Case: Sadanand S. Varde &amp; Others Vs. State of Maharashtra &amp; Others

Tax Act, 1961 would apply to a situation of sanction of an amalgamation scheme. The authorities entrusted with the administration of the statute (i.e. the Income Tax Act) also do not appear to have interpreted the provisions of Chapter XX-C to mean what is being contended now before us. By the principle of contemporanea expositio, the practical manner in which the provisions of Chapter XX-C have been interpreted over a considerably long period need not be upset by this Court, in our judgment. (See in this connection Raymond Synthetics Ltd. and others v. Union of India and others, A.I.R. 1992 S.C. 847 and N. Suresh Nathan and another v. Union of India and others, A.I.R. 1992 S.C. 564.(c) If this Court were to accept the contention of the petitioners and interpret the provisions of Chapter XX-C in the manner suggested by the petitioners, a large number of innocent persons who have been parties to amalgamation schemes would stand exposed to criminal prosecutions under section 276AB of the Income Tax Act. The Appropriate Authority has not placed any material before us that in any past case of sanction of an amalgamation scheme, they had insisted upon filing of a declaration in Form 37-I as required by the provisions of section 269BC, nor have they placed any material to show that any such parties have been subjected to criminal prosecutions under section 276AB for failure to do so.Thus, we are of the considered view that the contention of the petitioners, which was enthusiastically echoed by the fifth respondent, Appropriate Authority, that the transfer of the concerned land from the sixth to the ninth respondent under the scheme of amalgamation would be covered by the provisions of Chapter XX-C, though novel and ingenious, must be rejected.HISTORY OF LITIGATION114. Mr. Tulzapurkar, learned Counsel for the sixth and the ninth respondents, urged that the history of the litigation spanning about twenty long years covering several writ petitions and appeals from this Court to the Supreme Court, back and forth, the final decision of the Supreme Court in S.N. Raos case (supra) and the hanging sword of Damocles of this writ petition in which the petitioners have urged contentions after contentions, taken up by amendments after amendments, even though all contentions of petitioners were rejected at all stages by all courts, indicates that there is utter lack of bona fides on the part of the petitioners who claim to be pursuing this litigation in public interest. He also urged that, pursuant to the sanctioned plans, whose validity was upheld by the Supreme Court in S.N. Raos case (supra), the sixth and the ninth respondents have acted lawfully and in full compliance with all legal requirements and the applicable buildings Rules and Regulations. Obviously, this Court did not injunct the said respondents from continuing with the construction which started in 1984, despite repeated clamour for injunction orders by the petitioners. Perhaps being possessed with premonition that this writ petition has no substance, this Court merely made an order that the sixth and the ninth respondents may continue the construction at their risk upon filing an undertaking that they would claim no equities in the matter if the construction was allowed to continue. Mr. Tulzapurkar urges that the construction is complete and has resulted in a multistory seven star hotel, which was conceived off way back when the plans were submitted for sanction and there is no reason whatsoever to interfere with its functioning. On the other hand, he urges that the history of litigation from 1974 onwards, the repeated contentions and challenges in all available fora by the petitioners, contentions urged as to the applicability of Chapter XX-C of the Income Tax Act, 1961, taken together, suggest that there may be "something more than what meets the eye" as observed by the Supreme Court in Sachidanand Pandeys case (supra).115. There appears to be quite some legitimacy to the grievance made by the learned Counsel for the sixth and the ninth respondents. It appears to us that, what may have started as a bona fide Public Interest Litigation, soon degenerated into a case of private witch-hunting. If at all the petitioners were interested in pursuing the litigation as a Public Interest Litigation, after the observations of the Supreme Court in S.N. Raos case (supra), which we have reproduced above, the matter should have been put to rest. The annoying persistence with which the petitioners have pursued this writ petition certainly gives credence to the contention of the learned Counsel for the sixth and the ninth respondents that this writ petition was intended only as a PIL meaning Persecution Interest Litigation and not PIL meaning Public Interest Litigation.116. Though, this writ petition was seriously taken up for final hearing on 30th June 1998 and the hearing continued from 1st July 1998 to 5th August 1998 and the petition was finally reserved for judgment on 6th August 1998, the judgment could not be delivered earlier on