Void Agreement : Tenancy Rights cannot be attached and auctioned — Consequent auction and sale certificate issued to purchaser would be void. Contract Act S. 24 and S. 65.

The defendant No. 2 is a private limited company and because
of non payment of income tax, the recovery officer had issued a proclamation
which was published in govt. Gazette for sale of the property. The property
included the business alongwith the tenancy rights of the defendants over the
disputed premises.

The original plaintiffs bid was accepted in the auction and
the later on he deposited the amount with the income tax department. Nobody had
taken any objection nor had applied for setting aside the same within 30 days
from the date of auction. The defent No. 1 through income tax officer issued
sale certificate in favour of the original plaintiff. The suit premises was
actually property of LIC and defendant No. 2 was a tenant over the same.

The income tax authorities failed to put the plaintiff in
possession of the suit premises. Therefore, the original plaintiff filed suit
for possession of the suit premises alongwith movable articles. The trial court
held that the sale certificate in favour of the plaintiff was illegal, null,
void and unenforceable in law.

Before the Court the plaintiff alternatively contended that
if the sale was illegal the Union of India (Income tax Dept.) was liable to pay
compensation to him or atleast refund the amount alongwith interest.

S. 23 of the Indian Contract Act provides that the
consideration or object of an agreement is lawful, unless it is forbidden by
law; or is of such a nature that, if permitted, it would defeat the provisions
of any law. S. 24 provides that if the consideration is for an object which is
unlawful, the agreement is void.

Transfer of tenancy is not permitted under the law and,
therefore the object of the auction being the sale of tenancy rights was
unlawful and, therefore, auction as well as the sale certificate are void and
unenforceable.

S. 65 of the Indian Contract Act provides that when an
agreement is discovered to be void, or when a contract becomes void, any person,
who has received any advantage under such agreement or contract is bound to
restore it, or to make compensation for it to the person from whom he received
it. In view of this clear legal position, income tax authorities, who had
received the consideration amount from the plaintiff for the contract of sale,
which turned out to be void, was liable to restore and refund the said amount to
the plaintiff.

The defendant No. 1 Union of India was liable to refund that
amount to the plaintiff with interest at the rate of 18% per annum from the date
of suit till the realization of the amount to the plaintiff.