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CASE NO.: Appeal (civil)  1731 of 2005

PETITIONER: M.P. Housing Board

RESPONDENT: Anil Kumar Khiwani

DATE OF JUDGMENT: 14/03/2005

BENCH: ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT: J U D G M E N T

[Arising out of SLP (Civil) No.22560 of 2004]

WITH

CIVIL APPEAL No.1732 OF 2005

[Arising out of SLP (Civil) No.22616 of 2004]

M.P. Housing Board      \005    Appellant        

Versus

Kishan Lal Mulani               \005    Respondent

KAPADIA, J.

       Leave granted.

       These civil appeals by grant of special leave are directed  against a common Order dated 2.7.2004 passed by the High  Court of Madhya Pradesh at Jabalpur in M.A. No.1611 of 2003  and M.A. No.1628 of 2003.  

       Since the impugned order is common in both the appeals,  the same are jointly disposed of by this judgment.  

       For the sake of convenience, we may mention briefly the  facts of Civil Appeal No. 1731 of 2005 [arising out of SLP  (C) No.22560 of 2003].

       On 18th January, 2000, M.P. Housing Board, appellant  herein, issued an advertisement in local newspaper "Dainik  Bhaskar" inviting offers to subscribe to two schemes floated by  the Board, namely, Katara Hills Residential Scheme and Centre  Point Commercial Scheme.  In these appeals, we are concerned  with the booking of a showroom in the commercial complex.   According to the said advertisement, the estimated cost of a  showroom and departmental store in the commercial complex  (Centre Point), having built up area of 3550 sq. ft. on the upper  ground level, was Rs.39 lacs.  The registration amount was  Rs.3.90 lacs i.e. 10% of the estimated cost of Rs.39 lacs.  What  was proposed to be constructed was a seven storeyed

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commercial complex of showrooms, shops, halls etc. near New  Market Stadium, Bhopal.  To give publicity to the said  schemes, brochures were also distributed.

       On the basis of the above advertisement, Anil Kumar  Khiwani, the respondent herein, submitted an application in the  prescribed form enclosing his cheque for Rs.3.90 lacs, being  10% of the estimated cost of the showroom.  On 25.9.2000, a  temporary registration was made in favour of the said  respondent.  On the same date, he was informed in writing that  temporary registration stood granted to him and further  particulars would be conveyed to him on a later date regarding  the total consideration.  Thereafter, the appellant herein took  steps to prepare a detailed Project Report, which was approved  by the Town Planning Authority, the Municipal Corporation  and a Committee known as Building High-rise Committee.  The  appellant also called upon the State government to forward the  actual land cost and the lease rent, which the State proposed to  charge.  The appellant also called upon the electricity board to  forward to them the estimated strengthening charges.  After  getting all these informations and approvals, tenders were  invited and after receiving the tenders, the actual cost was  worked out which came to Rs.2000/- per sq. ft.

       Accordingly, by letter dated 27.9.2001, the respondent  herein was called upon to give his consent within one month.   By the said letter, each of the contributors including the  respondent was given an option to withdraw from the scheme if  he did not agree to the proposed actual cost of Rs.2000/- per sq.  ft.  The contributors were told to collect the registration amount  with interest @ 8% per annum from the board if they opted for  withdrawal from the commercial scheme, provided they opted  for refund by 10.10.2001.

       By letter dated 16.10.2001, the respondent wrote to the  board stating that he was not willing to accept the price nor was  he willing to withdraw the registration amount.

       By letter dated 27.11.2001, the board called upon the  respondent to pay an amount of Rs.71 lacs for the showroom on  the upper ground floor admeasuring 3550 sq. ft.  This was  objected to by the respondent vide notice given to the board.   Ultimately, on 29.6.2002, the appellant cancelled the  registration and called upon the respondent to collect the  registration amount of Rs.3.90 lacs with interest @ 8%  calculated up to June 30, 2002.

       On 15.7.2002, the present suit was filed for declaration  and injunction in the Court of Additional District Judge, Bhopal  (hereinafter referred to as "the trial Court"), being Civil Suit  No.39-A of 2002.  In the said suit, an application was moved  under order 39 rules 1 & 2 CPC.                    By impugned order dated 22.4.2003, the trial Court  prima facie came to the conclusion that the board was guilty of  inordinate delay in the implementation of the scheme; that the  board had demanded almost twice the amount indicated in the  advertisement after accepting the advance and consequently, the  board was restrained from allotting the showroom in question to  any other person, till the final hearing and disposal of the suit.    By the impugned order, the trial Court permitted the board to  call upon the contributor to deposit Rs.39 lacs in four  instalments in terms of the schedule indicated in the above  advertisement.

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       Aggrieved by the said decision, the matter was carried in  appeal.  By the impugned decision dated 2.7.2004, the High  Court dismissed the Miscellaneous Appeal No.1611 of 2003 as  well as Miscellaneous Appeal No.1628 of 2003.  Hence, these  appeals.

