IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 6097 OF 2008

(Arising out of SLP [C] No.21221 of 2006)

Kerala State Housing Board & Anr. … Appellant(s) Vs. Grace Joseph & Anr. … Respondent(s)

O R D E R  

Leave granted. Heard both parties.  

2. The appellant, Kerala State Housing Board (‘Board’ for short)  allotted  a  premises  (land  and  building)  to  the respondent in terms of agreement of sale dated 8.4.1992. Clause (4) of the agreement fixed a sum of Rs.31260/- as the tentative land value and tentative service charges (for providing  amenities).  The  said  clause  also  fixed  the (final)  cost  of  the  structure  as  Rs.86992/-.  Clause  10 enabled the Board to re-fix of the final price of the land

and  service  charges,  on  account  of  enhancement  of compensation for acquisition of the land and increase in the cost of amenities. Clause 11 provided for the interest payable on the difference between the tentative price and the  final  price  fixed.  The  said  Clauses  10  &  11  are extracted below :  

“10. It is agreed that the Kerala State Housing Board shall be entitled to re-fix the final price of the land and service charges thereon taking into account inter alia the enhanced compensation awarded by Courts and Tribunals. The cost incurred by the Board or and its  predecessors  in  interest  for  prosecuting  such proceedings  in  courts  and  tribunals  and  also  the increased  cost  of  development  works  and  amenities undertaken with respect to the scheme after a final settlement of accounts in connection therewith.  It is agreed that the decision of the Board in fixing the  revised  price  of  the  land  and  service  charges shall be conclusive and final.  11. It is expressly agreed between the parties hereto that after the finalization of the price of the land and  service charges  by the  Board the  party of  the second  part  shall  pay  to  the  Board  together  with interest at 15.5% and 13% per annum, the difference between  the  tentative  price  fixed  therefor  and  the price  finally  fixed  for  both  the  land  and  service charges by the Board, within thirty days of the date of a registered notice demanding the payment thereof or in such instalments such rate of interest to be determined by the Board.”

Clause 12 provides that the allottee shall be entitled to get  a  registered  sale  deed  conveying  the  premises  on payment  of  all  the  amounts  due  in  terms  of  the  said

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agreement  and  after  complying  with  all  the  terms  and conditions of the said agreement.  

3. It  is  stated  that  the  respondent  has  paid  the tentative  land  value  and  tentative  service  charges aggregating  to  Rs.31260/-  as  also  the  cost  of  structure being  Rs.86992/-  by  1994  and  secured  possession  of  the premises. More than a decade after the agreement, the Board send a demand notice dated 7.1.2004 claiming Rs.13406/- as the  difference  in  building  cost  (with  interest)  and Rs.163821/-  as  additional  land  value  (with  additional development and LAR) in all Rs.177227/-.  

4. Feeling aggrieved, the respondent approached the High Court contending that no particulars of the increased cost were furnished to her and that she was not liable to pay the  additional  amount  claimed  by  the  Board.  A  learned Single  Judge  of  the  Kerala  High  Court,  by  order  dated 14.6.2005 disposed of the writ petition by directing the appellant Board to furnish a detailed statement of account (showing  the  actual  cost  and  the  interest)  to  the respondent. Learned Single Judge also observed that if on receiving the statement of account the respondent wanted to

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dispute any part of the claim, she may have to approach the civil court, as that was in the nature of a civil dispute.  

5. The order of the learned Single Judge was challenged by  the  respondent  in  a  writ  appeal  before  the  Division Bench. The Division Bench found that in so far as cost of the  structure,  the  sum  of  Rs.86992/-  mentioned  in  the agreement was not a tentative but final figure and neither clause 10 nor clause 11 of the agreement enabled the Board to make a claim for increase in the cost of construction. The Division Bench was therefore of the view that increase of  Rs.13406/-  claimed  in  regard  to  the  cost  of  the structure was unwarranted. In so far as the increase in land  cost  and  service  charges,  the  Division  Bench  found that  the  Land  Acquisition  Officer  had  made  an  award  in regard  to  the  acquired  land  (where  the  project  was executed)  on  25.11.1981  and  the  reference  court  had enhanced the compensation by its award dated 5.12.1989. The Division  Bench  held  that  as  the  said  increase  by  the Reference  Court  was  more  than  two  years  prior  to  the agreement, the said increase would have been already worked into  land  cost  and  service  charges  shown  as  Rs.31260/- under the agreement dated 8.4.1992. The Division Bench also noted  that  the  award  of  the  Reference  Court  was  not

