Calcutta High Court
Ashwika Kapur vs Union Of India & Others on 24 February, 2022
A.P.O NO. 287 OF 2018
IN THE HIGH COURT OF JUDICATURE AT CALCUTTA
CIVIL APPELLATE JURISDICTION
ORIGINAL SIDE
RESERVED ON: 10.02.2022
DELIVERED ON: 24.02.2022
CORAM:
THE HON'BLE MR. JUSTICE T.S. SIVAGNANAM
AND
THE HON'BLE MR. JUSTICE HIRANMAY BHATTACHARYYA
A.P.O NO. 287 OF 2018
ARISING OUT OF
W.P NO. 2821 OF 1993
ASHWIKA KAPUR
VERSUS
UNION OF INDIA & OTHERS.
Appearance:-
Mr. J P Khaitan
Mr. Akhilesh Gupta
Mr. Debasish De
....For the Appellant.
Mr. P K Bhowmik
Mr. A Bhowmik
....For the Respondent.
Page 1 of 23
A.P.O NO. 287 OF 2018
JUDGMENT
(Judgment of the Court was delivered by T.S.SIVAGNANAM, J.)
1. This intra court appeal is directed against the order passed in W.P No.
2821 of 1993 dated 14.08.2018. The said writ petition was filed challenging
the order dated 29.07.1993 passed by the Appropriate Authority, under
Section 269 UD of the Income Tax Act, 1961 (the act for brevity).
2. The original writ petitioner is Mr. Ashwani Kapur, and the appellant
before us is his daughter Ms Ashwika Kapur, as the original writ petitioner
passed away on 27.03.2020.
3. Before we proceed further, it would be necessary to note as to who were
the parties to the writ petition. As mentioned, the original writ petitioner was
Mr. Ashwani Kapur, the first respondent Union of India through the
Secretary, Ministry of Revenue, Government of India, New Delhi, the second
respondent, the Appropriate Authority, Income Tax Department, Calcutta, the
third respondent, Superintending Engineer, Appropriate Authority, Income
Tax Department, Kolkata, the fourth respondent Mrs. Mina Gupta, the fifth
respondent Dr. Ambar Gupta and the sixth respondent M/s. Stewart Hall
(India) Limited.
4. An agreement dated 05.08.1988, was entered into between Mrs. Mina
Gupta and Dr. Ambar Gupta with M/s. Stewart Hall (India) Limited, agreeing
to let out a flat bearing No. D-113, Tower Block, Saptaparni Cooperative
Housing Society Limited, Ballygunge, Kolkata agreeing to lease out the said
flat for a monthly rent of Rs. 4,000/-initially for a period of three years,
renewable for a further period of two years. The original writ petitioner Mr.
Ashwani Kapur was employed in a senior position in M/s. Stewart Hall (India)
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Limited and he was permitted by his employer to occupy the flat as a licensee
under the company. During February 1993, Mrs. Mina Gupta and Dr. Ambar
Gupta wrote to M/s. Stewart Hall (India) Limited for increase of rent by Rs.
500/- per month, agreeing that the company can continue as a tenant as
long as they paid the rent on time. The company agreed to the said demand
and paid increased rent of Rs. 4500/- per month from January 1, 1993 with
a condition that the tenancy would continue as long as the company desired
to which Mrs. Mina Gupta and Dr. Ambar Gupta agreed. As mentioned, the
original writ petitioner Mr. Ashwani Kapur was occupying the flat as a
licensee of the company. An agreement for sale dated 21.04.1993 was entered
into between Mrs. Mina Gupta and Dr. Ambar Gupta and the original writ
petitioner/licensee agreeing to sell the flat, subject to the subsisting tenancy,
in favour of Mr. Ashwani Kapur for a sale consideration of Rs. 13,00,000/-.
