ORDER–One of the transferors receiving consideration more than transferee.
Ratio :
Where entire consideration amount has been tendered
by the government, merely because one of the persons entitled to
receive the amount has received less amount, will not
abrogate the purchase order as party receiving more amount agreed
to return the same to other aggreived party and there is no
dispute between them.
Facts :
As per the purchase order the discounted value of
consideration amount of Rs. 3,30,00,000.00 was Rs. 3,28.84,384.00.
According to the heirs, the discounted value, therefore, of Rs. 3
crores works out to Rs. 2,98,94,895.00, leaving a balance of Rs.
60 lakhs to be paid to the transferees. In the circumstances, the
transferors received Rs. 2,98,94,895.00 (consisting of Rs. 6
lakhs in excess which was payable to the trasnsferees). In the
above circumstances, the transferees received cheque for Rs. 60
lakhs and not for Rs. 66 lakhs. It is not in dispute that the
transferors have undertaken to return Rs. 6 lakhs to the
transferees/petitioners.
Held :
In the present case, the entire amount of Rs.
3.58,84,384.00 has been tendered by the Central Government. In
the circumstances, merely because one of the persons entitled to
receive the amount has received less amount of Rs. 6 lakhs, the
same will not abrogate the purchase order. The transferors have
not made a grievance. The transferors have also agreed to return
Rs. 6 lakhs to the builders. In the circumstances, the purchase
order is not abrogated.
Application :
Also to current assessment years.
Income Tax Act 1961 s.269UG
Income Tax Act 1961 s.269UE
Compulsory purchase of immovable property by Central Government–ABROGATION OF PURCHASE ORDER–Genuine clerical mistake in writing name of payee on cheque.
Ratio :
On genuine clerical mistake in writing correct name
of payee, purchase order would not be abrogated under section
269UE r/w section 269UG.
Held :
The present case is a case of bona fide clerical
mistake on the part of the government in writing the correct name
of the payee. The object of section 269UG is to compel the Central
Government to make the payment of consideration to the person who
is deprived of the property in time. The object of section 269UG
is stringent. The object is also to see to it that the government
makes the payment in time to the person entitled to receive
consideration. In the present case, the consideration is validly
received by the transferors. This is not dispute. It is the
transferees who have received the cheque containing error in its
name as Payee. If it is bona fide mistake on the part of the
government as in the present case, it cannot be said that the
purchase order stands abrogated. Abrogation of the purchase order
would mean that the property which vested in the government is
once again divested and revested in the citizen. This is a
drastic consequence for not effecting a legal tender by the
Central Government. Such drastic consequence cannot be said to
arise in cases of genuine clerical mistakes.
Application :
Also to current assessment years.
Income Tax Act 1961 s.269UG
Income Tax Act 1961 s.269UE
Compulsory purchase of immovable property by Central Government–CONSIDERATION–Relevant date for computing period of one month.
Ratio :
Relevant date for computing period of one month
mentioned in section 269UG is the date when cheque is posted by
the government and not the date on which cheque is received by
petitioner(s).
Held :
The important words in section 269UG are
“Consideration…..shall be tendered to the persons entitled
thereto”. In the present case, Rs. 60 lakhs was tendered to the
petitioners by speed post on 31-5-1995 which cannot be disputed.
The last date was 31-5-1995. In view of the above expression
under section 269UG, namely, that the consideration shall be
`tendered’, it is clear that in the present case, consideration
was tendered to all the parties as per agreement as also as per
the impugned order dt. 26-4-1995. These facts would clearly mean
that consideration was tendered before prescribed time. In the
circumstances, it is not open to the petitioners to contend
that the date on which they received the payment is the relevant
date.
Application :
Also to current assessment years.
Income Tax Act 1961 s.269UG
JUDGMENT
S.H. Kapadia, J.
1. This petition is filed by the purchaser challenging the compulsory purchase order passed by the Appropriate Authority on the ground that respondent No. 1 had not paid full amount of earnest money on the due date and even the short payment of Rs. 60,00,000 made by cheque was in the name of a wrong person. Therefore, the compulsory purchase order stands abrogated under s. 269UH of the IT Act, 1961. It is also contended that the determination of the market value by the Appropriate Authority at Rs. 6,600 per square foot F.S.I. is unreasonable and perverse.
2. In this petition, the points involved for determination are as follows :
(a) Whether the purchase order passed by the Appropriate Authority stood abrogated by virtue of clerical spelling mistake in the name of payee in the cheque drawn by the Central Government in favour of the transferees for refund of earnest money.
(b) Whether the purchase order passed by the Appropriate Authority stood abrogated on the ground that the transferors have been paid an amount in excess of their share vis-a-vis transferees and correspondingly the transferees have been paid less to that extent, although the tender made by the Central Government as a whole was in consonance with the purchase order passed by the Appropriate Authority. In this connection, it is clarified that there is no dispute between the parties that the Central Government tendered the entire amount of consideration as per the purchase order of the Appropriate Authority.
(c) Whether the purchase order passed by the Appropriate Authority could be said to be perverse on the ground that it is based on irrelevant factors and/or incomparable instances.
3. Before coming to the facts of this petition, as a prelude, we wish to point out that in Bombay, developers enter into agreements not only to purchase lands, flats and plots but on account of acute demand even floor space index and the rights connected thereto are purchased by developers. Purchase of floor space index entails complex nature of transactions. Moreover, various parties are involved in transactions which further complicate the nature of the agreements between the parties particularly in the matter of valuation. Moreover, family arrangements between various branches of transferors or agreements of such nature warrant apportionment of purchase price. In such cases, the Appropriate Authority is required to carefully ascertain not only the valuation aspect of the transaction but also the amount liable to be apportioned between the co-sharers. In the light of this prelude, we are required to consider the various sections of Chapter XX-C of the IT Act.
