Union of India & Ors. Vs. M/s Shatabadi Trading & Investment Pvt.Ltd. & Ors.
Email(From the Judgment and Order dated 17.12.97 of the Delhi High Court in C.W. N. 4153/93 and C.M. No. 3199 of 1994)
(From the Judgment and Order dated 17.12.97 of the Delhi High Court in C.W. N. 4153/93 and C.M. No. 3199 of 1994)
Dr. Rajeev Dhawan, Mr. L.R. Gupta, Dr. A.M. Singhvi, Senior Advocates, Mr. Ashok Mathur, Mr. P.K. Bansal and Mr. K.S. Rana, Advocates with them for the Respondents.
Income Tax Act, 1961
Chapter XX-C – Compulsory purchase of immovable property by Central Government – Order of compulsory purchase made by Appro-priate Authority – Interference by High Court – When justified – Sale of property proposed for Rs. 1.75 crores – Property pur-chased by Department under Chapter XX-C of IT Act – Auction sale of the property under directions of Supreme Court for over Rs. 4 crores – Auction sale confirmed by Supreme Court – High Court holding the order of compulsory purchase to be illegal, irration-al and arbitrary and accordingly setting aside the order – Basis of valuation disclosed to the party concerned – Valuation report however not disclosed or made available to the party – Whether that alone would vitiate the order of purchase – Whether High Court justified in interfering with the order of the Appropriate Authority. Held, non supply of valuation report alone would not be vital to the case – Department having given the details of the report in the show cause notice and other materials having been made available to the party, High Court not correct in interfer-ing with the order of Appropriate Authority. High Court also erred in holding that in respect of tenanted property Department cannot invoke chapter XX-C procedure. Supreme Court having con-firmed the auction sale, setting aside the order of the Appro-priate Authority and directing initiation of proceedings for restitution of the property would result in anomalous position. High Court should not have brushed aside the auction sale in the manner it did. High Court’s order set aside and order of Appro-priate Authority restored.
The basis of the valuation had been disclosed to the party con-cerned in the show cause notice in sufficient detail. Even if other records such as the valuation reports were not disclosed or made available may not affect the decision itself. The non-supply of the valuation report itself may not be vital to the case. For in this case the department has given the details of the report in the show cause notice itself which was issued and other mate-rials having been made available to the party concerned, we do no think that there is justification for the High Court to interfere with the same on that ground. (Para 6)
The grievance of the petitioners before the High Court was that not one of the methods but the combination of different methods of valuation such as comparative sales, cost or income or rent or developer’s approach should have been adopted. The High Court, in fact, examined the facts, materials and the valuation report of the Appropriate Authority to come to the conclusion that the comparisons made were wrong or otherwise but that was not the procedure to be adopted as indicated in Sudha Patil’s case (supra). Thus, the order made by the High Court needs to be set aside. (Para 7)
There is one other factor which is very significant, namely, that this Court having allowed the auction of the property in question ending confirmation of the same and that order having become final, now to allow the order made by the Appropriate Authority to be set aside and to permit the parties to work out in appro-priate proceedings for restitution of the property would lead to serious anomalous position. When the transferor without demur allowed the property to be sold pursuant to the orders of this Court and that sale having taken place and this Court having affirmed the same and the proceedings by way of SLP filed under Article 136 of the Constitution coming to an end as having become infructuous, the High Court could not have brushed aside that sale in the manner it has been done. The impact of such decision ought to have taken note of by the High Court. (Para 9)
We allow these appeals, set aside the order made by the High Court restore that of the Appropriate Authority in the proceed-ings arising under Chapter XX-C of the Act. No costs. (Para 10)
2. K.Basavarajappa v. Tax Recovery Commissioner, Bangalore & Ors., (1996 (11) SCC 632) (Para 9)
3. C.B. Gautam v. Union of India, (1993 (1) SCC 78) (Para 1)
1. In respect of property comprised in 25, Friends Colony West, New Delhi (hereinafter referred to as ‘the subject property’), an agreement was entered into to sell for a consideration of Rs.1.75 crores on 1.2.1991. On 4.2.1991, the intended seller and the purchaser filed Form 37-I for issuance of ‘No Objection Certifi-cate’. However, on 18.4.1991, a purchase order was passed by the Appropriate Authority and on the same day, the owner of the land was directed to surrender the possession of the subject property. In that regard, a writ petition was preferred before the High Court and on March 1, 1993, that writ petition was allowed in the light of the decision of this Court in C.B. Gautam v. Union of India, (1993 (1) SCC 78). Subsequent to the decision in the said writ petition decided by the High Court a show cause notice had been issued disclosing the following facts:
“In the case of subject property, the apparent consideration is Rs.1,75,00,000. The plot area is 3595.32 sq. mtrs. including 830.95 sq. mtrs. declared as excess land under ULCR Act. The net plot area comes to Rs.3595.32-830.95=2764.37 sq. mtrs. If sal-vage value of Rs.1,64,445 is considered, the achieved land rate works out to Rs.1,75,00,000 – 1,64,445 = 1,73,35,555 divided by 2764.37 = Rs.6271 per sq. mtrs. We may compare the sale instance of property at 60, Friends Colony (East) which was agreed to be sold on December 5, 1990 for apparent consideration of Rs.2,65 crores. If the depreciated value of structure of sale instance is taken at Rs.11,60,000 the land rate per sq. mtrs.. works out to Rs.2,65,00,000 (-) 11,60,000 = 2,53,40,000 divided by 1173.91 = Rs.21,586. If adjustment on account of time gap of +2%, side open + 10%, potential for basement + 10% in the sale instance and nearness to railway track -5% and size of plot – 5% is taken into account, the rate per sq. mtrs.. works out to Rs.24,180. This gives land value of subject property as Rs.2764.37 x 24180 = Rs.6.68 crores. In view of the fact that the subject property is tenanted, its value is deferred for 5 years at 8% interest and the present value would work out to Rs.4.55 crores to which Rs.1,64,000 salvage value is to be added. This brings value of the subject property to Rs.4.564 crores which is 160% above the apparent consideration.”