Mrs. Mina Gupta and Dr. Ambar Gupta filed Form 37 I dated 04.05.1993
before the Appropriate Authority, the original second respondent, under
Chapter XX-C of the Act, in the capacity of transferors and the original writ
petitioner was the transferee. It was specifically stated that the flat was
occupied by Stewart Hall (India) Limited as a tenant and possession would be
granted to the original writ petitioner (licensee) only after no objection
certificate is issued by the Appropriate Authority. On 17.05.1993, a team of
valuers from the office of the Appropriate Authority visited the flat. Thereafter,
on 15.07.1993 the Appropriate Authority addressed both the transferors and
the transferee raising various queries. This communication is said to have
been received on 17.07.1993 to which the original writ petitioner filed a reply
on 20.07.1993. The case of the original writ petitioner is that on 26.07.1993
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late in the afternoon, he received a show cause notice dated 21.07.1993 fixing
the date of hearing on 27.07.1993 at 11:00 AM. Along with the show cause
notice, a valuation report valuing the flat at Rs. 28,35,000/- was enclosed
wherein there was reference to three sale instances. The writ petitioner's case
is that no documents relating to the sale instance were provided along with
the show cause notice and in none of the sale instances, the property was
shown to be a tenanted property or a property developed by a Cooperative
Housing Society, as in the case of the subject flat. On 27.07.1993, the
transferors also filed their reply to the show cause notice and on the same
day, the tenant namely Stewart Hall (India) Limited also filed their reply. The
original writ petitioner challenged the valuation report provided along with
the show cause notice and requested for the report of the valuating team
which had visiting the flat in May 1993. No reply was received by the original
writ petitioner and an order dated 29.07.1993 was passed by the Appropriate
Authority exercising their right of pre-emptive purchase. This order was put
to challenge in the writ petition.
5. The writ petitioner contended that the order of pre-emptive purchase of
the flat under Section 269 UD (1) of the Act is arbitrary and unreasonable
and in violation of the principles of natural justice. The valuation of the
property as adopted by the Appropriate Authority was challenged as being
excessive, irrationally prepared based on incorrect valuation method. Further
it was contended that the rent capitalisation method should have been
adopted in computing the valuation of the flat as the lease executed by the
transferors in favour of the company was subsisting. It was further contended
that the Appropriate Authority without any material came to an erroneous
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conclusion that there is a likelihood of the company to forego the tenancy
right which was contrary to the statement made in the declaration and
therefore such inference by the Appropriate Authority was perverse. Further
the Appropriate Authority erroneously held, that the tenancy right expired on
04.08.1993 in the absence of any document or evidence to the said effect.
Further the Appropriate Authority ignored the fact that the transferors were
transferring the flat pending litigation between themselves and the society
and the flat was mortgaged to UCO Bank and in the event, the bank was
successful in such litigation the society would have to pay substantial
amount and the individual flat owner including the transferee would have to
pay proportionate amount which will exceed the actual consideration of Rs.
13,00,000/-. Further it was contended that the Appropriate Authority over
looked the fact that the flat in question was part of a cooperative complex and
the transferee would never become a full owner as in the case of an
ownership flat and all future transfers would be subject to the approval of the
society and this was not the case in respect of the three sale instances
referred to by the Appropriate Authority in the pre-emptive purchase order.
Further the Appropriate Authority ought to have noted that the vendors were
in urgent need of funds as a surgery was required to be performed on Mr.
Ranjit Gupta and he was also under treatment for cancer and owing to the
circumstances and encumbrances on the property, no purchaser was willing
to pay more than Rs. 6,00,000/- and this important fact ought to have been
considered by the Appropriate Authority while determining the value of the
property. It was further submitted that since the show cause notice was
served only in the late afternoon of 26.07.1993 for the hearing fixed on
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27.09.1993, the writ petitioner had less than a day to prepare for the hearing
and the opportunity granted was inadequate and therefore after the purchase
order was passed, the writ petitioner filed an application for rectification of
mistake which was rejected by the Appropriate Authority without application
of mind. That apart, the writ petitioner had pleaded that the Appropriate
Authority should have applied the rental method in valuing the property and
it failed to appreciate the meaning and purport of Section 3 of the West
Bengal Premises Tenancy Act, 1956. With regard to the valuation of the
property, the petitioner placed reliance on the decision of the Hon'ble
Supreme Court in C.B. Gautam Versus Union of India and Others1.
