:

Mr. J. P. Shah, learned advocate for the petitioner requests to delete respondent No. 2 from the petition as no relief is claimed against him. Request is granted. On deletion of respondent No. 2, respondent No. 1 now becomes the sole respondent.

Rule. Mr. B. J. Shelat, advocate instructed by M/s. R. P. Bhatt & Co. waives service of Rule on behalf of the respondent (original respondent No. 1). On the facts and in the circumstances of the case, the matter is taken up for final hearing today.

2. This petition is filed by the petitioner for quashing and setting aside orders at Annexures "G" and "H" passed by Appropriate Authority on 28th April, 1995. By order, Annexure "G", in exercise of powers conferred under s. 269UD(1) of the IT Act, 1961 (hereinafter referred to as "the Act"), the respondent exercised power to purchase immovable property consisting of land with superstructure situated in Bootee Street in Cantonment area, Pune bearing House No. 900 (GLR Survey No. 390/5A), admeasuring o. 34 acres (14810.4 sq. ft. or 1375.92 sq. mtrs) (PUC for short). By order, Annexure "H", passed under s. 269UE(2) of the Act, the property was ordered to be taken over from the transferor.

It is the case of the petitioner that in the light of memorandum of undertaking ("MOU" for short) entered on 29th Dec., 1994, the petitioner agreed to purchase land from one Mr. Shahrokh Rustom Mazda on old grant tenure with three tenants therein. In MOU, it was mentioned that the land was owned by the Central Government and held by the vendor on old grant tenure. It was also stated that the land was occupied by three sitting tenants and it was for the purchaser to get them evicted at his own costs if he wished to do so. The consideration which was agreed between the parties was Rs. fifty one lacs. An amount of Rs. five lacs was paid by way of earnest money at the time of execution of MOU. The remaining amount was to be paid as mentioned in MOU. In accordance with the provisions of s. 269UC, Form No. 37-I was filled in by the parties on 6th Jan., 1995. In MOU as well as in Form No. 37-I, it was stated that three persons other than the owner were in occupation of the property as tenants and they were having leasehold rights.

On 10th April, 1995, the Appropriate Authority issued notice to transferor and transferee under the provisions of s. 269UD(1A), alleging therein that the rate of property under consideration ("PUC") was too low in view of two sale instances referred to in the notice. It was averred that PUC was situated in Bootee Street in Cantonment area. Sale Instance Property 1 (SIP-1 for short) was also situated on General Thimmaya Road in Cantonment area whereas Sale Instance Property 2 (SIP-2 for short) was situated at about 150 metres from General Thimmaya Road. In case of PUC, the agreement was of 29th Dec., 1994 while in case of SIP-1 it was of 31st Aug., 1994 and in case of SIP-2, it was of 6th Jan., 1995. SIP-1 was sold at the rate of Rs. 10,886 per sq. mtr. whereas SIP-2 was sold at the rate of Rs. 13,660 per sq. mtr. Apparent consideration of PUC was Rs. 3,519 per sq. mtr. Discounted consideration of SIP-1 was Rs. 9,984 per sq. mtr. SIP-2 was Rs. 13,588 per sq. mtr. while that of PUC was of Rs. 3,317 per sq. mtr. In view of those facts, it was clear that apparent as well as discounted consideration of PUC appeared to be understated by more than 15%. The Appropriate Authority, therefore, called upon the parties to show cause as to why an order under s. 269UD(1) should not be passed and the property should not be acquired under Chapter XX-C of the Act.

