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Unitech Ltd. & Anr. v. Union of India & Anr.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 430 of 2007)Decided 4 Nov 2015
Civil Appeal No. 430 of 2007
Justice Madan B. Lokur · Justice S.A. Bobde

Background

Vidarbha Engineering Industries leased three plots of land in Nagpur and entered into a collaboration agreement with Unitech Ltd. to build a commercial complex, with Unitech keeping 78% of the built area and giving 22% to Vidarbha. The Appropriate Authority under the Income Tax Act treated the agreed sale price of the land as undervalued, suspecting an attempt to evade tax, and ordered the government to buy the land under the pre-emptive purchase provisions. Unitech challenged the order through the courts.

Decision Breakdown

The Supreme Court allowed the appeal and set aside both the Appropriate Authority's order of 29 July 1994 and the High Court's order of 20 February 2004. The Court held that the law, though it does not expressly say so, must be read to require that the affected parties be given a chance to show cause before a purchase order is made, because natural justice is a basic part of fair decision-making. It also found that the authority and High Court had not explained why a sale in an adjoining locality was preferred over sales in the same locality as comparable instances, so the valuation reasoning was incomplete.

Lesson Learnt

Even where a tax law is silent on hearings, a government authority that wants to take over someone's property must first give them a fair chance to explain the price they agreed. Authorities must also explain the basis for the valuation they rely on.

Official source (sci.gov.in)View Judgment (PDF)

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