6. The Appropriate Authority and the other official respondents resisted
the prayers in the writ petition by contending that the case involves decision
on disputed question of facts which cannot be decided in the writ petition
under Article 226 of the Constitution of India, this Court would not go into
merits of the decision taken by the Appropriate Authority or re-appreciate the
facts which were available on record before the Appropriate Authority. It was
further submitted that the valuation adopted by the department determined
the fair market value of the property at Rs 26,35,000/-as against the
apparent sale consideration of Rs. 12.98,250/- which was 118.37 % more
than the apparent sale consideration. The valuation was done by relying upon
three sale instances all of which are in respect of properties situated in
similar localities and near to the property in question, after giving due
allowance to various relevant factors. The transferors, the transferee and the
company were issued show cause notices, they had filed their written
(1993) 199 ITR 530 (SC)
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submissions and the transferors/transferee were represented by counsel and
after considering all the materials placed on record by the parties and upon
hearing the oral submission, the pre-emptive purchase order came to be
passed. Further it was contended that, after the agreement of tenancy dated
05.08.1988 there was no agreement for continuing of the tenancy for a
further term of two years. However, it appears that the company wrote a letter
dated 26.03.1993 to the transferors in which it is stated that rent was
increased from Rs. 4000/- to 4500/- per month and the tenancy may be
continued for such period as the company may desire. The said letter was not
signed by the owners. Another letter dated 11.02.1993, which was produced
before the Appropriate Authority was signed only by Dr. Ambar Gupta.
Therefore, the Appropriate Authority held that the tenancy had expired on
04.08.1993. Thus, it was contended that the order under Section 269 UD (1)
was passed after giving proper opportunity to all the parties and making full
enquiry and there is nothing illegal about it. On the above grounds, the
official respondents sought to sustain the order passed by the Appropriate
Authority.
7. The Learned Single Bench after noting the facts framed two issues for
consideration:-
(i) Whether the purchase order dated 29.07.1993 under Section
269 UD (1) was vitiated on account of breach of principles of
natural justice.
(ii) Whether the authorities took note of extraneous material into
consideration while passing the order dated 29.07.1993.
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8. On the first issue, the petitioner placed reliance on the decision of the
Hon'ble Supreme Court in Sona Builders Versus Union of India and Others. 2
The Learned Single Bench took note of the submission that the writ petitioner
did not have adequate time to reply to the show cause notice, however, did
not accept the contention on the ground that he did not seek for adjournment
of the hearing but participated in the hearing and therefore cannot contend
that there was violation of principles of natural justice. With regard to the
decision in Sona Builders, the Learned Single Bench held that in the said
case a request for adjournment was made which was turned down, hence the
decision is distinguishable.
9. With regard to the second issue, which largely pertains to the valuation
of the property, upon noting the facts as also the encumbrance with UCO
Bank, the Learned Single Bench observed that the right of an individual flat
owner will be affected only minimally. Further the Court approved the
valuation report prepared by the authorities. Taking note of the decision
relied on by the writ petitioner in the case of Appropriate Authority and
Another Versus Kailash Suneja and Another 3, the Court held that in the case
on hand the Appropriate Authority has not questioned the validity of the
agreement to transfer the property or the title of the vendor, it has only
questioned the quality of the encumbrances i.e. the tenancy which the
Appropriate Authority was entitled to do so. With regard to the contention of
the writ petitioner that valuation should be on rental basis, the Learned
Single Bench held that the Appropriate Authority had doubted the tenancy
(2001) 251 ITR 197 (SC)
(2001) 251 ITR 1
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itself and there were good reasons to do so. It also observes that the writ
petitioner was in possession of the flat and at the time of entering into the
agreement for sale, he was in employment of the company, Stewart Hall
(India) Limited, but retired from service on 01.01.2007. Further the Learned
Single Bench observed that the tenant company will continue to remain as
such and unless the company surrenders tenancy, although it is not in
possession, it will continue to remain liable for payment of rent to the owner
which will be the Central Government. With regard to the decisions relied on
by the petitioner to adopt the rental valuation method, the Learned Writ
Court observed that those were all cases which were decided based on
relevant fact situations and cannot be applied to the writ petitioner's case and
accordingly by order dated 14.08.2018, the writ petition was dismissed.