account of several overriding reasons beyond our control. At one stage, following the dicta of the Supreme Court in (Bhagwandas Fatechand Daswani & others v. II P.A. International & others)42, J.T. 2000(1) S.C. 266, we even suggested to the parties and Counsel that we may treat this matter as not part-heard and set it down for re-hearing. However, we are glad to note that the parties and their Counsel reposed full faith in our ability to remember and decide the facts and the legal issues on the basis of our detailed notes supplemented by the efficient written submissions filed by the parties. At their request, we have decided the matter ourselves, though after a span of twenty two months. While regretting the unavoidable delay in delivering our judgment, we express our gratitude to the learned Counsel on both sides who have with consumable skill rendered invaluable help in unravelling several knotty and complicated legal issues. At the end of the day, in our considered judgment, the writ petition has no merit and must fail.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]Mr. Kalsekar, learned Counsel for the petitioners, urged that the sanctioning of the Development Plans is contrary to the provisions of the CRZ Notification dated 19th February, 1991. There are several limbs to the argument.33. The first limb urged is that the Bandra Fort, which is situated at the tip of peninsular piece of land called Bandra Lands End, is a heritage fort and would, therefore, appropriately fall withinand the Notification dated 19th February, 1991 which prescribes norms for regulation of building activities, substantially prohibits new constructions within 500 meters of High Tide Line except such of the construction activities as are listed in paragraph 2(xii). It is contended that the Bandra Lands End is an area of outstanding natural beauty/historical heritage falling withincategory. The petitioners place reliance on certain letters placed on record as Exhibits to the writ petition in support of this contention. In the letter dated 1st July, 1985 written by Shri Salim Ali, President, Bombay Natural History Society (Exhibit "D" to the Writ Petition), it is pointed out that the Bandra Lands End, where the concerned plot is situated, is a place of natural beauty and the construction of a hotel on the said plot would disturb the ecological balance and scenic beauty of the spot. Reliance is also placed on a letter dated 26th July, 1985 addressed by Dr. Rashmi Mayur, Director, Urban Development Institute (Exhibit "D2" to the Writ Petition). A letter written in the Indian Express by Dr. P.J. Deoras of the Society for Clean Environment dated 31st August, 1985 and the letter of Dr. Rashmi Mayur dated 26th July, 1985 are the letters in support of this contention. Reliance is also placed on the letter of the then Prime Minister of India, Smt. Indira Gandhi, addressed to Shri. V.P. Naik, the then Chief Minister of Maharashtra, on 15th July, 1974. On the basis of these letters, it is contended that the entire Bandra Lands End area including the concerned plot would fall withinis no doubt that the Bandra Fort as such is an area of historical/heritage value. In fact, the Bandra Fort has been declared to be such by a Notification dated 23rd April, 1984 issued under section 4(3) of the Maharashtra Ancient Monuments and Archaeological Sites and Remains Act, 1960 (hereinafter referred to as "MAMA Act"). This Notification describes the name of the monument as "Bandra Fort Remains and adjoining open land". There was some error in the description of the particulars contained in the Notification dated 23rd April 1984 which has now been corrected after Writ Petition No. 1403 of 1998 came to be filed by Enjay Hotels Limited and Another challenging the dimensions indicated in the Notification. An affidavit came to be filed in the said Writ Petition by the Director of Archaeology and Museums, Mumbai, who admitted that there was a patent error in the dimensions originally mentioned in the Notification in respect of the Bandra Fort area on 23rd April, 1984. The actual dimensions of the Bandra Fort were also indicated. Writ Petition No. 1403 of 1998 came to be disposed of as withdrawn when it was clearly demonstrated by the petitioners in the said Writ Petition, with reference to the facts, figures and maps, that the dimensions of the Bandra Fort and remains and open land specified in the Notification dated 23rd April, 1984 were inherently improbable and that there was an apparent error in the dimensions specified in the said Notification. In fact, the present first petitioner was the second respondent in the said Writ Petition No. 1403 of 1998 and he agreed with the contention of the petitioners in Writ Petition No. 1403 of 1998 as a result of which the first respondent, State of Maharashtra, in the said writ petition, was permitted to issue a corrigendum under section 39 of the MAMA Act to indicate the correct dimensions of the Bandra Fort and surrounding area which was declared as a protected monument under section 4(3) of the MAMA Act. The corrigendum Notification is dated 31st