       Normally, this Court is reluctant to interfere with the  interim orders passed under order 39 rules 1 & 2 CPC.   However, in the present case, we are concerned with  construction of a seven storeyed commercial premises under a  self-financing scheme floated by the appellant.  In the said  complex, there are showrooms, departmental stores and halls  for commercial uses.   

       The question involved in this case is \026 whether the offer  contained in the above advertisement was for a fixed amount of  Rs.39 lacs?

       In the present case, the advertisement inserted by the  appellant in "Times of India" indicated Rs.39 lacs as cost of the  built-up area admeasuring 3550 sq. ft., whereas the  advertisement inserted in the local newspaper "Dainik Bhaskar"  indicated Rs.39 lacs as estimated cost for the aforestated built- up area.   

       According to the respondent herein, investment was  made by him on the basis of the advertisement in "Times of  India".  According to the respondent, Rs.39 lacs was a fixed  cost and, therefore, the board was not entitled to raise the price  to Rs.71 lacs, particularly when it was guilty of delay in  completing the project.  It was submitted that the board was not  entitled to approbate and reprobate and that it was bound by its  offer of Rs.39 lacs as contained in advertisement in "Times of  India".

       In this case, we are concerned with a self-financing  scheme under which a commercial complex is constructed.  In a  self-financing scheme, costing plays an important role.  The  building in question comprises of various units.  These units are  self-financed.  A buyer of the unit has to fund the cost of  construction. A buyer under such a scheme cannot be permitted  to buy a unit at a price which is less than the cost of  construction.  In a self-financing scheme, pricing is generally  based on cost of construction unlike sale of houses after they  are completed, in which cases pricing is generally market  related.  In the case of a self-financing scheme, no buyer can  claim a right to purchase any unit at a price lower than the  actual construction cost, as the board raises its funds in turn  from the banks and other financial institutions to whom the  board is required to pay interest periodically.  In the case of a  self-financing scheme, even if there is failure on the part of one  contributor to pay the costs, the entire scheme falls in jeopardy  and, therefore, there is no merit in the contention advanced on  behalf of the respondent that the impugned orders should not be  interfered with as they are confined only to a particular unit  purchased by the respondent.   

       It was urged on behalf of the appellant that there was a  mistake in the advertisement inserted in "Times of India",  inasmuch as the word "estimated" stood omitted inadvertently  from the fourth column dealing with cost, though it has been so  mentioned in the advertisement in the local newspaper "Dainik  Bhaskar".  It was further contended on behalf of the appellant  that the respondent had filled-in an application form to which  the terms and conditions of allotment were attached.  Clause 10

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of the conditions read as follows: "The cost of plot/house/flat which is mentioned in  the table, is estimated.  If there is any increase then  the same will be informed to the allottee."

It was, therefore, submitted that the respondent was fully aware  that the amount of Rs.39 lacs mentioned in the advertisement  was an estimated cost and not a fixed cost.  

       On the other hand, it was urged on behalf of the  respondent that the document on which reliance is placed by the  board was not placed before the trial Court as well as before the  High Court and, therefore, no interference was called for in the  matter.  It was urged on behalf of the respondent that the  respondent was ready and willing to deposit Rs.39 lacs at the  earliest and that the board should be restrained from charging  and recovering the entire amount of Rs.71 lacs, pending hearing  and final disposal of the suit.  In this connection, reliance was  also placed on the decision of this Court in Indore  Development Authority v. Sadhana Agarwal (Smt.) & Others  reported in [(1995) 3 SCC 1] as also the decision of this Court  in Kanpur Development Authority v. Smt. Sheela Devi &  Others reported in [AIR 2004 SC 400].

       Time has come when the Courts should be slow in  interfering at interim stage with schemes which are based on  costing.  India is having cost-push economy.  In a self-financing  scheme based on costing, an interim injunction has a cascading  effect.  Failure on the part of even one contributory in  contributing the amount to the cost results in total failure of the  project.  The developer, like the housing board, makes an initial  investment by borrowing funds from the market.  Therefore, an  interim injunction at the initial stage of the project would result  in the total collapse of the entire project.  It would also affect  the contributions made by other co-purchasers.  Several  components go into costing, including the lease rent payable to  the State Government.  These aspects have not been considered  by the trial Court.           Our observations herein however should not be read to  mean that the developer in the present case has an absolute right  to increase the cost of flats initially announced as estimated  cost.  The final cost should be proportionate to the estimated  cost mentioned in the offer keeping in mind the rate of  inflation, escalation of the prices of inputs, escalation in the  prices of the construction material and labour charges.  These  factors have got to be taken into account on the basis of the  evidence which may be considered at the time of final hearing  of the suit.  In the present case, however, the appellant has not  placed before the trial Court the documents mentioned  hereinabove and, therefore, we are remitting the matter to the  trial Court for fresh decision, in accordance with law.