Challenging the order, the daughter of the original writ petitioner Ms Ashwika
Kapur has preferred this appeal.
10. We have heard Mr. JP Khaitan, Learned Senior Council assisted by
Mr. Akhilesh Gupta and Mr. Debashis Dey, Learned counsel for the appellant
and Mr. P.K. Bhowmik, Learned Senior Standing Council, assisted by Mr.
Ashok Bhowmik, Learned Junior Standing Counsel for the respondents.
11. The correctness of the order passed in the writ petition is questioned
largely on two grounds:-
12. Firstly, on the ground that the order passed by the Appropriate
Authority impugned in the writ petition, was liable to be set aside on the
ground of gross violation of principles of natural justice. The second ground is
with regard to the valuation of the property in which certain other factual
matters were also considered. We recapitulated certain dates and events. An
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agreement for sale was entered into on 21.04.1993 between Mrs. Mina Gupta
and Dr. Ambar Gupta, the original respondents 4 and 5, the owners of the
flat with the father of the appellant Mr. Ashwani Kapur agreeing to sell the
flat in question along with the existing tenancy in favour of Stewart Hall
(India) Limited, the original 6th respondent in which the appellant's father was
employed as a senior executive. The sale consideration agreed to be paid was
Rs. 13,00,000/-. On 04.05.1993 the transferors and the transferee filed an
application before the Appropriate Authority in Form No. 37 (ix). In the said
application, it has been specifically stated that the flat is in occupation of
M/s. Stewart Hall (India) Limited who is the tenant and possession would be
handed over to the transferee, appellant's father, only after obtaining no
objection certificate from the Appropriate Authority. After about 13 days after
filing the statutory form, a team of valuers from the office of the Appropriate
Authority have visited the flat, after which nothing happened for one month
and letter dated 15.07.1993 was sent by the Appropriate Authority, received
by the transferors and the transferee on 17.07.1993, raising certain queries.
The writ petitioner sent reply dated 20.07.1993 stating that the agreement
between the landlord and the tenant enclosing vouchers, evidencing payment
of rent and other documents were enclosed along with form 37 I, however,
one more set of copies of those documents were also furnished along with the
letter dated 20.07.1993. The writ petitioner stated that the tenancy is
governed by The West Bengal Premises Tenancy Act, 1956 and that there is
no litigation between the transferors and the tenant (Stewart Hall India
Limited). Further it was stated that the tenant is the company and the
transferee is in occupation of the said flat as an employee of the company as
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the company provides accommodation to its senior employees. The flat in
question is in a cooperative housing society exclusively meant for residential
purpose. Further the encumbrance on the property and the disadvantages, to
be faced as the property is with the cooperative society were set out in detail
and the writ petitioner stated that he is taking enormous risk in entering into
such an agreement and if he is not admitted as a member of the cooperative
society, it will end in long drawn litigation. It was further stated that unless
the transfer is executed in his favour, he would not be entitled to apply for
membership to the society. Further the writ petitioner emphasised the
property is not a freehold property, it can be transferred only to eligible
individuals not to any corporate body subject to the acceptance of the
membership by the society. Further the property is in tenancy with the
company which is governed by the Tenancy Act, of 1956 and the tenant
cannot be evicted in terms of the procedure laid down therein. Further the
property is under mortgage to UCO Bank and litigation is pending, the bank
is taking all steps to block all transfers pending resolution of the dispute
which may take several years to be resolved. With regard to the valuation, as
the flat has been rented out, it was submitted that the valuation should be on
the basis of rental method. Further the writ petitioner stated that the vendors
are in emergent need of money for medical treatment which is a very relevant
factor to be taken into consideration. On 26.07.1993, sometime during late
afternoon, the writ petitioner is stated to have received the show cause notice
dated 21.07.1993, fixing the date of hearing on the next date i.e on
27.07.1993 at about 11:00 AM. A valuation report valuing the flat at Rs.