The petitioner submitted reply to the aforesaid show cause notice on 18th April, 1995, inter alia, contending that SIPs were located on General Thimmaya Road in Pune Camp, while PUC was situated in Bootee Street. General Thimmaya Road was prime location in Pune Cantonment and an exclusive commercial centre area but Bootee Street though in nearby area, it was predominately a lower middle class locality. Another major factor, according to the petitioner, was that PUC was under old grant rights and for getting it converted into freehold, additional expenditure of conversion charges at the rate of around Rs. 260 per sq. ft. would have to be incurred. It was also mentioned that PUC was occupied by three sitting tenants, namely : (1) Mr. Behram Surty, (2) Mr. F. G. Hirani and (3) Mr. Behram Shahbadi. PUC was surrounded by motor garages which would reduce value of any property. The plot was also faced by a burial ground which had further reduced its value. It was having a very small frontage. In the light of all those facts, the petitioner contended that the consideration for which the property was agreed to be sold was reasonable and the notice was required to be withdrawn. The vendor also submitted a similar reply on 21st April, 1995.

After considering the replies of the parties, the Appropriate Authority passed on order under s. 269UD(1) of the Act, holding that it was satisfied that the market rate of PUC would not be less than Rs. 7,500 per sq. mtr. and thus, there was understatement of more than 15% and it was proper to pass an order for pre-emptive purchase, and accordingly the impugned order was passed.

In para 4, the Appropriate Authority stated :

"4. We have carefully gone through the submission made by the transferor and transferee and the same are discussed hereunder :

As regards the first contention that the SIP-I and SIP-II are on General Thimmaya Road which is an upper class residential and commercial area while the PUC is on Bootee Street, there is no doubt that the locations of the SIP-1 and SIP-2 are superior to the location of the PUC but we want to add that no two properties would be identical in all respects and yet comparisons can be made to arrive at a fair and reasonable conclusion about the market rate of a particular property. In para 2 above, it has been noted that the land rate of PUC is Rs. 3,819, of SIP-1 is Rs. 10,886 and of SIP-II is Rs. 13,660 per sq. mtr. as per apparent consideration. The difference is wide and any one can realise the implication.

The contention regarding tenancy and the cost of eviction etc., it would not change the situation to such an extent that the rate of PUC would be brought near the rates of SIP-I and SIP-II even after making reasonable adjustments for locational advantages of the SIP-I and SIP-II.

Another contention raised was regarding the calculation of discount under s. 269UA(b) r/w r. 48-I and it is argued that discounting is not correct. We have examined the matter with reference to the relevant clause of the agreement and have found that the contention is totally misplaced and misconceived. Clauses 9(a) to 9(d) are clear and there is no ambiguity. Clause (c) contemplates payment of Rs. 5 lakhs per month from the date of 37-A clearance or 30th April, 1995, whichever is earlier. Hence we are unable to agree with the contention raised in this regard.

The last contention raised is that the PUC plot is under old grant and conversion charges have to be paid. This is a statement of fact but this would not affect the value of the PUC. Even in the case of SIP-I as well as SIP-II, such conversion charges had to be paid.

Having considered the above and keeping in view the location of the PUC, in our considered opinion, the market rate of the PUC would not be less than Rs. 7,500 per sq. mtr. and thus the understatement is more than 15%."

3. Mr. J. P. Shah, learned counsel for the petitioner raised various points. He contended that the notice issued by Appropriate Authority was vague and no material particulars had been supplied to the petitioner as to how SIP-1 and SIP-2 could be said to be comparable to PUC. He submitted that when in the impugned order itself, a finding is recorded that location of SIP-1 and SIP-2 was superior to PUC, no order could have been passed placing reliance on SIP-1 and SIP-2. Mr. Shah argued that PUC was occupied by three tenants and though that fact was accepted by the Appropriate Authority, it committed serious error of law in observing that "it would not change the situation". According to the counsel, the authority was not right in observing that conversion charges which were required to be paid by the petitioner would not affect the value of PUC inasmuch as in case of SIPs also, such conversion charges had to be paid. Finally, Mr. Shah contended that on the same day and in similar circumstances, an order was passed by the same authority in case of SIP-2 and upheld the contention similar to one raised by the petitioner. In almost identical circumstances, an order of pre-emptive purchase was made against him which is illegal and contrary to law. According to Mr. Shah, there is an error apparent on the face of the record, committed by the respondent authority in passing the impugned orders by not applying relevant principles and ignoring material considerations. The orders, therefore, are required to be interfered with in exercise of powers under Arts. 226 and 227 of the Constitution of India.

