PRIMA REALTYversusUNION OF INDIA AND ORS.

                           PRIMA REALTY                                     A
                                   V.
                    UNION OF INDIA AND ORS.

                        NOVEMBER 18, 1996

                [J.S. VERMA AND B.N. KIRPAL, JJ.]                           B

    Income Tax Act, I961 : Sections 269-UD (1), 269-UE (I}, 269-
UG(l) and 269-UH (1).

      Income Tax-Immovable property-Compulsory purchase a/-
Payment of consideration-By cheque-Misdescription of name of payee          C
in cheque-Failure to correct some within prescribed statutory time-limit-
Ejfect of-Held: Misdescription ofname amounted to description ofanother
legal entity-Hence, order ofpurchase stood abrogated and property got
revested in transferors-Income Tax Rules, I962, R48-L and Form 37.

      Income Tax-Immovable property-Compulsory purchase a/-
                                                                            D
Payment ofconsideration-By cheque-Statutory time-limit-Computation
of-Payee neither indicated mode ofpayment nor appeared personally to
receive cheque-Hence cheque dispatched to payee by post on last date of
statutory time-limit-Payee received cheque on some later date-Held: It
was reasonable to assume that payment of a large amount would be made E
by cheque and sent by post-Post office was agent ofpayee for purpose of
receiving payment-Hence, though the cheque was received by payee on
some later date it amounted to payment within prescribed period ofstatutory
time-limit.

      Income Tax-Immovable property-Compulsory purchase of-                 F
payment of consideration-Made by cheque-Short-fall in payment to
transferee-Though entire consideration was made collectively to persons
entitled to receive payment-Held: Adjustment of exact amount due to
each person was an internal arrangement-Hence, such short-fall in
payment by itself would not vitiate order of purchase.
                                                                            G
     An agreement for sale of the right, title and interest of the
respondents~transferors in respect of a property was made in favour
of the appellant-transferee. The appellant-transferee was described
as "Prima Realty, Partnership Firm". A statement in statutory form
No. 37-1 as required by Section 269-UG(l) and (3) of the Income Tax         H
                                 665
    666                   SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.


A Act, 1961 read with Rule 48L of the Income Tax Rules, 1962 duly
  signed by all the parties to the agreement was filed with the
  appropriate authority giving details of the persons " interested in
  consideration". As required by the proviso to Section 269-UD(I) of
  the Act the purchase order had to be made within a period of3 months
  from the date of filing of the agreement. After a show cause notice
B under Section 269-UD(l-A) of the Act to the persons concerned, the
  order of purchase was passed under Section 269-UD(I) of the Act
  acquiring the property and determining the apparent consideration
  payable by the Central Government. The purchase order correctly
  recorded the date on which the payment was required to be made by
  the Central Government under the Act. The cheque in favour of
C appellant-transferee was drawn in the name of "Prime Realty Ltd."
  instead of Prima Realty, Partnership Firm". This cheque was sent by
  speed post on the required date of payment and was delivered to the
  appellant-transferee only on the next day. However, there was a short-
  fall in the amount tendered to the appellant-transferee. Subsequently,
  the appellant-transferee returned the cheque with a covering letter
D to the appropriate authority contending that the purchase order stood
  abrogated on account of non-compliance with Section 269-UG(I) of
  the Act. The appellant-transferee then filed a writ petition before
  the High Court for quashing the compulsory purchase order, and it
  was dismissed. Being aggrieved the appellant-transferee preferred the
E present appeal.
          On behalf of the appellant-transferee it was contended that the
    tender of the amount of consideration was not as required by Section
    269-UH(I) of the Act and, therefore, there was revesting of the
    property in the transferors in accordance with Section 269-UD(I);
F   that the cheque was not a valid tender since the description of the
    payee in the cheque was of a different legal entity, i.e., a limited
    company otbe.r than the partnership firm which was the correct
    description of the appellant; that the cheque was sent by post and
    since the post office could not be deemed to be the agent of the
G   addressee and mere posting of the cheque on the last date for payment
    of consideration under Section 269-UG(I) of the Act would not operate
    as the delivery of cheque to the addressee and, therefore, the tender
    of the consideration was not a valid one; and that the purchase order
    made under Section 269-UD(I) must be quashed.

