The Apex Court in RBANMS Educational Institution reaffirmed the principles enabling the use of Order 7 Rule 11 of the Code of civil Procedure,1908 and brought back to life section 269 ST of the Income Tax Act, 1961 and corresponding amendment of 271 DA of the Income Tax Act,1961. This article aims to provide a quick read for lawyers and litigants alike.
Brief Facts
RBANMS Educational Institution (“Appellant”) was established in the year 1873 as a public charitable trust, dedicated to serving first-generation learners from marginalized communities in urban Bangalore. In 1905, ‘the Sappers Practice Ground,’ (“Suit Property”) was leased to the Appellant. Subsequently, in 1929, this Suit Property was formally conveyed to the Appellant by the concerned municipal authority.
Since then, the Appellant has been in continuous possession of the Suit Property, utilizing it for various educational purposes including Pre-University Colleges, first-grade degree colleges, and sporting facilities serving both their institutions and the youth of Bangalore. .
Litigation
The inception of the present dispute arose from the filing of a suit for permanent injunction by Shri B. Gunashekhara and Anr. (“Respondents”) against the Appellants before the City Civil Court and Sessions Judge, Banglore (‘Trial Court”). By way of the said suit, Respondents (being the original Plaintiffs) sought to restrain the Appellant (being the original Defendant), from creating any third-party interests over the Suit Property. The Respondents set up their case based on the execution of an alleged Agreement To Sell with one Mr. Ramesh S Reddy and one Maheshwari Ranganathan qua the Suit Property for a sale consideration of INR 9,00,00,000 against which INR 75,00,000/- was claimed to be paid as advance in cash. The Appellant in due course took aid of Order 7 Rule 11, of the Code of Civil Procedure,1908 (“CPC”) for rejecting the plaint at the threshold on the ground that the Respondent are mere agreement holders and inter alia no right is created in the Suit Property. However, the Trial Court in its wisdom dismissed the Appellant’s application on 03.06.2020. Aggrieved by the Trial Court’s decision the Appellant approached the High Court of Karnataka (“High Court”) under Civil Revision as provided for under section 115 of CPC. Thereafter the High Court passed an order on 19.11.2020 partly allowing, while directing the Trial Court to reconsider the appellant’s application under Order 7 Rule 11 (a) & (d) of the CPC expeditiously. However, nothing fruitful resulted as the Trial Court on 11.06.2021 again dismissed the aforementioned application. For the second time the Appellant moved a Civil Revision Petition before the High Court, which was dismissed on 02.06.2022 (“Impugned Order”). The Impugned Order was assailed before the Hon’ble Supreme Court.
Substantive Aspect
The Apex Court dealt with the Impugned Order based on the contentions of the Appellant and the Respondent reaffirming the settled law on Order 7 Rule 11 (a) and (d) of the CPC along with the allied provisions provided for in the Transfer of Property Act, 1882, Specific Relief Act,1963 and the Registration Act, 1908 which are essentials of any property dispute under the Indian Law.
While the judgement is a treasure trove for any lawyer diving into civil litigation and property law. It is seen that an important line of thought has stemmed out from the Judgement, one which involves curbing black money. A crucial point to understand is that the Apex Court while examining the pleadings of the Respondents, albeit the source for the Apex Court taking cognizance of the rampant black money which still exists in the system.
The judgement leans into the legislative decisions of introducing Section 269 ST of the Income Tax Act,1961 wherein it has been laid out that no person shall receive an aggregate of INR 2,00,000/- from any person in respect of a single transaction or transactions relating to one event or occasions other than by way of a cheque or a bank draft. Further, the Apex Court took sharp notice of section 271 DA of the Income Tax Act,1961 i.e. the corresponding punitive provision which enables the implementation of section 269 ST of the Income Tac Act,1961. It allows the Joint Commissioner of Income Tax Department to impose penalty on any recipient who has received a sum of money in contravention to the Section 269ST of the Income Tax Act,1961. Provided that the recipient is able to prove that there were good and sufficient reasons for contravention.
The Hon’ble Supreme Court observed that even though legislative intent is visible no desired change has taken place. There is no onus on the person initiating the payment, which is evident from the present case. Keeping in view of the current scenario the Supreme Court issued the following directions:
- Whenever, a suit is filed with a claim that Rs. 2,00,000/- and above is paid by cash towards any transaction, the courts must intimate the same to the jurisdictional Income Tax Department to verify the transaction and the violation of Section 269ST of the Income Tax Act, if any,
- Whenever, any such information is received either from the court or otherwise, the Jurisdictional Income Tax authority shall take appropriate steps by following the due process in law,
- Whenever, a sum of Rs. 2,00,000/- and above is claimed to be paid by cash towards consideration for conveyance of any immovable property in a document presented for registration, the jurisdictional Sub-Registrar shall intimate the same to the jurisdictional Income Tax Authority who shall follow the due process in law before taking any action,
- Whenever, it comes to the knowledge of any Income Tax Authority that a sum of Rs. 2,00,000/- or above has been paid by way of consideration in any transaction relating to any immovable property from any other source or during the course of search or assessment proceedings, the failure of the registering authority shall be brought to the knowledge of the Chief Secretary of the State/UT for initiating appropriate disciplinary action against such officer who failed to intimate the transactions.
Analysis
The directions of the Hon’ble Supreme Court come as wakeup reminder for all those people who deal in significant cash transactions which are above INR 2,00,000/-. The objective of the said directions, places onus not only on the recipient, but also on the initiator/donor of any such cash transaction, which is in contradiction to Section 269 ST of the Income Tax Act, 1961. It appears that the implementation of the above mentioned directions will henceforth be an attempt to curb the practice of reducing the price consideration depicted while executing any instrument for transfer of immovable property, wherein stamping and registration is mandatory. Thereby, enabling the exchequer to receive its rightful dues.
Further, the Government’s constant fight against black money is aided by the present judgement. However, it would be important to note whether the above said directions give a free hand to the Revenue Authorities to harass the general public at large under the guise of the said directions or follow due process to serve the rightful purpose. Although, it is step towards curbing black money and increasing legitimate transactions, a close watch will have to be maintained whether there will be an influx or reduction of civil suits filed before the courts. As earlier the courts have recognised such considerations paid in cash while determining disputes related to ownership of properties.
Contributed by Amaya M. Nair.
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