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CASE NO.: Appeal (civil) 6049  of  1998

PETITIONER: APPROPRIATE AUTHORITY & ANR.

       Vs.

RESPONDENT: R.C.CHAWLA & ORS.

DATE OF JUDGMENT:       10/05/2001

BENCH: S. Rajendra Babu & K.G. Balakrishnan

JUDGMENT:

RAJENDRA BABU, J. : L...I...T.......T.......T.......T.......T.......T.......T..J

   An  agreement  to sell was entered into on  6.5.1994  by respondent  NO.3 with respondent Nos.  1 and 2 in respect of property  bearing  municipal No.C-590, Defence  Colony,  New Delhi  for  a  total sale consideration of Rs.80  lacs.   An application  in Form 37(I) was filed before the  Appropriate Authority  as required under Section 269UC of the Income Tax Act,  1961  [hereinafter  referred to as  the  Act].   The Appropriate  Authority  by an order made on 30.1.1984  under Section 269UD ordered the purchase by the Central Government of the said property for the sale consideration mentioned in the agreement to sell.  This order was challenged before the High  Court in C.W.P.No.3884 of 1994.  The High Court by  an order  made  on 17.10.1997 quashed the order for  compulsory sale  made  in  favour of the Union of  India.   Hence  this appeal by special leave.

   According  to the Appropriate Authority, the fair market value is assessed to be Rs.96,85,650/-, thus resulting in an increase  by  20 per cent of the apparent  consideration  of Rs.80  lacs  plus conversion charges of  Rs.1,04,000/-.   In reaching this conclusion, the Appropriate Authority took two instances  of  sale of properties situate at  C-77,  Defence Colony,  New  Delhi and C-86, Defence Colony, New  Delhi  to show that the value has been understated by more than 15 per cent.   Even  assuming  for the sake of  argument  that  the valuation  assigned  by  the Appropriate  Authority  to  the property  in  question is correct, one important factor  has been  ignored by the Appropriate Authority, namely, that the property  was  under litigation and proceedings  were  still pending  in  the court of law at the time when the sale  was sought  to be made and the Additional District Judge in fact had  issued  an injunction on May 27, 1994  restraining  the same,  transfer  or  parting  with  the  possession  of  the property.   The  Department  brushed  aside  this  important factor  as  regards  pending   litigation,  which  had  been initiated by the step brother of the transferor in which the title  of  the  transferor had been  challenged.   In  those circumstances,  the  High  Court  felt  that  the  impending

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litigation  altogether  cannot be ignored while  determining the  fair market value on the ground that the transferor had agreed  to indemnify the transferee or that in the long  run the  litigation  will  fail.   Whatever  may  be  the  other argument  that had been addressed by the parties  concerned, it  is clear that the pending litigation assumed  sufficient importance  in the matter.  The High Court took note of  the fact  that in other cases where there is pending  litigation in  respect  of  properties  which have  been  subjected  to proceedings  under  Chapter  XX-C  of   the  Act  had   been discounted by 10 per cent.  It is not necessary to determine this  particular  percentage.  The well known  principle  of administrative law that if a relevant factor is ignored, the order made becomes vitiated has to be applied in the present case  as  well.   On  that  basis, the  order  made  by  the Appropriate  Authority is vitiated and on this short  ground we find that the view taken by the High Court is correct and calls for no interference.

   The   appeal  is,  therefore,   dismissed   with   costs quantified at Rs.10,000/-