Appropriate Authority & Anr. Vs. Kailash Suneja & Anr.
Email(From the Judgment and Order dated 17.12.97 of the Delhi High Court in C.W.P. No. 5220/93 and 1988 of 1994)
(From the Judgment and Order dated 17.12.97 of the Delhi High Court in C.W.P. No. 5220/93 and 1988 of 1994)
Mr. M.S. Syali, Senior Advocate, Mr. K.K. Mohan and Ms. Geetanja-li Mohan, Advocates with him for the Respondents.
Income Tax Act, 1961
Chapter XX-C – Compulsory purchase of immovable property by Central Government – Interference by High Court – Scope of – Whether the conclusion of the Appropriate Authority regarding fair market value ought to be accepted and cannot be made a subject matter of examination by High Court as in an appeal – Whether High Court has power under Article 136 to interfere with the findings of the Appropriate Authority. Held, where there are several methods of valuation and one such method is adopted by the department and that is reasonable, it may not call for inter-ference but where there are loopholes or lacunae in the process of reasoning adopted by such authority, High Court can interfer-e by virtue of Article 136. In the absence of proper reasoning as to why in one case in respect of tenanted property, rent capi-talization method is adopted while in another, the land and building method is adopted, High Court was justified in going into the calculation of fair market value and holding the action of the Appropriate Authority to be incorrect.
2. C.B.Gautam v. Union of India (JT 1992 (6) SC 678) (Para 1)
1. The property comprised in No. G-4(Old No. C-62), Maharani Bagh, New Delhi on a plot measuring about 800 sq. yards was agreed to be sold pursuant to an agreement dated July 1, 1993 for a sale consideration of Rs.79 lakhs. The property consists of two floors – ground and the first – and is in occupation of the tenants. The agreement provided for symbolic delivery of the possession while it was open to the purchaser to make use of the portion over the roof on the first floor. An application in Form 37(I) was filed on 9.7.1993. The Appropriate Authority worked out the fair market value of the property and the apparent con-sideration fell short by 24 per cent of the fair market value. The Appropriate Authority compared the property in question with three different properties as sale instances to arrive at the correct market value of the value of the property in question : (1) G-8, Maharani Bagh, (2) D-18, Maharani Bagh, and (3) N-62, Panchsheel Park. The High Court went into the mode of calcula-tion of fair market value adopted by the Appropriate Authority and stated that in respect of property comprised in D-18, Mahara-ni Bagh the agreement had been entered into on 25.6.1991 and on account of the time gap of 24 months, the adjustment of plus 24 per cent was to be made and in respect of property comprised in G-8, Maharani Bagh, there was basement potential and, therefore, adjustment of minus 10 per cent was to be made by the Appropriate Authority on that count. This basis is termed to be perverse. In identical circumstances when the valuation adopted by the Appropriate Authority was challenged in Appropriate Authority & Anr. v. Sudha Patil (Smt.) & Anr., (JT 1998 (7) SC 571 = 1998 (8) SCC 237), this Court after examining the decision in C.B.Gautam v. Union of India, (JT 1992 (6) SC 678 = 1993 (1) SCC 78) and the in absence of provision of filing an appeal against the order made by the Appropriate Authority, had stated that the conclusion of the Appropriate Authority regarding the fair market value in a matter of compulsory acquisition of immovable property after considering all the germane and relevant materials should be accepted and the same should not be made a subject matter of the examination as if it is an appeal. Reasons set forth by the Appropriate Authority are as follows :
Subject property Ist sale instance
Sale agreement Apparent sale Declared land rate works Sale deed dated 25.6.91,
9.7.93 consideration out at Rs.21,821 per sq. 24 months earlier sale
mt. Value to be increased at agreement
1% per month for 24 months
24%
Has no basement 10% to be Thus value to be added is 14%
deducted (24%-10%) if 14% is added the
land rate of subject property
would come to
Rs.21,821 x 14%
Rs.24,875 or Rs.25,000 per
sq.mt.
Value of land Rs.1.30 crores
Depreciated value of the Rs.9,35,758
structure
Total value of the subject Rs.1,39,33,758
property
The property is Depreciated value for 6 years
tenanted at 8% is calculated at : Rs.87,78,267
(Rs.1,39,33,758 x .63)
(a) Thus the value of the Rs.87,78,267
subject property is
(b) To this rent for 6 years
is added Rs.1,42,092
Has barsati Has no barsati
potential of the potential
area is 149.90 Rs.37,27,500
sq. mts.
(c) This is to be added.
The value of the subject
property is fixed at Rs.1,26,42,859
Or
Rs.1,26,45,000
This is 58% more than the
apparent consideration of
the subject property (Rs.79,99,390)
Subject property D-18 (known 2nd sale instance
as I-15), Maharani
Bagh
Sale agreement Sale deed dated 1.12.1992
Rs.1.11 crores
Adjusted declared land
rate works out at Rs.29,587
per sq. mt.
Value to be increased at 1%
per month 7 months earlier to
sale agreement
For 7 months + 7%
FAR (not so much
as the 2nd instance) FAR (140-100) – 28%
Side open (not – 5%
available/ which is
available in 2nd
instance)
Has no
basement potential – 10
+7% – 43%
– 36%
Declared land rate
deducting -36%
29,587 x .64 = Rs.18,950 per sq. mt.