H         Allowing the appeal, this Court
                 PRIMA REALTY v. UNION OF INDIA                      667

      HELD : I.I. The appellant-transferee is a partnership firm with A
the name "Prima Realty" but the cheque described the payee as "Prime
Realty Ltd." which referred to a different legal entity, a limited
company instead of a firm. The tender of the cheque could not,
therefore, be treated as tender to the appellant-transferee. It was
reasonable to assume that the cheque would not be honoured by the
banker to credit the amount of that cheque to the account of the 8
appellant since it could relate to another legal entity, a limited
company. In such a situation the appellants were justified in taking
the view that the cheque was not meant for them, and they could not
lawfully require the bank to deposit the amount of the cheque in
their account. There was, thus, clear non-compliance of the
requirement of Section 269-UG(I) of the Act. The consequence C
envisaged by Section 269-UH of the Act ensued. 1674-E-G]

     1.2. Although the Central Government sent a corrected cheque
in the name of "Prima Realty", the same was admittedly of no
consequence. [671-B]
                                                                            D
      1.3. Accordingly, the order made under Section 269-UD(I) of the
Act by the appropriate authority stood abrogated and the property
was revesteil in the transferors in terms of Section 269-UH(I) of the Act
with the other consequential results including those specified in Section
269-UH(2) and Section 269-UD(3) of the Act. In view of the fact that        E
the cheque for the amount has not been encashed, the remaining
amount has become refundable to the Central Government, which
would be refunded by the appellants with interests @12% per annum
from the date due till the date of payment. (674-H, 675-ABI

     Davies v. Elsby Brothers Ltd., (1960) 3 All. E.R. 672, referred to.    F

      2. According to the ordinary course of business usage the only
reasonable and proper inference is that the payment of a large amount
would be made by cheque issued by the Central Government and
unless the payee went to collect the cheque personally, the cheque          G
had to be sent by post to the payee. According to this implied term,
it must be assumed that unless the cheque was collected personally by
the payee it would he sent by post thereby constituting the post office
as the agent of the payee for the purpose of receiving the payment.
In the present case the payee did not indicate the mode of payment to
them inspite of a letter received by them to indicate the mode of           H
    668                    SUPREME COURT REPORTS [J 996] SUPP. 8 S.C.R.


A payment. The appellant did not even choose to replf to that letter.
    In these circumstances it was reasonable for the concerned authority
    to have waited for the cheque to be collected personally by the payee
    till the last date and to have dispatched it by post on that day when
    no one came to collect the cheque personally from the authority. In
    such a situation, payment by cheque dispatched by post amounted to
B   tender of the payment to the payee on that date itself when the cheque
    was put in the course of transmission through post so as to be beyond
    the control of the sender from the time of its dispatch by post.
                                                          [672-EH, 673-Af

          CIT, Bihar v. Mis. Patney & Co., [1959) Supp. 2 SCR 868 and
C Shri Jagdish Mills Lid. v. CIT, [19601 I SCR 236, relied on.
         3. The payment of the entire consideration due under the
    purchase order was made collectively to the persons entitled to receive
    the payment even though there was some difference in the amount
    tendered to the appellant-transferee. The adjustment of the exact
D   amount due to each, between the several persons who had to share
    the total amount of consideration was an internal arrangement
    between them, and this by itself would not vitiate the tender of t!te
    amount of consideration and order of purchase as required by Section
    269-UG(I) of the Act. [673-CD]      .

E         CIVILAPPELLA TE JURISDICTION: Civil Appeal No. I4554ofl 996.

         From the Judgment and Order dated 15.12.95 of the Bombay High
    Court in W.P. No. 1106 of 1995.

         F.S. Nariman, Subhas Sharma, P.H. Parekh, Jay Munim and
F   Ms. Sunita Sharma for the Appellant.

