Facts of the Case

  • The Agreement: On November 19, 1995, the Petitioner (Avenue Realities and Developers Private Limited) entered into an agreement to purchase an immovable leasehold property (No. S-380, Panchsheel Park, New Delhi) from its owners (Respondents No. 3 to 5) for a total apparent sale consideration of Rs. 2.79 Crores.
  • Compulsory Acquisition Order: On February 29, 1996, the Respondent (Appropriate Authority of the Income Tax Department) exercised its pre-emptive rights and passed an acquisition/compulsory purchase order under Section 269 UD(1) of the Income Tax Act, 1961, overriding the private transaction.
  • Disbursement and Retention of Funds: Following the acquisition order, the Central Government disbursed the full apparent consideration in March 1996. The Petitioner (the intending purchaser) received and encashed a cheque of Rs. 42 Lakhs (refund of earnest money) on March 17, 1996. The sellers (Respondents No. 3 and 4) received and encashed Rs. 2.37 Crores on March 22, 1996. Both parties retained, used, and utilized these funds.
  • Filing of the Writ Petition: On May 21, 1996 (re-filed after objections on July 2, 1996), the Petitioner moved a Writ Petition under Article 226 of the Constitution of India challenging the validity of the compulsory purchase order.
  • Concealment: In the pleadings of the writ petition and subsequent rejoinders, the Petitioner completely concealed the fact that they and the sellers had already received, accepted, and encashed the full apparent sale consideration from the Central Government months prior to filing the suit. Interim stay against auctioning the property was obtained by the Petitioner on July 4, 1996, keeping the Government out of possession and out of pocket for over 15 years.

Issues Involved

  1. Whether the compulsory purchase order passed by the Appropriate Authority under Section 269 UD(1) was legally flawed due to a lack of explicit tax evasion allegations or incorrect fair market value calculations.
  2. Whether a petitioner is entitled to seek discretionary and equitable relief under Article 226 of the Constitution of India when they have deliberately suppressed and concealed material facts (the receipt and encashment of full sale consideration) from the Court.
  3. Whether a party can challenge the validity of an acquisition order after knowingly accepting, retaining, and utilizing the financial benefits/compensation arising out of that very order (the principles of Estoppel and Approbate and Reprobate).

Petitioner’s Arguments

  • Merits of Acquisition: The Petitioner argued that the order was void as there was no allegation of tax evasion or under-the-table transactions in the show-cause notice. They also claimed the Fair Market Value (FMV) was calculated wrongly because proper deductions were not given for factors like unmutated property, joint ownership, "sher mukha" shape, and conversion expenses.
  • Protest on Payment: During the final hearings, the counsel for the Petitioner orally claimed that the payment was accepted "under protest and without prejudice," though no administrative proof or dispatch delivery records of such letters could be produced from the files.
  • Statutory Violations: The Petitioner faintly alleged violations of Section 269 UG and Section 269 UH, asserting that the full apparent consideration was not paid within the statutory period due to outstanding disputes regarding DDA conversion charges and provisional unearned increases.
  • Pleading of Estoppel: It was argued that the Revenue Department could not raise the defense of estoppel or acquiescence because they had not formally incorporated this specific plea into their main counter-affidavit.

Respondent’s Arguments

  • Suppression of Facts: The Income Tax Department pointed out through their application for vacation of stay (CM No. 2208/1997) that the Petitioner approached the High Court with unclean hands by totally concealing the receipt and utilization of Rs. 42 Lakhs by themselves and Rs. 2.37 Crores by the sellers.
  • Contractual Bar: The Revenue relied on Clause 8 of the original Agreement to Sell, which explicitly stipulated that if the Appropriate Authority exercises its pre-emptive right to purchase, the earnest money of Rs. 42 Lakhs would be paid by the Authority to the Vendee (Petitioner), the balance to the vendors, and upon such payment, the Vendee would hold no surviving rights against the Vendors.
  • Government Loss: The Respondents emphasized that the Central Government had been kept out of pocket to the tune of Rs. 2.79 Crores since March 1996 while being completely restrained from utilizing, transferring, or auctioning the property due to the misleading interim stay obtained by the Petitioner.

Court Order / Findings

  • Dismissal on Conduct: The High Court declined to evaluate the technical merits of the property valuation or the acquisition order, holding that the writ petition deserved outright dismissal based entirely on the inequitable conduct, concealment, and lack of candid disclosure by the Petitioner.
  • Doctrine of Clean Hands: Relying on landmark apex court rulings like K.D. Sharma v. Steel Authority of India Ltd. and Prestige Lights Ltd. v. State Bank of India, the Court observed that writ jurisdiction under Article 226 is extraordinary, equitable, and discretionary. A litigant who deliberately suppresses vital material facts to secure an ex-parte or interim restraint order soils their hands and forfeits the right to be heard on merits.
  • Doctrine of Approbate and Reprobate: The Court ruled that the Petitioner cannot blow hot and cold (qui approbat non reprobat). A person who knowingly accepts and utilizes the fruits/benefits of an order or transaction is legally estopped from turning around and declaring that very order as void or illegal to secure further advantages.
  • Rejection of Statutory Defenses: The Court dismissed the Section 269 UG/UH arguments, finding that the exact consideration of Rs. 2.79 Crores cited in Form No. 37-1 was cleanly paid by the Government within time and enjoyed by the parties for over a decade. Consequently, the writ petition was dismissed with no order as to costs.

Important Clarification

  • Writ Jurisdiction vs. Civil Suits (Pleading Estoppel): The Court clarified that strict civil procedure rules regarding the mandatory inclusion of an "Estoppel" plea within the primary written statement (as seen in civil suits) do not restrict a writ court. Because the factual details of the payments were explicitly captured in the Revenue's interim stay-vacation applications, and because the Court itself gave ample opportunities to the Petitioner to address it during final arguments, the rule of equity and conduct could be fully invoked by the High Court to deny discretionary relief.

Sections Involved

  • Section 269 UC of the Income Tax Act, 1961 (Restrictions on transfer of immovable property / Filing of Form 37-1).
  • Section 269 UD(1) of the Income Tax Act, 1961 (Order by Appropriate Authority for preemptive/compulsory purchase of property by Central Government).
  • Section 269 UG & 269 UH of the Income Tax Act, 1961 (Payment/Deposit of consideration and vesting/re-vesting of property in owner upon default).
  • Article 226 of the Constitution of India (Power of High Courts to issue certain writs / Equitable Discretionary Jurisdiction).

Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2012:DHC:2205-DB/SKN29032012CW24891996.pdf

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