TMI Blog1995 (12) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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. 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 ₹ 3.60 crores. Under the said agreement, vide clause 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 ₹ 30,00,000 as stated hereinabove. The total consideration under the development agreement agreed to be paid by the transferees to the transferors was ₹ 3.60 crores out of which ₹ 3 crores 30 lakhs was to be paid in the form of money whereas ₹ 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 ₹ 60 lakhs as an earnest money to the seven co-owners and a further sum of ₹ 6 lakhs was paid as an earnest money to Dr. Rao. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioners 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, clause 2(b) of the agreement, the developers have specifically undertaken to utilise the F.S.L only for the construction of bungalows and not for construction of apartments/flats. Under clause 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 paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Sri V. R. Venkat Rao 42,84,000 42,68,991 3,00,00,000 2,98,94,895. Under section 269UF of the Income-tax Act, the last date for effecting tender of consideration by the Central Government was May 31, 1995. On May 31, 1995, cheques were sent by speed post as follows : ₹ 29,41,152 each was tendered to respondents Nos. 6, 7, 8 and 11. ₹ 29,38,463 was tendered on May 31, 1995, to respondents Nos. 9, 10 and 12. ₹ 93,04,488 was tendered on May 31, 1995, by the Central Government to respondents Nos. 3 to 16 and ₹ 60 lakhs was tendered on May 31, 1995, to the petitioners. In other words, the total tender effected by the Central Government on May 31, 1995, was to the tune of ₹ 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 ₹ 60 lakhs, the name of the petitioners/transferees/developers is shown as Prime Reality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 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. The first contention advanced on behalf of the petitioners is that the cheque for ₹ 60 lakhs was received by the petitioners on June 1, 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 ₹ 60 lakhs was posted by the Government on May 31, 1995. It was received by the transferees/petitioners on June 1, 1995. The last date for effecting tender was May 31, 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awn erroneously in favour of Prime Reality Ltd. instead of Prima Realty. According to the petitioners, this error itself abrogated the impugned purchase order dated April 26, 1995. According to the petitioners, under section 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 Realty , no legal tender was effected in favour of the transferees within the stipulated time and, therefore, the impugned purchase order dated April 26, 1995, stood abrogated. At this stage, it may be mentioned that the cheque was sent by the Government on May 31, 1995. It was received on June 1, 1995. Thereafter, objection was raised by the petitioners/transferees on June 19, 1995. Immediately, the cheque was corrected and on June 22, 1995, the corrected cheque was handed over to the petitioners for ₹ 60 lakhs. The above facts indicate that a clerical mistake crept in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal 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. It is next contended on behalf of the petitioners that in the present case under the agreement dated January 13, 1995, ₹ 66 lakhs was paid by the petitioners/transferees to the transferors. They paid ₹ 60 lakhs as an earnest money to Swamy family and ₹ 6 lakhs to Dr. Rao. According to the petitioners, therefore, the Government did not effect legal tender when the Government forwarded the cheque of ₹ 60 lakhs and not for ₹ 66 lakhs to the petitioners on May 31, 1995. In this connection, the facts are required to be briefly mentioned. The agreement dated January 13, 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 Venu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of ₹ 30,00,000. The family arrangement of 1992 clearly demarcates the shares of each of the co-sharers as stated hereinabove. By letter dated May 25, 1995, the transferors clearly demanded ₹ 2,98,94,895. No objection was raised by the Rao family who are also the transferors. During the period commencing from April 26, 1995, when the purchase order was passed, up to May 31, 1995, no dispute was raised either by Rao's family or the transferees' family (sic) with regard to the apportionment of the said amount. Under section 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 section 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 section 269UG(1). It is further provided that if the person entitled to the amount of consideration doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on May 25, 1995, demanding ₹ 2,98,94,895 which they have been paid and in the process the transferees have received ₹ 60 lakhs instead of ₹ 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 dated January 13, 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 section 269UG. In the present case, the entire amount of ₹ 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 ₹ 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 ₹ 6 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conveyance. As stated hereinabove, the property vested in the Government on May 31, 1995. In the circumstances, the petitioners have also contended that the loss of interest at the rate of 18 per cent. per annum on ₹ 66 lakhs paid on January 13, 1995, and loss of interest amounting to ₹ 3,71,250 at the rate of 18 per cent. per annum on ₹ 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, the impugned purchase order is vitiated. Mr. Doctor, therefore, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is adopted looking to the facts of the present case, then no interference is called for under article 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. As stated above, two plots in question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 600 and on that basis the valuation officer decided the built-up area rate of ₹ 5,914 per square foot and the F.S.I. rate was calculated at the rate of ₹ 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the out-house 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 ₹ 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 ₹ 4,073 per square foot. As stated above, the present transaction is of January 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er v. Appropriate Authority [1997] 223 ITR 572 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 v. Appropriate Authority [1997] 223 ITR 572 (Bom), 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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