Pre-emptive purchase under Chapter XX-C fails without genuine comparable evidence and fair disclosure in the show-cause notice.

Compulsory purchase under Chapter XX-C could not rest on an unsuitable comparable sale where the buyer had a special advantage and the authority relied on unsupported appreciation rather than genuine market evidence; the pre-emptive purchase order was therefore unsustainable. A show-cause notice must disclose the material and reasons underlying the prima facie view of undervaluation so the affected parties can meet the case against them; the deficient notice and resulting order were vitiated for breach of natural justice. Where completion was delayed by interim court orders and the transferor did not obstruct performance, equitable interest on the unpaid consideration was warranted at a moderated rate.

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Issues: (i) Whether the compulsory purchase order under Chapter XX-C could be sustained on the basis of the sale instance relied upon as showing gross undervaluation of the suit property; (ii) Whether the show-cause notice was vitiated for failure to disclose the material and reasons forming the basis of the tentative view of undervaluation, thereby violating natural justice; (iii) Whether the transferor was entitled to interest on the balance consideration because completion of the sale was delayed by the interim court orders.

Issue (i): Whether the compulsory purchase order under Chapter XX-C could be sustained on the basis of the sale instance relied upon as showing gross undervaluation of the suit property.

Analysis: The comparative transaction relied upon by the authority was found unsuitable because the purchaser in that instance was the owner of adjoining land and had a special advantage from the purchase, including enhanced floor space index. Such a buyer was likely to pay a premium not reflective of the true market value. The authority also adopted an unsupported appreciation rate and did not fairly consider the petitioner's comparable instances from the same locality and near in time. On the material on record, the agreed consideration could not be treated as grossly understated.

Conclusion: The compulsory purchase order could not be sustained on the ground of undervaluation and the finding was against the Revenue.

Issue (ii): Whether the show-cause notice was vitiated for failure to disclose the material and reasons forming the basis of the tentative view of undervaluation, thereby violating natural justice.

Analysis: A notice under section 269UD(1) must disclose the basic material on which the authority forms its prima facie view, so that the transferor and transferee have a real opportunity to meet the case against them. A summary inquiry does not dispense with this minimum requirement. Since the notice did not disclose the relevant basis for the alleged undervaluation, the petitioners were prejudiced in their defence.

Conclusion: The notice and the resulting order were vitiated for breach of natural justice, in favour of the petitioner.

Issue (iii): Whether the transferor was entitled to interest on the balance consideration because completion of the sale was delayed by the interim court orders.

Analysis: The transferor had not obstructed the sale or opposed completion of the transaction and was deprived of the consideration because of the litigation and interim orders. On equitable considerations, compensation by way of interest was warranted, though not at the rate claimed. The equities justified a moderated rate on the unpaid balance consideration from the date fixed by the Court.

Conclusion: The transferor was entitled to interest at 15 per cent per annum on the balance consideration, in favour of the transferor.

Final Conclusion: The pre-emptive purchase order was set aside, the writ petition succeeded, and the transferor received equitable interest on the unpaid sale consideration.

Ratio Decidendi: For compulsory purchase under Chapter XX-C, the authority must base its action on genuine comparable material showing clear gross undervaluation, and the show-cause notice must disclose the material underlying the prima facie conclusion so that the affected parties can effectively answer it.

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