4. With this prelude, the facts of the present case may be seen. Prior to 31st Oct., 1970, one V. R. Swamy was the owner of plot bearing Nos. 558 and 559 in sub-scheme No. III, Chembur. The above two plots also had a bungalow and other structures standing thereon. On 31st Oct., 1970, V. R. Swamy died. Respondents Nos. 6 to 12 along with one Dr. Rao (since deceased) are the heirs and legal representatives of V. R. Swamy. On 18th Nov., 1992, the family arrangement was arrived at, under which, Dr. Rao as a co-sharer got 23.45 per cent share in the total holding. Dr. Rao was also in use and occupation of the bungalow. Dr. Rao was also an administrator of the estate of the deceased V. R. Swamy. On 13th Jan., 1995, respondents Nos. 6 to 12 along with Dr. Rao (since deceased) entered into a development agreement with the petitioners/transferees. The said development agreement was in respect of the above two plots. On 13th April, 1995, Dr. Rao died leaving behind respondents Nos. 13 to 16 as his legal heirs. In other words, respondents Nos. 6 to 16 are hereinafter referred to for the sake of brevity and convenience as “transferors” whereas the petitioners are described as “transferees”. The total area of the above two plots is 1,706 square yards equal to 15,354 square feet at Chembur. The plots fall in the residential zone. Permitted F. S. I. at the relevant time was. 75. In other words, in respect of the two plots the permissible F. S. I. stood at 11,515 square feet (15,354 X. 75). As stated above, the two plots belonged to eight co-owners including Dr. Rao. As stated hereinabove, the property was occupied by Dr. Rao who stayed in the bungalow on the plots. By development agreement dt. 13th Jan., 1995, the transferors transferred the entire F. S. I. of 11,515 square feet except 2,000 square feet of F. S. I. 2,000 square feet was retained by Dr. Rao for construction of a new bungalow by the petitioners/transferees/developers at the cost of Rs. 30,00,000. In other words, the petitioners purchased rights in the F. S. I. to the extent of 9,515 square feet for a sum of Rs. 3.60 crores. Under the said agreement, vide cl. 5, it was further provided that the petitioners as developers shall provide temporary accommodation to Dr. Rao in a nearby locality in property admeasuring 2,500 square feet till the developers constructed a new bungalow at the cost of Rs. 30,00,000 as stated hereinabove. The total consideration under the development agreement agreed to be paid by the transferees to the transferors was Rs. 3.60 crores out of which Rs. 3 crores 30 lakhs was to be paid in the form of money whereas Rs. 30 lakhs was to be paid as consideration in the form of bungalow to be constructed for Dr. Rao. Under the said agreement, the transferees paid Rs. 60 lakhs as an earnest money to the seven co-owners and a further sum of Rs. 6 lakhs was paid as an earnest money to Dr. Rao. This was at the time of execution of the agreement. Under the agreement, it was further stipulated that within one year of the agreement, the petitioners as developers would construct a new bungalow; that only after Dr. Rao was put in possession of the new bungalow, the petitioners would have the right to construct and develop the above two plots, by constructing bungalows to be sold to the public. In other words, till Dr. Rao is put in possession of the new bungalow, the petitioners did not have right to develop the property for one year because the petitioners agreed to construct a bungalow for Dr. Rao within one year from the date of development agreement.
Further, under the said agreement by way of recital, there is a reference to the family arrangement dt. 18th Nov., 1992, under which share of each of the co-shares has been spelt out. Briefly, it may be mentioned that the heirs of V. R. Swamy as co-sharers are given the share of 10.94 per cent (approximately) whereas Dr. Rao is given a share of 23.45 per cent. Under cl. 1A of the agreement, it is inter alia, stipulated that the total consideration would be Rs. 3 crores 60 lakhs out of which Rs. 3 crores 30 lakhs would be paid in consideration in the form of money whereas the balance in the form of a bungalow on a portion of the above plots. Under clause 1B, out of the total consideration of Rs. 3 crores, was payable to one branch of family (i.e., Swamy family) as follows :
Rupees 60 lakhs was payable as an earnest money on execution of the agreement, Rs. 75 lakhs within one month from the receipt of the NOC under Chapter XX-C of the IT Act, Rs. 1 crore 50 lakhs within four months from the date of the receipt of the NOC and the balance amount of Rs. 15 lakhs on the execution of the conveyance.
