TaxTMI 
TaxTMI 
1996 (9) TMI 2
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.... The appellant--a private limited company--is a tenant on the ground floor of a building situate on the Mount Road (now called Anna Salai), Madras. On March 30, 1989, the owner of the building entered into an agreement with another person for sale of the building, for a sum of Rs. 26 lakhs. The appropriate authority, constituted under Chapter XX-C of the Act, on coming to know of the aforesaid agreement initiated proceedings, in exercise of its powers under the said Chapter for purchase of the building. He ordered the building to be purchased by the Central Government for the same consideration as shown in the agreement in accordance with section 269UD of the Act. The appropriate authority then issued a communication to the appellant inf....
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.... as the Constitution Bench of this court in C. B. Gautam v. Union of India [1993] 199 ITR 530, has struck down the expression " free from all encumbrances " in sub-section (1) of section 269UE, what was vested with the Central Government is only the right of the erstwhile owner of the building without affecting the leasehold right of the appellant. The second is that the appellant's right in the building has been protected by the Tamil Nadu Buildings (Lease and Rent Control) Act, 1960 (for short, " the T. N. Act "), and as such his statutory right cannot be by-passed through the vesting process. The Division Bench of the Madras High Court repelled both contentions. The learned judges pointed out that the transferor has stipulated in the ....
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....he result that the property in question would vest in the Central Government subject to such encumbrances and leasehold interests as are subsisting thereon except for such of them as are agreed to be discharged by the vendor before the sale is completed." However, the Bench approved the distinction that in case the agreement for sale contains the stipulation to the effect that the property would be sold free from all encumbrances or certain encumbrances then the vesting in the Central Government would be free from such encumbrances. The following passage in the judgment makes the position clear (at page 559 of 199 ITR) : " As we have stated earlier, where an agreement for sale provides that the property is intended to be sold free of ....
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....ver vacant possession even though vacant possession could not be delivered having regard to the fact that the premises were in the occupation of a bona fide tenant." The Karnataka High Court concluded that : " on the facts and circumstances set out above, in so far as the tenant is concerned, the term of the sale agreement providing for delivery of vacant possession should be read down as only providing for delivery of vacant possession of the remaining portions of the premises. . . ." The said view of the learned single judge of the Karnataka High Court is not in consonance with the reasoning of this court in C. B. Gautam's case [1993] 199 ITR 530. The position has been clearly stated by this court in the judgment as follows (at page 56....
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....right is a very limited one. If the agreement to sell does not provide for vacant possession or the determination of monthly tenancies, such tenancies would continue even on an order for purchase by the Central Government being made by the appropriate authority concerned under section 269UD(1) ; but such tenants would lose the protection given to tenants under the rent protection laws because such laws are not made applicable to properties owned by the Central Government with the result that their tenancies could be terminated by the Central Government." (emphasis supplied). Learned counsel for the appellant, however, contended that the T. N. Act applies even to buildings owned by the Central Government and hence the aforesaid observatio....