Value of the land of the 52 x 18,950
subject property Rs.98,54,000
Depreciated value of the
structure 9,33,758
Rs.1,07,87,758
Tenanted Depreciated value at the Rs.67,96,287
rate of 8% (Rs.1,07,87,758 x .63)
Rental increase for 6 years Rs.1,42,092.00
= Rs.28,21,655
Barsati potential
148.90 sq.mt. x Total value of the subject Rs.97,60,034
18,950 property 22% higher than to AC
Subject property 3rd sale instance
Sale agreement 9.7.1993 N-62, Panchsheel Park
800 sq.yds. having FAR
Land rate declared works 29.4.1993
out at Rs.28,455 per sq.mt. sale agreement consid-
eration Rs.1,56,00,000
If the rate of increase of Rs.35,02,220
1% per month
4 months + 4% time gap Rs.1,91,02,220
No open area Falling open area -5%
No basement Basement available
potential 10%
+4% – 15%
= -11%
The land rate works out at
Rs.25,333 (28,455 x .89)
Land rate of subject property
(ground floor , 1st floor) 520
sq. mts.
= 25,333 x 520 = Rs.131,73,160
= 1,31,73,160.00
Depreciated
value of the
structure =9,33,758.00
———
Rs.1,41,06,918.00
———
The Appropriate Authority added one per cent every month. The basement and barsati potential was also taken into account. The Appropriate Authority took into account the subject property was tenanted and made certain calculations such as 6 years’ deferred value at 8 per cent and 6 years’ rent was added to the value arrived at by the above process.
2. The High Court disapproved this process of arriving at the figures and that the apparent consideration fell short of the fair market value by more than 15 per cent and, therefore, the High Court held that the action is incorrect.
3. The Department contends that the learned Judges of the High Court could not have sat on judgment over the manner of calcula-tions made by the Appropriate Authority. If any of the factors set out therein had been ignored in the matter of arrival of fair market value, the same would have affected the consideration made by the Appropriate Authority. There are several methods of arriv-ing at fair market value such as comparative sale method or the capitalisation of the rent, i.e., yield method or any other appropriate method. But when the Appropriate Authority adopted one or the other method and in that process there is no inherent error or the factors taken note of by the Appropriate Authority being relevant, it is submitted that it is not open to the High Court to have interfered with such a matter. This Court in Sudha Patil’s case (supra) has stated that when the Appropriate Author-ity comes to the conclusion one way or the other after giving due opportunity to the parties concerned and there has been under-valuation on that basis by more than 15 per cent of the fair market value, the Appropriate Authority had jurisdiction to interfere with the same.
4. The High Court took the view that there is nothing on record to suggest as to what were the special reasons for making a purchase order in respect of wholly tenanted property. Even assuming that there was some justification for the authority to initiate proceedings for the pre-emptive purchase of the property under Chapter XX-C of the Act, the method of valuation of the fair market value had to be just and reasonable. The authority has compared the values of incomparable properties. While con-sidering comparable instances, the instances of tenanted proper-ties had to be taken into consideration and not vacant properties by discounting without any factual or legal basis. While the agreement in relation to property at Maharani Bagh had been entered into in June 1991, the agreement for the property in question was entered into on July 1, 1993. Therefore, there is no basis for adding 24% on the hypothetical basis that there would be increase of 1 per cent every month.
5. In respect of tenancy, the plea taken before the High Court is that the purchaser had mutual terms to get the property vacat-ed from the tenant. While the ground floor tenancy was from the year 1979 and the first floor tenancy was from the year 1967, there is hardly any justification to presume that the tenants would vacate in 5/6 years. The sale instance in respect of property comprises in S-39-A, Panchsheel Park, which was substan-tially tenanted without any justification, was not taken into consideration, though rent capitalisation method was applied in that case. Why in respect of one tenanted property rent capi-talisation method was applied to work out the fair market value and in the other case land and building method was applied is not clear. It is on this basis the High Court allowed the writ petition before it.
6. It is no doubt true that the scope of interference under Article 226 of the Constitution is very limited, but that is only in the nature of a judicial review of the proceedings and not by way of appeal or revision where the scope of interference is much wider. In cases of the present nature where several methods are available for finding out the value of the property and if one or the other method is adopted by the Department and that may be reasonable, it may not call for any interference. However, if there are loopholes or lacunae in the process of reasoning adopt-ed by that authority in reaching the conclusion as in the present case that the tenanted property would be vacated soon or that the property is close to the vicinity of the situation of the subject property if compared, adopting different methods of valuation, then the parties who appear before the authorities will definite-ly have a reason to have a heart burn. If one method of valua-tion is adopted and benefit is given to one party and why that method is not adopted in the other case to reach the conclusion the other way is not clear and in our opinion it is unjustifi-able. If in this background the High Court examined the matter and arrived at a conclusion one way or the other, we do not think it is necessary for us to interfere with that finding in a pro-ceeding arising under Article 136 of the Constitution.
7. Hence these appeals shall stand dismissed. No costs.
