Calcutta High Court
Associated Cement Companies Ltd. And ... vs Appropriate Authority And Ors. on 20 April, 1993
Equivalent citations: [1995]213ITR288(CAL)
Author: Ruma Pal
Bench: Ruma Pal
ORDER UNDER S. 269UD--Writ by intending purchaser--Allegedly delayed. Ratio : Writ petition by intending purchaser challenging validity of purchase order filed on date of auction dismissed as adequate opportunity given to petitioner. Held : The order of appropriate authority was valid for the following reasons. (i) Each of the points raised by the petitioner had been considered. (ii) The objections based on the locality of the properties the sale of which had been relied on by the appropriate authority could not be determined by the High Court. The appropriate authority had acted on material having a rational nexus with the conclusion reached. (iii) Eight days, notice was given to the petitioner and it was heard for three days. Copies of all material sought were made available. Therefore, adequate opportunity was given (iv) There was delay in moving the writ petition. The petitioner remained silent over their rights for several weeks after the order was communicated to it. No explanation was given for the delay. Delay of several weeks was fatal. Application : Also to current assessment years. Income Tax Act 1961 s.269UD JUDGMENT Ruma Pal, J.
1. The petitioner-company entered into an agreement to purchase a flat at premises No. 70D, Hindustan Park, Calcutta (referred to as "the flat") on September 22, 1992. The total consideration price was stated to be Rs. 28.50 lakhs. On September 29, 1992, the petitioner-company and the owner of the flat being respondent No. 5 herein filed Form No. 37-I before the appropriate authority under Section 269UC of the Income-tax Act, 1961 (referred to as "the Act"). On October 13, 1992, an inspection was held and detailed scrutiny made in respect of the transaction in question. The particulars together with instances of five other properties, their description, locality and values were submitted to the appropriate authority on November 4, 1992, along with a report of the executive engineer. The executive engineer was of the view that the consideration for the sale of the flat in question had been understated.
2. On November 20, 1992, notice was issued to the petitioner-company requesting it to show cause why the flat in question should not be purchased under Chapter XX-C of the Act as the apparent consideration shown by the petitioner appeared to be understated as compared to the fair market value of the flat in question. According to the petitioners, this notice was received on November 23, 1992. On November 25, 1992, the petitioner appeared and also submitted a letter asking for a copy of the valuation report prepared or obtained by the Department so that it could make submissions as to whether the apparent consideration as stated in the agreement for sale was less than the fair market value by 15 per cent. At the hearing on November 25, 1992, the petitioner was told that the appropriate authority was basing its finding as to undervaluation on two transactions : one relating to sale of a flat at Ballygunge Circular Road, Calcutta, and the other at Southern Avenue, Calcutta. The petitioner-company was also asked to make available details of any transactions done in respect of any flats sold in the vicinity. By a letter dated November 27, 1992, the petitioner submitted that the transactions on the basis of which the appropriate authority was holding that the transaction in question was being made at undervalue were not in respect of comparable properties. The petitioners also gave details of a transaction at Dover Road where two flats had been sold at Rs. 326 per sq. ft. in September, 1992, At the hearing held on November 27, 1992, the petitioners were handed over a xerox copy of a valuation note dated November 27, 1992, which showed that the market value of the flat in question was Rs. 35,17,910 (i.e., 25,4 per cent, more than the apparent consideration), xerox copy of the detailed scrutiny dated November 3, 1992, and xerox copy of the valuation done by the executive engineer on November 4, 1992. The petitioners asked for time in order to consider these documents. On November 30, 1992, a hearing was held and written comments were also submitted by the petitioners before the appropriate authority. On the same date, the appropriate authority passed an order under Section 269UD of the Act by which the appropriate authority ordered the flat in question to be purchased by the Central Government at Rs. 27,99,706 being the amount equal to the amount of effective apparent consideration. The appropriate authority gave detailed reasons for the order dealing with the points raised by the petitioners in the letter dated November 30, 1992.
3. Both the orders under Section 269UD(1) as well as the reasons in support of such order are the subject-matter of challenge in this writ petition.
4. The impugned order and the reasons were, according to the petitioner, received by them on December 15, 1992.
5. On December 31, 1992, the Central Government paid a sum oi' Rs. 27,99,706 to respondent No. 5 in respect of the flat under the provisions of Section 269UG after receiving possession from the owner under Section 269UE of the Act.
6. On January 8, 1993, the flat was advertised for sale by the Central Government along with other properties with the reserve price of Rs. 33,60,000. The auction was to be held on January 29, 1993.
7. On January 29, 1993, an interim order was passed on this writ application restraining the respondents from proceeding with the sale notice dated January 8, 1993, in respect of the flat in question, Affidavits have been duly filed and the matter argued.