Mr. B. J. Shelat, learned counsel appearing for the respondent authority, on the other hand, supported the orders passed by the respondent authority. He raised preliminary contentions regarding territorial jurisdiction of this Court as well as locus standi of the petitioner in filing the petition.

On merits, Mr. Shelat submitted that after taking into account relevant facts and circumstances and after affording reasonable opportunity of being heard to the parties, the authority came to a conclusion that there was understatement of apparent consideration to the extent of more than 15% and, hence, the order was passed. Such order cannot be said to be contrary to law. There is no error apparent on the face of the record which requires to be corrected in exercise of extraordinary jurisdiction of this Court under Art. 226 of the Constitution and the petition is liable to be dismissed.

4. Having given anxious and thoughtful consideration to the facts and circumstances of the case, we are of the view that the petition requires to be allowed. So far as the preliminary contention of Mr. Shelet is concerned, we do not find any substance therein. It is, no doubt, true that the litigation pertains to immovable property situated in Pune. It is also true that both the parties i.e. transferor and transferee are residents of Pune. From the record, however, it clearly transpires that notice under s. 269UD(1A) of the Act was issued by the respondent from Ahmedabad. The petitioner submitted his reply to the said show cause notice at Ahmedabad, and after considering notice as well as reply, the Appropriate Authority passed an order at Ahmedabad which is impugned in the present petition. It is, therefore, very clear that atleast a part of cause of action can certainly be said to have arisen within the territorial jurisdiction of this Court. In our opinion, therefore, this Court has jurisdiction. Article 226(2) of the Constitution reads as under :

"The power conferred by cl. (1) to issue directions, orders or writs to any Government, authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories."

Since part of cause of action can be said to have accrued at Ahmedabad within the territorial jurisdiction of the High Court of Gujarat, this Court has jurisdiction to entertain the petition. The preliminary contention raised by Mr. Shelat, therefore, fails and the same is rejected.

5. On merits, we are of the view that the contentions raised by Mr. Shah are well-founded and must be upheld. Looking to contents of show cause notice, we see considerable force in the arguments of learned counsel for the petitioner that notice does not disclose relevant facts as to the location of PUC and SIP-1 and SIP-2. In para 3, it was stated :

"The PUC is situated in Bootee Street in Cantonment area. The SIP-1 is situated on General Thimmaya Road in Cantonment area. SIP-2 is situated about 150 metres from General Thimmaya Road. In view of the above, the apparent consideration and the discounted consideration of the PUC appears to be understated by more than 15%. The members of the Appropriate Authority are, therefore, satisfied that this is a fit case for the issue of show cause notice under s. 269UD(1A) of the IT Act, 1961."

Mr. Shah is right on arguing that from the show cause notice, it is not at all clear as to how PUC can be compared with SIP-1 and SIP-2. From the portion of para 3 extracted above, it appears that PUC is in Bootee Street in Cantonment area while SIP-1 is situated on General Thimmaya Road in Cantonment area and SIP-2 is situated about 150 metres from General Thimmaya Road. It is not made clear as to what is the distance between PUC and SIP-1 and SIP-2. It is also not clear where SIP-2 is situated considering and keeping in mind, the location of PUC. The notice, therefore, can be said to be vague and on that ground alone, the orders are liable to be quashed.