Under cl. 1C, the petitioners agreed to pay Rs. 30 lakhs to Dr. Rao and further Dr. Rao was to be provided a bungalow on ownership basis. Under cl. 1C(i)(a), Rs. 6 lakhs was payable as an earnest money to Dr. Rao. Rs. 7,50,000 within one month from the receipt of the NOC was payable to Dr. Rao, Rs. 15 lakhs within four months from the receipt of the NOC was payable to Dr. Rao and the balance amount was payable at the time of conveyance. Under the said agreement, vide cl. 1C(ii) a new bungalow was required to be completed by the petitioners within 12 months of Dr. Rao handing over vacant possession of the old bungalow to the developers in order to enable the developers to construct a new bungalow and only on completion of the new bungalow the developers were entitled to utilise the balance 9,515 square feet F. S. I. by constructing bungalows. In other words, once Dr. Rao is put in possession of the new bungalow the developers were entitled to develop the balance area by constructing new bungalows. They were entitled to sell the same. Under cl. 2(b) of the agreement, the developers have specifically undertaken to utilise the F. S. I. only for the construction of bungalows and not for construction of apartments/flats. Under cl. 5 of the agreement, the developers have agreed to provide to Dr. Rao temporary alternative accommodation being a vacant bungalow admeasuring 2,500 square feet (carpet area) in Chembur area in order to enable Dr. Rao to shift to the temporary accommodation and in order to enable the developers to construct a new bungalow as stated hereinabove. Under the agreement, the petitioners so far have paid as follows :
———————————————————————-
S. No. Amount Date of payment
(in rupees)
----------------------------------------------------------------------
1. 66,00,000 13th Jan., 1995
2. 82,50,000 31st May, 1995
3. 1,65,00,000 31st Aug., 1995
4. 16,50,000 On conveyance
----------------------------------------------------------------------
On 30th Jan., 1995, Form No. 37-I under the IT Act was filed. Annexure “E” sets out the shares of the transferors as per the family arrangement. On 3rd April, 1995, a show-cause notice was issued by respondent No. 5 under s. 269UD(1A) of the IT Act. On 13th April, 1995, Dr. Rao died leaving behind his wife, son and two daughters (respondents Nos. 13 to 16). On 17th April, 1995 the Appropriate Authority gave personal hearing to the petitioners. On 26th April, 1995, the Appropriate Authority passed the impugned order under s. 269UD(1) to purchase the property for discounted consideration of Rs. 3,58,84,394 by holding that the market value of the property would come to Rs. 5 crores 23 lakhs which is 15 per cent higher than Rs. 3 crores 60 lakhs.
On 29th April, 1995, respondent No. 5 called upon the transferors to hand over the possession of the property within 15 days. Respondent No. 5 also called upon the transferors to hand over certain documents of title. By letter dt. 25th May, 1995, respondent No. 6 and five others addressed a letter to the Appropriate Authority to distribute Rs. 2,98,94,895 as under :
———————————————————————-
Sl. Name of the Apportionment of Apportionment
No. transferor consideration of discounted
as per agreement value (Rs.)
(Rs.)
----------------------------------------------------------------------
1. Shri V. K. Satyanarayana 42,87,000 42,71,981
2. Mrs. V. Venkataratnamma 42,87,000 42,71,981
3. Smt. D. Savitri Devi 42,87,000 42,71,981
4. Smt. V. Ambaraju 42,84,000 42,69,991
5. Smt. K. Surya Rekha 42,84,000 42,68,991
6. Ku. V. Rajeswari 42,87,000 42,71,980
7. Sri. V. R. Venkat Rao 42,84,000 42,68,991
----------------------------------------------------------------------
3,00,00,000 2,98,94,895
----------------------------------------------------------------------
Under s. 269UF of the IT Act, the last date for effecting tender of consideration by the Central Government was 31st May, 1995. On 31st May, 1995, cheques were sent by speed post as follows :
Rs. 29,41,152 each was tendered to respondents Nos. 6, 7, 8 and 11. Rupees 29,38,463 was tendered on 31st May, 1995, to respondents Nos. 9, 10 and 12. Rupees 93,04,488 was tendered on 31st May, 1995, by the Central Government to respondents Nos. 3 to 16 and Rs. 60 lakhs was tendered on 31st May, 1995, to the petitioners.
In other words, the total tender effected by the Central Government on 31st May, 1995, was to the tune of Rs. 3,58,84,384 as per the particulars given in paragraph 15 of the writ petition.
However, it may be mentioned that the name of the petitioners’ firm is “Prima Realty”. By mistake, in the cheque drawn by the Central Government for Rs. 60 lakhs, the name of the petitioners/transferees/developers is shown as “Prime Reality Ltd.”. It is the case of the petitioners, therefore, that on 31st May, 1995, on account of the above mistake in the name of the payee, no legal tender was effected and, therefore, the purchase order stood abrogated. It is also contended on behalf of the petitioners that they were entitled to receive Rs. 66,00,000 and not Rs. 60,00,000 and, therefore, the purchase order stood abrogated. At this stage, it may be clarified that although the petitioners received short payment of Rs. 6 lakhs in terms of the agreement, the heirs of Dr. Rao received proportionately certain amount in excess. It is also clarified that there is no dispute inter se between the parties. Dr. Chandrachud, appearing on behalf of the transferors, has clarified the position that the excess amount, if any, will be paid by them to the petitioners. The fact remains that the Central Government effected legal tender for Rs. 3,58,84,384 as ordered by the Appropriate Authority. Although the petitioners received the cheque on 1st June, 1995, for Rs. 60,00,000 drawn in favour of Prime Reality Ltd., they returned the cheque on 19th June, 1995, to the Central Government. On 22nd June, 1995, the correction was made and the petitioners accordingly received a cheque of Rs. 60,00,000 in the name of Prime Reality. Being aggrieved by the impugned purchase order dt. 26th April, 1995 (hereinafter referred to as “the impugned order”), the purchasers have filed this writ petition.
5. At this stage, we may state that we would appreciate the contentions raised by learned counsel for the petitioners by keeping in mind the following salient features :
(a) The transferors have not challenged the order of compulsory purchase.
(b) No dispute was raised either by the transferors or transferees with regard to the apportionment of the purchase amount offered by the respondents, but at the same time no agreed letter of apportionment by the transferors or transferees was given to the competent authority as required under s. 269UG. On 25th May, 1995, the co-sharers of the Swamy family had written a letter for apportionment of the money.
(c) The transferors have not claimed before the Appropriate Authority the amount they were entitled to recover on failure of agreement for sale.
(d) The competent authority has tendered the entire amount as per the purchase order.
