Gujarat H.C : The petitioner for appropriate writ, direction and/or order quashing and setting aside the order dt. 27th Oct., 1994 (Annexure A)

Counsel Appeared

S.N. Soparkar, for the Petitioner : B.J. Shelat for R.P. Bhatt, for the Respondents.

C.K. THAKKAR, J.:

This petition is filed by the petitioner for appropriate writ, direction and/or order quashing and setting aside the order dt. 27th Oct., 1994 (Annexure A) to the petition passed by Appropriate Authority, respondent No. 2 herein by which an order was passed in exercise of the power under s. 269UD(1) of IT Act, 1961 (hereinafter referred to as “the Act”).

2. It is the case of the petitioner that respondent No. 3 owned a plot of land admeasuring 675 sq. yds. situate at Maninagar, Ahmedabad, on which seven shops were constructed. All the shops were let out to different tenants and they were in possession since many years. The petitioner was also one of the tenants. Since respondent No. 3 was willing to sell the property and the petitioner was one of the sitting tenants, the petitioner was interested in buying the property. An agreement to sell was, therefore, entered into between the petitioner and respondent No. 3 on 21st July, 1994 for an amount of Rs. 13.13 lacs. The agreement is annexed to the petition. As the total sale consideration exceeded Rs. 10 lacs, it was necessary to fill in Form No. 37-I as required under s. 269UC(3) of the Act. The Appropriate Authority issued show cause notice on 14th Oct., 1994, calling upon the transferor and transferee as to why the property should not be compulsorily purchased, inter alia, alleging that considering two sale instances referred to in the notice, “apparent and discounted” consideration of property under consideration was underestimated by more than 15%. The petitioner as well as respondent No. 3 were, therefore, called upon to show cause why an order under s. 269UD(1) of the Act should not be passed. The petitioner as well as respondent No. 3 replied the said show cause notice on 21st Oct., 1994. In reply, it was contended that the main road frontage of property under consideration was occupied by seven tenants since last more than 30 years. It was not liability of the vendor to get those tenants evicted. It was also stated that since the purchaser was one of the tenants that he had purchased the property. So far as Sales Instance Property-1 (SIP-1) was concerned, it was submitted that there was a very small room on the back side of plot which did not affect development. Regarding Sales Instance Property-2 (SIP-2), it was mentioned that it was not in commercial zone but was wrongly mentioned in the show cause notice that it was in commercial zone. In view of the above reasons, it was contended by the petitioner as well as respondent No. 3 that it was not a case to acquire property under s. 269UD(1) of the Act and notice was liable to be revoked.

After considering the reply, the Appropriate Authority passed the impugned order. In paras 4 and 5, it was stated as under :

“4. We have carefully considered the argument advanced by Shri B.K. Jani, Advocate and submissions made by the transferor and the transferee and same are not accepted on the following grounds :

The property under consideration can be developed even without disturbing tenants because the property under consideration is a corner plot and can have separate entrance on 30′ wide road. Though the property is in the residential zone, it has commercial potential. There are seven shops on the front on 50′ wide road and is situated opposite L.G. Hospital. The sale instance relied upon by the Appropriate Authority is of the same area and comparable to the property under consideration. As discussed in the show cause notice, the apparent and discounted rate are low compared to the market rate of the property situated in that area and apparent and discounted consideration are understated by more than 15%.

5. We have carefully considered all relevant facts, material gathered and submission made by the transferor and the transferee and we are satisfied that it is a fit case for pre-emptive purchase of the property, under the provisions of Chapter XX-C of the IT Act, 1961. Therefore, in exercise of the powers vested in us under s. 269UD(1), we hereby order the purchase of the property.”

Mr. S.N. Soparkar, learned counsel for the petitioner raised various contentions. He submitted that there is an error apparent on the face of the record committed by Appropriate Authority in not considering the relevant and material fact that neither SIP-1 nor SIP-2 could be said to be comparable. The order, therefore, suffers from non- application of mind and requires to be quashed. He also submitted that SIP-1 could not have been taken into account inasmuch as was having seven sitting tenants. Considering that vital fact, Authority was not right in coming to the conclusion and in recording a finding that discounted rate per sq. mt. of property under consideration would be Rs. 2,236 and of SIP-1 of Rs. 2,788 and SIP-2 as Rs. 3,772.

In affidavit-in-reply, filed on behalf of the respondent, the deponent took into account the fact regarding sitting tenants in property under consideration but has stated as under : “(3)(C) With reference to para 2.1 and 3.2(a) it is submitted that the grounds raised therein are not tenable. The property is a corner plot abutting on a 50′ road and 30′ wide road and, hence, can be developed even without disturbing the tenanted shops abutting the 50′ wide road. The net discounted rate of property under consideration after deducting area occupied by the tenants and after considering the capitalised value of tenanted portion the rate per sq. mts., of PSI (sic) comes to Rs. 3,140, the statement giving the working is annexed hereto and marked Annexure 1. Comparing this rate with the rate of SIP-2 there is an under statement by more than 15%.”