28,35,000/- was enclosed along with the show cause notice. Thus, within a
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day the writ petitioner was required to attend the hearing as well as the
transferors and the tenant company. There appears to have been a hurried
approach in the matter, as on and after 30.07.1993 the Appropriate Authority
would be denuded of jurisdiction to pass orders. It has to be borne in mind
that Form 37 I was filed by the transferors and the transferee on 04.05.1993
and at the fag end of the expiry of the period of limitation for passing the
order, a hearing was fixed on 27.07.1993 which intimation was received by
the writ petitioner only on 26.07.1993 in the late afternoon. The official
respondents have not denied the said submission of the writ petitioner as
regards the date and time of receipt of the show cause notice. The question
would be whether such an opportunity was really an opportunity, was it
adequate, considering the facts and circumstances of the case. It is no doubt
true that the transferors, the transferee (writ petitioner) as well as the tenant
company had filed their objections. The further question would be merely
because the writ petitioner had filed his objection/reply to the show cause
notice and participated in the hearing, would negate compliance of the
principles of natural justice. We note the reply given by the transferors, dated
27.07.1993, that is on the date fixed for personal hearing. In the first
paragraph, it has been stated that the vendors have received the show cause
notice on 26.07.1993 in the evening and had no time to prepare a reply and
submit before the hearing because the hearing was fixed at 11:00 AM on
27.07.1993. The vendors reiterated the submissions made by the writ
petitioner in his letter dated 20.07.1993 in response to the query raised by
the Appropriate Authority in his letter dated 15.07.1993. Further it was
pointed out that no documents relating to the three sale instances referred to
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for determining the value of the property at Rs. 28,35,000/- was enclosed
along with the show cause notice. Further, the writ petitioner sought for the
copy of the valuation report prepared by the officers of the department after
they visited the flat in May 1993. The transferors have also pointed out that
they belong to a very respectable family and the need for money was on
account for medical emergency for surgery to be performed on their father
who was a retired Inspector General of Police of repute. The circumstances
under which the transferors took the decision to sell the property was
elaborately set out as to how they were unable to obtain any offers more than
Rs. 6,00,000/- owing to the fact that the property is not a freehold property,
there are pending litigations, the property is mortgaged with UCO Bank and
tenancy is subsisting with the company among other matters. If such was the
fact situation, can it be said that there has been compliance of principles of
natural justice. Principles of natural justice cannot be put in a straight-jacket
formula and has to be considered taking note of the fact and circumstances
of each case. In our view, the decision in Sona Builders should enure in
favour of the appellant. In the said case, the show cause notice was issued on
21.05.1993 from Delhi to the appellant therein who was in Jaipur, fixing the
hearing on 31.05.1993. The Hon'ble Supreme Court took note of the fact that
it would take two or three days for the notice to be received in Jaipur, even
though despatched by speed post and therefore the notice gave only five days
to the addressees to respond out of which two days were Saturday and
Sunday. The Hon'ble Supreme Court noted that under Section 269 UD, the
Appropriate Authority had two months to act commencing from the end of the
month in which form 37 I was filed. It noted that the form was filed on March
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09, 1993 and the Appropriate Authority had two months and twenty one days
to take action but did not take action until one week from the last available
date and gave the appellant therein only three days to respond which was
held to be most inadequate. The Learned Single Bench had distinguished the
decision on the ground that the appellant therein sought for adjournment of
the hearing whereas the writ petitioner before us did not do so. In our
respectful view, that is not the manner in which the ratio laid down by the
Hon'ble Supreme Court in Sona Builders has to be interpreted or
distinguished. The opportunity granted to the aggrieved should not be
illusory but should be effective and reasonable. In the preceding paragraphs,
we have set out the relevant dates and one day before last day, after which
the Appropriate Authority cannot exercise jurisdiction the pre-emptive
purchase order was passed. The power exercised under Section 269 UD(1) is
a very serious matter as the department seeks to exercise its right of pre-
emptive purchase, thereby compelling the vendor to sell the property to the
Government and not in accordance with the agreement they had entered into
with the prospective purchaser. Therefore, the opportunity should be
adequate, reasonable and not illusory. Assuming the writ petitioner had
sought for an adjournment, obviously the Appropriate Authority could not
grant one as within a day thereafter, he would loose jurisdiction to pass any
orders. Thus, even if such a representation had been made, the Appropriate
Authority would have not acceded to the request as he was statutorily barred
from doing so. In DLF Universal Ltd. Versus Appropriate Authority,4 it was held
that the provisions of Section 269 UD are to be strictly construed, there is no
(2000) 243 ITR 730 (SC)
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power to extend time lines stipulated in the said provision. Thus we are of the
clear view that the transferors and the transferee did not have adequate
opportunity to put forth their objections apart from failure to furnish the copy
of the valuation report of the subject property as done by the department. The
documents pertaining to the three sale instances which were referred in the
show cause notice were also not provided. Therefore, it is amply clear that
there has been gross violation of principles of natural justice which would be
sufficient to set aside the order passed by the Appropriate Authority by
allowing the writ petition.