(e) In the present case, two adjoining plots with an old structure carrying total F. S. I. of 11,515 square feet, out of which F. S. I. of 2,000 square feet is retained by one of the co-owner’s family, and the balance area of 9,515 square feet is sold with an express covenant that the builder will demolish the old structure and construct a new bungalow and thereafter utilise the 9,515 square feet to construct new bungalows.
6. The first contention advanced on behalf of the petitioners is that the cheque for Rs. 60 lakhs was received by the petitioners on 1st June, 1995. According to the petitioners, it is the date on which the consideration pursuant to the purchase order is received by the party which is the relevant date and not the date on which the cheque was posted by the Government. In the present case, the cheque for Rs. 60 lakhs was posted by the Government on 31st May, 1995. It was received by the transferees/petitioners on 1st June, 1995. The last date for effecting tender was 31st May, 1995, which is not in dispute. In the circumstances, it is contended on behalf of the petitioners that the Government did not effect the tender in favour of the transferees/petitioners. It is contended on behalf of the petitioners that similarly the cheques in favour of the transferors were also posted on 31st May, 1995. They were received after the due date by the transferors and in the circumstances the purchase order stood abrogated because the Government did not effect the legal tender within the stipulated time. We do not find any merit in the said contention. Under s. 269UG, the Central Government is duty bound to tender the amount of consideration payable in accordance with s. 269UF to the person or persons entitled thereto within one month from the end of the month in which the immovable property comes to the Central Government under s. 269UE. The important words in s. 269UG are “consideration…. shall be tendered to the persons entitled thereto”. In the present case, Rs. 60 lakhs was tendered to the petitioners by speed post on 31st May, 1995, which cannot be disputed. The last date was 31st May, 1995. In view of the above expression under s. 269UG, namely, that the consideration shall be “tendered”, it is clear that in the present case, consideration was tendered to all the parties as per agreement dt. 13th Jan., 1995, as also as per the impugned order dt. 26th April, 1995. These facts would clearly mean that consideration was tendered before the prescribed time. In the circumstances, it is not open to the petitioners to contend that the date on which they received the payment is the relevant date. In the present case, therefore, there is no merit in the first contention advanced on behalf of the petitioners.
Further, it may also be noted that the transferors consist of two families, namely, the Swamy family and the Rao family, who have not objected to the above purchase order under the provisions of s. 269UD. Normally, the Central, Government is required to tender the amount of consideration to the transferor entitled to receive it. The petitioners have not filed any claim application before the Appropriate Authority. They have not filed any proceedings challenging the purchase order. In the circumstances, both as a matter of law and even as a matter of fact, there is no substance in the first contention advanced on behalf of the petitioners/transferees.
7. It is next contended on behalf of the petitioners that the impugned purchase order dt. 26th April, 1995, stood abrogated because the cheque for Rs. 60 lakhs was drawn erroneously in favour of “Prime Reality Ltd.” instead of “Prima Realty”. According to the petitioners, this error itself abrogated the impugned purchase order dt. 26th April, 1995. According to the petitioners, under s. 269UG, the Government is required to tender the consideration as per the order passed by the Appropriate Authority. According to the petitioners, since the cheque was drawn in favour of “Prime Reality Ltd.” and not in favour of “Prima Reality”, no legal tender was effected in favour of the transferees within the stipulated time and, therefore, the impugned purchase order dt. 26th April, 1995, stood abrogated. At this stage, it may be mentioned that the cheque was sent by the Government on 31st May, 1995. It was received on 1st June, 1995. Thereafter, objection was raised by the petitioners/transferees on 19th June, 1995. Immediately, the cheque was corrected and on 22nd June, 1995, the corrected cheque was handed over to the petitioners for Rs. 60 lakhs. The above facts indicate that a clerical mistake crept in writing the name of the payee. As stated in the prelude, in several cases the agreements entered into between the parties on the basis of which the impugned purchase order is passed are complicated in nature, particularly with regard to the apportionment of consideration between the persons entitled to receive it under the agreement. We have to construe, therefore, s. 269UG also taking into account the reality of the situation. In the present case, the facts indicate that the tender was effected in time. Although the impugned purchase order was made by the Appropriate Authority on 26th April, 1995, the letter of apportionment was given by the co-sharers belonging to the Swamy family only on 25th May, 1995. Further, the Government was informed even by the transferees regarding the above error in the spelling of the name of the payee only on 19th June, 1995, and immediately a corrected cheque was handed over to the transferees on 22nd June, 1995. In the above circumstances, it is not possible to accept the contention of the petitioners herein, both in law and on the facts of the present case, that the impugned purchase order dt. 26th April, 1995, stood abrogated because legal tender was not effected as required under s. 269UG. It is not in dispute that the Government effected legal tender for the entire consideration of Rs. 2,58,94,895 as directed by the order passed by the Appropriate Authority on 26th April, 1995. In the circumstances, the present case is a case of bona fide clerical mistake on the part of the Government in writing the correct name of the payee. The object of s. 269UG is to compel the Central Government to make the payment of consideration to the person who is deprived of the property in time. The object of s. 269UG is stringent. The object is also to see to it that the Government makes the payment in time to the person entitled to receive the consideration. In the present case, the consideration is validly received by the transferors. This is not in dispute. It is the transferees who have received the cheque of Rs. 60 lakhs containing an error in its name as payee. We have to construe s. 269UG, therefore, in the light of the Act. If it is a bona fide mistake on the part of the Government as in the present case, it cannot be said that the purchase order stands abrogated. Abrogation of the purchase order would mean that the property which vested in the Government is once again divested and revested in the citizen. This is a drastic consequence for not effecting a legal tender by the Central Government. Such drastic consequence cannot be said to arise in cases of genuine clerical mistakes. In the circumstances, there is no merit in the second contention advanced on behalf of the petitioners.