        Dr. R.R. Mishra, Ranbir Chandra, B.K. Prasad, S.N. Terdol and
    Mukul Mudgal for the Respondents.

G         The Judgment of the Court was delivered by

          J.S. VERMA, J.: This appeal by special leave is against the judgment
    dated December 15, 1995 by which the appellant's writ petition challenging
    the compulsory purchase order dated April 26, 1995 made by the appropriate
    authority under Section 269 UD(I) of the Income Tax Act, 1961 (for
H   short "The Act") has been dismissed. Jn short, the challenge is on the
                   PRJMA REAL TY v. UNION OF INDIA                           669


ground that the compulsory purchase order stood abrogated under Section              A
269 UH (I) of the Act in view of the failure of the Central Government to
tender under Section 269 UG (I) the amount of consideration required to
be tendered within the period specified therein in respect of the immovable
property which had vested in the Central Government under Section 269
UE (I) of the Act
                                                                                     B
       The material facts are these. An agreement for sale of the right, title
and interest of Respondents 6 to 12 and one Dr. V.S.J. Rao (in all eight
transferers) was made on 13.1. 1995 in favour of the appellant 'Prima
Realty' in respect of a property at Chembur in Bombay for an aggregate
sum of Rs. 3,60,00,000 (Rupees three crores and sixty lakhs), Out of the
total sale consideration, a sum of Rs. 3,30,00,000 was to be paid in cash,           C
i.e., by pay orders/demand drafts payable in instalments over a period of
approximately 24 months and the remaining amount of Rs.30,00,000 was
to be paid towards the cost of reconstruction of the bungalow occupied by
Dr. Rao and his family in that property. A statement in statutory form No.
37-l as required by Section 269 UC(!) and (3) read with Rule 48L duly
signed by all parties to the agreement was filed with the appropriate authority      D
on January 30, l 995 giving details of the persons ·'interested in
consideration". As required by the proviso to Section 269 UD(l) the
purchase order had to be made on or before April 30, l 995. Show cause
notice was issued under Section 269 UD (IA) addressed to respondents 6
to 12 and Dr. V.S.J. Rao (the transfer.ors) and to the appellant (the transferee).
The appellant/transferee was described in this notice as "Prima Realty,              E
Partnership Firm". On April 13, 1995 Dr:V.S.J. Rao expired and was
survived by respondents 13 to 16 as the legal heirs. Show-cause notices
were then issued by the appropriate authority to the legal heirs of Dr. Rao.
On April 26, 1995 the compulsory purch.ase order was passed by the
appropriate authority under Section 269 UD(l) of the Act acquiring the
property and determining the apparent consideration payable by the Central           F
Government at Rs. 3,58,84,384 (Rupees three crores.fifty eight lakhs eighty
four thousand three hundred and eighty four only). The purchase order
correctly records that the sum of Rs. 3,58,84,384 has been arrived at,
taking into account the discounted value of the sum of Rs. 3,30,00,000
with reference to the date on which the payment was required to be made              G
by the Central Government under the Act, i.e., on or before May 31, 1995
which works out exactly to Rs. 3,28,84,384 (Rupees three crores twenty
eight lakhs eighty four thousand three hundred and eighty four only).
Thus adding the additional consideration of Rs. 30 lakhs (towards the cost
of construction of the new bungalow) the total consideration payable by
the Central Government was Rs. 3,28,84,384 plus Rs. 30 lakhs amounting               H
    670                      SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.


