CASE NO.: Appeal (civil) 6050-6051 of 1998 PETITIONER: APPROPRIATE AUTHORITY & ANR. Vs. RESPONDENT: KAILASH SUNEJA & ANR. DATE OF JUDGMENT: 07/08/2001 BENCH: S. Rajendra Babu & K.G. Balakrishnan JUDGMENT:
RAJENDRA BABU, J. :
The property comprised in No. G-4(Old No. C-62), Maharani Bagh,
New Delhi on a plot measuring about 800 sq. yards was agreed to be sold
pursuant to an agreement dated July 1, 1993 for a sale consideration of
Rs.79 lakhs. The property consists of two floors – ground and the first –
and is in occupation of the tenants. The agreement provided for
symbolic delivery of the possession while it was open to the purchaser to
make use of the portion over the roof on the first floor. An application in
Form 37(I) was filed on 9.7.1993. The Appropriate Authority worked out
the fair market value of the property and the apparent consideration fell
short by 24 per cent of the fair market value. The Appropriate Authority
compared the property in question with three different properties as sale
instances to arrive at the correct market value of the value of the
property in question : (1) G-8, Maharani Bagh, (2) D-18, Maharani Bagh,
and (3) N-62, Panchsheel Park. The High Court went into the mode of
calculation of fair market value adopted by the Appropriate Authority
and stated that in respect of property comprised in D-18, Maharani Bagh
the agreement had been entered into on 25.6.1991 and on account of the
time gap of 24 months, the adjustment of plus 24 per cent was to be
made and in respect of property comprised in G-8, Maharani Bagh, there
was basement potential and, therefore, adjustment of minus 10 per cent
was to be made by the Appropriate Authority on that count. This basis is
termed to be perverse. In identical circumstances when the valuation
adopted by the Appropriate Authority was challenged in Appropriate
Authority & Anr. vs. Sudha Patil (Smt.) & Anr., 1998 (8) SCC 237, this
Court after examining the decision in C.B.Gautam vs. Union of India,
1993 (1) SCC 78 and the absence of provision of filing an appeal against
the order made by the Appropriate Authority, had stated that the
conclusion of the Appropriate Authority regarding the fair market value
in a matter of compulsory acquisition of immovable property after
considering all the germane and relevant materials should be accepted
and the same should not be made a subject matter of the examination as
if it is an appeal. Reasons set forth by the Appropriate Authority are as
follows :
Subject property
Ist sale instance
Sale agreement
9.7.93
Apparent sale
consideration
Declared land rate works
out at Rs.21,821 per sq.
mt. Value to be increased
at 1% per month for 24
months 24%
Sale deed dated
25.6.91, 24 months
earlier sale agreement
Has no
basement
10% to be
deducted
Thus value to be added is
14% (24%-10%) if 14% is
added the land rate of
subject property would
come to
Rs.21,821 x 14%
Rs.24,875 or Rs.25,000
per sq.mt.
Value of land
Rs.1.30 crores
Depreciated value of the
structure
Rs.9,35,758
Total value of the subject
property
Rs.1,39,33,758
The property is
tenanted
Depreciated value for 6
years at 8% is calculated
at :
Rs.87,78,267
(Rs.1,39,33,758 x .63)
(a) Thus the value of the
subject property is
Rs.87,78,267
(b) To this rent for 6 years
is added
Rs.1,42,092
Has barsati
potential of the
area is 149.90
sq. mts.
Has no barsati
potential
Rs.37,27,500
(c) This is to be added.
The value of the subject
property is fixed at
Rs.1,26,42,859
Or
Rs.1,26,45,000
This is 58% more than
the apparent considerat-
ion of the subject
property
(Rs.79,99,390)
Subject
property
D-18 (known as
I-15), Maharani
Bagh
2nd sale instance
Sale agreement
Sale deed dated
1.12.1992
Rs.1.11 crores
Adjusted declared land
rate works out at
Rs.29,587 per sq. mt.
