Supreme Court Upholds Review of Order in Property Dispute Case: Sunil Vasudeva vs. Sundar Gupta (2 July 2019)

Introduction

Date of the Judgment: 2 July 2019

The Supreme Court of India, in this civil appeal, addressed a critical question regarding the review jurisdiction of the High Court. The core issue revolves around a property dispute that has spanned decades, involving a contested auction sale and subsequent legal challenges. Can a High Court recall its own order and restore a writ petition for a fresh hearing? This judgment clarifies the scope of review jurisdiction and its application in complex property disputes.

The case involves a property in Delhi that was sold in an auction by the Income Tax Department. The original owners challenged this sale, leading to a series of legal battles. The Supreme Court had to decide if the High Court was correct in reviewing its earlier decision and ordering a fresh hearing of the writ petition.

The judgment was delivered by a bench comprising Justices A.M. Khanwilkar and Ajay Rastogi, with Justice Rastogi authoring the opinion.

Case Background

The dispute centers around property No. 43, Prithviraj Road, New Delhi. The property was originally owned by a Hindu Undivided Family (HUF) consisting of Kirodimull Lohariwala and his son, Premchand Gupta.

In August 1957, Kirodimull Lohariwala filed a suit in the High Court of Calcutta against Premchand Gupta, claiming the property as his self-acquired property. During this time, the High Court appointed an official receiver for the property on 1st May 1958.

The Income Tax Department initiated certificate proceedings to recover dues from the HUF and sold the property in an open auction on 18th August 1964 to V.N. Vasudeva, an income tax practitioner and lawyer of Kirodimull Lohariwala, for Rs. 2,60,000. A sale certificate was issued on 1st April 1965.

Kirodimull Lohariwala objected to the sale, arguing that the Income Tax Department did not obtain prior permission from the High Court of Calcutta. Although this objection was initially overruled by the Chief Commissioner, Delhi on 26th February 1965, the Income Tax Department sought condonation for not obtaining prior leave from the High Court and permission to complete the sale. The High Court of Calcutta granted liberty to the Income Tax Department to sell the property on 8th September 1965.

Later, the grandsons of Kirodimull Lohariwala (respondents 1-3) filed a suit before the District Judge at Delhi on 19th May 1985, seeking a declaration that they were still the owners of the property and an injunction against V.N. Vasudeva, the auction purchaser. Simultaneously, they filed a writ petition in the High Court of Calcutta challenging the auction sale.

Timeline

Course of Proceedings

The respondents (grandsons of Kirodimull Lohariwala) initially filed a writ petition (C.O. No. 18500(W) of 1985) in the High Court of Calcutta challenging the auction sale of the Delhi property. The High Court reserved its judgment in March/April 1986 but dismissed the writ petition on 26th October 1990, noting that the respondents had an alternative remedy of filing a suit in the District Court, Delhi.

However, the title suit in Delhi (Suit No. 471 of 1985), which was pending when the High Court reserved its judgment, was dismissed on 3rd October 1986, due to non-service upon the main defendants. This fact was not brought to the notice of the High Court.

Subsequently, the respondents filed an application to recall the order of 26th October 1990. The High Court allowed this application on 20th November 1998, recalling the earlier order and directing the matter to be heard on merits.

The appellants appealed against this order, but the Division Bench of the High Court disposed of the appeal on 17th August 2001 without interfering with the recall order. The appellants then filed a Special Leave Petition (SLP) in the Supreme Court, which was dismissed on 10th January 2002.

The appellants filed a miscellaneous application in the disposed-of writ petition, which was dismissed by the High Court on 31st March 2006. The respondents appealed this order, which was dismissed on 19th October 2012, with liberty to file a fresh suit in Delhi.

The respondents filed a review application against the order of 19th October 2012. The High Court, through its order dated 24th September 2014, reviewed its earlier order, set aside the order of 31st March 2006, and directed the writ petition to be heard on merits. This order was challenged by the appellants in the present appeal before the Supreme Court.

Legal Framework

The judgment primarily revolves around the interpretation and application of Section 293 of the Income Tax Act, 1961, which bars civil courts from entertaining suits against the Income Tax Department.

Section 293 of the Income Tax Act, 1961 states:
“No suit shall be brought in any civil court to set aside or modify any proceeding taken or order made under this Act, and no prosecution, suit or other proceeding shall lie against the Government or any officer of the Government for anything in good faith done or intended to be done under this Act.”

This provision restricts the jurisdiction of civil courts in matters related to actions taken under the Income Tax Act, directing aggrieved parties to seek remedies through writ petitions under Article 226 of the Constitution of India.

Arguments

Arguments by the Appellants

• The review petition filed by the respondents was not maintainable under Order 47 Rule 1 of the Code of Civil Procedure (CPC), which outlines the grounds for review.
• The High Court failed to identify any new evidence or errors apparent on the face of the record, which are necessary for a review.
• The respondents are abusing the legal process by repeatedly litigating the same issue for over 50 years.
• The auction sale of the property was valid, and the original owner, Kirodimull Lohariwala, had accepted it.
• The Single Judge of the High Court had already addressed all the issues on merits in its order dated 26th October 1990.
• Recalling the order of 26th October 1990 and restarting the proceedings would be an abuse of the legal process.