6. We are, however, not allowing the petition only on that ground since in our opinion, even otherwise also, the orders are liable to be quashed. Looking to the reasons recorded by respondent authority, it is clear that the authority is satisfied that location of SIP-1 and SIP-2 is superior to location of PUC. Now the respondent authority has observed that two properties would not be identical in all respects and hence on the basis of fair and reasonable comparison, a conclusion must be based. The authority observed that the rate of PUC was very low as the difference was very wide and, hence, an order of pre-emptive purchase was made. In our opinion, the approach as also reasoning of Appropriate Authority cannot be said to be legal, valid, proper and in accordance with law. If location of SIP-1 and SIP-2 is superior to location of PUC, no reliance could be placed by Appropriate Authority on such sale instance and they could not be treated as comparable cause. In that case, no inquiry could have been proceeded further. Though Appropriate Authority conceded that location of SIP-1 and SIP-2 was superior, yet it proceeded to recite as to insufficiency of apparent consideration for which an agreement to sell / memorandum of consideration was entered into. In our considered view, both cannot stand together. If instances were not comparable, no further inquiry was needed on that count and an order for pre-emptive purchase could not be passed.

7. The matter can yet be looked from a different angle. The petitioner has stated in the petition that there were three sitting tenants in PUC. The said fact is also mentioned in agreement to sell as well as in reply to show cause notice. It is not the case of Appropriate Authority that the said fact was not correct. On the contrary, looking to the order, it clearly appears that the authority had accepted that fact. It was observed in the order that the contention of tenancy would not change the situation to such an extent that the consideration quoted by the parties can be said to be proper. In affidavit-in-reply also, it was observed by the authority that

"monthly tenancies have no claim in transaction of this kind. They cannot object to the transfer of land or giving of development rights."

Here also, in our opinion, approach of the authority cannot be said to be in consonance with law. The question is not whether the tenants have right in such proceedings. The question is as to the amount of consideration to be paid by a willing purchaser to a willing seller when there are sitting tenants in property in question. In our opinion, the property in which there are no tenants cannot be put on par with the property in which there are sitting tenants and peaceful and vacant possession cannot be handed over immediately to the vendee. It is not the case of Appropriate Authority also that on SIP-1 and SIP-2 there were sitting tenants. Hence, placing of reliance on SIP-1 and SIP-2 and recording of finding that there was understatement of consideration of PUC cannot be said to be valid and cannot be upheld. Mr. Shah in that connection rightly placed reliance on the order passed by Appropriate Authority on the same day in respect of SIP-2 (Ex. X/1). In that case, the same authority considered the fact of sitting tenants being there on the property. In para 6(ii), it was observed :

"This property was covered under the old grant scheme and can be converted into freehold tenure after payment of premium to the Cantonment authorities and the responsibilities of conversion was with the transferee. Moreover, the structure on this property was under the occupation of 3 tenants and 2 occupiers in addition to the transferor. The rent payable was meagre and the tenants were occupying the structure for last 25 years. Moreover, the transaction is very old (20th Sept., 1993)."

Considering all these aspects, this property is also not comparable to the PUC.

8. Mr. Shah is right, therefore, in contending that in case of SIP-2 the fact that the property being in occupation of tenants weighed with the authority and it rightly observed that such tenanted property cannot be said to be comparable to the property in which there was no tenant. That fact, however, was not considered relevant by the same authority in the instant case. Thus, there is an error of law apparent on the face of the record.

9. Finally, Mr. Shah is right in contending that the statement regarding payment of conversion charges made by Appropriate Authority in the impugned order is factually incorrect. In para 4, Appropriate Authority has observed that even in case of SIP-1 and SIP-2, conversion charges had to be paid. Mr. Shah relying upon the order passed by the same authority in case of SIP-2 stated that in fact, in case of SIP-2 such conversion charges had already been paid. When the proceedings were initiated under Chapter XX-C in respect of that property, the said aspect was considered by Appropriate Authority and a finding was recorded to that effect. It was observed :

"Secondly, the SIP was subject to the payment of conversion charges of Rs. 200 to Rs. 300 per sq. ft. to Pune Cantonment Board thereby increasing the cost of development of the SIP by Rs. 2,153 to Rs. 3,229 per sq. mtr. Such conversion charges in the case of PUC have already been paid."

Thus, even on this ground, the order is vulnerable.

