TMI Blog1993 (3) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... therside facing Infantry Road, Bangalore. This property originally belonged to one H. M. Maneckji, who purchased the same in a court sale on March 20,1952, and the sale in his favour was confirmed on March 10, 1953. The said Maneckji transferred the said property in favour of one N. K. Irani and his wife, respondent No. 2, by a registered deed dated May 14, 1957.The said N. K. Irani died on January 5, 1972, leaving behind his wife and a son, who are respondents Nos. 2 and 3 in these proceedings. Under the law of succession applicable to Parsis, the share belonging to N. K. Irani devolved upon his wife and son and thus respondent No. 2 became the owner of undivided three-fourths share while respondent No. 3 became owner of the remaining one-fourth share. The third respondent is residing in the United States of America and he is a non-resident Indian. He executed a power of attorney in favour of one G. K. Irani to deal with the property in question. Inasmuch as the third respondent was a non-resident Indian, he applied to the Reserve Bank of India for permission to sell the property.The Reserve Bank of India gave such permission. The property was agreed to be sold to Messrs. Neat Hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the absence of good and strong reasons. Moreover, the Reserve Bank of India is a statutory authority and it had accepted the price quoted in the agreement. When that is so, there is hardly any justification for the income-tax authorities to come to a different conclusion unless there are strong circumstances leading to suspicion in the mind of the authorities.No such circumstances are forthcoming in the course of the order nor does the order disclose as to why they resiled from their earlier view taken by them while granting the no objection certificate under section 269UL(1) ofthe Act. When the result of the order affects the rights of the parties, it is necessary that some good and tenable reasons must be available to the authorities to make the order which is impugned herein. Simply issuing an order in the usual format does not take the matter any further. In the present case, there is hardly any application of mind to the relevant facts arising in the case. As tenable reasons are not forthcoming to sustain the A impugned orders, the same cannot be allowed to stand and they stand quashed. Pursuant to the interim order made by this court, the Department has paid a sum of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be purchased under section 269UD(1) of the Act. The learned single judge has quashed the order on the following grounds : That, on an earlier occasion, the appropriate authority has considered the consideration of Rs. 1,25,02,500 for the second respondent's share and Rs. 41,67,500 for the third respondent's share as adequate and granted no objection certificate " for registration of the sale transaction under section 269UL(1) of the Act on June 27, 1988 ; that during the gap of one year escalation, if any, in the price has been taken care of because the difference in the consideration amount between the earlier agreement of sale dated April 28, 1988, and the present agreement of sale dated May 22, 1989, is Rs. 17,36,325 ; that the Reserve Bank of India has accepted the price quoted in respect of the share of the third respondent ; that the order dated July 25, 1989, does not disclose any such circumstances leading to suspicion in the mind of the authority ; that there is hardly any application of mind by the appropriate authority to the relevant facts arising in the case. On the aforesaid grounds, the learned single judge has come to the conclusion that there is no justification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1 was filed before the appropriate authority seeking permission for effecting registration of the sale. The appropriate authority, by its order dated June 27, 1988, granted the " no objection certificate ". It is relevant to mention the reasons given in that order because the learned single judge has taken a view that there is no application of mind by the appropriate authority while refusing to grant the " no objection certificate " with reference to the second agreement dated May 22, 1989. The relevant portion of the proceedings dated June 27, 1988, of the appropriate authority containing the reasons for the issue of the purchase order are as under: " We find that the property in question is a large plot extending to about 43,300 sq. ft. with old buildings thereon. It faces Infantry Road. The land rate as per agreement works out to Rs. 382 per sq. ft. after adjusting the salvage value of old buildings and structures. On the basis of development method, assuming a flat selling rate of Rs. 475 per sq. ft and FAR of 2, the land rate obtaining in this case would be Rs. 451 per sq. ft. It is understood that the transferors have obtained clearance from the Urban Land Ceiling and Reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority, by its order dated July 25, 1989, has refused to grant the permission and has held that it is a fit case to issue the purchase order under section 269UD(1) of the Act and it has accordingly directed that the property in question be purchased pre-emptively. The reasons given by the appropriate authority for taking a view different from the one it took on June 27, 1988, are reflected in the proceedings dated July 25, 1989, containing