Arguments by the Respondents

• The auction sale of the property was never confirmed.
• V.N. Vasudeva, the auction purchaser, had a fiduciary relationship with Kirodimull Lohariwala and took advantage of it.
• Civil courts do not have jurisdiction to deal with such matters under Section 293 of the Income Tax Act, 1961.
• The order of 26th October 1990 did not consider the effect of Section 293 of the Income Tax Act, 1961 and the order dated 8th September 1965 passed by the High Court of Calcutta.
• The dismissal of the title suit was not brought to the notice of the court, and the High Court’s observation that all contentions could be raised in the pending suit was not a finding.
• If the writ petition is not heard on merits, the respondents will be left without a remedy, as their contentions have not been decided by any competent court.
• No prejudice will be caused by relegating the parties back to the writ petition.

The respondents argued that the High Court was correct in reviewing its earlier order because the original order did not consider the bar on civil suits under Section 293 of the Income Tax Act, 1961. They also contended that the auction sale was not validly confirmed and that V.N. Vasudeva had taken undue advantage of his position.

The appellants, on the other hand, argued that the review was not maintainable as there was no error apparent on the face of the record and that the respondents were abusing the legal process by repeatedly litigating the same issue.

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame specific issues in a separate section. However, the core issue that the court addressed was:

• Whether the High Court was justified in exercising its review jurisdiction to recall its earlier order and restore the writ petition for a fresh hearing, considering the provisions of Section 293 of the Income Tax Act, 1961 and the order dated 8th September 1965 passed by the High Court of Calcutta.

Treatment of the Issue by the Court

Authorities

Cases Relied Upon by the Court

Legal Provisions Considered by the Court

Judgment

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the following factors:

• Error Apparent on the Face of the Record: The most significant factor was the High Court’s failure to consider Section 293 of the Income Tax Act, 1961, which bars civil suits against the Income Tax Department. This omission was deemed a clear error that justified the review.
• Need for a Remedy: The Court was concerned that if the writ petition was not heard on merits, the respondents would be left without a legal remedy. This concern weighed heavily in favor of allowing the review.
• Consequential Effect of the Order dated 8th September 1965: The Court noted that the High Court’s order dated 8th September 1965, which permitted the Income Tax Department to sell the property, had a significant bearing on the case, and its effect had not been considered in the previous orders.
• Principles of Review Jurisdiction: The Court applied the principles laid down in Kamlesh Verma vs. Mayawati and Others [2013(8) SCC 320] to determine that the High Court’s review was justified due to the error apparent on the face of the record.

The Supreme Court rejected the argument that the respondents were abusing the legal process, emphasizing that the High Court had rightly identified a significant legal error and that the respondents deserved a chance to have their claims heard on merits. The Court also noted that the High Court’s order of 8th September 1965, which permitted the Income Tax Department to sell the property, had a significant bearing on the case, and its effect had not been considered in the previous orders.

The Court considered the principles governing review jurisdiction as laid down in Kamlesh Verma vs. Mayawati and Others [2013(8) SCC 320], and found that the High Court had correctly applied these principles in recalling its earlier order.

The Court also emphasized that no party should be left without a remedy, and that the respondents’ concerns about the legality of the auction sale and the conduct of V.N. Vasudeva needed to be addressed.

The Court quoted the following from the judgment:

• “The basic principles in which the review application could be entertained have been eloquently examined by this Court in Kamlesh Verma (supra)”
• “From the material on record, it manifests that the subject property (43, Prithviraj Road, New Delhi) was purported to be sold in the certificate proceedings initiated by Income Tax Department for recovery of income tax dues of Sambhuram Kirodimull HUF to the auction purchaser late V.N. Vasudeva for a sum of Rs. 2,60,000/­ on August 18, 1964.”
• “In our considered view, there appears no error being committed by the High Court in passing the impugned judgment dated 24th September, 2014 in exercise of its review jurisdiction and that needs no interference by this Court.”

Key Takeaways

• Review Jurisdiction: This judgment reaffirms the scope of review jurisdiction of the High Court, emphasizing that it can be exercised tocorrect errors apparent on the face of the record, particularly when significant legal provisions have been overlooked.
• Section 293 of the Income Tax Act, 1961: The judgment underscores the importance of Section 293 of the Income Tax Act, 1961, which bars civil courts from entertaining suits against the Income Tax Department. It clarifies that aggrieved parties must seek remedies through writ petitions under Article 226 of the Constitution.
• Remedy for Aggrieved Parties: The judgment emphasizes that no party should be left without a remedy, and courts must ensure that all parties have a fair opportunity to have their claims heard on merits.
• Fiduciary Relationships: The judgment highlights the importance of fiduciary relationships and the need to ensure that no party takes undue advantage of such relationships.
• Long-Standing Disputes: The judgment demonstrates that even in long-standing disputes, courts must be willing to correct errors that may have occurred in earlier proceedings to ensure justice is served.

Conclusion

The Supreme Court’s judgment in Sunil Vasudeva vs. Sundar Gupta (2019) is a significant ruling that clarifies the scope of review jurisdiction of the High Court in cases involving property disputes and the Income Tax Act. The Court emphasized the importance of considering all relevant legal provisions and ensuring that no party is left without a remedy. By upholding the High Court’s review order, the Supreme Court has reaffirmed the principle that courts must be willing to correct errors to ensure justice is served, even in long-standing disputes. The case serves as a reminder of the need for meticulous legal analysis and the importance of protecting the rights of all parties involved.