8. It is next contended on behalf of the petitioners that in the present case under the agreement dt. 13th Jan., 1995, Rs. 66 lakhs was paid by the petitioners/transferees to the transferors. They paid Rs. 60 lakhs as an earnest money to Swamy family and Rs. 6 lakhs to Dr. Rao. According to the petitioners, therefore, the Government did not effect legal tender when the Government forwarded the cheque of Rs. 60 lakhs and not for Rs. 66 lakhs to the petitioners on 31st May, 1995. In this connection, the facts are required to be briefly mentioned. The agreement dt. 13th Jan., 1995, as regards the apportionment refers to the family arrangement of 1992. Under the said family arrangement of 1992, the shares are indicated as hereinbelow :
(i) Mrs. Venuturapalli Venkataratnamma 10.94 per cent (ii) Mr. Venuturapalli Kalyan Satyanarayan 10.94 per cent (iii) Mr. Venuturupalli Ramakrishna Venkat Rao 10.93 per cent (iv) Miss Venuturupalli Rajeshwari 10.94 per cent (v) Mrs. Devaguptu Savitridevi 10.95 per cent (vi) Mrs. Voleti Manikyamba 10.93 per cent (vii) Mrs. Kalipatanapu Suryarekha 10.93 per cent (viii) Dr. Venuturupalli Sunder Jagannadha Rao 23.45 per cent
Thereafter, Dr. Rao died on 13th April, 1995. The purchase order was made on 26th April, 1995, after the demise of Dr. Rao. The Central Government addressed letters to the heirs of Dr. Rao from time to time to hand over the possession of the property and also documents (including probate will of Dr. Rao). This was during the period between 26th April, 1995, and 31st May, 1995. It is only on 25th May, 1995, that the heirs of Dr. Rao addressed a letter to the Dy. CIT stating that as per the purchase order the discounted value of consideration amount of Rs. 3,30,00,000 was Rs. 3,28,84,384. According to the heirs, the discounted value, therefore, of Rs. 3 crores works out to Rs. 2,98,94,895, leaving a balance of Rs. 60 lakhs to be paid to the transferees. In the circumstances, the transferors received Rs. 2,98,94,895 (consisting of Rs. 6 lakhs in excess which was payable to the transferees). In the above circumstances, the transferees received a cheque for Rs. 60 lakhs and not for Rs. 66 lakhs. It is not in dispute that the transferors have undertaken to return Rs. 6 lakhs to the transferees/petitioners. However, it is the case of the petitioners that the short payment of Rs. 6 lakhs under the above circumstances abrogates the purchase order. It is also contended on behalf of the petitioners that even between the two branches of the family of Dr. Swamy and Dr. Rao, the heirs of Dr. Rao have received certain amount in excess vis-a-vis the amount payable to Swamy family and, therefore, no legal tender was effected in accordance with the agreement between the parties and in the circumstances, the purchase order stood abrogated. It is also contended that the said payment is not in accordance with the purchase order. We do not find any merit in the said contention. The purchase order clearly indicates that the total consideration payable in the form of money was Rs. 3,28,84,384, being the discounted value of Rs. 3,30,00,000. The purchase order clearly recognises that Dr. Rao was entitled to the benefit of a new bungalow to be constructed at the cost of Rs. 30,00,000. The family arrangement of 1992 clearly demarcates the shares of each of the co-sharers as stated hereinabove. By letter dt. 25th May, 1995, the transferors clearly demanded Rs. 2,98,94,895. No objection was raised by the Rao family who are also the transferors. During the period commencing from 26th April, 1995, when the purchase order was passed, up to 31st May, 1995, no dispute was raised either by Rao’s family or the transferees’ with regard to the apportionment of the said amount. Under s. 269UG(1) it is stipulated that the amount of consideration shall be tendered to the person entitled thereto within one month from the end of the month in which the purchase order is made and the property stand vested in the Central Government. Under s. 269UG(2), it is further provided that if any dispute arises as to the amount of apportionment of consideration amongst the persons entitled to receive the said amount, the Central Government shall deposit with the Appropriate Authority the said consideration required to be tendered under s. 269UG(1). It is further provided that if the person entitled to the amount of consideration does not consent to receive the amount tendered or if there is any dispute as to the title to receive the amount of consideration, then the Central Government shall deposit the amount with the Appropriate Authority. Therefore, under s. 269UG(3) if the person entitled to the amount of consideration does not consent to receive it, then the amount shall be deposited by the Central Government with the Appropriate Authority. By way of the proviso to s. 269UG(3) it is further provided that the liability of any person who receives the whole or part of the consideration for immovable property vested in the Central Government to the person entitled thereto will not be obliterated by virtue of the amount being deposited under s. 269UG(3). In other words, if, as in the present case, one of the branches of the family of the transferors receive the amount in excess, then the liability of that branch to pay the other branch in terms of the agreement is not obliterated by virtue of s. 269UG. This proviso also indicates that the legislature was aware of the fact that the disputes may arise inter se between the parties in which event the Central Government is duty bound to deposit money with the Appropriate Authority. Sec. 269UG(2) and (3), therefore, indicate that if a person is aggrieved by the apportionment made by the Appropriate Authority in the impugned order, which is either on the ground of title or by way of person refusing to accept the consideration, then the Government is duty bound to deposit money with the Appropriate Authority. In the present case, it is not in dispute that the Government has tendered the entire amount of Rs. 3,58,84,384. However, the dispute is whether one branch of the transferors has received more than the other branch and, secondly, whether the transferors have received Rs. 6 lakhs in excess to the transferees although the entire amount has been legally paid to the parties concerned. In other words, the total figure is not in dispute. Here also it may be mentioned that the heirs of Dr. Rao have clearly stated through their counsel that they will return the excess amount both to the Swamy family as well as to the transferees. In the circumstances, in the present case, even till this date, there is no dispute between the parties. The heirs of the Swamy family, on the contrary, addressed a letter to the respondents on 25th May, 1995, demanding Rs. 2,98,94,895 which they have been paid and in the process the transferees have received Rs. 60 lakhs instead of Rs. 66 lakhs.