July, 1998 and correctly specifies the dimensions of the Bandra Fort remains and the surrounding area falling within the MAMA Act as notified under section 4(3) of the MAMA Act.Mr. Kalsekar then urged the third limb of the argument, that even if the plot fell withinwas not accepted, there could be no doubt that the concerned plot fell withind setting up of new activities and expansion of new industries is totally prohibited within the Coastal Regulation Zone under paragraph 2(i) of the Notification dated 19th February, 1991. It is contended that setting up of a five or more star hotel is an "industry" and as such would fall within the prohibition of the meaning of paragraph 2(i) of the Coastal Regulation Zone Notification dated 19th February 1991. Mr. Kalsekar placed reliance on certain judgments rendered under the provisions of the Industrial Disputes Act, 1947 holding that a hotel would be an "industry" within the meaning of section 2(j) of the Industrial Disputes Act, 1947.The Court had occasion to inspect the concerned plot, and the construction on it, during the course of which it was noticed that the construction on the concerned plot is such that a straight line drawn from the Bandra Fort to the Father Agnel Ashram, or one of the high rise buildings (all authorised constructions) would put the disputed construction on the landward side when reckoned from East side. Despite the dispute raised by the learned Counsel form the petitioners, during the site inspection we had recorded our site inspection notes dated 17th July, 1998 which forms part of the record of the case. We are, therefore, satisfied that the construction on the concerned plot falls on the landward side of a straight line drawn between two existing authorised constructions, reckoned from Eastern side. Thus, in our view, the construction carried out by the sixth and the ninth respondents on the concerned plot does not conflict with the restrictions imposed on constructions inareas and is perfectly consistent with the permitted development activity inarea. The Notification dated 9th July, 1997 provides that buildings shall be permitted only on the landward side of the existing authorised structures subject to existing local Town and Country Planning Regulations including the existing norms of Floor Space Index/Floor Area Ratio. The prohibition here is only on constructions on the seaward side of the existing road or existing structure. If there was any doubt as to the manner in which the construction had to be carried out, even on the landward side, this is clarified by a subsequent notification which provides that construction shall be permitted on the landward side of an imaginary line between the two authorised constructions drawn parallel to the High Tide Line. Looked at this way also, we find that the construction does not contravene thee is no material on record to show that the hotel constructed by the sixth and the ninth respondents discharges untreated wastes and effluents into the sea. As to the grievance against the Bombay Municipal Corporation Sewerage Purification Plant, the grievance has no substance since the Bombay Municipal Corporation Sewerage Purification Plant is intended to treat city wastes and effluents and render them innocuous before being discharged into the sea. Hence, we see no violation of(v) of Clause 2 of 1991 CRZ Notification.s (viii) and (xii) of Clause 2 of the said notification are intended to permit land reclamation for limited purposes and to permit construction activity between Low Tide Line and High Tide Line for carrying of treated effluents and wastes water discharges into the sea. In our view, the Bombay Municipal Corporation Sewerage Purification Plant and the proposed pipeline fall within the activity permitted by these clauses. In fact, by the Notification dated 9th July, 1997,(viii) has been completely substituted and the activity of construction of the Bombay Municipal Corporation Sewerage Purification Plant is wholly permitted thereunder.The petitioners contend that the construction of the hotel on the concerned plot contravences the ULCA exemption order dated 25th July, 1978 as it contravenes the conditions of user of the land and the restrictions and conditions imposed in the said order. One of the conditions of the order dated 25th July, 1978 made under section 20 of ULCA granting exemption specifically stipulated was that "no transfer by way of sale mortgage, gift, lease or otherwise" shall be made of the exempted land and that in case of violation of this condition, the exemption order was liable to be revoked. There was also a condition that the sixth respondent was to give an area of 7000 square yards free of cost to the Bombay Municipal Corporation for being maintained as a public park. The petitioners contend that the building of the hotel on the concerned plot violates both these conditions.In our view, this contention is no longer Res Integra for the petitioners to urge in the present writ petition. This contention, in terms, was argued and rejected by the Division Bench of this Court in Review Petition No. 8 of 1985 (Per