According to the respondent, even if property under consideration could not be compared with SIP-1, it could be compared with SIP-2. Mr. Soparkar, submitted that looking to affidavit-in-reply, it is clear that Appropriate Authority itself was of the opinion that apparent consideration of property under consideration mentioned in the show cause notice (Rs. 2,236) would then come to Rs. 3,140 per sq. mtr. Obviously, therefore, reliance placed on SIP-1 could not be pressed in service. In our opinion, Mr. Soparkar is right in submitting that in that case, the petitioner could place reliance on that instance in support of his contention, particularly when it is not the case of Appropriate Authority that in case of SIP-1, the apparent consideration was understated. When in case of SIP-1 where discounted consideration was Rs. 2,788 per sq. mtr., and no steps were taken, it was open to the petitioner to place reliance on that instance as comparable with property under consideration and such fact could not be ignored by Appropriate Authority while deciding the case in question. On that ground, therefore, the petition requires to be allowed by upholding the contention of Mr. Soparkar.

The matter, however, does not end there. Even with regard to SIP-2, the contention of the petitioner is well founded. As stated by us hereinabove, in reply to the show cause notice itself, it was mentioned by the petitioner as well as respondent No. 3 that property under consideration was in residential zone whereas SIP-2 was in commercial zone. In the impugned order, it was stated that property under consideration was having commercial potential. It did not state specifically anything about SIP-2. However, in affidavit-in-reply, it was stated : “3.(e) With reference to ground (c), the averments made therein are not accepted. It is submitted that SIP-1 is abutting 40′ wide road knowing (sic) L.G. Hospital SIP-2 is situated behind Swaminarayan Temple in Maninagar area. Both are lying in residential zones. Both the SIPs are, therefore, comparable to the property under consideration.” Thus, from the affidavit-in-reply also the case of the respondent is that property under consideration as well as SIP-2 both are in residential zone and both are, therefore, comparable. The petitioner has filed an affidavit-in- rejoinder and in that rejoinder, he has stated that property under consideration is in residential zone but SIP-2 is in commercial zone. Reliance is placed on a certificate issued by Town Development Officer, Ahmedabad Municipal Corporation, Ahmedabad (local authority), dt. 23rd Nov., 1994. In the said certificate, it was mentioned that SIP-2 was situated in local commercial zone.

In view of the above facts coupled with certificate issued by local authority, it is established that SIP-2 is located in commercial zone. In our opinion, therefore, SIP-2 also cannot be compared with property under consideration and, hence, reliance placed on SIP-2 also cannot be said to be legal. It is not a sale comparable one and in passing the impugned order on the basis of SIP-2, the respondent authority has committed an error apparent on record.

Apart from the above grounds, in our opinion, Mr. Soparkar is right in submitting that the satisfaction as contemplated by s. 269UD(1) must be based on objective facts. There must be evidence and material to arrive at conclusion and satisfaction. Rejection of sale instances and/or grounds and/or reasons put forward by the party is one thing. At the most, it can be said to be a negative finding for not accepting the case of the transferor/transferee. The law, however, requires something more. In our opinion, it is incumbent upon Appropriate Authority to come to a positive and definite conclusion that the property was undervalued. A similar question arose before us in Special Civil Application No. 869 of 1995 decided by us on 30th March., 1995 [reported as Anagram Finance Ltd. vs. Appropriate Authority & Anr. (1995) 127 CTR (Guj) 193]. Considering the relevant provisions of the Act as also the decision of the Hon’ble Supreme Court in Barium Chemicals Ltd. & Anr. vs. Company Law Board & Ors. AIR 1967 SC 195, we observed as under : “The combined reading of s. 269UD(1A) and (1B) of the Act leaves no room of doubt that it is a question of objectively decision making process by taking into consideration all relevant materials which have come before hearing authority and considering the rival aspects of the matter. Moreover, requirement of law is to specify the grounds on which the order of pre-emptive purchase is made. That obligation does not stop by merely rejecting the submissions made before it. Rejection of submissions made by the vendors or transferee or persons interested in the property, does not lead to consequence that ground for making pre-emptive purchase exists. Sine qua non is that the reasons must exist on the material placed before it, for supporting the action taken for pre-emptive purchase under s. 269UD of the Act. The order clearly falls short of this requirement.”

In our opinion, the point is concluded by the above decision also. Since no satisfaction has been arrived at by the respondent Authority on the basis of objective facts and no reasons have been recorded for coming to a positive conclusion as to why there was difference of more than 15%, the order cannot be said to be in accordance with law and must be quashed and set aside.

For the foregoing reasons, the petition requires to be allowed and is accordingly allowed. The impugned order dt. 27th Oct., 1994, passed by Appropriate Authority at Annexure-A is hereby quashed and set aside. Respondent No. 1 is directed to complete necessary formalities within a period of six weeks from the date of receipt of the order of the Court including issuance of clearance certificate. Rule made absolute.

No order as to costs.

[Citation: 218 ITR 226]