8. At the hearing the petitioners have raised two contentions. The first is that the appropriate authority had improperly rejected instances of sale of properties at Dover Road given by the petitioners and had failed to consider the difference between the localities of the two instances relied upon by it and that of the flat, in the impugned order. The second contention is that there was a denial of natural justice. The notice to show cause had been received two days before the date of the first hearing, It is contended that adequate opportunity had not been given to enable the petitioners to show that the transaction in question was not being made for an undervalue.
9. The respondent authorities have said that the writ petition was grossly delayed. Secondly, it is stated that the petitioner being only the purchaser had no right or interest in the property under Section 54 of the Transfer of Property Act and, therefore, could not maintain the writ petition. Thirdly, it is stated that the provisions of Chapter XX-C of the Act had been challenged as being unconstitutional before the various courts. The Supreme Court ultimately upheld the validity of the provisions of Chapter XX-C of the Act substantially, on November 17, 1992, in. the case of C.B. Gautam v. Union of India . By that decision, the Supreme Court also directed that the authority concerned should give an opportunity to the parties interested of being heard. This requirement was read into the provisions of Section 269UD by the Supreme Court in order to uphold its constitutional validity. The decision of the Supreme Court was communicated to the appropriate authority only on November 19, 1992, immediately whereupon the notice to show cause was issued to the petitioners and respondent No. 5. According to the respondents, the Supreme Court had stated in the judgment of C.B. Gautam's case [1993] 199 ITR 530, that a summary hearing was sufficient. In the instant case, a hearing had been held on three days. All documents had been made available. There was, as such, sufficient compliance with natural justice. Finally, it is contended that the appropriate authority had duly considered all aspects of the matter. The reasoning of the appropriate authority was not perverse. The court was only called upon to see whether the materials had been considered and not to appreciate the evidence as in. an appeal. Reliance has been placed on the decisions of the Supreme Court in :
(a) State of U. P. v. Maharaja Dharmander Prasad Singh, ;
(b) Homi Jahangir Gheesta v. CIT ;
(c) Oriental Investment Co. P. Ltd. v. CIT .
10. The point regarding the maintainability of the writ petition at the instance of the transferee appears to be concluded by the decision of the Supreme Court in C. B. Gautam's case [1993] 199 ITR 530.
11. There the petitioner was the intending purchaser. It had been argued by the Central Government that the transferee could not he said to have any legal interest in the property and that he could not have any serious grievance on the grounds of violation of the principles of natural justice. However, at page 540 of the report, it was stated :
" . . . . the learned Attorney-General .... did not seriously contest the position that the parties aggrieved by a proposed order of purchase were entitled to have an adequate opportunity to show cause against the order of purchase by the Central Government being made by the appropriate authority in exercise of the powers conferred under Section 269UD of the Income-tax Act.
In view of this fair stand taken by the Attorney-General, the controversy has become somewhat narrow."
12. The question was also considered at some length by me in the case of Hari Krishna Kanoi v. Appropriate Authority (Matter No. 3110 of 198'7, dated September 11, 1992). In that case a similar contention on the part of the respondent authorities was rejected. In any event, I do not think that it is really open to the respondents to raise the point at this stage. They had given the show-cause notice to the petitioner-company. It was the petitioner-company whose arguments were considered and negatived by the appropriate authority. It is too late to say now that the petitioner cannot question the decision of the appropriate authority by way of an application under Article 226.
13. However, as far as the merits of the petitioners' case are concerned, I am unable to accept either of the contentions raised by them.
14. As far as the first ground is concerned it is certainly not for the court in exercise of its jurisdiction under Article 226 to either weigh the evidence before the appropriate authority or interfere with any finding of fact unless the appropriate authority had taken into account irrelevant factors or ignored relevant factors or had acted so unreasonably that no authority properly instructed in the law could have reached such a conclusion. As already noted, each of the points raised by the petitioners had been considered. The objections based on the locality of the properties the sale of which had been relied upon by the appropriate authority is not one which can be determined by this court. It is not a patent fact that properties in Hindusthan Park are less valuable than properties in Ballygunge Circular Road or Southern Avenue so that the court must take judicial notice of the same. In C. B. Gautam's case [1993] 199 ITR 530, the Supreme Court at page 550 of the report has said :
" The satisfaction of the competent authority for initiation of acquisition proceedings is a subjective satisfaction of the objective facts set out above. The reason for the formation of the belief must have a rational and direct connection with the material coming to the notice of the competent authority, though the question of sufficiency or adequacy of the material is not open to judicial review."
15. In my opinion, the appropriate authority has acted on material which has a rational nexus with the conclusion reached.
