Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 6
PETITIONER:
INDORE DEVELOPMENT AUTHORITY
Vs.
RESPONDENT:
SMT. SADHANA AGARWAL & ORS.
DATE OF JUDGMENT07/03/1995
BENCH:
SINGH N.P. (J)
BENCH:
SINGH N.P. (J)
VERMA, JAGDISH SARAN (J)
CITATION:
1995 SCC (3) 1 JT 1995 (3) 1
1995 SCALE (2)135
ACT:
HEADNOTE:
JUDGMENT:
N.P.SINGH, J.:
1. The Appellant, Indore Development Authority (hereinafter
referred to as the ’Development Authority’) has been con-
stituted under the provisions of the M.P. Nagar Tatha Gram
Nivesh Adhiniyam, 1973 (hereinafter referred to as ’the
Act’). The writ-petitioners/respondents (hereinafter
referred to as ’the respondents’) are the intended,
allottees of flats in the Navlakha Housing Complex Scheme
No.31 in the town of Indore, on hire-purchase basis.
2.It appears that in the year 1977, an advertisement was
issued by the Development Authority, inviting applications
from the persons interested in purchase of flats in multi-
storeyed buildings on hire-purchase basis. As per the said
advertisement, a deposit of Rs. 1,000/- for Lower Income
Group (hereinafter referred to as ’the LIG’) residential
flat and a deposit of Rs.2,000/- for Middle Income Group
(hereinafter referred to as ’the MIG’) residential flat was
to be made. It was also said that the plinth area for the
MIG Flat shall be 805 sq. ft. and that of the LIG flat shall
be 500 sq.ft. It was further said that at the time of the
allotment of the flat a deposit of Rs. 11,000/- was to be
made by the hirepurchaser for the MIG flat and Rs.7500/for
the LIG flat. The rest of the amount was to be paid in
instalments. Details of such instalments were mentioned.
At the foot, it was said that the cost of the flats
aforesaid was based on estimate and that the definite cost
would be intimated at the time of allotment. The estimated
period for completion of the said scheme was mentioned as
two years.
3.Pursuant to the aforesaid offer made by the Development
Authority, in
3
respect of MIG and LIG flats, the respondents and others got
themselves registered as prospective hire-purchasers and
made the prescribed deposits for the purpose of the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 6
allotment of the flats. After a lapse of about two years,
the Development Authority by its letter dated 5. 11. 1979
intimated that according to the plan approved for advance of
loan by HUDCO (a financing institution) 162 MG flats of
plinth area of 750 sq.ft., 12 LIG flats of plinth area of
500 sq.ft. each would be constructed in the four blocks from
3rd floor to 7th floor of the building in the Navlakha
Housing Scheme. The probable and estimated cost of MIG and
LIG flats were. given out at Rs.70,000/- and Rs.45,000/-
respectively. There was modification also in respect of
payment of instalments, so far the cost of flats on hire-
purchase was concerned. He registration fee to be deposited
was also revised as Rs.5,000/- in place of Rs.2,000/ - for
MIG flat and Rs.3,000/- in place of Rs. 1,000/- in respect
of LIG flat.
4. Once again by letters dated 7.10.1980 and 25.10.1980
the respondents were intimated that due to the increase in
the prices of the materials the estimated cost of LIG flats
shall be Rs.60,000/- instead of Rs.45,000/- and that of the
MIG flats shall be Rs.95,000/- instead of Rs.70,000/-. It
was said in the communication that the revision had been
made on basis of the prevailing market rates of the
construction materials. According to the respondents, they
had no option but to concede to the aforesaid arbitrary and
unilateral demand made by the Development Authority. By
letters dated 261 A 984 and 26.12.1984, be Development
Authority again intimated to the respondents a further hike
in the cost of the flats. It was said that the cost of LIG
flat had been raised to Rs. 1, 16,000/- and the cost of MIG
flat had been raised to Rs. 1,30,000/-. In the letter
aforesaid dated 26.1.1984, respondents were informed that
the area of the LIG flat which had already been constructed
was 714.94 sq.ft. in place of 500 sq.ft. as initially
intimated in the year 1977. From the records, it appears
that the construction of the building had been completed in
the year 1982 and the flats were ready for allotment. But
possession could not be delivered to the respondents because
of a writ petition filed in respect of alleged irregular
allotments of 56 flats.
5. After receipt of communication dated 26.1.1984 the
respondents filed a writ petition challenging the increase
of the cost of flats registered by the respondents. The
stand of the Development Authority, before the High Court,
was that the price of the flats had to be raised because of
the hike in the cost of construction. In respect of LIG
flats, yet another defence was taken, saying that increase
of the plinth area from 500 sq.ft. to 714.94 sq.ft. was also
a factor for the hike in the price of such LIG flats. The
High Court allowed the said writ petition on a Ending that
the appellant Development Authority, had been dealing with
the respondents in an arbitrary and dictatorial manner. The
escalation of the cost at different stages amounting to more
than 100% had not been explained to the satisfaction of the
Court. On that finding a direction was given to the
appellant to deliver the possession of the flats to the
respondents and other applicants on the-basis of the
estimated cost conveyed to the respondents and others by
letters aforesaid issued in October 1980 i.e. so far MIG
flat is concerned at the rate of Rs.95,000/- and LIG flat at
the rate of Rs.60,000/-, within one month from the date of
the order.