the reasons recorded for holding that it is a fit case for the issue of the purchase order. In paragraphs 1 to 5 of the proceeding, the appropriate authority has dealt with the previous history relating to the property, its location and the previous transaction of agreement of sale dated April 28, 1988, and its previous order dated June 27, 1988. It has also been noticed that the third respondent is a non-resident Indian and he is presently residing in the United States of America. In paragraph 6 of the order, the FAR has been worked out at 2 and the average flat rate is referred to at Rs. 650 per sq. ft. It has also been further stated that the executive engineer worked out the land value as per development method at Rs. 695 per sq. ft. In par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into account the salvage value, the land rate was worked out at Rs. 457 per sq. ft. The said property was purchased having regard to the sale instances of flats in and around Infantry Road. It is also noticed that Sri D. N. Irani obtained the permission of the Reserve Bank of India for sale of his undivided interest in the property to Mass Traders Pvt. Ltd. as required under the Foreign Exchange Regulation Act, 1973. It is also observed from the proceedings of the Special, Deputy Commissioner, Urban Land Ceiling, that there is no excess vacant land in the premises at Nos. 4 and 5 (new Nos. 9 and 11), Infantry Road, Bangalore." On the basis of the aforesaid reasons, the appropriate authority has held that it is a fit case for issuing purchase order under section 269UB(1) of the Act. Before formulating the points for determination it is necessary to refer to the various interim orders passed in the writ petitions. The writ petitions were filed on August 16, 1989, and came up for preliminary hearing before the court on August 17, 1989. Learned standing counsel for the Central Government was directed to take notice for the respondents on that day and the petitions were directed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid by the petitioner to the appropriate authority and on that the respondents shall consider the issue of a no objection certificate. It is certainly open to the petitioner to work out the modalities to get the sale deed executed from respondents Nos. 2 and 3 as also other documents after the no objection certificate is issued by the concerned authority. The amounts to be paid and adjusted shall be made Within a period of 30 days from today. The Department wants to recover interest from the petitioner. Such a question does not arise at all. Whatever amounts have been paid is in lieu of consideration for the sale of property. Property was in the possession of the Department until now just as the amount paid is in the possession of sellers. If, on that amount, the Department seeks to claim interest, the seller/petitioner can claim damages for deprivation of possession. Neither of the reliefs can be granted to either of them. Further, certain amount is deposited to the credit of the petitioner under interim order of this court and the Department cannot have any claim over the interest thereon." In the light of the contentions urged on both the sides and also by Sri M. R. Naik, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eclares, subject to the articles of association, that the profits or any portion thereof should be distributed by way of dividends among the shareholders. He has undoubtedly a further right to participate in the assets of the company which would be left over after winding up but not in the assets as a whole. Similarly, in Daman Singh v. State of Punjab [1986] 60 Comp Cas I ; AIR 1985 SC 973, 979, a question arose as to whether the interest of member of a co-operative society would be equated to the interest of the co-operative society. It was held thus (at page 11 of 60 Comp Cas) : " The next submission of the learned counsel was that section 13(8), (9) And (10) did not make express provision for the issue of notice to the members of the concerned co-operative societies and were, therefore, violative of the principles of natural justice. He argued that in the absence of any provision, the rules of natural justice may be read into the provisions and notice to the members of the affected societies was imperative. Otherwise, he argued, members of one society would be forced, against their will and without being heard, to associate themselves with members of another society. We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the legal right that can be enforced under article 226 like article 32 must ordinarily be the right of a person who complains of infraction of such right and approaches the court for relief. It was also held that the right that can be enforced under article 226 shall ordinarily be the personal or individual right of the petitioner himself though, in the case of some of the writs like habeas corpus or quo warranto, this rule may have to be relaxed or modified. Further, in that case, the petitioner therein had an agreement under which he had the right to manage the Oriental Gas Company for a period of 20 years and to receive remuneration for the same. Under section 4 of the West Bengal Oriental Gas Company Act, 1960, the petitioner therein was deprived of that right for a period of five years. Therefore, it was held that he could maintain a petition under article 226 of the Constitution as his right to manage the company and to receive