C.S. Jayanandan and K.P. George vs Appropriate Authority and Others

R. Jayasimha Babu, J.—A residential house on a plot measuring one ground in Madras city is the subject-matter of the agreement in respect

of which Form No. 37-I was filed. The agreed consideration was Rs. 15 lakhs. The transferor is a retired employee of the Railways and the

transferee is engaged in business.

The appropriate authority has made an order for compulsory purchase of the property on the ground that the plots near by had been sold at

much higher prices ranging from Rs. 18.25 lakhs to Rs. 22 lakhs per ground. That view of the authority was based on two transactions under the

agreement dated October 20, 1994. The proposed purchaser under those agreements was a developer who had purchased the two plots for the

purpose of using the plots, together for further development. No question of tenancy which would decrease the value of the property arises in

those cases.

Though the transferor had not filed objections, the transferee in his objection to the show-cause notice stated that the transferee is a tenant and

that he has been there for several years ; that the transferor was obliged to the transferee because of the help provided by the transferee and his

family on various occasions including in the admission of the transferor''s son in the Regional Engineering College at Calicut, where he provided

lodging and boarding to his son. It was stated that the agreement to sell had been concluded as early as in December, 1993, but could not be

completed at that time on account of financial difficulties on the part of the transferee. He had further submitted that the sale agreements which the

authority had referred to were in respect of plots which were not comparable. He had also stated that due to his failure in memory, he had omitted

to mention the tenancy in Form No. 37-I.

The authority rejected the contention regarding the non-comparability. It did not advert to the other contentions that the transferor had received

help from the transferee and that the transferee was obliged to him that was a factor which went into fixing of the price. Regarding the tenancy, the

authority did not reject the claim that the transferee was a tenant but only opined that even if he is regarded as a tenant, the value could not be

regarded as having been significantly reduced by reason of his tenancy. It did not choose to discount the value and the comparable property which

had been purchased by the developer though the developer had purchased the two adjoining plots for the purpose of putting up a substantial

construction thereon. Counsel stated at the Bar that the notice intended for the transferee had been received by his chartered accountant who had

been authorised to receive the same. The transferee was unaware of the notice having been received and had not filed any objection to the notice.

Counsel further submitted that the parents of the transferee were residing in the premises as tenants though the transferee himself was carrying on

business at Vellore and that there are records, such as voters'' list, rental receipts to show that the transferee was a tenant, that rents had been paid

by the tenant, and that there are bank statements to substantiate the same. The transferor has stated that due to failure in memory, he had omitted

to bring the factum of tenancy on record in the agreement and in Form No. 37-I. In the circumstances, the authority ought not to have held that the

tenancy was doubtful and even if the tenancy was there, it would not have any bearing on the value.

If the residential house was in fact tenanted that factum of tenancy would certainly affect the value. It is stated at the Bar that the tenant was

entitled to the protection of the Rent Control Act. A person in that position can certainly cause difficulty for the landlord to regain possession and

litigation could extend to several years. Other persons would not be willing to invest much in a tenanted property, and would prefer to invest in

property which they could immediately take possession of and use in the manner desired. Here, the fact that the transferee was the tenant also

would not render that tenancy valueless. I, therefore, consider it in the interest of justice to direct the authority to permit the petitioner to produce

before it, the evidence of tenancy and after perusing the records, the authority if satisfied that there was in fact a tenant, shall take it into account

and decide the value of those properties, the extent of the discount on what otherwise would be the value for the plots in that area by reason of the

tenancy shall be worked out by the authority.

The property chosen for comparison was property acquired by a developer. That property is one which cannot be regarded as identical for the

purpose of valuation of the properties owned by the petitioners. The residential house on a relatively small size of a small plot cannot command the

same value as the two plots which are capable of being used together for the purpose of putting up a multi-storeyed construction thereon. The

authority shall keep these factors in mind while computing the value of the property of the petitioners herein.

As the impugned order has omitted to take into account some relevant facts, and has proceeded under a wrong assumption that the property

acquired by the developer for carrying out substantial development by way of construction of buildings with several floors, can be compared with a

small property, the impugned order is therefore set aside. The matter is remitted back to the authority for fresh disposal in accordance with law,

and in the light of the observations made in this order. W. P.s are accordingly ordered. WMPs are closed.