6. On behalf of the appellant, it was
4
pointed out that at no stage the appellant had made any
commitment in respect of the final cost of the flats in
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 6
question. Since very beginning, they had given out only an
estimated and probable cost of the flats and they have kept
the respondents informed from time to time about the rise in
the price of the flats, due to several intervening
circumstances including escalation of the cost of the
construction materials. In this connection, our attention
was drawn to the advertisement and the application for
registration. The particulars which were issued in respect
of the flats aforesaid gave the details of the area in
respect of Middle Income Group and Lower Income Group.
After the schedule for payment of different instalments,
Note(1) said:
"The above price is on estimated basis.
Definite price will be intimated at the time
of allotment. Persons receiving flats will
have to pay the service charges fixed. The
probable period of completion of the scheme is
2 years".
Reference was also made to a communication dated S. II.
1979, addressed to the respondents. It was said in the said
communication that in Scheme No.31 Navlakha Residential
Complex, it had been proposed to build Higher/Middle/Lower
income groups houses by taking loan from HUDCO; - "according
to scheme sanctioned by 0 now 162 and 12 houses of 750
sq.ft. and 500 sq.ft. in four blocks from third storey to
seventh storey with provision of lift will be built whose
probable cost is expected to be respectively Rs.70,000/- and
Rs.45,000/-". Thereafter, the details of the payment to be
made by the persons who had registered themselves for
allotment of the flats, according to the scheme sanctioned,
by the HUDCO was given out. In that communication, it was
also said that if any person wanted to have refund of the
registration fee then the whole amount would be refunded
without interest. Thereafter the appellant issued the
communication aforesaid dated 7.10.1980 in continuation of
its earlier communication dated 5.11.1979 to all the
respondents saying:
"The Authority had in its earlier letter
No.14039 dated 5.11.1979 indicated the
estimated cost of the above flat of
Rs.45,000/-. But as you know the market prices
have increased very much. Due to draught
causing scarcity of cement, the scheme is
delayed. Now the estimated cost of the flat
at the current market price has been estimate
d
at Rs.60,000/-".(emphasis supplied)
Thereafter, the details of the revised instalments which the
respondents were required to pay was mentioned. There is no
dispute that pursuant to the said communication, the
respondents have paid from time to time. However, the
communication dated 26.1.1984 aforesaid, which became the
subject matter of controversy said:
"In the above mentioned Navlakha Complex one
MIG Flat was reserved in your name. In this
connection, you were given preliminary
information by letter No. 14039 dated 5.11.79
about the amount of instalment based on
probable cost and other conditions.
Thereafter, in continuation, the Authority by
letter No. 1 1969 dt. 7.10.1980, informed you
for the reasons given in letter about the
probable cost estimated at the time. During
this interval, increase in the price of
various materials required in construction,
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 6
suggestion of Architect and use of the area
under construction, the area of each flat in-
creased and that due to inevitable reasons,
the actual cost of the flat has
5
become Rs. 1,16,000 (in words Rupees one lac
sixteen thousand). On account of the above
reasons the area of the flat has become 714.94
sq.ft. in place of 500 sq.ft."
Thereafter, a request was made by the appellant to the
respondents to deposit the balance amount. A similar letter
was addressed to the persons, who had registered themselves
for MIG flats informing them that the area of the flat had
become 808.12 sq.ft. and the actual cost of the flat was Rs.
1,30,000/-.
7. It may be mentioned that the respondents were given
possession of the flats in the year 1984 itself, on basis of
the direction given by the High: Court. Since then they arc
in possessions thereof Because of that the appellant
Development Authority is claiming interest at the rate of
150 % from the respondents, since the date they have taken
possession of the flats, over the amount which are yet to be
paid by the respondents.
8. During the last decade, it has become a common feature
not only with the private builders, but with the builders,
including Development Authorities which can be held to be a
State within the meaning. of Article 12 of the Constitution;
(1) to escalate the price of the flats booked (2) not to
deliver such flats according to the schedule mentioned in
the advertisement inviting applications. In this process
certainly the victims are the citizens who have booked such
flats for shelter. The people belonging to the Lower Income
Group, having estimated the total amount, which they may
have to pay for the flats in question are on many occasions
put to great strain and stress because of the revision and
escalation of the cost of such flats. But the development
authorities who construct such flats have their own story.
According to them, under the existing circumstances it is
very difficult, if not impossible, to keep to the time
schedule because of several intervening factors, including
litigations pending in courts from time to time. Then the
escalating price of the construction materials, labour
charges etc. are the other contributory factors.