remuneration therefor had been infringed by the provisions of the impugned Act. Therefore, it is not possible to hold that the aforesaid decision would be of any assistance to Sri Kapur. No personal right of Sri Kapur is infringed by the impugned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors and the shareholders are all exercised through their newspapers through which they speak. The press reaches the public through the newspapers. The shareholders speak through their editors. However, in the instant case, no question of any infraction or infringement of rights of shareholders of the company is involved. Hence, it is not possible to apply the proposition laid down in Bennett Coleman and Co.'s case, AIR 1973 SC 106, to the case on hand and hold that Sri Kapur has a right to challenge the order of pre-emptive purchase and to intervene in the proceedings in question. In Neptune Assurance Co. Ltd.'s case [1973] 43 Comp Cas 469; AIR 1973 SC 602, again the Bank Nationalisation case [1970] 40 Comp Cas 325; AIR 1970 SC 564, was referred to and it was held that the court would not concentrate merely upon the technical objections to the action and deny itself jurisdiction to grant relief to the shareholders. If the State action impairs the rights of the shareholders as well as of the company, the locus standi of the petitioner cannot be challenged. It has already been pointed out that, in the instant case, by reason of the pre-emptive purchase, no right of the shareholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yet been born. . . . This rule in regard to locus standi thus postulates a right-duty pattern which is commonly to be found in private law litigation. But, narrow and rigid though this rule may be, there are a few exceptions to it which have been evolved by the courts over the years. " It has already been pointed out that no personal right of Sri Kapur is infringed and his legally protected interest as a shareholder of the company is not affected by reason of the order of the appropriate authority directing pre-emptive purchase. His case also does not fall within any one of the exceptions to the rule of locus standi as enunciated in the aforesaid S. P. Gupta's case, AIR 1982 SC 149. At any rate, it has not been demonstrated to us that the value of his share is in any way affected or that the company has been put to a loss to such an extent that the very value of the share is diminished. Therefore, we do not see any justification in the contention of Sri Kapur that his interest as a shareholder is affected and thereby the decision in S. P. Gupta's case, AIR 1982 SC 149, would apply to this case. On the other hand, the decision of the Supreme Court in Mrs. Bacha F. Guzdar's cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d case, the Supreme Court addressing itself to the question as to whether the provisions of Chapter XX-C are bad in law as there is no provision for giving the concerned parties an opportunity of being heard before an order is passed under the provisions of section 269UD(1) of the said Chapter for the purchase by the Central Government of an immovable property agreed to be sold in an agreement of sale, took the view that such an opportunity to show cause and an opportunity of being heard should be read into the said provision. After referring to some of its earlier decisions, the Supreme Court has held, among other things, as under ( at page 553 ) : " It must, however, be borne in mind that courts have generally read into the provisions of the relevant sections a requirement of giving a reasonable opportunity of being heard before an order is made which would have adverse civil consequences for the parties affected. This would be particularly so in a case where the validity of the section would be open to a serious challenge for want of such an opportunity. It is true that the time-frame within which the order for compulsory purchase has to be made is a fairly tight one but, in o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of this case and in view of the observations made by the Supreme Court in C B. Gautam's case [1993] 199 ITR 530 in the last but one paragraph of its judgment, notwithstanding the fact that opportunity of being heard and opportunity to show cause were not given to respondent No. 1, he cannot be allowed to reopen the matter and he cannot have the right to challenge the order. It is pointed out by Sri Dathu that in the instant case, the Central Government had already made the payment to the owners of the property, i.e., respondents Nos. 2 and 3, and they have received the amount towards the purchase by the Central Government without any protest and that even possession of the property was also given to the Central Government by the owners and that, therefore, in the context of the observations of the Supreme Court in the last but one paragraph of its judgment in C. B. Gautam's case [1993] 199 ITR 530, respondent No. 1 has no right to challenge the order of the appropriate authority. In C. B. Gautam's case [1993] 199 ITR 530, the Supreme Court in the last but one paragraph of its judgment has observed as under ( at page 562): " We may clarify that, as far as completed transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to by us earlier would also go to show that the matter relating to pre-emptive purchase by the Central Government had not reached its terminal point in all respects when the writ petition was filed by the instant respondent