In the above circumstances, we do not find any merit in the contention of the petitioners that the tender is not effected as per the order passed by the Appropriate Authority and as per the development agreement dt. 13th Jan., 1995. As stated in our prelude, with the complex nature of development rights and with the complex nature of apportionment mentioned in the agreement, such dispute may often arise for which we cannot come to the conclusion that the purchase order stands abrogated, as long as the full consideration amount is tendered by the Government under s. 269UG. In the present case, the entire amount of Rs. 3,58,84,384 has been tendered by the Central Government. In the circumstances, merely because one of the persons entitled to receive the amount has received less amount of Rs. 6 lakhs, the same will not abrogate the purchase order. Further, the Swamy family has not made any grievance. The transferors have not made a grievance. The transferors have also agreed to return Rs. 6 lakhs to the builders. In the circumstances, the purchase order is not abrogated.
9. Mr. Doctor next contended that in the present case the impugned purchase order dt. 26th April, 1995, is perverse. Mr. Doctor contended that the sale instances on which the impugned purchase order is based are incomparable sale instances. It is contended on behalf of the petitioners that relevant sale instances on which the petitioners placed reliance have not been taken into account. It is also contended on behalf of the petitioners that extraneous factors are taken into account. It is contended on behalf of the petitioners that under the development agreement the builders/transferees had agreed to construct a bungalow at the minimum cost of Rs. 30,00,000 after demolishing the existing bungalow; that under the agreement, on receipt of possession of the property from Dr. Rao within 12 months the petitioners were required to construct a new bungalow and only after putting Mr. Rao in possession of the completed new bungalow the developers were entitled to develop the remaining F. S. I. of 9,515 square feet by constructing bungalows and selling the same to third parties; that the builders were not entitled to develop the property in any other way except by way of construction of bungalows and finally the Appropriate Authority has not considered the relevant sale instances but has placed reliance on totally irrelevant sale instances. Mr. Doctor contended that in the present case a large number of factors which depress the market value have not been taken into account. Mr. Doctor contended that in the present case, the builders were entitled to construct bungalows only after putting Dr. Rao in possession of the new bungalow within 12 months from their receiving possession of the old bungalow from Dr. Rao; that Dr. Rao and his family in the meantime were required to be given temporary alternative accommodation of a bungalow also admeasuring around 2,500 square feet for about 12 months which would also entail cost to the developers; that the builders/petitioners had paid Rs. 66 lakhs as earnest money to the transferors at the time of execution of the development agreement, i.e., on 13th Jan., 1995; that the petitioners paid Rs. 82,50,000 on 31st May, 1995; that Rs. 1,65,00,000 was payable by the petitioners on 31st Aug., 1995, and Rs. 16,50,000 on execution of the conveyance. As stated hereinabove, the property vested in the Government on 31st May, 1995. In the circumstances, the petitioners have also contended that the loss of interest at the rate of 18 per cent per annum on Rs. 66 lakhs paid on 13th Jan., 1995, and loss of interest amounting to Rs. 3,71,250 at the rate of 18 per cent per annum on Rs. 87,50,000 was one of the important factors which the Appropriate Authority has not taken into account. In the circumstances, Mr. Doctor contended that both on the basis of the incomparable sale instances and omission of relevant factors, contended that the impugned purchase order is liable to be set aside.
In the present case, the last argument advanced on behalf of the petitioners is on the merits of the impugned purchase order. This argument can be divided into two parts. Firstly, whether the correct valuation principles have been taken into account by the Appropriate Authority or not. As a limb of the same argument, it may be stated that according to the petitioners incomparable sale instances were taken into account and, therefore, the impugned order is liable to be set aside. The second part of the argument is that the relevant factors like interest on the amount invested as also various embargoes on the right of the developers to develop the property which would depreciate the fair market value and which would bring the market value within the 15 per cent margin have not been taken into account by the Appropriate Authority.
