The deposit under section 269UG(3) was valid and section 269UH did not operate to revest the property in the petitioners.

Issue (ii): Whether the reasons recorded in the deposit order, namely non-production of the original will, want of probate, and the nature of the executors' authorisation, were legally sustainable.

Analysis: The objection regarding probate was held erroneous because, under section 213 of the Indian Succession Act, 1925, probate was not required on the facts of the case. The objection regarding non-production of the original will was rejected because the will had been deposited with the Registrar under the Indian Registration Act, 1908 and, on the testator's death, the original remained with the registering authority. The objection relating to the executors' resolution and absence of a separate power of attorney was also rejected because the will itself authorised two executors to carry out day-to-day administration and the resolution was only in implementation of that authority.

Conclusion: These objections were unsustainable in law, but they did not alter the validity of the deposit under section 269UG(3).

Final Conclusion: The writ petition failed because the pendency of the earlier challenge created a dispute as to entitlement sufficient to justify deposit of the consideration with the Appropriate Authority, and no statutory revesting under section 269UH followed.

Ratio Decidendi: A bona fide dispute as to entitlement to receive consideration under section 269UG(3) may arise even in the absence of rival claimants, including where the claimant is simultaneously challenging the acquisition provisions or the vesting order; in such a case, deposit with the Appropriate Authority is valid and revesting under section 269UH does not occur.

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