No. 1. Looked at from any point of view, therefore, we are of the view that the submission made by Sri Dathu, learned standing counsel for the Department, is not correct. Sri Dathu, however, invited our attention to the decision of this court in Rajata Trust v. Chief CIT [1992] 193 ITR 220. It is true that this court in the said case has taken the view that a person who has entered into an agreement for purchase of the property is not a " person interested in the property" and that he cannot object to the purchase by the Central Government. It appears to us that the said decision has proceeded on the basis that the order passed under Chapter XX-C of the Act is not quasijudicial in nature and that it is administrative in character. However, as pointed out earlier, the legal position in that behalf stands completely changed by reason of the interpretation placed by the Supreme Court with reference to section 269UD of the Act in C. B. Gautam's case [1993] 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us that this court could perhaps decide the questions in controversy on merits, having regard to the fact that the pre-emptive purchase order was made as long back as in the year 1989, and having regard to the fact that the Central Government had already paid the entire consideration amount payable to the transferors and that possession of the property was also handed over to the Central Government. The said thinking of ours was reflected in the order dated January 13, 1993, recorded in the order sheet. The same reads as under : " During the course of hearing, it was contended that, in the light of the judgment of the Supreme Court in C. B. Gautam's case [1993] 199 ITR 530, the matter be remitted to the appropriate authority to afford an opportunity to the transferor and the transferee to put forth their say in the matter. As the matter is of the year 1989, and pursuant to the order, the appropriate authority has already paid the entire consideration amount payable to the transferor and deposited the amount payable to the first respondent, which was paid by the first respondent as advance to the transferor and the transferor has also accepted the said consideration and put the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusions in matters which have been left by the Legislature to the decisions of specially constituted Tribunals. In paragraph 22 of its judgment, the Supreme Court has observed as under (at page 118 of AIR 1965 SC and at page 12 of 26 FJR): "Incidentally, we ought to point out that even if the Division Bench was right in holding that the impugned order should be corrected by the issue of a writ of certiorari, it would have been better if it had not made its own findings on the evidence and passed its own order in that behalf. In writ proceedings, if an error of law apparent on the face of the record is disclosed and a writ is issued, the usual course to adopt is to correct the error and send the case back to the special Tribunal for its decision in accordance with law. It would, we think, be inappropriate for the High Court exercising its writ jurisdiction to consider the evidence for itself and reach its own conclusions in matters which have been left by the Legislature to the decisions of specially constituted Tribunals." Then again in the decision in Chingleput Bottlers v. Majestic Bottling Co., AIR 1984 SC 1030, the Supreme Court in paragraph 15 has observed as under (at page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed (as by breach of natural justice or error on the face of the record ), certiorari will quash and mandamus may issue simultaneously to require a proper rehearing. An example is Board of Education v. Rice [1911] AC 179 (HL) cited elsewhere ; the Board's decision was ultra vires since they had addressed their minds to the wrong question ; consequently, it was quashed by certiorari and the Board were commanded by mandamus to determine the matter according to law, i.e., within the limits indicated by the House of Lords'. " We may also point out here that a Division Bench of this court comprising justice Venkatachaliah ( as he then was ) and justice Puttaswamy ( as he then was ) have in the decision in Jagadish Patil v. State [1981] 1 Kar LJ 537, held as under: "Whenever a complaint of violation of rules of natural justice is made by an aggrieved person, it is not normally possible to predict what decision would have been taken by the appropriate authority, had it complied with the principles of natural justice. In such a situation this court which does not exercise an appellate jurisdiction but only a supervisory jurisdiction within the well-defined limits cannot embark upon an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, was not only that the company should have been given an opportunity to explain the evidence against it, but also an opportunity to be informed of the proposed action of take over and to represent why it be not taken over. The further question to be considered is : What is the effect of the non-observance of this fundamental principle of fair play ? Does the non-observance of the audi alteram partem rule, which in the quest of justice under the rule of law, has been considered, universally and most spontaneously acceptable principle, render an administrative decision having civil consequences, void or voidable ? In England, the outfall from the watershed decision, Ridge v. Baldwin [1964] AC 40 brought with it a rush of conflicting