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challenged by the land owners and therefore, there was no question of any increase after 8.4.1992; and that the award of the Reference Court was challenged by the Board before the High Court and the High Court had reduced the amount awarded  by  the  Reference  Court  and  that  had  attained finality. The Division Bench was therefore of the view that there was no justification for demanding any increase in cost towards land. It held that the increase in cost, if any,  that  could  be  demanded  was  only  in  regard  to  the development work and amenities. In view of its findings, the  Division  Bench  allowed  the  appeal,  by  its  judgment dated  22.6.2006,  set  aside  the  judgment  of  the  learned Single Judge and quashed the demand notice dated 7.1.2004. It however left it open to the Board to make a fresh demand only in regard to service charges (that is the increased cost of development work and amenities undertaken in regard to  the  scheme)after  final  settlement  of  account.  The Division Bench also directed that the title deed should be issued  to  the  respondent  on  execution  of  an  undertaking that she will pay the amount due towards increased cost of development work and amenities. The Board sought review, which was rejected on 13.10.2006.

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6. The  said  judgment  and  order  are  challenged  by  the Board in this appeal. The Board is not able to challenge the  quashing  of  the  demand  for  Rs.13406/-  towards  extra cost of structure, as the contract shows that Rs.86992/- paid by the respondent was the final price and the contract did not provide for any increase therein. In regard to the land cost, the Board submitted that the sum of Rs.31260/- shown as tentative land value and service charges in the agreement  dated  8.4.1992  did  not  take  into  account  the compensation  enhancement  granted  under  the  award  dated 5.12.1989 of the reference court as the said amount had not been paid to the land-owners by then and, the final cost was worked out after payment to the land-owners and after the  litigation  ended.  It  was  further  submitted  that  the Division  Bench  could  not  have  assumed  that  the  enhanced land  cost  had  been  taken  into  account  in  the  tentative price shown in the agreement.  

7. We find considerable force in the contention of the appellant.  The  appeal  filed  against  the  award  of  the Reference Court, by the Board, was pending till 1996 and therefore the land price mentioned in the agreement dated 8.4.1992 could not be said to be final. We also find that the Division Bench, before passing the impugned judgment,

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did not secure the working sheets in regard to the price of the land nor examined the accounts. The agreement (clause 10) specifically stated that the land price was tentative and any increase demanded was payable. If the entire cost of land including enhancement had already been taken into account  while  fixing  the  cost  of  land  mentioned  in  the agreement, it would not have stated that the land price was tentative and subject to increase in final settlement. The fact that the cost of construction was shown as the final price and the cost of land and development was shown as tentative clearly demonstrate that the amount shown in the agreement towards land cost and service charges was not the final cost. The Division Bench could have at best directed the  Board  to  give  actual  calculation/break  up  of  the increased  amount  (as  was  directed  by  the  learned  Single Judge). If the Division Bench did not want to refer the parties to a civil court in the event of any part of the calculation being disputed, it ought to have examined the accounts, considered the objections of the respondent and finally decided the issue. The direction issued by the High Court  in  regard  to  the  tentative  service  charge  should equally apply to the tentative land cost also.  

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8. We therefore allow this appeal in part and set aside the judgment of the High Court in so far as it relates to the  cost  of  land  and  service  charges.  The  matter  is remanded to the High Court with the following directions:  

(a) The  Board  shall  furnish  to  the  respondent  the calculation-sheet in regard to Rs.177227/- claimed as the increased cost of land and service charges (for development  and  amenities)  within  two  months  from today;  

(b) If the respondent agrees with the calculation and pays the  amount,  the  Board  shall  execute  the  sale  deed within one month from the date of payment;  

(c) If the respondent disputes the amount claimed by the Board,  either  in  regard  to  land  cost  or  service charges, she may file objections to the calculations and the Division Bench shall decide the same.  

(d) If  there  is any delay  in the disposal  by the High Court, it is open to the respondent to furnish a bank guarantee for the amount claimed by the Board, without prejudice and obtain the sale deed.  

(e) The quashing of the demand in respect of increase in cost of construction is upheld.  

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……………………………………………………..J [R. V. Raveendran]

…………………………………………………………J [Lokeshwar Singh Panta]

New Delhi; October 3, 2008.  

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