A in all to Rs. 3,58,84,384. The purchase order also correctly described the
    appellant/transferee as "Prima Realty, partnership firm .... ". On April 29,
    1995 a letter in the standard form was addressed by the appropriate authority
    to the transferors and the transferee requesting them for various documents
    and papers retating to the property; and the letter to the appellant/transferee
    was addressed correctly as "Prima Realty, partner".
B
         Section 269 UG( 1) requires that the amount of consideration payable
  in accordance with the provisions of Section 269 UF shall be tendered to
  the person or persons entitled thereto within a period of one month from
  the end of the month in which the immovable property concerned becomes
  vested in the Central Government under Sub-section (1), or, as the case
C may be, Sub-section (6) of Section 269 UE. In the present case, the
  purchase order having been made on April 26, 1995 the property concerned
  became vested in the Central Government under Sub-section ( 1) of Section
  269 UE on the date of that order. The amount of consideration, namely,
  Rs. 3,58,84,384 became payable and was required to be tendered to the
  person or persons entitled thereto under Section 269 UG( 1), within a period .
D of one month from the end of the month of April I 995, i.e., on or before
   May 31, 1995. The persons entitled to the payment of the amount of
  consideration were the transferors/respondents 6 to 12 and the legal heirs
   of Dr. V.S. J. Rao and the transferee/appellant to the extent of their shares
   in the consideration. The appellant/transferee became entitled to the sum
E of Rs. 66 lakhs which had been paid by them as earnest money to the
   transferors; and transferors were entitled tb the remaining amount to the
   extent of their shares therein, the details of which were given in the
   statutory form No. 37-I filed with the appropriate authority. The
   dispute relates to the compliance of this requirement under Section 269
   TJG(I) of the Act.
F
        On May 31, 1995 the Central Government issued nine cheques, all
  dated May 31, I 995 drawn on the State Bank of India in J'Qvour of
  respondents 6 to 12, Dr. V.S.J. Rao's heirs and the appellant/transferee
  aggregating Rs. 3,58,84,384. The cheque in favour of the appellant was
G for Rs. 60 lakhs only, instead of Rs. 66 lakhs and was drawn in favour of
  "Prime Reality Ltd." instead of' Prima Realty, partnership firm". This
  cheque was sent by speed post on May 31, 1995 and was delivered to the
  appellant only on June l, 1995. On June 19, 1995 the appellant returned
  the cheque dated May 31, 1995 for Rs. 60 lakhs with a covering letter to
  the appropriate authority contending thatthe purchase order stood abrogated
H on account of non-compliance with Section 269 UG(I). On June 21,
                   PRIMA REAL TY v. UNION OF INDIA                        67I


1995 the appellant filed the Writ Petition No. l l 06 of 1995 in the Bombay       A
High Court for quashing the compulsory purchase order.

      Thereafter on June 22, 1995 the Central Government sent a corrected
cheque for Rs. 60 lakhs in the name of"Prima Realty" which is admittedly
of no consequence, ifthe consequence ofre-vesting of the property in the
transferors on the failure of payment of consideration within the prescribed      B
period has ensued by virtue of Section 269Uh (I). However, the Division
Bench of the Bombay High Court dismissed the writ petition. Hence this
appeal by special leave.

      Shri F. S. Nariman, learned counsel for the appellant advanced several
arguments but his main contention is that the tender of the amount of             C
consideration was not as required by Section 269 UG(l) and, therefore,
there was re-vesting of the property in the transferors in accordance with
Section 269 Uh( l ). On this basis it was contended that the purchase order
dated April 26, 1995 made under Section 269 UD(l) must be quashed and
consequential reliefs flowing from the re-vesting of the property in the          D
transferors under Section 269 UH, must be granted.

      Before we deal with the main contention, we may mention the other
points urged by Shri Nariman in which we find no merit.

      lt was; urged by Shri Nariman that the tender of the consideration          E
was made only on June I, I 995 when the cheque was delivered by post to
the applellant even though it was dispatched on May 3 I, I 995 because the
post office could not be deemed to be the agent of the addressee and mere
posting of the cheque on May 3 I, I 995 would not operate as the delivery
of cheque to the addressee. He argued that the appellant at no time made
any request for the consideration to be sent by post and, therefore, the post     F
office would not become the agent of the addressee.