2. The intended transferor and the transferee raised several contentions before the Appropriate Authority for not proceeding with the said show cause notice. The principal ground is that the difference between the sale consideration and the fair market value does not exceed 15 per cent if the various circumstances surrounding the sale are taken note of. Even assuming that there is such a difference between the apparent sale consideration and the fair market value beyond 15 per cent it would not automati-cally prove that there was an under-valuation so as to attract the provisions of Section 269UD of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). It was contended that the apparent sale consideration of the property in question is higher than the fair market value if determined by an appropriate norm, method or standard. There were several compelling circum-stances set out in the affidavit filed by the transferor which existed under which the property was sold at Rs.1.75 crores considering the best/maximum price he could get for a tenanted property. Even otherwise, the facts would disclose that the transferor sold the property for Rs.1.75 crores particularly when he was getting a rental income of the property to the extent of Rs.4,000 per month and he was residing in a tenanted house where he was paying about Rs.8,000/- per month as rent and he had no other house in Delhi and no business premises wherein he could carry on his business and that he was also paying very heavily for more than Rs.14,000/- per month as rent for the business premises and was in dire need of finances to carry on his busi-ness gainfully and successfully. The transferor had no hope of getting the property vacated from the tenant, Shri Vinod Jain who was very affluent, possessed of great political influence and at whom instance the action to acquire the property has been ini-tiated. It was contended that the sale instances cited in the notice are not comparable properties because the property com-prised in 60, Friends Colony is a vacant property and the actual physical and vacant possession of the property was handed over and delivered to the purchaser while the subject property is a tenanted property occupied by a person who cannot be easily evicted. There were dissimilarities between the subject proper-ty and the property comprised in 60, Friends Colony and, there-fore, the department ought not to have compared the same. There-after they set out a dozen instances where method of valuation adopted was different. It was also contended that the valuation report prepared by the Departmental Valuer is not a bona fide one. Thus, it is ultimately submitted that the conclusions of the department are mala fide, arbitrary and discriminatory re-sulting in deliberate adoption of a wrong method of determining fair market value of the subject property. It was also contended that in the previous purchase order made on 18.4.1991 it was noticed that one Vinod Jain had offered Rs.4.5 crores and it was made clear that the offer of Bishwanath Traders and Investment Ltd. in the case of the previous purchase order and also now the offer of Vinod Jain are all bogus and manipulative and a pretext for the Appropriate Authority to acquire the subject property. The Appropriate Authority rejected the various contentions raised by the parties and proceeded to pass an order for acquisition. Challenging the said order on the averments raised before the Appropriate Authority, writ petition was filed before the High Court.
3. The High Court admitted the writ petition and granted interim order of stay restraining the department to proceed further in the matter. Against the said interim order a special leave petition was preferred before this Court. During the pendency of the proceedings before this Court, an order was made on 25.4.1994 directing that the property be auctioned subject to bid confirma-tion by this Court. Auction was held and Smt.Anju Jain, Mr. Vineet Jain and Mr. Manish Jain as the highest bidders of the property offered their bid at Rs.4.01 crores and permission was sought for confirmation of the same. Various pleadings were raised in those proceedings to the effect that the auction itself was a farce and stage managed by the Appropriate Authority in collusion with Mr. Vinod Jain and the property was purchased by him in the name of his wife and two sons for Rs.4.01 crores and that if the said bid was allowed it would be a fraud on the Government and public exchequer and the writ petition filed before the High Court challenging the validity of the proceedings initiated under Chapter XX-C were yet to be considered. However, this Court after hearing the matter at length rejected the said objections of the intending purchasers and confirmed the same on 19.9.1994. A sale deed has been executed by the Appropriate Authority in favour of the highest bidders and it is significant to note that the original owner of the property Arjun Anand, respondent no.9 herein has not challenged the aforesaid impugned order of the department and in fact without any protest received a sum of Rs.1.75 crores from the department and a further amount of Rs.14,03,500/- by way of interest. He had accepted the amount without any protest and has not contested the matter either in the High Court or in this Court and thereafter the said SLP (C) No. 6040 of 1994 filed by the Appropriate Authority along with other connected matters was disposed of as having become infruc-tuous in view of the auction sale held and confirmation thereof by this Court.