10. Before coming to the above argument on the merits, it would be relevant to note that under Chapter XX-C of the IT Act, valuations in respect of immovable property are akin to acquisition proceedings and not to the valuation principles which are applicable for assessing tax on the basis of valuation of the property. The principles for valuation under the WT Act or other taxation laws are not applicable to the acquisition under Chapter XX-C of the IT Act. The 15 per cent margin covers the estimation part of the valuation. Chapter XX-C acquisition provides for a 15 per cent margin between the fair market value and the agreed value mentioned in the development agreement. This 15 per cent covers the estimation part of the valuation so that no injustice is done while acquiring the property. The right of pre-emptive purchase by the Central Government is on the amount equal to the amount of apparent consideration. The order under s. 269UD is required to be passed in time by apportionment. Therefore, the Appropriate Authority has to make valuation of the property by taking into account the relevant facts. Certain element of guess-work is involved because a large number of factors are there to be considered and since a large number of factors exist, various methods of valuation of immovable property are also involved and it is for the Appropriate Authority to apply the appropriate method looking to the facts of each case. In respect of the land, important factors are location, frontage, transport facilities, etc. Comparable sale instances only provide a good guide or even a market index of the prices prevailing in the locality. In appropriate cases even a single comparable case can be taken into account. [see Krishna Kumar Rawat vs. Union of India (1995) 214 ITR 610 (Raj)]. One more aspect may be mentioned that under Art. 226 of the Constitution, this Court is not sitting in appeal over the decision of the Appropriate Authority. If the appropriate method of valuation is adopted looking to the facts of the present case, then no interference is called for under Art. 226 of the Constitution. Under the system of valuation of land one of the important methods which is a well known method is known as the development method of valuation. This method is applied where an old building/bungalow is required to be demolished and a new construction is required to be raised. This method is also known as the residual method. Another method is known as cost of replacement. This method is also known as the contractors method. Under this method, the price of an alternative site and the cost of construction of the building is taken as the basis for valuation of the lands in question. Similarly, the other common method for acquisition is where reliance can be placed on similar sale instances. It is open to the Appropriate Authority to adopt any of the methods of valuation looking to the factors involved. It is also open to the Appropriate Authority to adopt more than one method to the land in question for the purposes of valuation.
With these observations on valuation, the present case is required to be examined.
11. As stated above, two plots in question lie in a residential zone. The total permissible F. S. I. is 11,515 square feet. The owners transferred the entire land admeasuring (1,706 square yards) 15,354 square feet except 2,000 square feet of F. S. I. in favour of the petitioners. The said 2,000 square feet of F. S. I. was required to be retained by Dr. Rao for construction of a bungalow by the petitioners for residential house. The remaining F. S. I. was available to the petitioners to construct bungalows for sale. The agreement also stipulates that the developers will not utilise the balance F. S. I. of 9,515 square feet for any other purpose except to construct the bungalows. This indicates the potentiality of the land and the future use to which the land is to be put to. In the present case, the Appropriate Authority placed reliance on sale instance, vide case No. 17529. The said sale instance relates to the sale of a bungalow (Atur Park) in Chembur. The agreement of sale in respect of the (Atur Park) bungalow took place on 30th Jan., 1995. The rate per square foot is Rs. 6,906. It was contended on behalf of the petitioners that when a flat or a bungalow is sold, the price of the flat or the bungalow is higher than the cases where F. S. I. is sold as in the present case. It was contended on behalf of the petitioners that the market value of a flat or a bungalow with ready possession consists of at least four factors, namely, cost of F. S. I., interest cost for the amount invested, cost of construction and other administrative costs as also the profit margin of the developers. According to the petitioners, the Appropriate Authority has not taken the above discounting factors into account and if these discounting factors are taken into account then the market price even on the basis of comparable sale instances would stand reduced and it would come within the margin of 15 per cent. We do not find any merit in the said contention advanced on behalf of the petitioners. As stated hereinabove, the comparable sale instance provides an index of the market prices. The method to be adopted by the Appropriate Authority would depend on a large number of factors. In the present case, the Appropriate Authority found that the plots in question are adjoining the road, that they are close to the railway station, that the two plots are also rectangular in shape and that the two plots are ultimately required to be used for construction of bungalows. Whereas in the case of Atur Park, it was a sale of a completed bungalow. The Appropriate Authority found that in the present case the development of the plots was postponed by a year and the entire agreement proceeds on the basis of the right of development being given to the builder to construct only bungalows and thereafter sell the same. It also indicates the potentiality of the land and future use of the property which factors are also required to be taken into account. The built-up area under the agreement in respect of Atur Park was 1,772 square feet. The valuation officer considered the cost of the building at the rate of Rs. 600 and on that basis the valuation officer decided the built-up area rate of Rs. 5,914 per square foot and the F. S. I. rate was calculated at the rate of Rs. 5,514 per square foot. On the basis of the said calculation, the valuation officer came to the conclusion that in the case of Atur Park, the rate per square foot stood at Rs. 6,906 (approximately). The Appropriate Authority also took into account the other two sale instances concerning the flat and the office premises bearing Cases Nos. 16901 and 16260 and found substantial increase in the land prices in Chembur during the period September, 1994, up to 30th Jan., 1995. Taking into account the escalation, the Appropriate Authority came to the conclusion that in the present case the going rate of the land/F. S. I. in Chembur area in January, 1995, stood at around Rs. 5,500 per square foot on the basis of which the fair market value in respect of the subject-matter plots would come to Rs. 5,23,32,500, whereas, in the present case, the plots have been sold for a total consideration of Rs. 3,30,00,000 plus cost of construction of a bungalow of Rs. 30,00,000 for Dr. Rao. In the circumstances, the Appropriate Authority came to the conclusion that the difference between the fair market price and the agreed price was more than 15 per cent and, therefore, the acquisition took place and the purchase order came to be passed. As stated hereinabove, it is not open for this Court to sit in appeal over the findings of the Appropriate Authority. Even if one comparable sale instance has been taken into account and if that sale instance provides cogent material then the purchase order cannot be said to be passed on extraneous factors.
