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Issues Involved:
1. Violation of principles of natural justice. 2. Determination of fair market value and its relation to tax evasion. 3. Disclosure of materials and documents to the petitioner. 4. Entitlement of the vendor to interest on the consideration money. Detailed Analysis: 1. Violation of Principles of Natural Justice: The petitioner-bank argued that the impugned orders violated the principles of natural justice as they were denied a reasonable opportunity to defend themselves. The court noted that Chapter XXC of the Income-tax Act did not initially contain provisions for a hearing before an order of compulsory pre-emptive purchase. However, the Supreme Court in C. B. Gautam v. Union of India [1993] 199 ITR 530 held that such a requirement must be read into the provisions. The court found that the show-cause notices issued did not disclose the basis or materials for the tentative findings, thereby denying the petitioner a real opportunity to rebut the presumption of undervaluation. The court concluded that the entire proceedings were vitiated due to the violation of natural justice. 2. Determination of Fair Market Value and Its Relation to Tax Evasion: The court emphasized that the power of compulsory purchase under section 269UD(1) of the Income-tax Act must be exercised to prevent tax evasion, not merely to determine the fair market value. The Supreme Court in C. B. Gautam's case stated that an order for compulsory purchase must be supported by reasons germane to countering tax evasion. The court found that the impugned orders lacked any finding that the undervaluation was made with a view to evade tax. The orders were based solely on the determination that the fair market value was more than 15% higher than the apparent consideration, without considering whether this was done to evade tax. This approach was deemed erroneous and contrary to the principles laid down by the Supreme Court. 3. Disclosure of Materials and Documents to the Petitioner: The court found that the respondents failed to supply all relevant documents to the petitioner, including the agreement and valuation report in SIDBI's case, which were relied upon to determine the fair market value. This non-disclosure deprived the petitioner of a reasonable opportunity to make an effective representation. The court held that the proceedings were further vitiated by this failure to disclose relevant materials. 4. Entitlement of the Vendor to Interest on the Consideration Money: The vendor (respondent No. 7) claimed interest on the balance consideration money due to the delay caused by the proceedings. The court noted that the Supreme Court in C. B. Gautam and Rajalakshmi Narayanan v. Margaret Kathleen Gandhi had directed payment of interest under specific circumstances. However, in this case, the vendor had contested the proceedings, contributing to the delay. The court held that equity did not demand payment of interest to the vendor, particularly when the agreement did not provide for such interest and the vendor had objected to the pre-emptive purchase. The court did, however, find it equitable for the petitioner to reimburse the vendor for maintenance costs and taxes incurred during the proceedings. Conclusion: Both writ applications succeeded. The impugned orders of pre-emptive purchase were set aside, and the appropriate authority was directed to issue the requisite "no-objection certificate" by January 31, 1998. The vendor was required to hand over possession of the flats to the petitioner upon payment of the balance consideration. The petitioner was also directed to reimburse the vendor for maintenance costs and taxes. There was no order as to costs, and the request for a stay of the operation of the order was refused.
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