Konda Madhava Reddy, C.J. and S.M. Daud, J.). The Division Bench rejected the contention by saying, "that some encroachments have been made thereon and some buildings have been constructed by others does not in any way militate against that land still being reserved under Approved Plan for development into a garden". This judgment of this Court was specifically challenged before the Supreme Court in S.N. Raos case (supra) and the challenge was rejected by the Supreme Court.It is also not possible to say that the State Government was not alive to the fact of the existence of hutments on portions of Revenue Survey No. 6 which was shown as reserved for garden. In fact, the record suggests that the State Government seriously considered the Bombay Municipal Corporations suggestion regarding deletion of reservation for garden from other plots bearing CTS Nos. 919 to 924, but accepted the suggestion of the Bombay Municipal Corporation with regard to CTS No. 922. In other words, the State Government maintained the reservation for garden in respect of all other areas even after due consideration of the fact that there were hutments on the said plot of land. We are, therefore, satisfied that the sanction granted by the State Government to the development plan was not vitiated on account ofof mind as contended. The contention must, therefore, fail for that reason also.There is overwhelming authority of precedents suggesting that when an amalgamation takes place, the transfer of assets takes place by the force of the Company Courts order and/or by operation of law; it ceases to be a contractual or a consensual transfer. The contention, therefore, is that Chapteris not attracted to such a transfer by operation of law. This contention has substance and needs to be upheld.It is alternatively contended by the Counsel for the sixth and the ninth respondents that sectionis not intended to apply to all types of transfers, but only to some particular types of transfers as there is no reference therein to a transfer consequent upon an amalgamation scheme. Hence, it is contended that a transfer consequent upon amalgamation falls outside the sweep of sectionIn order to drive home this point, the learned Counsel drew our attention to section 2(1B) of the Income Tax Act, 1961 which defines the expression "amalgamation". Sections 45 and 47 of the Income Tax Act which deal with capital gains arising upon a transfer of a capital asset, expressly exclude a situation of amalgamation for the purposes of capital gains. Similarly, section 45 of the Gift Tax Act, 1958 provides that no gift tax will be leviable in a situation of amalgamation. The term "amalgamation" under the provisions of Gifts Tax Act has the same meaning as in section 2(1B) of the Income Tax Act. It is, therefore, contended that, in an amalgamation, there is neither any sale, nor any exchange of any immovable property, nor any lease thereof. See in this connection (Commissioner of Income Tax v. Rasiklal Manecklal HUF)31, A.I.R. 1989 S.C. 1333.98. It is true that in a case of amalgamation there is a share exchange ratio prescribed according to which the shareholders of the transferor company would be entitled to the shares of the transferee company. This, however, does not make it a situation of exchange of immovable property, or relinquishment of any right to immovable property so as to make the transaction amenable to sectionof the Income Tax Act. There is neither sale nor purchase in a case of amalgamation. Section 54 of the Transfer of Property Act defines "sale" as a transfer of ownership in exchange for a price, "price" being defined in section 2(10) of the Sale of Goods Act as any consideration paid for sale of the goods. In (CIT v. Motors and General Stores Pvt. Ltd.)32, 66 ITR 692  , it was pointed out by the Supreme Court that the presence of money consideration is an essential element of a transaction of sale. Tested by this yardstick, it would appear that in an amalgamation no consideration in any formmuch less in the form of moneyflows from the transferee company to the transferor company, which was the erstwhile owner of the assets. The shares are issued by the transferee company, not to the transferor company, but to the shareholders of the transferee company, who must necessarily be treated as distinct from the transferor company itself. The shareholders of the transferor company could not be deemed in law to be the owners of the assets of the transferee company, nor can they be said to have held any interest in the assets of the transferee company. See in this connection (Bacha Guzdar v. Commissioner of Income Tax)33, A.I.R. 1955 S.C. 74. Right from the time of Solomons case, a company has always been treated as a separate and distinct juristic person with a personality of its own different from that of its shareholders. No shareholder can legitimately claim to have an interest in any of the properties or assets held by the company. The judgment of the Supreme Court in (AccountantSecretarial Services Pvt. Ltd. v. Union of India)34, A.I.R. 1988 S.C. 1708, was pressed into service to contend that