9. This Court in the case of Bareilly Development
Authority v. Ajai Pal Singh, (1989) 2 SCC 116, had to deal
with a similar situation in connection with the Bareilly
Development Authority which had undertaken construction of
dwelling units for people belonging to different income
groups styled as ’Lower Income Group’,’Middle Income
Group’,’Higher Income Group’ and the ’Economically’ Weaker
Sections. The respondents to the said appeal had registered
themselves for allotment of the flats in accordance with the
terms and conditions contained in the brochure issued by the
Authority. Subsequently, the respondents of that appeal,
received notices from the Authority intimating the revised
cost of the houses/flats and the monthly instalment rates
which were almost double of the cost and rate of instalments
initially stated in the General Information Table. But
taking all facts and circumstances into consideration, this
-Court said that it cannot be held that there was a
misstatement or incorrect statement or any fraudulent
concealment, in the brochure published by the. Authority.
It was also said that the respondents cannot be heard to say
that the authority had arbitrarily and unreasonably changed
the terms and conditions of the brochure to the prejudice of
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 6
the respondents. In that connection, it was pointed out
that the most of the respondents had accepted the changed
6
and varied terms. Thereafter they were not justified in
seeking any direction from the Court to allot such flats on
the original terms and conditions. Recently, the same
question has been examined in the case of Delhi Development
Authority V. Pushpendra Kumar Jain, JT 1994 (6) SC 292. In
respect of hike in the price of the flats, it was said:-
"Mere identification or selection of the
allottee does not clothe the person selected
with a legal right to allotment at the price
prevailing on the date of drawal of lots. The
scheme evolved by the appellant does not say s
o
either expressly or by necessary implication.
On the contrary, clause (14) thereof says that
"the estimated prices mentioned in the
brochure are illustrative and are subject to
revision/modification depending upon the exi-
gencies of lay out, cost of construction etc.
Although, this Court has from time to time taking the
special facts and circumstances of the cases in question has
upheld the excess charged by the development authorities,
over the cost initially announced as estimated cost, but it
should not be understood that this Court has held that such
development authorities have absolute right to hike the cost
of flats, initially announced as approximate or estimated
cost for such flats. It is well known -that persons be-
longing to Middle and lower Income Groups, before
registering themselves for such flats, have to take their
financial capacity into consideration and in some cases it
results into great hardship when the development authorities
announce an estimated or approximate cost and deliver the
same at twice or three of the said amount. The final cost
should be proportionate to the approximate or estimated cost
mentioned in the offers or agreements With the high rate of
inflation, escalation of the’ prices of construction
materials and labour charges, if the scheme is not ready
within the time frame, then it is not possible to deliver
the flats or houses in question at the cost so announced.
It will be advisable that before offering the flats to the
public such development authorities should fix the estimated
cost of the flats taking into consideration the escalation
of the cost during the period the scheme is to be completed,
In the instant case , the estimated cost for the LIG flat
was given out at Rs.45,000/-. But by the impugned
communication, the appellant informed the respondents that
the actual cost of the flat shall be Rs. 1,16,000/- i.e. the
escalation is more than 100%. The High Court was justified
in saying that in such circumstances, the Authority owed a
duty to explain and to satisfy the Court, the reasons for
such high escalation. We may add that this does not mean
that the High Court in such disputes, while exercising the
writ jurisdiction, has to examine every detail of the
construction with reference to the cost incurred. The High
Court has to be satisfied on the materials on record that
the. authority has not acted in an arbitrary or erratic
manner.
10.So far the facts of the present case are concerned, it is
an admitted position that in the proforma attached to the
application for registration, the appellant said that the
price mentioned by them was a probable and estimated cost,
the definite price shall be intimated at the time of the
allotment. Thereafter, the appellant had been informing the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 6
respondents and others who had got themselves registered,
from time to time regarding the escalation in the cost of
the flat. One of the reasons for the rise of the price for
the LIG flat
7
from Rs. 60,000/- to Rs. 1,16,000/- appears to be the
increase in the area of the flat itself from 500 sq.ft. to
714.94 sq.ft. From 1982 to 1984, possession of the flats
could not be delivered because of the dispute pending in the
Court which-also contributed to the increase in the cost of
the flat. Admittedly, the respondents came in possession of
the flats in the year 1984. In the facts and circumstances
of the case, we are satisfied that no interference was
called for by the High Court.’
11.We are informed that respondents have not paid the
balance amount as demanded by the appellant from them, be-
cause of the pendency of the writ application before the
High Court and appeal before this Court. The appellant has
claimed the said amount with interest at the rate of 15%
since the date the possession was delivered, till the
balance amount is paid. As the respondents are in
possession of the flats since 1984 without payment of any
rent to the appellant, they should not have any grievance in
making payment of the balance amount with interest. Still
taking all facts and circumstances into consideration, we
direct the respondents to make payment of the balance amount
along with simple interest at the rate of 6% per annum from
the date of obtaining possession of the flat until payment.
12.Accordingly, the appeal is allowed. However, in the
facts and circumstances of the case, there shall be no
orders as to cost.
8