IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION WRIT WRIT WRIT PETITION NO.871 OF 1993 PETITION NO.871 OF 1993 PETITION NO.871 OF 1993 Mrs Kantadevi P.Jain .. Petitioners & anr Vs. 1. The Appropriate Authority 1 (a) & ors .. Respondents Mr.J.D.Mistry with Ms.Bina Pillai i/b D.M.Harish & Co for Petitioners Mr.R.Asokan for Respondents CORAM CORAM CORAM : Dr.S.Radhakrishan and : Dr.S.Radhakrishan and : Dr.S.Radhakrishan and A.V.Nirgude, A.V.Nirgude, A.V.Nirgude, JJ JJ JJ DATE DATE DATE : 16th June, 2008 : 16th June, 2008 : 16th June, 2008 JUDGMENT JUDGMENT JUDGMENT ( Per A.V.Nirgude, J ) ( Per A.V.Nirgude, J ) ( Per A.V.Nirgude, J ) 1. The Petitioners nos. 1 and 2 are owners of a building known as ’Jain Arcade’ situated at Khar Danda Road, Khar (W) Mumbai-52 including part of a bulding consisting of Unit No.1A, 2 and 3 on Ist floor at the rear side of the building having carpet area of 720 sq.ft which was constructed by them after demolition of old structure known as ’Mittersain House’ which was acquired long back. The property being residential comprised of ground and 1st floor and which was tenanted to several members of Jain family and smaller HUF’s. In 1981, the petitioners obtained permission from Urban Land Ceiling Authorities for demolishing the structure and for constructing new one on condition that the tenants would be provided 2 alternate accommodation. It was also undertaken that the floors 1st and 2nd would be used for residential purpose. The respondent is a smaller HUF jain family and was occupying certain unit no.7 in the old building which they surrendered for reconstruction purpose. The petitioners agreed to provide them one garage premises on the ground floor of the newly constructed building in June 1988. Thereafter, the building was re-constructed. No garage could be constructed on the ground floor. So the petitioners agreed to sell unit nos. 1A and 3 on the first floor of new buiding to the respondent no.3 vide an agreement dt. 15.2.1992. The agreed rate for the said transfer was Rs.2992/- per sq.ft. The parties then filed Form no.37I on 18.3.1992 in compliance of section 269 UC of the Income Tax Act (hereinafter referred to as the said Act). On 26.5.1992 the respondent no.1 the Appropriate authority passed the order acquiring the property under section 269 UD-I of the Act. Immediately, thereafter the petitioners filed a Writ Petition bearing No.1384 of 1992 against the order. The Writ Petition was allowed and this Court remanded the matter back to the Appropriate Authority for deciding it afresh in the light of directions 3 contained in C.B.Gautam’s case { (1993) 199 ITR 530).} Thereafter the petitioners received a show cause notice dt.9.2.1993 along with reasons recorded earlier on 26.5.1992. The petitioners then submitted their reply. 2. The respondent no.1 Appropriate Authority passed an order under section 269 UD (1) of the Act on 29.3.1993 which is impugned in this Writ Petition. 3. The question is whether the order under challenge is legally justifiable. The answer is in the negative. 4. Mr.Mistry learned counsel appearing for the petitioners attacked the legality and correctness of the order. On the other hand, Mr.Asokan appearing for the respondents tried to defend the order. The Appropriate Authority in our considered view repeatedly violated the principles of natural justice during the proceedings under section 269 UD of the Act which has a far reaching and serious civil consequences. So while exercising such power the authority has to follow the principles of natural justice very 4 meticulously although the proceedings are of a summary nature. 5. The show cause notice which is annexed with the statement of reasons is the first instance of violation of principles of natural justice. It is annexed with the reasons recorded by the Appropriate Authority on 26.5.1992. 6. In the statement of the reasons, the Appropriate Authority clearly recorded its considered opinion that the apparent consideration for the property was understated and so they were satisfied that it was a fit case for exercising the pre-emptive right to purchase the property under section 269 UD (1) of the Act. It is further mentioned that " such an order is also passed accordingly." This statement in the reasons annexed to the show cause notice clearly establish that the Appropriate Authority had already made up its mind and decided the matter against the petitioners. This was not a stage where the matter could be concluded finally. This was a stage when the party is informed about the prima facie material against it. On pointing out such prima facie material such a party is asked to show 5 cause why final decision should not be taken against them. On receipt of the show cause notice, the party would be able to gather material to convince the authority as to how their prima facie view was incorrect and why they should drop the proposed action. But, the statement of reasons annexed to the show cause notice in this case as indicated above gives a contrary picture. Reading the show cause notice annexed with the reasons, we think this party would have no hope of success. No matter how much material they would produce before the Authority in reply to the show cause notice and whatever they would submit in support of their case. This aspect of the show cause notice thus goes against the principles of natural justice. 7. Second aspect that can go against the principles of natural justice is the fact that the show cause notice and the material annexed to it clearly mentioned that the Appropriate Authority had got disputed property inspected through Valuation Officer on 23.4.1992 and even the members of the Authority did so on 25.5.1992. The report which was submitted by the Valuation Officer on 23.3.1992. A copy of this report has 6 not been given to the petitioners despite the fact that they requested for it. 8. Now in the proceedings of this nature, if the Appropriate Authority was utilising any material against a party, a copy of such a report is bound to be given to the party so that they can deal with it. They can submit their case and they would also be able to discuss the correctness of this report. In the absence of such a report, they would be deprived of such an opportunity to deal with it. Denial of such an opportunity is in clear violation of the principles of natural justice. Besides, in the absence of such a report on record an adverse inference can be drawn that the report was not it was not supporting the opinion of the Appropriate Authority and they purposely concealed it. 9. The third glaring error committed by the Appropriate Authority is their failure to derive the " fair market value " of the property in question. The Appropriate Authority in the final order referred to three sale instances. They noticed that the rate per sq.feet of this sale instance was more than Rs.3000/- per sq.ft. They 7 concluded that the apparent rate mentioned by the parties in their document is Rs.2992/- per sq.ft which was obviously low. 10. This finding of the Appropriate Authority is not in accordance with the judgment of the Supreme Court in C.B.Gautam’s case (1993) 199 ITR 530). The Supreme Court in that judgment clearly stated that the Appropriate Authority must find out as to whether the apparent consideration is less by 15 and more percentage than the " fair market value " of the property. It was therefore, incumbent upon the Appropriate Authority to first determine meticulously using proper method of valuation the "fair market value " of the property. Thereafter, they should have compared it with the apparent consideration. In the absence of this exercise, the impugned order deserves to be set aside. 11. Even on facts, the Appropriate Authority failed to consider the following admitted facts : a) that the respondents were the tenants of the old building and were required to be accommodated. b) The property in question was residential one and could not have been used for commercial purpose. 8 c) The other part of the first floor of the building which was used as a bank cannot be compared with this portion of the building. d) The location of the property in question has disadvantage of being on the rear side of the building. 12. In view of this, we are convinced that the Writ Petition deserves to be allowed and the impugned order deserves to be quashed and set aside. Accordingly, Rule is made absolute with no order as to costs. { A.V.Nirgude, J } A.V.Nirgude, J } A.V.Nirgude, J } { Dr.S.Radhakrishnan, J } Dr.S.Radhakrishnan, J } Dr.S.Radhakrishnan, J }