Value to be increased at 1% per month 7 months earlier to sale agreement For 7 months + 7% FAR (not so much as the 2nd instance) FAR (140-100) - 28% Side open (not available/ which is available in 2nd instance) - 5% Has no basement potential - 10 7% - 43% - 36% Declared land rate deducting 36% 29,587 x .64 = Rs.18,950 per sq. mt. Value of the land of the subject property Depreciated value of the structure 52 x 18,950 Rs.98,54,000 9,33,758 Rs.1,07,87,758 Tenanted Depreciated value at the rate of 8% Rs.67,96,287 (Rs.1,07,87,758 x .63) Rental increase for 6 years Rs.1,42,092.00 = Rs.28,21,655 Barsati potential 148.90 sq.mt. x 18,950 Total value of the subject property Rs.97,60,034 22% higher than to AC Subject property Sale agreement 9.7.1993 3rd sale instance N-62, Panchsheel Park 800 sq.yds. having FAR Land rate declared works out at Rs.28,455 per sq.mt. If the rate of increase of 1% per month 4 months + 4% time gap 29.4.1993 sale agreement consid eration Rs.1,56,00,000 Rs.35,02,220 Rs.1,91,02,220 No open area Falling open area -5% No basement potential Basement available 10% 4% - 15% = -11% The land rate works out at Rs.25,333 (28,455 x .89) Depreciated value of the structure Land rate of subject property (ground floor , 1st floor) 520 sq. mts. = 25,333 x 520 = Rs.131,73,160 = 1,31,73,160.00 =9,33,758.00
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Rs.1,41,06,918.00
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The Appropriate Authority added one per cent every month. The
basement and barsati potential was also taken into account. The
Appropriate Authority took into account the subject property was
tenanted and made certain calculations such as 6 years deferred value at
8 per cent and 6 years rent was added to the value arrived at by the
above process.
The High Court disapproved this process of arriving at the figures
and that the apparent consideration fell short of the fair market value by
more than 15 per cent and, therefore, the High Court held that the action
is incorrect.
The Department contends that the learned Judges of the High
Court could not have sit on judgment over the manner of calculations
made by the Appropriate Authority. If any of the factors set out therein
had been ignored in the matter of arrival of fair market value, the same
would have affected the consideration made by the Appropriate
Authority. There are several methods of arriving at fair market value
such as comparative sale method or the capitalisation of the rent, i.e.,
yield method or any other appropriate method. But when the
Appropriate Authority adopted one or the other method and in that
process there is no inherent error or the factors taken note of by the
Appropriate Authority being relevant, it is submitted that it is not open to
the High Court to have interfered with such a matter. This Court in
Sudha Patils case [supra] has stated that when the Appropriate
Authority comes to the conclusion one way or the other after giving due
opportunity to the parties concerned and there has been under-valuation
on that basis by more than 15 per cent of the fair market value, the
Appropriate Authority had jurisdiction to interfere with the same.
The High Court took the view that there is nothing on record to
suggest as to what were the special reasons for making a purchase order
in respect of wholly tenanted property. Even assuming that there was
some justification for the authority to initiate proceedings for the pre-
emptive purchase of the property under Chapter XX-C of the Act, the
method of valuation of the fair market value had to be just and
reasonable. The authority has compared the values of incomparable
properties. While considering comparable instances, the instances of
tenanted properties had to be taken into consideration and not vacant
properties by discounting without any factual or legal basis. While the
agreement in relation to property at Maharani Bagh had been entered
into in June 1991, the agreement for the property in question was
entered into on July 1, 1993. Therefore, there is no basis for adding 24%
on the hypothetical basis that there would be increase of 1 per cent every
month.
In respect of tenancy, the plea taken before the High Court is that
the purchaser had mutual terms to get the property vacated from the
tenant. While the ground floor tenancy was from the year 1979 and the
first floor tenancy was from the year 1967, there is hardly any
justification to presume that the tenants would vacate in 5/6 years. The
sale instance in respect of property comprises in S-39-A, Panchsheel
Park, which was substantially tenanted without any justification, was
not taken into consideration, though rent capitalisation method was
applied in that case. Why in respect of one tenanted property rent
capitalisation method was applied to work out the fair market value and
in the other case land and building method was applied is not clear. It is
on this basis the High Court allowed the writ petition before it.
It is no doubt true that the scope of interference under Article 226
of the Constitution is very limited, but that is only in the nature of a
judicial review of the proceedings and not by way of appeal or revision
where the scope of interference is much wider. In cases of the present
nature where several methods are available for finding out the value of
the property and if one or the other method is adopted by the
Department and that may be reasonable, it may not call for any
interference. However, if there are loopholes or lacunae in the process of
reasoning adopted by that authority in reaching the conclusion as in the
present case that the tenanted property would be vacated soon or that
the property is close to the vicinity of the situation of the subject property
if compared, adopting different methods of valuation, then the parties
who appear before the authorities will definitely have a reason to have a
heart burn. If one method of valuation is adopted and benefit is given to
one party and why that method is not adopted in the other case to reach
the conclusion the other way is not clear and in our opinion it is
unjustifiable. If in this background the High Court examined the matter
and arrived at a conclusion one way or the other, we do not think it is
necessary for us to interfere with that finding in a proceeding arising
under Article 136 of the Constitution.
Hence these appeals shall stand dismissed. No costs.
…J.
[ S. RAJENDRA BABU ]
…J.
[K.G. BALAKRISHNAN]
August 07, 2001.