1. This original petition is filed by two petitioners jointly. The first petitioner is a partnership firm and the 2nd petitioner is a private limited company. M/s. P. Sahadeva Menon, V. Govindankutty, G. Gopinathan Pillai, K.M.Ramakrishna Pillai and M.A.George are the partners of the firm. They are also the only shareholders of the 2nd petitioner company. The 1st petitioner firm purchased 69.222 cents of land comprised of 43.926 cents in Sy.No.59/6A1 and 25.296 cents in Sy.No.60/1A1 of Edappally North Village by sale deed nos.3987 dated 4.5.1979 and 5188 dated 11.11.1993 respectively, for a total sale consideration of Rs.2,55,407/-. The firm started a small scale industrial unit, engaged in the business of manufacturing laboratory chemicals, reagents etc. In the land bought by them they constructed factory buildings in 1980, 1988 and 1995 for the purpose of their business.

2. The firm entered into an agreement with the company for sale of the said land and buildings for a total sale consideration of Rs.60 lakhs, of which Rs.50 lakhs were to be paid by D.D. or pay order drawn on any bank and the balance Rs.10 lakhs were to be credited to the account of each of the five partners in equal shares. Ext.P3 is that agreement dated 3.10.1998. The firm had credit facilities from M/s.Union Bank of India, Edappally Branch, for repayment of amounts due on which the said land and buildings were mortgaged as security. By Ext.P5 valuation dated 16.6.1994, the Bank had valued the 69.322 cents of land at Rs.15,59,745/- at the rate of Rs.22,500/- per cent and the buildings at Rs.11,05,635/- aggregating to Rs.26,65,380/-. At the instance of the Bank, the buildings were insured with the National Insurance Company Ltd. for a sum of Rs.25,00,000, as evidenced by Ext.P6 policy of insurance dated 16.10.1998.

3. At that time, Chapter XXC of the Income Tax Act, 1961 was in force (which was later repealed), S.269UC of which stipulated that no transfer of immovable property of such value exceeding five lakhs rupees as may be prescribed should be effected, except after entering into an agreement for transfer between the transferor or and transferee at least four months before the intended date of transfer, reduced into writing in the form of statement in Form 37I prescribed under Rule 48L of the Income Tax Rules, which had to be furnished to the appropriate authority under the Act. Under Section 269UD, after receipt of the said statement, the appropriate authority may make an order for purchase by the Central Government of such immovable property at an amount equal to the apparent consideration fixed in the statement. But no such order shall be made after the expiration of three months from the end of the month, in which the statement under Section 269UC is received by the appropriate authority.

4. For the sale of the abovesaid property, the petitioners filed Ext.P7 statement in Form 37I dated 3.10.1998 before the appropriate authority, which was received by the appropriate authority, on 8.10.1998. On receipt of the same, by Ext.P8 communication dated 28.10.1998, the appropriate authority directed the petitioners to produce copies of the encumbrance certificate, khata certificate, parent deed and tax receipt in respect of the property. The petitioners complied with the same by Ext.P9 letter dated 4.11.1998. The appropriate authority gave a notice for inspection of the property to be conducted on 21.11.1998, which was first postponed to 8.2.1999 and later to 12.2.1999. After the inspection, on 12.2.1998 itself, Ext.P10 show cause notice was issued to the petitioners directing the petitioners to show cause why an order for pre-emptive purchase of the property under Section 269UD(1) of the Income Tax Act, 1961, should not be passed, since the appropriate authority is satisfied that the apparent consideration shown in the agreement for sale is below the market price by over 15% and therefore a presumption is to be drawn that such undervaluation has