a bank constituted under the Banking Companies (Acquisition and Transfer of Undertaking) Act, 1970, though materially controlled by the Central Government, has a distinct personality of its own and its property cannot be said to be the property of the Union of India. Hence, it is contended that by the act of amalgamation, there was no sale of any assets by the transferor company (sixth respondent) to the transferee company (ninth respondent) in the amalgamation. Thus, it is urged that there being no sale or exchange or lease of immovable property in the case of amalgamation, the transfer of the assets of the sixth respondent to the ninth respondent does not fall within the ambit of Chapterof the Income Tax Act, 1961.The conclusions which we have arrived at on statutory interpretation, also appear backed by the following practical considerations:(a) It is significant that the Appropriate Authority has not bothered to take action under section 276ABof the Income Tax Act, 1961.Nor has it initiated any other action in connection with the aforesaid transfer for over such a long period ofWe can take judicial notice that several schemes of transfer are sanctioned every day by the Company Judge and no one seems to have seriously suggested, argued or held that Chapterof the Income Tax Act, 1961 would apply to a situation of sanction of an amalgamation scheme. The authorities entrusted with the administration of the statute (i.e. the Income Tax Act) also do not appear to have interpreted the provisions of Chapterto mean what is being contended now before us. By the principle of contemporanea expositio, the practical manner in which the provisions of Chapterhave been interpreted over a considerably long period need not be upset by this Court, in our judgment. (See in this connection Raymond Synthetics Ltd. and others v. Union of India and others, A.I.R. 1992 S.C. 847 and N. Suresh Nathan and another v. Union of India and others, A.I.R. 1992 S.C. 564.(c) If this Court were to accept the contention of the petitioners and interpret the provisions of Chapterin the manner suggested by the petitioners, a large number of innocent persons who have been parties to amalgamation schemes would stand exposed to criminal prosecutions under section 276AB of the Income Tax Act. The Appropriate Authority has not placed any material before us that in any past case of sanction of an amalgamation scheme, they had insisted upon filing of a declaration in Formas required by the provisions of section 269BC, nor have they placed any material to show that any such parties have been subjected to criminal prosecutions under section 276AB for failure to do so.Thus, we are of the considered view that the contention of the petitioners, which was enthusiastically echoed by the fifth respondent, Appropriate Authority, that the transfer of the concerned land from the sixth to the ninth respondent under the scheme of amalgamation would be covered by the provisions of Chapterthough novel and ingenious, must be rejected.There appears to be quite some legitimacy to the grievance made by the learned Counsel for the sixth and the ninth respondents. It appears to us that, what may have started as a bona fide Public Interest Litigation, soon degenerated into a case of privateIf at all the petitioners were interested in pursuing the litigation as a Public Interest Litigation, after the observations of the Supreme Court in S.N. Raos case (supra), which we have reproduced above, the matter should have been put to rest. The annoying persistence with which the petitioners have pursued this writ petition certainly gives credence to the contention of the learned Counsel for the sixth and the ninth respondents that this writ petition was intended only as a PIL meaning Persecution Interest Litigation and not PIL meaning Public Interest Litigation.116. Though, this writ petition was seriously taken up for final hearing on 30th June 1998 and the hearing continued from 1st July 1998 to 5th August 1998 and the petition was finally reserved for judgment on 6th August 1998, the judgment could not be delivered earlier on account of several overriding reasons beyond our control. At one stage, following the dicta of the Supreme Court in (Bhagwandas Fatechand Daswaniothers v. II P.A. Internationalothers)42, J.T. 2000(1) S.C. 266, we even suggested to the parties and Counsel that we may treat this matter as notand set it down forHowever, we are glad to note that the parties and their Counsel reposed full faith in our ability to remember and decide the facts and the legal issues on the basis of our detailed notes supplemented by the efficient written submissions filed by the parties. At their request, we have decided the matter ourselves, though after a span of twenty two months. While regretting the unavoidable delay in delivering our judgment, we express our gratitude to the learned Counsel on both sides who have with consumable skill rendered invaluable help in unravelling several knotty and complicated legal issues. At the end of the day, in our considered judgment, the writ petition has no merit and must fail.