13. The next aspect is with regard to the valuation of property. The
Appropriate Authority came to the conclusion that the tenancy was not
subsisting. This is a factually incorrect finding. According to the Appropriate
Authority, the tenancy expired on 04.08.1993, whereas the agreement for sale
was on 21.04.1993. The Appropriate Authority lost sight of this important
fact which would go to show that on the date of the agreement of sale the
tenancy was subsisting. Therefore, such finding is perverse.
14. The next aspect is with regard to the valuation of the property. The
transferors and the transferee contended that the appropriate method of
valuation shall be the rent capitalisation method. The Appropriate Authority
rejected such contention by observing that since the tenancy is not
recognised, such rent capitalisation method cannot be adopted. We fail to
understand as to the meaning of the expression "tenancy is not recognised."
The Appropriate Authority had two options firstly to examine and ascertain as
to whether there was a valid tenancy or to hold that there is no tenancy
subsisting. There cannot be a finding or in other words, there cannot be a
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conclusion, that the tenancy is not recognised and there is no such power
vested with the Appropriate Authority by piercing into the transactions which
were much ahead of the agreement for sale. The Appropriate Authority has no
right to question the validity of the agreement for sale, nor it can go into the
legality of the transaction or the title of the vendors. Therefore, the finding of
the Appropriate Authority to the effect that the tenancy is not recognised is
perverse and unsustainable. The Learned Single Bench while considering this
issue has made an observation that the Appropriate Authority doubts the
tenancy. On a careful reading of the order passed by the Appropriate
Authority dated 29.07.1993, we find that there is no such finding rendered by
the authority. As the authority has used the expression that the "tenancy is
not recognised."As pointed out, as on the date of the agreement of sale i.e.