16. The next question relates to the adequacy of opportunity. What would be sufficient opportunity in the context of proceedings under Section 269UD has been laid down by the Supreme Court in the decision in C.B. Gautam's case [1993] 199 ITR 530, 561 :
" .... if the appropriate authority considers it fit, it may issue a show-cause notice calling upon the petitioner and other concerned parties to show cause why an order for compulsory purchase of the property in question should not be made under the provisions of Sub-section (1) of Section 269UD and give a reasonable opportunity to the petitioner and such other concerned parties to show cause against such an order being made. In view of the limited time-frame, this will have to be done with a sense of urgency. If, after such an opportunity is given, the appropriate authority so considers it fit, it may hold an inquiry, even though summary in nature, and may pass an order for compulsory purchase by the Central Government of the property in question under Section 269UD(1).'"
17. It is to be noted that the Supreme Court gave an option to the appropriate authority to issue a show-cause notice. The hearing could be brief or even summary in nature, In this case eight days' notice was given. The matter was heard on three days. Copies of all material sought to be relied upon were made available. Incidentally, in the last letter of the petitioners dated, November 30, 1992, it was not stated that the time was inadequate for production of any further material. Indeed, it is not the petitioners' case that they had collected any further material subsequently which they could have produced if they had more time. In any event a prudent purchaser of property of about Rs. 10 lakhs should have armed itself against the possibility of action under Section 269UD after submission of Form No. 37-I. Thus a hearing of the kind held in this case was sufficient.
18. There is one aspect of the matter which is only touched upon as it is not of much relevance, and that is the explanation given by the respondents for issuing the show-cause notice barely 10 days before the expiry of the period fixed under Section 269UD. The petitioners say that what the Supreme Court held was really of a declaration of the law as it always stood. The appropriate authority should have issued the notice earlier. Not having done so the petitioners cannot be made to suffer.
19. In my view it would have required legal clairvoyance for the appropriate authority to have foreseen the outcome of C. B. Gautam's case . The notion that courts merely declare what the law is, does not fix the appropriate authority with actual knowledge of the law. Appreciating the difficulties which might be faced by the appropriate authority in complying with the requirement to give the affected parties an opportunity to show cause, on November 27, 1992, the Supreme Court clarified its judgment dated November 17, 1992, by saying (at page 564) :
" .... in respect of matters pending before the authorities and which, though not agitated in courts of law, are pending at various stages before the authorities in all such cases, we direct that Form No. 37-I shall be deemed to have been filed a.s on the date of the judgment of this court dated November 17, 1992, for purposes of completion of proceedings in terms of Section 269UD(1)."
20. But as pointed out by the petitioners themselves, November 27, 1992, was a Friday. The weekend intervened and the hearing was concluded on Monday. The clarification came too late.
21. There is another aspect of the matter which is also another reason for holding against the petitioners. This is the delay in moving the writ petition. The petitioners slept over their lights for several weeks after the impugned order was communicated to them. The court in C.B. Gautam's case has described the time frame under Chapter XX-C of the Act as a "tight" one. The need for urgency is not only upon the authority, but is placed on the affected parties also. Section 269UE provides that 15 days after the service of the order of acquisition, possession is to bo taken by the Central Government of the property in question, by force, if necessary. The Central Government took possession within this time. Section 269UG provides for payment of the consideration by the Central Government within one month of the passing of the order. Failure to do so entails abrogation of the acquisition order under Section 269UH. Payment was also made by the Central Government according to the statute. The Central Government then, very properly, put up the flat for sale a week later. Since the essence of action under Chapter XX-C is to prevent the deprivation of the revenue of the Central Government, it is expected that the Central Government will take expeditious steps to recoup the loss entailed, by selling the flat. The petitioner allowed all this to happen. Even after the advertisement on January 8, 1993, the petitioner did not move the court till the day of the sale. No explanation has been given either in the writ petition or in the affidavit in reply for the delay although the respondents specifically took the point in their affidavit. It is no answer to say that no equities of any third party had intervened and that, therefore, the petitioners' rights could not be defeated by a delay of about six weeks. What would be considered delay is always relative. In the context of the case, the delay of several weeks is, in my view, fatal. Had I not held on the merits against the petitioners, I would have dismissed the petition on this ground alone irrespective of the question of intervening equities as the court does not assist a laggardly litigant.
22. For the reasons stated the writ petition is dismissed. As the sale had been postponed at the instance of the petitioners, I think it would be only fair to direct them to pay the costs of the advertisement to the Central Government which I do. The petitioners will pay such costs within a fortnight of the Central Government intimating the petitioners of the actual amount of expenditure incurred. All interim orders are vacated.
23. Stay of this judgment is prayed for and is granted for a period of two weeks from date.
24. Let a xerox copy of this judgment be given to the parties upon their undertaking to apply for the certified copy of the judgment and on payment of usual charges.