M. Sundararajan and Another vs Appropriate Authority and Others

R. Jayasimha Babu, J.—The petitioner, M. Sundararajan, in W.P. No. 20284 of 1994 entered into an agreement on August 25, 1988, for

the purchase of property with an extent of three grounds and 1,844 sq. ft. at No. 37, IV Main Road, Gandhi Nagar, Madras-20, for a sum of Rs.

19 lakhs. The rate per ground was Rs. 5,04,000. The petitioner and the vendor filed a statement u/s 269UC of the Income Tax Act, 1961, in

Form No. 37-I on September 7, 1988. The Appropriate Authority on November 15, 1988, made an order for compulsory purchase of the

property and that order was challenged by the petitioner in W.P. No. 15039 of 1988 on December 5, 1988. This court stayed further proceedings

on December 9, 1988, though by that date the vendor had surrendered possession. The property was not put up for auction in view of the interim

order passed by this court on January 2, 1989. This court made an order directing the authority to pay the sale consideration under the agreement

between the vendor and the vendee, namely, Rs. 19,00,000 to the vendor and on such payment, the vendor was to return the advance of Rs.

1,00,000 to the vendee. Counsel for the vendor who is one of the respondents here confirms that the advance that has been received earlier

interim of Rs. 1,00,000 had been returned to the vendee. The vendor has thus received the value in full.

The writ petition filed by the petitioner in W.P. No. 15039 of 1988 was subsequently dismissed. However, an appeal filed against that order in

Writ Appeal No. 880 of 1994 ( M. Sundararajan Vs. Appropriate Authority and others, ) was allowed by a Division Bench of this court on July

28, 1994, and the matter was remanded to the authority for fresh disposal after giving due opportunity to the petitioner. The petitioner was asked

to furnish a bank guarantee for a sum of Rs. 19,00,000 in favour of the authority to ensure a payment of the consideration in the event of the

authority ultimately deciding to grant no objection certificate. The bank guarantee was duly furnished to the authority by the petitioner.

After the matter went back to the authority it issued fresh show-cause notice to the legal heirs of the vendors as also to the petitioner calling

upon them to show cause as to why the property should not be pre-emptively purchased for a discounted consideration of Rs. 18,53,247. It was

stated therein, inter alia, that the agreed land rate on the basis of discounted consideration was Rs. 4,84,400, whereas the market value was over

Rs. 5,90,727. Two sale instances in the vicinity of the property were relied upon by the authority, both being at 39, Second and Third Main Road,

Gandhi Nagar, Adyar, in which sales 5-1/2 grounds were agreed to be sold under the agreement dated July 30, 1987, at the rate of Rs. 5,90,727

per ground and 3.673 grounds were agreed to be sold under the agreement dated April 27, 1988, at the rate of Rs. 6,81,550 per ground.

In reply to that show-cause notice, the petitioner filed his objections, pointing out therein, inter alia, that neither himself nor his vendor had any

intention to avoid any tax, that there was no evidence to show that they had any such motive that the properties mentioned in the show-cause

notice were not in the immediate vicinity of this property that the larger road width in front of this property was, in fact, a disadvantage, as the

larger area was required to be left open and that the sales effected of other properties in the immediate vicinity of this property were effected at

rates much lower than the rates at which the petitioner had agreed to purchase this property that in fact, the property situated at 38, IV Main

Road, which was immediately adjacent to this property had been sold under a document dated August 3, 1986 at the rate of Rs. 2,72,420 per

ground. The petitioner also gave details of other sales of properties in the vicinity in all of which the rate was less than the rate as discounted by the

authorities for this property.

Thereafter, the petitioner wrote to the authority on September 29, 1994, bringing to the notice of the authority about a sale agreement of

February 1987, between Mr. Raj Mohan Gandhi and others and Mr. S.S. Rajasekhar, son of Mr. C. Subramaniam, former Governor of

Maharashtra, under which property bearing No. 4, IV Main Road, Gandhi Nagar, Adyar, Madras, which property was situated on the same road

as that on which the property the subject-matter of the agreement between the petitioner and the proposed transferor, was situated was agreed to

be sold for Rs. 10,11,000 that property had an extent of 3.11 grounds. The authority had issued a ""no objection certificate"", for that transaction in

April, 1987. The land rate per ground under that agreement worked out Rs. 3,25,000. The petitioner pointed out that even after providing inflation

at the rate of 0.92 per cent, per month, the land rate for the property which was the subject-matter of the impugned order works out Rs. 3,78,913

which is very much less than the land rate of Rs. 4,84,400 per ground worked out for this property by the authority. The petitioner also pointed out

that many of the transactions relied upon by the petitioner were subsequent to the date of the agreement. The property transacted at No. 38, IV

Main Road, Gandhi Nagar, Adyar, at the rate of Rs. 2,72,420 per ground was a transaction entered into, a few days before the date of the

agreement between the petitioner and his transferors.