21.04.1993, the tenancy was subsisting. Hence the Appropriate Authority
exceeded its jurisdiction in assuming certain events which were to take place
much after the agreement for sale. These are all aspects which are beyond the
jurisdiction of the Appropriate Authority. Therefore, in our view the decision
in K.L Suneja would apply to the facts and circumstances of the case, wherein
it was held that only question which the Appropriate Authority can decide is
whether the property is undervalued or not; it cannot go beyond terms of the
agreement; it cannot question the validity of the agreement, legality of the
transaction or the title of the vendor. Thus, we are fully satisfied that the
Appropriate Authority clearly breached all the above legal principles
rendering the order to be wholly illegal. Thus, if the tenancy was subsisting,
the Appropriate Authority was required to adopt the rent capitalisation
method. In C.B.Gautam, it was argued by the revenue that if the expression
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"free from all encumbrances" if to be struck down, it would be left open to an
intending seller of immovable property to undervalue the property by creating
a bogus lease or bogus encumbrance and this would defeat the purpose for
which chapter XX-C was introduced. Considering the said submission of the
revenue, the Hon'ble Supreme Court pointed out that if the lease or an
encumbrance found to be bogus, it can be treated as of no legal effect and it
could not affect any of the rights of the Central Government on the vesting of
the property in the event of an order for purchase being made under Section
269 UD (1) of the Act. In the case on hand, there is no finding rendered by
the Appropriate Authority that the lease was bogus rather curiously the
Appropriate Authority states that the tenancy is "not recognised". This in our
view is not sustainable. Further in C.B. Gautam the Hon'ble Supreme Court,
has pointed out as to what are all the factors which may be looked into while
valuing a property. Moreover, in a given transaction of an agreement to sell,
there might be several bona fide considerations which might induce a seller to
sell his immovable property at less than what might induce a seller to sell his
immovable property at less than what might be considered to be the fair
market value. For example: he might be in immediate need of money and
unable to wait till a buyer is found who is willing to pay the fair market value
for the property. There might be some disputes as to the title of the
immovable property as a result of which it might have to be sold at a price
lower than the fair market value or a subsisting lease in favour of the
intending purchaser. There might similarly be other genuine reasons which
might have led the seller to agree to sell the property to a particular
purchaser at less than the market value even in cases where the purchaser
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might not be his relative. This clearly shows that an order for compulsory
purchase results in the rights of holders of encumbrances and leasehold
rights being destroyed or significantly diminished. It was further held that in
a given case, it might happen that property is intended to be sold under an
agreement to sell subject to encumbrances and leasehold rights, and very
often agreements to sell immovable property do not provide that the property
sold would be free from encumbrances or leasehold rights. In such a case, the
apparent consideration, even if it is equivalent to the fair market value, would
be indicative of the market value of the property subject to such
encumbrances. If, in such a case, an order for compulsory purchase is made,
the result would be that the property would be compulsorily purchased and
the amount to be paid for the purchase would be only equal to the apparent
consideration and the apparent consideration would not take into account
the value of the encumbrances on the property like mortgages and so on or
the leasehold rights. It was further held that a property may be heavily
encumbered and its value can be considerably depressed if it were sold
subject to encumbrances. Further it was observed that it is equally well
known that a property in respect of which there is a subsisting lease for a
substantial period of time would fetch a comparatively low price because the
purchase thereof would not carry with it the right to possession or occupation
during the subsistence of the leasehold interests, in such cases, the amount
of apparent consideration could be even less than the value of the
encumbrances or the leasehold interests.
15. The facts pointed out in the above decisions are manifest/apparent on
record in the case on hand which had been conveniently ignored by the
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Appropriate Authority. The specific plea of the transferors as regards the
compelling circumstances to sell the property was not noted by the
Appropriate Authority. The other factors which diminish the value of the
property were not taken into consideration. As laid down by the Hon'ble
Supreme Court in Kailash Suneja in case of pre-emptive of purchase of
property, the method of valuation of the fair market value has to be just and
reasonable. The writ petitioner was not provided with the copies of the
relevant documents pertaining to the three properties which were referred to
as the sale instances to arrive at the value of the subject property. The writ
petitioner has specifically stated that none of those three properties are
tenanted properties. In Kailash Suneja, it has been held that while
considering comparable instances, the instances of tenanted properties has
to be taken into consideration. This aspect has been brushed aside by the
Appropriate Authority.
16. The revenue placed reliance on the decision in Mrs. Sunny Uppal
Versus Appropriate Authority (Income Tax Department) and Others 5. This
decision deals with scope of judicial review under Article 226 and 227 of the
Constitution. The Hon'ble Supreme Court after taking into consideration
various decisions culled out the situations where the court can exercise the
power of judicial review:-
(i) Erroneous assumption or excess of jurisdiction;
(ii) Refusal to exercise jurisdiction;
(iii) Error of law apparent on the fact of the record as distinguished from
a mere mistake of law or error of law relating to jurisdiction;
(2003) 261 ITR 446 (Delhi)
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(iv) Violation of the principles of natural justice;
(v) Arbitrary or capricious exercise of authority or discretion;
(vi) Arriving at a finding which is perverse or based on no material;
(vii) A patent or flagrant error of procedure;
(viii) Order resulting in manifest injuries.