      The law on the point is settled by the decisions of this Court. In
Commissioner of Income-tax, Bihar & Orissa v. Mis Patney & Co., [1959]
Suppl. 2 SCR 868, it was held that "If it is shown that the creditor authorised   G
the debtor either expressly or impliedly to send a cheque by post the property
in the cheque passes to the creditor as soon as it is posted. Therefore, the
post office is an agent of the person to whom the cheque is posted if there
by any express or implied authority to send it by post." In Shri Jagdish
Mills Ltd. v. The Commissioner of Income-tax, [1960] I SCR 236, it was
held as under.                                                                    H
    672                     SUPREMECOURTREPORTS [1996] SUPP. 8 S.C.R.


A                " .......... The stipulation in the contract between the appellant
                 and the Government was that the payment would be made
                 by cheques. The Government of India was located in Delhi
                 and the cheques would be necessarily drawn by it from Delhi.
                 Could it be imagined that in the normal course of affairs the
                 cheques thus drawn in Delhi would be sent by a messenger
B                to Baroda so that they may be delivered to the appellant in
                 Baroda? Or that the officer concerned would come to Baroda
                 himself and hand the same over to the appellant in Baroda?
                 The only reasonable and proper way of dealing with the
                 situation was that the payment would be made by cheques
                 which the Government would send to the appellant at Baroda
                 by post. According to the course of business usage in general
c                which appears to have .been followed in this case, the parties
                 must have intended that the cheques should be sent by post
                 which is the usual and normal agency for transmission of
                 such articles. If that were so, there was imported by necessary
                  implication an implied request by the appellant to send the
                 cheques by post from Delhi thus constituting the Post Office
D
                  its agent for the purposes of receiving those payments."

                                                                       (pag~ 247)


          Admittedly, there was no express stipulation of the mode of payment
E of the consideration or that the cheque would be sent by post. However,
  according to the ordinary course of business usage the only reasonable and
  proper ;nference is that the payment of such large amount would be made
  by cheque issued by the central Government and unless the payee went to
  collect the cheque personally, the cheque had to be sent by post to the
F payee. According to this implied term, it must be assumed that unless the
  cheque was collected personally by the payee it would be sent by post
  thereby constituting the post office as the agent of the payee for the purpose
  of receiving the payment. lil the present case the payees did not indicate
  the mode of payment to them inspite of a letter received by them to indicate
  the mode of payment. The appellant did not even choose to reply to that
G letter. In these circumstances it was reasonable for the concerned authority
  to have waited for the cheque to be collected personally by the payee till
  the last date, i.e., May 31, 1995 and to have dispatched it by post on that
  day when no one came to collect the cheque personally from the authority.
  In such a situation, payment by cheque dispatched by post on May 31,
   1995 amounted to tender of the payment to the payee on may 31, I 995
H itself when the cheque was put in the course of transmission through post
                      PRJMA REALTY v. UNION OF INDIA                         673


    so as to be beyond the control of the sender from the time of its dispatch       A
•   by post. This contention has no merit.

          The next contention of Shri Nariman is that the exact amount required
    to be paid to the appellant was the sum of Rs. 66 lakhs and not Rs. 60
    lakhs for which the cheque was sent on May 31, 1995 since the total
    amount paid as earnest money by the appellant was Rs. 66 lakhs. In the           B
    facts of the present case we do not find any merit even in this contention.
    There is no dispute that the total amount of Rs. 3,58,84,384 inclusive of
    Rs. 60 lakhs sent to the appellant/transferee was tendered by cheque by the
    concerned authority collectively to the persons entitled to the payment.
    The payment of the entire consideration due under the purchase order
    was, therefore, made collectively to the persons entitled to receive the         C
    payment even though there was some difference in the amount tendered to
    the appellant/transferee. The adjustment of the exact amount due to each,
    between the several persons who had to share the total amount of
    consideration was an internal arrangement between them, and this by itself
    would not vitiate the tender of the amount of consideration as required by
    Section 269 UG (!).This contention also fails.                                   D

          The question now is of the effect of the description of the payee in
    the cheque for the sum of Rs. 60 lakhs which was sent to the appellant on
    May 31, 1995. In the cheque, the payee was described as "Mis Prime
    Realty Ltd. "The question is : whether this can be treated as a valid tender     E
    of the amount to the appellant?

