Compulsory purchase under Chapter XX-C needs prior hearing and reasons; compensatory interest may follow when sale proceeds are withheld.

Compulsory purchase under Chapter XX-C requires a pre-decisional opportunity to show cause and a reasoned order communicated to the affected parties; an order passed without hearing and without recorded reasons is vulnerable to being set aside. In pre-emptive purchase matters, interest on the balance sale consideration is compensatory where the owner is kept out of payment by court orders and has not obstructed the transaction. The commentary notes that later proceedings in another court do not by themselves defeat entitlement, and that a nine per cent per annum rate was treated as appropriate where the property remained in the owner's possession.

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Issues: (i) Whether the order of pre-emptive purchase under Chapter XX-C of the Income-tax Act, 1961, was invalid for want of opportunity to show cause and for absence of recorded reasons. (ii) Whether interest was payable on the balance sale consideration, and if so at what rate, after the impugned order was quashed and the matter remitted.

Issue (i): Whether the order of pre-emptive purchase under Chapter XX-C of the Income-tax Act, 1961, was invalid for want of opportunity to show cause and for absence of recorded reasons.

Analysis: The impugned order was made under section 269UD(1) after the statement in Form No. 37-I had been filed under section 269UC. The governing rule, as read down in the controlling Supreme Court decision, required that the affected parties be given a reasonable opportunity to show cause before an order for compulsory purchase was made, and the order communicated to them had to disclose reasons. The impugned order in the present case was passed without affording such opportunity and without recording reasons.

Conclusion: The order of pre-emptive purchase was bad in law and was quashed.

Issue (ii): Whether interest was payable on the balance sale consideration, and if so at what rate, after the impugned order was quashed and the matter remitted.

Analysis: The entitlement to interest was tested against the principles that interest is compensatory where the owner is prevented from receiving the sale price due to court orders and no delay or obstruction is attributable to the owner. The Court applied the principles underlying the Supreme Court decisions on interest in pre-emptive purchase matters and held that the owner was not disentitled merely because she later approached another High Court when she had already been seeking payment and had not obstructed the purchase. Since the property continued in the owner's possession, the appropriate compensatory rate was fixed at nine per cent per annum.

Conclusion: Interest at nine per cent per annum was directed on the balance consideration in the manner specified in the operative directions.

Final Conclusion: The writ petition succeeded to the extent that the pre-emptive purchase order was set aside, consequential directions were issued on fresh consideration by the appropriate authority, and compensatory interest was fixed for the eventual outcome of the renewed proceedings.

Ratio Decidendi: An order of compulsory purchase under Chapter XX-C cannot stand unless the affected parties are given a pre-decisional opportunity to be heard and the order contains reasons, and where a party is kept out of the sale consideration by court orders without having obstructed the transaction, compensatory interest may be awarded in exercise of writ jurisdiction.

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