4. One of the learned Judges of the High Court (K.Ramamoorthy, J.), apart from referring to the various facts arising in the case, the pleadings, the contentions put forth before the Court, some of the decisions of different High Courts and of this Court on the matter of law, did not specifically deal with the conten-tions arising in the case on analysis of the facts arising in the matter. As regards the contentions of the impact of the sale that had taken pursuant to the permission granted by this Court, which stood confirmed by an order of this Court, the learned Judge stated that the same could not come in the way of deciding the writ petition as the order of this Court was made only in proceedings arising in an interlocutory matter. In the other judgment rendered by Sabharwal J., the facts stated earlier have been noticed but does not deal with the matter in the perspective in which the department has proceeded and on the other hand sits in judgment over the same to find out whether the method of valuation adopted by the department one way or the other is correct or not. He does not hold one way or the other as to the impact of the order of sale made by this Court.
5. This Court in Appropriate Authority & Anr. v. Sudha Patil (Smt.) & Anr., (1998 (8) SCC 237), held that merely because no appeal is provided for against the order of the Appropriate Authority directing the compulsory acquisition by the Government, the supervisory power of the High Court would not get enlarged nor can the High Court exercise an appellate power while examin-ing the correctness of the conclusion arrived at by such tribun-al. On the materials, if two views are possible, even then it would not be possible for the High Court to substitute its con-clusion for that of the tribunal. It is trite to say that the proceedings arising under Article 226 of the Constitution is in the nature of judicial review and such review could be only in respect of the process of decision and not the decision itself. In the case on hand, the Appropriate Authority had adopted the comparison of the market sales approach considering the location of the property. The approach of the High Court that in cases where the property is a tenanted property and is being sold the department cannot adopt the stand of invoking the provisions of Chapter XX-C may not be correct. Having given due deductions towards tenancy arising in respect of the property and on compar-ison with similar properties situated else where though not tenanted but after discounting for the tenancy if mode of valua-tion is adopted by the department, the High Court could not have termed the same as illegal, irrational or arbitrary.
6. The basis of the valuation had been disclosed to the party concerned in the show cause notice in sufficient detail. Even if other records such as the valuation reports were not disclosed or made available may not affect the decision itself. The non-supply of the valuation report itself may not be vital to the case. For in this case the department has given the details of the report in the show cause notice itself which was issued and other materials having been made available to the party con-cerned, we do no think that there is justification for the High Court to interfere with the same on that ground.
7. The grievance of the petitioners before the High Court was that not one of the methods but the combination of different methods of valuation such as comparative sales, cost or income or rent or developer’s approach should have been adopted. The High Court, in fact, examined the facts, materials and the valuation report of the Appropriate Authority to come to the conclusion that the comparisons made were wrong or otherwise but that was not the procedure to be adopted as indicated in Sudha Patil’s case (supra). Thus, the order made by the High Court needs to be set aside.
8. Though, serious arguments have been advanced by the learned Counsel appearing for the parties in this Court as to the mode of valuation, nature of the power under Chapter XX-C of the Act, scope of judicial review, the requirements to be taken note of in the valuation and large number of decisions are referred to, we do not think, there is any need for us to advert to the same for the principles stated therein are identical to what we have stated in the course of this order.
9. There is one other factor which is very significant, namely, that this Court having allowed the auction of the property in question ending confirmation of the same and that order having become final, now to allow the order made by the Appropriate Authority to be set aside and to permit the parties to work out in appropriate proceedings for restitution of the property would lead to serious anomalous position. When the transferor without demur allowed the property to be sold pursuant to the orders of this Court and that sale having taken place and this Court having affirmed the same and the proceedings by way of SLP filed under Article 136 of the Constitution coming to an end as having become infructuous, the High Court could not have brushed aside that sale in the manner it has been done. The impact of such decision ought to have taken note of by the High Court. Indeed in K.Basavarajappa v. Tax Recovery Commissioner, Bangalore & Ors., (1996 (11) SCC 632), this Court has held that an agreement to sell creates no interest in the property and in the absence of a decree of specific performance of an agreement even though au-thorised by the general power of attorney holder of the original owner of the property had no locus standi to move an application for setting aside the auction-sale on offer to deposit full tax dues. If we extend the said principle to the present facts, we find it hardly possible to come to the conclusion the High Court has arrived at. It is possible that the writ proceedings were still pending before the High Court but those writ proceedings were not at the instance of the owner of the subject property and the agreement holder did not have any interest other than that was indicated in the K.Basavarajappa’s case (supra). In that view of the matter, we do not think the High Court should have ignored the effect of the same.
10. For the aforesaid reasons, we allow these appeals, set aside the order made by the High Court restore that of the Appropriate Authority in the proceedings arising under Chapter XX-C of the Act. No costs.