          The contention of Shri Nariman is that it was not a valid tender to
    the appellant since the description of the payee in the cheque was of a
    different legal entity, i.e., a limited company other than the partnership
    firm which is the correct description of the appellant. The point for            F
    consideration is : whether the description of the payee in the cheque was
    of a legal entity distinct fr0m, and other than the appellant. If it be so, as
    contended by Shri Nariman, it was not a valid tender to the appellant/
    transferee. The result would be a deficiency in tender of the amount of
    consideration to this extent and, therefore, non-compliance of Section           G
    269 UG (I) resulting in the consequences provided in Section 269 UH.

          Admittedly the correct description of the appellant/transferee is
    "Prima Realty" which is a partnership firm. It is settled that the firm
    name is a compendious mode of describing the partners collectively; and
    a limited company, by itself a legal entity, is a distinct person or legal H
    674                     SUPREME COURT REPORTS [1996] SUPP. 8 S.C.R.


A entity. The description of the payee in the cheque was ofa limited company
    named as "Prime Reality" and not even "Prima Realty" which is the firm
    name of the appellant's partnership firm. Does it describe the appellant as
    the payee?

          In Davies v. £/shy Brothers, Ltd, (1960) 3 All E.R. 672 at 676,
B Devlin, L.J. indicated the test for deciding whether a misdescription of
    this kind is merely a misnomer or the description of a different person or
    legal entity. The test is :

                 " ...... "I cannot tell from the document itself whether they
                 mean me or not and I shall have to make inquiries", then it
c                seems to me that one is getting beyond the realm of misnomer.
                 One of the factors which must operate on the mind of the
                 recipient of a document, and which operates in this case, is
                 whether there is or is not another entity to whom the
                 description on the writ might refer."

D         In that decision amendment was sought to change the defendant from
    'EB (a firm)' to 'EB (Ltd.)' and it was held that these were two different
    entities, the firm and the company; and therefore, it was not a case of
    mere amendment to correct the misnomer but one of substitution by one
    entity for another. The position in the present case is similar.
E
        The appellant/transferee is a partnership firm with the name "Prima
  Realty" ~ut the cheque described the payee as "Prime Reality Ltd" which
  referred to a different legal entity, a limited company instead of a firm.
  The tender of the cheque could not, therefore, be treated as tender to the
  appellant. It was reasonable to assume that the cheque would not be
F honoured by the banker to credit the amount of that cheque to the account
  of the appellant since it could relate to another legal entity, a limited
  company. ·In such a situation the appellants were justified in taking the ·
  view that the cheque was not meant for them, and they could not lawfully
  require the bank to deposit the amount of the cheque in their account. The
G result is that the tender of the amount of consideration was short to the
  extent of Rs. 60 lakhs for which amount this cheque was made. There
  was, thus, clear non-compliance of the requirement of Section 269 UG
  (I) of the Act. The consequence envisaged by Section 269 UH of the Act
  ensued.

H         Accordingly, the order dated April 24, 1995 made under Section
                  PRIMA REALTY v. UNION OF INDIA                       675

269 UD(l) by the appropriate authority stood abrogated and the property        A
was revested in the transferors in tenns of Sub-section (I) of Section 269
UH of the Act with the other consequential results including those specified
in Sub-section (2) of Section 269 UH and Sub-section (3) of Section 269
UD. It is not necessary to detail all the consequences which follow as a
result thereof, in terms of the Income-truc Act, 1961 and any other laws
which.may be applicable. In view of the tact that the cheque for the amount    B
of Rs. 60 lakhs has not been encashed, the remaining amount of Rs.
2,98,84,384 has become refundable to the Central Government as on June
I, 1995, which would be refunded by the appellants with interest@ 12%
per annum from June 1, 1995 till the date of payment. It is directed
accordingly. All the consequences in accordance with law including the
requirement of execution of the conveyance in favour of the appellants         C
follow as already indicated.

      This appeal is allowed in the manner indicated. No costs.

v.s.s.                                                    Appeal allowed.