17. In our view, the above decision would support our conclusion, as
a writ petition would be maintainable when there is violation of principles of
natural justice, when the finding of the authority is perverse or based on no
materials and when the authority has committed an error of law relating to
jurisdiction. The facts in the decision in Mrs. Sunny Uppal are
distinguishable, the Court held that the writ petitioners therein had never
complained about non supply of valuation report and only in the writ
petition such a plea was raised. That apart, the writ petitioner therein did
not raise that rent capitalisation method has to be adopted. Therefore, the
Court found that the writ petitioner therein cannot raise the same for the
first time before the Writ Court. Thus the decision is clearly distinguishable
on such aspects as the parties before us had sought for the copies of the
reports/documents, consistently pleaded that rent capitalisation method
has to be adopted as there was a valid tenancy subsisting. The revenue
placed reliance on the decision in Appropriate Authority Versus Smt. Sudha
Patil and Another 6. This decision was with regard to the jurisdiction of this
Court under Article 226/227 of the Constitution of India. As pointed out by
us, when there has been gross violation of principles of natural justice and
when there is a perversity in the approach of the authority, failure to take
(1999) 235 ITR 118 (SC)
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into consideration relevant materials, ignoring settled legal principles more
particularly regarding the valuation of the property, undoubtedly this Court
would be well justified in exercising its jurisdiction under Article 226 of the
Constitution. Therefore, the decision in Smt. Sudha Patil would not render
assistance to the case of the revenue considering the facts and
circumstances of the case on hand.
18. The valuation of the property must be made by taking into
consideration all relevant facts which has not been done by the Appropriate
Authority. The valuation adopted by the authority has not been done in an
objective manner, without reference to the materials placed by the
transferors and transferee. More importantly proper and adequate
opportunity was not granted to the transferors/transferee/tenant. Fair
hearing is a postulate of decision making by a statutory authority exercising
quasi-judicial powers. The rules of natural justice operates as implied
mandatory requirement, non-observance whereof invalidates the exercise of
power. [Refer: Government of India Versus Maxim A Lobo, 7 Vidyavathi
Kapoor Trust Versus CCIT 8 affirmed in C.B. Gautam Versus Union of India 9
19. In Kamala (Ch.) Versus Appropriate Authority,10 it was held that
sufficient opportunity should be given to the concerned parties and copies of
relevant documents should be furnished, failure to do so was held to be
gross breach of natural justice, as held in Sona Builders (supra).
(1991) 190 ITR 101 (Mad)
(1992) 194 ITR 584 (Kar)
(1993) 199 ITR 530 (SC), (supra)
(1999) 240 ITR 63 (Mad)
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20. In Appropriate Authority Versus Naresh M Mehta,11 it was held that the
Appropriate Authority has no jurisdiction to go into the objects or the
purpose of the transaction, or its legality and validity. In Amudha (T) Versus
Members, Appropriate Authority,12 it was held that the Appropriate Authority
should exercise power under Section 269 UD with great care and utmost
fairness. Market value should be determined in a fair and just manner.
21. Thus, for all the above reasons, we are of the clear view that the order
passed by the Appropriate Authority dated 29.07.1993 is unsustainable, in
gross violation of principles of natural justice, perverse and liable to be set
aside.
22. In the result, the appeal is allowed, the order passed in the writ
petition is set aside. Consequently the writ petition is allowed and the order
passed by the Appropriate Authority dated 29.07.1993 is set aside and the
Appropriate Authority is directed to issue necessary certificate under Section
269 UL of the Act within two weeks from the date of receipt of the server
copy of this judgment and the vendors are directed to proceed further to
complete the sale transaction in favour of the appellant within four weeks
from the date of receipt of the certificate under Section 269 UL of the Act. No
costs.
(1992) 64 Taxman 241 (Mad)
(1993) 202 ITR 525 (Mad)
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(T.S. SIVAGNANAM, J)
I agree.
(HIRANMAY BHATTACHARYYA, J)
(P.A- SACHIN)