opinions on this point. The majority of the House of Lords in Ridge v. Baldwin held that the non-observance of this principle had rendered the dismissal of the Chief Constable void. The rationale of the majority view is that where there is a duty to act fairly, just like the duty to act reasonably, it has to be enforced as an implied statutory requirement, so that failure to observe it means that the administrative act or decision was outside the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority, in the light of the decision of the Supreme Court in Gautam's case [1993] 199 ITR 530 and other decisions alluded to earlier with reference to the effect of violation of the principles of natural justice, it is really not necessary for us to examine in detail as regards the correctness or otherwise of the findings given by the learned single judge. However, we hasten to observe here that it is difficult to agree with the finding recorded by the learned single judge that the appropriate authority has not applied its mind to the various aspects while reaching the conclusion which it did. Similarly, it is also not possible to agree with the view of the learned single judge that the valuation made by the Reserve Bank of India should prevail. We would like to point out that the Reserve Bank of India, even though it is a statutory authority, and has accepted the value of the property while giving permission to a non-resident Indian to sell the property, nevertheless has taken care to observe that the sale consideration of the property as indicated in the letter for permission shall not be construed as the value of the property for the purposes of the Income-tax Act, 1961, the Gif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not only deprived of the benefits of a large sum of Rs. 1,84,06,325, but also was prevented from auctioning the property. It is submitted that the pre-emptive purchase under Chapter XX-C is made not for the purpose of accumulating property but for the purpose of ensuring that there is no evasion of the tax payable by the parties and that such property which is purchased under Chapter XX-C will generally be sold by way of public auction and the amount recovered. Therefore, in the normal course, in the absence of an interim order obtained by the petitioner, the property would have been sold and the amount would have been recovered. Therefore, it is submitted that sufficient safeguards should be provided to the Central Government as well as to the owner of the property and that the Central Government also should be compensated for the deprivation of the use of a large sum of the amount and also for disabling it from auctioning the property in question. It is submitted by Sri Dathu, learned standing counsel for the Department, that as a result of the quashing of the "order of the appropriate authority, the Central Government shall have to return the property to the owner and the lat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overing the amount. As the pre-emptive purchase is made for selling the property and recovering the amount, it could not put the property for any use also, because, on August 21, 1989, the first respondent has obtained an order restraining the Central Government from altering the nature of the property during the pendency of the writ petitions. Further, after a lapse of 3 1/2 years, he will have the benefit of again reconsidering the matter, and stands the chance of getting the purchase approved. In the event he succeeds, he will be getting the property only for a sum of Rs. 1,84,06,325 even after a lapse of 3 1/2 years and whereas, the appropriate authority, for having exercised its legitimate power under Chapter XX-C of the Act, the Central Government had been deprived of the very sum for a period of more than 3 1/2 years without any benefit. Therefore, it is necessary to balance the interest of both the parties and also safeguard their interests. Accordingly, we pass the following order: (i) Writ appeals are allowed. (ii) The order dated October 23, 1992, passed by the learned single judge in W. P. Nos. 14319 and 14320 of 1989 (see page 745 ) is set aside. The order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to respondent No. 1 with interest at 12 per cent. per annum from the date of deposit till the date of refund of the amount which shall be made within one month from the date the amount is deposited by the auction purchaser.. (g) It is also further directed that, in the event the purchase order is passed and pursuant to that, property is sold in public auction by the Central Government and in that public auction, if it fetches more than Rs. 3 crores 15 lakhs (this sum we have taken from the notification issued by the Central Government for auctioning the is very property which was proposed to be held on 12th and 13th November, 1992), the Central Government shall refund the interest paid by respondent No. 1 as directed above on the sum of Rs. 1,84,06,325 at the rate of 12 per cent. per annum from September 14, 1989, to April 15, 1993, or till the date of deposit by the first respondent, whichever is earlier, within one month from the date of the amount deposited by the auction-purchaser. (h) The auction shall be held within a period of nine months from the date the purchase order is passed. (iv) These directions regarding auction and-refund of the interest by the Central Governme ..... 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