Chapter XX-C pre-emptive purchase requires hearing of affected parties; shareholder lacks independent standing to challenge the transaction.

A shareholder of the purchaser-company has no independent locus standi to challenge a pre-emptive purchase order because the company is a separate legal person and the order affects the company's transaction, not the shareholder's personal rights. Chapter XX-C proceedings attract audi alteram partem: the intending purchaser and the transferors are entitled to notice and a reasonable opportunity of being heard before an order under section 269UD(1) is made, and an affected purchaser may challenge the order. An order made without such hearing is vitiated, so the proper course is quashing followed by remand for fresh consideration with equitable conditions.

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Issues: (i) Whether a shareholder of the purchaser-company had locus standi to challenge the order of pre-emptive purchase. (ii) Whether the intending purchaser and vendors were entitled to a reasonable opportunity of being heard before an order under Chapter XX-C was made and whether the purchaser could challenge the order. (iii) Whether the order of the learned single judge could stand and what relief should follow after the violation of natural justice.

Issue (i): Whether a shareholder of the purchaser-company had locus standi to challenge the order of pre-emptive purchase.

Analysis: A shareholder has no independent right in the assets of a company as the company is a separate juristic person. The challenged order operated on the company's agreement and property transaction, not on any personal legal right of the shareholder. The authorities cited on shareholder rights did not assist because no direct infringement of the shareholder's own legal or protected interest was shown.

Conclusion: The shareholder had no locus standi to challenge the order.

Issue (ii): Whether the intending purchaser and vendors were entitled to a reasonable opportunity of being heard before an order under Chapter XX-C was made and whether the purchaser could challenge the order.

Analysis: The statutory scheme of Chapter XX-C was construed in the light of the principles of natural justice. A pre-emptive purchase order has serious civil consequences, so a reasonable opportunity to show cause and be heard must be read into Section 269UD(1) of the Income-tax Act, 1961. The intending purchaser and the transferors are affected parties and are entitled to participate before the authority. The absence of such hearing vitiates the order. The purchaser, being an affected party, can also challenge the order.

Conclusion: The intending purchaser and the transferors were entitled to notice and hearing, and the purchaser could challenge the order.

Issue (iii): Whether the order of the learned single judge could stand and what relief should follow after the violation of natural justice.

Analysis: Since the pre-emptive purchase order had been made without the hearing required by law, the appropriate course was not to sustain the learned single judge's approach on merits but to remit the matter to the competent authority for fresh decision after hearing the parties. To balance equities, the remand was coupled with conditions regarding deposit, interest, retention of property, and further proceedings.

Conclusion: The writ appeals were allowed, the single judge's order was set aside, the pre-emptive purchase order was quashed, and the matter was remitted for fresh consideration subject to conditions.

Final Conclusion: The decision holds that Chapter XX-C proceedings are subject to audi alteram partem, a shareholder of the company lacks independent standing to impeach the company's transaction, and the proper remedy for breach of hearing is quashing followed by remand for fresh adjudication with equitable safeguards.

Ratio Decidendi: In proceedings for compulsory purchase under Chapter XX-C of the Income-tax Act, 1961, a reasonable opportunity of being heard must be afforded to the intending purchaser and the transferors before an order under Section 269UD(1) is made, and an order passed in violation of that requirement is liable to be quashed and remitted for fresh decision.

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