Though the petitioner had thus placed elaborate material which prima facie showed that the rate at which he had agreed to purchase the

property from his transferors, was the fair market value, the authority brushed aside all those documents by merely observing that all the

transactions were subsequent to the date of the agreement between the petitioner and his transferors. This is what the authority has observed in

relation to these documents :

The transferee has furnished details of sales in I, II, III and IV Main Road in Gandhi Nagar area. The dates of registration of these documents

vary from August 29, 1988 to March 15, 1989, which are beyond the agreement date, viz., August 25, 1988, under discussion and hence are not

comparable.

As regards details furnished in respect of the properties vide letter of the transferee dated September 23, 1994, it is seen that the property at Door

No. 31, IV Main Road, Gandhi Nagar, Madras, relates to transfer of undivided share of interest in land and not a case of outright sale as in the

case under discussion. The second property at No. 4, IV Main Road, Gandhi Nagar, Adyar, is further away compared to the sale instances

indicated in the show-cause notice and as such both the sale instances relied on by the transaferee are not comparable.

The authority did not doubt the genuineness of any of the transactions relied upon by the petitioner. The authority merely asserted that they are

not comparable. This manner of dealing with the rights of parties must be very strongly disapproved. The authority is vested with vast powers and

superior courts do not interefere with their orders except on strong grounds, having regard, inter alia, to the fact that power is vested in an authority

which is composed of members with long years of experience and who have in the past held high positions. It is expected of them that they will

bring a judicial approach to the matters before them. To brush aside what is inconvenient without meeting the points raised and stating cogent

reasons for not accepting the evidence presented is not a sound judicial approach.

The reasons, if at all they can be characterised as such, given by the authority, are clearly arbitrary and wholly untenable. The fact that every

transaction had been entered into, the transactions were not doubted by the authority on the date subsequent to the date of the agreement, but

transactions ranging from a few days subsequent to the agreement to the date within one year of the agreement did not on that account alone

render them non-comparable. The authority did not find that there was fall in price after the date of the agreement. On the other hand, the method

of valuation adopted by the authority to make addition to the values ascertained from the date of the transaction till the date of the consideration,

further amounts for the period subsequent to the period of transaction, that there was inflation. If properties were transacted at a lesser rate

immediately after the date of the agreement, that evidence is a clear evidence which is relevant and is helpful in ascertaining the market value when

the value shown in those transactions are less than the value at which the parties before the authority, had agreed to transact. The authority''s

refusal to regard another property on the same rate which was transacted at a figure which is almost half the rate at which the petitioner had agreed

to buy this property and which transaction was about one year prior to the date of the agreement between the petitioner and his transferor, is again

wholly arbitrary. Even, after providing for inflation for the period subsequent to the date of that transaction, the market value of this property was

very much less than the value at which the petitioner had agreed to buy the property.

The mere fact that the authority is entitled to raise a presumption that the petitioner intends to avoid tax at the stage of issuing a show-cause

notice, does not entitle it to brush aside the evidence on market value offered by the parties in response to that show-cause notice which evidence

if properly examined would demonstrate that the value at which the parties had agreed to transact was in accordance with those values which were

capable of being regarded as market value. The genuineness of the transaction not having been doubted, the authority cannot merely rely on one or

two transactions, cited by it where the values were higher ignoring the fact that even subsequent to those transactions properties in the vicinity had

been transferred at much lower rates.

The authority appears to have been over anxious to sustain its earlier order directing compulsory purchase. It is most unfortunate that the

authority should have brought such an approach to the consideration of a case before it. The authority should be free from prejudice or bias of any

kind including bias in favour of itself in seeking to sustain the order made by it on earlier occasion. The matters have to be approached with an

open mind. All evidence presented before the authority was required to be considered in a fair and non-arbitrary manner which the authority has in

this case failed to do.

Having regard to the long period that has lapsed from the date of the agreement, nearly ten years have gone and the fact that even after the

remand the order made by the authority has been found to be arbitrary and unsustainable this is a fit case wherein any request for further remand

should be declined. A person who has entered into a transaction to purchase immovable property, at its fair market value is not to be driven to

endless litigation on account of the authority''s order. Having regard to the evidence placed by the petitioner before the authority. It is clear that the

market value of the property at the time of the transaction cannot be said to have been higher than the rate at which the petitioner had agreed to

purchase the property.

The impugned order is, therefore, set aside. The authority is directed to issue a ""no objection certificate"" immediately after the petitioner pays

to the authority a sum of Rs. 19,00,000. Such payment shall be made by the petitioner within a period of six weeks from the date of receipt of a

copy of this order.

The petitioner shall be entitled to costs in the sum of Rs. 2,500. Consequently, W. M. P. No. 30905 of 1994 is closed.