12. On the other hand, the petitioners have relied upon the sale of plot of land at Janki Niwas, Chembur. The petitioners contended that the sale of Janki Niwas indicated rate of 2,106 per square foot and the total consideration in the case of Janki Niwas was Rs. 1 crore. According to the petitioners, this was the best comparable sale instance and if that sale instance is taken into account then the purchase order is bad in law. We do not find any merit in the said contention advanced on behalf of the petitioners. As rightly held by the Appropriate Authority in the case of Janki Niwas the transaction took place in October, 1994, whereas we are concerned with the agreement dt. 13th Jan., 1995. Secondly, in the case of Janki Niwas, the F. S. I. over the ground floor and the first floor only was sold whereas in the present case the F. S. I. is in respect of the land and it is sold on the basis that the builder would construct bungalows on the land and that too after demolishing the existing structures. This was not the case in the matter of Janki Niwas. Moreover, the Appropriate Authority found that in the case of Janki Niwas there are there tenants on the ground floor, one tenant in the outhouse and one in the garage. Moreover, the Appropriate Authority found that the vendor was in occupation of the first floor and the terrace and the transfer was of the balance F. S. I. to be used for construction on demolishing the existing structure and in that case the owner was also required to be given a flat of 800 square feet on ownership basis on the second floor of the new construction for a consideration of Rs. 5,00,000. Whereas, in the present case, apart from location of the plots in a fully developed area with well defined boundaries and compound wall on all three sides of the plot of a rectangular shape and taking into account the totality of all the facts, the Appropriate Authority rejected the sale instance in the case of Janki Niwas on which reliance was placed by the petitioners. We do not find any reason to interfere with the said findings of the Appropriate Authority. The petitioners have also relied upon another sale instance in Case No. 166970. In this case, the sale was of the F. S. I. in respect of a plot. The sale took place in November, 1994. The fair rate was Rs. 4,073 per square foot. As stated above, the present transaction is of 13th Jan., 1995. As stated above, the market price index indicates the increase in the sale prices even in three months and in the circumstances the Appropriate Authority found it fit to reject the said sale instance. As stated hereinabove, in the present case, we have to see a large number of factors including the location of the plot, shape of the plot, proximity to the road and the railway station as also potentiality of the plot and the user to which the plot would be put to. In such matters, there cannot be a strait-jacket formula. As stated hereinabove, different methods are required to be taken into account. The contractors’ method or even the cost of replacement method along with the comparable sale instances method could be simultaneously applied. If these methods are kept in mind then the Appropriate Authority’s decision in the present case cannot be held to be based on extraneous factors. One more fact may also be noted that in the present case, even according to the petitioners, the cost of alternative accommodation is Rs. 5,500 per square foot. On this basis also, the fair market value of the subject property would come to Rs. 5,23,32,500 whereas under the agreement the consideration is Rs. 3,60,00,000 which if discounted is Rs. 3,58,84,384. In other words, the fair market value exceeds the apparent consideration by approximately a 45 per cent margin. One more aspect may be mentioned that ultimately margin of 15 per cent is fixed because it covers the estimation part of the valuation so that no injustice is done while acquiring the property. It may be once again stated that the right of pre-emptive purchase is on an amount equal to the amount of an apparent consideration so as to relieve the transferors of any grievance. However, since a certain amount of guess-work is involved, the margin covers the estimation part of the valuation to the extent of 15 per cent. This is also because various factors are required to be taken into account on the basis of which various methods of valuation are required to be adopted and from these various methods the best possible method is required to be selected and applied.
13. Today when we were about to pronounce judgment, learned counsel for the petitioner invited our attention to the judgment of the Division Bench of the Bombay High Court (Nagpur Bench) in the case of Nirmal Laxminarayan Grover vs. Appropriate Authority (1997) 223 ITR 572 (Bom), and contended that the ratio of the said judgment squarely applies to the facts of the present case. According to Mr. Doctor, learned counsel for the petitioner, in the above judgment in the case of Nirmal Laxminarayan Grover vs. Appropriate Authority (supra) it has been held that the Department must make genuine efforts to collect sale instances location-wise and time-wise; that action must be taken only in cases of gross undervaluation from which an inference must flow of undervaluation; that the show-cause notice must indicate a prima facie case of undervaluation; that the transferor must have proper opportunity to meet the Department’s case of undervaluation and that the Department must prove by cogent material that the land is undervalued. The above principles have been reiterated in several judgments of this Court. In the present case, the basic argument which is sought to be put into service today once again is that the show-cause notice did not indicate even a prima facie case of undervaluation. This is the sum and substance of the argument advanced by learned counsel for the petitioner today for which he has relied upon the above judgment of the Division Bench in the case of Nirmal Laxminarayan Grover vs. Appropriate Authority (supra). We do not find any merit in the said contention. The show-cause notice dt. 3rd April, 1995, given by the Dy. CIT on behalf of the Appropriate Authority clearly gives particulars of the sale instances on which reliance is placed by the Department/Appropriate Authority (see page 96 of the writ petition). It inter alia, clearly refers to the sale instance in respect of Atur Park at Chembur, Bombay dt. 30th Jan., 1995, which indicates the land/plot rate of Rs. 6,906 per square foot. On the basis of the show-cause notices, replies were filed by the transferor. The order of the appellate authority also indicates the consideration of all the sale instances including the abovementioned sale instance in respect of Atur Park. In the circumstances, it is clear that the ratio laid down by the Division Bench of this Court (Nagpur Bench) in the case of Nirmal Laxminarayan Grover vs. Appropriate Authority (supra), has been followed by the Department and the Appropriate Authority in the present case. Further, the said judgment of the Division Bench does not take any contrary view.
14. In the circumstances, we do not find any merit in the writ petition. The writ petition fails. Rule is discharged with costs.
15. Learned counsel for the petitioner seeks a direction against the respondents not to auction the property for two months. The prayer is granted. The respondents are directed not to hold public auction of the property in question till 15th Feb., 1996. The respondents are also directed to revalidate the cheque dt. 31st May, 1995, for Rs. 60 lakhs within 15 days from the date of its presentation to the concerned authority.
