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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

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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

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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,

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             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

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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

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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