       In the case of Gujarat Bottling Co. Ltd. v. Coca Cola Co.  reported in [(1995) 5 SCC 545] this Court, while discussing the  factors to be considered by the Courts in exercise of the  discretion under order 39 rules 1 & 2 CPC, has observed as  follows:  "The grant of an interlocutory injunction during  the pendency of legal proceedings is a matter  requiring the exercise of discretion of the court.   While exercising the discretion the court applies  the following tests \026 (i) whether the plaintiff has a  prima facie case; (ii) whether the balance of  convenience is in favour of the plaintiff; and (iii)

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whether the plaintiff would suffer an irreparable  injury if his prayer for interlocutory injunction is  disallowed.  The decision whether or not to grant  an interlocutory injunction has to be taken at a  time when the existence of the legal right assailed  by the plaintiff and its alleged violation are both  contested and uncertain and remain uncertain till  they are established at the trial on evidence.  Relief  by way of interlocutory injunction is granted to  mitigate the risk of injustice to the plaintiff during  the period before that uncertainty could be  resolved.  The object of the interlocutory  injunction is to protect the plaintiff against injury  by violation of his right for which he could not be  adequately compensated in damages recoverable in  the action if the uncertainty were resolved in his  favour at the trial.  The need for such protection  has, however, to be weighed against the  corresponding need of the defendant to be  protected against injury resulting from his having  been prevented from exercising his own legal  rights for which he could not be adequately  compensated.  The court must weigh one need  against another and determine where the "balance  of convenience" lies.  In order to protect the  defendant while granting an interlocutory  injunction in his favour the court can require the  plaintiff to furnish an undertaking so that the  defendant can be adequately compensated if the  uncertainty were resolved in his favour at the trial.

       Under Order 39 of the Code of Civil  Procedure, jurisdiction of the Court to interfere  with an order of interlocutory or temporary  injunction is purely equitable and, therefore, the  Court, on being approached, will, apart from other  considerations, also look to the conduct of the  party invoking the jurisdiction of the Court, and  may refuse to interfere unless his conduct was free  from blame.  Since the relief is wholly equitable in  nature, the party invoking the jurisdiction of the  Court has to show that he himself was not at fault  and that he himself was not responsible for  bringing about the state of things complained of  and that he was not unfair or inequitable in his  dealings with the party against whom he was  seeking relief.  His conduct should be fair and  honest.  These considerations will arise not only in  respect of the person who seeks an order of  injunction under Order 39 Rule 1 or Rule 2 of the  Code of Civil Procedure, but also in respect of the  party approaching the Court for vacating the ad  interim or temporary injunction order already  granted in the pending suit or proceedings."

       The judgment of this Court in the case of Indore  Development Authority (supra) supports the appellant herein.   In that case, an advertisement was issued by the development  authority in the year 1977 inviting applications from persons  interested in purchase of flats on hire-purchase basis.  The  estimated cost for the LIG flat was mentioned at Rs.45,000/-.   In the proforma attached to the application for registration, the  development authority had stated that the price mentioned by  them was a probable price and that the definite price shall be  intimated at the time of allotment.  The purchasers were given

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possession in the year 1984.  They instituted writ petition  before the High Court challenging the demand raised by the  development authority based on escalation.  The writ petition  was allowed by the High Court.  This Court, in the facts and  circumstances of that case, came to the conclusion that the High  Court should not have interfered with the hike in the cost of  construction.  This Court observed that the development  authority owed a duty to explain and satisfy the Court the  reasons for such high-escalation but this did not warrant the  High Court while exercising the jurisdiction to examine every  detail of the cost of construction.  Accordingly, this Court  allowed the appeal filed by the development authority  observing: "9.     \005. Although this Court has from time to  time, taking the special facts and circumstances of  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 belonging 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 in great hardship when the  development authorities announce an estimated or  approximate cost and deliver the same at twice or  thrice 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 pro  forma 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

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informing the 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  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."

       The judgment of this Court in the case of Kanpur  Development Authority (supra), on which reliance is placed on  behalf of the respondent, has no application to the facts of the  present case as in that matter there was an express clause in the  brochure that the escalation shall not exceed 10%.  In the  present case, there is no such clause in the brochure.  In the  present case, we are concerned with a commercial complex  constructed under a self-financing scheme and not with the  residential houses as was the case in the matter of Kanpur  Development Authority(supra).  Hence, the said judgment has  no application to the facts of the present case.

       Before concluding, we may point out that the  observations made herein are only to give reasons in support of  this judgment and they will not bind the parties hereto in the  proceedings before the trial Court.

       Subject to above, both the appeals are allowed; the  impugned judgment and orders are set aside and the matter is  remitted to the trial Court for fresh decision, in accordance with  law.  However, in the facts and circumstances of this case, there  will be no order as to costs.