10. Mr. Shelat contended that the present petition is filed by the transferee who has no locus standi in such proceedings to challenge the order passed under s. 269UD(1) of the Act. But even if it is assumed that he has such right, then also, the right is a limited one. For the said proposition of law, reliance is placed on decisions in Devesh Behari Saxena vs. Dy. CIT & Anr. (1994) 208 ITR 637 (All), Smt. Vimala Devi G. Maheshwari vs. S. K. Laul & Ors. (1994) 208 ITR 734 (Bom), Vimal Agarwal vs. Appropriate Authority & Ors. (1994) 210 ITR 16 (Bom), and in Lok Housing & Construction vs. Appropriate Authority & Ors. (in writ petition No. 548 of 1995 decided by a Division Bench of the High Court of Bombay on 26th April, 1995). In the said case, after considering the relevant provisions of the Act, the High Court of Bombay held that after decision in C. B. Gautam vs. Union of India & Ors. (1992) 108 CTR (SC) 304 r/w 1993 (1) SCC 78, a show cause notice is required to be given to both - transferor and transferee before acquiring the property under Chapter XX-C of the Act. But in exercise of writ jurisdiction, there cannot be any appraisal or reappreciation of facts and materials. Interference in writ jurisdiction is justified only when the order made by Appropriate Authority is either perverse or there is no evidence or is passed on some extraneous consideration and/or materials. Mr. Shelat contended that this Court is not exercising appellate powers, and the extent of judicial review under Art. 226 of the Constitution is limited to correcting only errors of law apparent on record. As far as proposition of law is concerned, there can be no dispute. It is true that we cannot substitute our opinion for the opinion of Appropriate Authority by reappreciating the facts. In the instant case, however, as stated by us hereinabove, SIP-1, and SIP-2, are not comparable instances and yet they have been compared by the respondent and a finding has been recorded by Appropriate Authority that there was understatement of consideration of PUC of more than 15%. This is not permissible in law. Such instances could not have been relied upon by Appropriate Authority. Likewise, the respondent authority has committed an error of law in not properly considering the fact that the PUC was tenanted property and it could not have been compared with SIP-1. Again, in case of SIP-2, the authority considered the fact regarding property in occupation of tenant as relevant for not treating it as comparable to other property on which reliance is placed by the Department but the same reasoning was not applied in case of PUC. Finally, the fact of payment of conversion charges also weighed with the authority which was not the case and the statement was factually not correct. In our opinion, therefore, Mr. Shelat is not right in contending that this is a case of reappreciation of facts. In our view, factors which could not have been taken into account were considered which has vitiated the order passed by the authority. We may also observe that in view of insertion of sub-s. (1A) of s. 269UD of the Act w.e.f. 17th Nov., 1992, notice is required to be issued to both - transferor as well as transferee. That point is also concluded in C. B. Gautams case (supra). If such notice is required to be given, it is open to the aggrieved party to challenge that decision and in that case, he can take all contentions available to him in law. In our opinion, therefore, the contention that the transferee has only limited right to challenge cannot be said to be well-founded and is negatived.

11. Apart from the above grounds, Mr. Shah is right in submitting that the satisfaction contemplated by s. 269UD must be based on objective facts. There must be evidence and material to reach the conclusion and satisfaction. Rejection of sale instances and/or grounds and/or reasons put forth 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. But the law requires something more. In our considered 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 on 30th Jan./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 Honble Supreme Court in Barium Chemicals Ltd. & Anr. vs. Company Law Board & Ors. AIR 1967 SC 295, 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 submission made before it. Rejection of submissions made by the vendors or transferee or person interested in the property, does not lead to consequence that grounds 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."

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

12. For the foregoing reasons, the petition requires to be allowed and is accordingly allowed. The impugned orders dt. 11th Jan., 1995 passed by the respondent Appropriate Authority at Annexure "G" and "H" are hereby quashed and set aside. The respondent is directed to complete necessary formalities within a period of six weeks from the date of receipt of the writ of the Court including issuance of clearance certificate. Rule is made absolute. No order as to costs.