Dr. Prahlad Saini vs Chairman

Sanjay Yadav, J.—With consent, matter is heard finally. Grievance raised by the petitioner is against the demand by respondent M.P. Housing Board in lieu of enhanced price for allotment of Senior MIG 187 situated at Dhanvantari Nagar, Jabalpur.

The case of the petitioner is that in pursuance to advertisement dated 12.4.2007 published in local daily newspaper for allotment of H.I.G constructed by M.P. Housing Board, the petitioner applied for the same and was given registration No. 3. Whereon after following due procedure of drawing the lottery the petitioner was found entitled for the allotment of the house in question; whereupon he was asked to deposit Rs. 60,000/-. Further deposits were also made by the petitioner in furtherance to demand raised by the Housing Board. That, subsequently vide letter dated 21.10.2009 (under challenge) the petitioner was called upon to deposit Rs. 11,46,062/- which was required to be deposited by 30.10.2009. Being aggrieved by above demand raised by the respondent Housing Board, petitioner has filed this petition on the ground that on the date of advertisement the petitioner had expected price of Rs. 6,55,000/-, 10% whereof, i.e., 60,000/- was initially deposited on 19.4.2007; however, arbitrarily the amount has been enhanced to Rs. 11,46,062/-. It is this action of the respondent which is being questioned vide this petition on the ground that the same is arbitrary and the respondent Board cannot back-out from the price once advertised at the time when the registration was offered.

The respondent Board has resisted the claim. It is stated that vide advertisement dated 12.4.2007, houses at Dhanwantari Nagar, Jabalpur were put for sale at a cost of Rs. 5,95,000/- under Self Financing Scheme and Rs. 6,55,000/- under Hire Purchase Scheme. It is urged that on 19.4.2007, the petitioner applied for HIG under Self Financing Scheme. That, on 10.1.2008, the petitioner was informed that he has been allotted MIG 187 under Self Financing Scheme. The estimated cost whereof would be Rs. 7,14,000/-. Vide said letter the consent of the petitioner was also sought for by the respondent as to whether he agrees to purchase the house on escalated price, he is at liberty go give his consent. It is urged that petitioner since was interested in purchasing the house, deposited an amount of Rs. 60,000/-, Rs. 40,000/- and Rs. 80,000/- on 19.4.2007, 4.12.2007 and 11.11.2008 respectively. Whereupon, the house was registered in his name. It is further contended that with passage of time there was an escalation in cost of construction and since the Board has undertaken the project on no profit no loss basis, the petitioner was called to bear the escalated price. It is urged that there was no arbitrariness on the part of the respondent in calling upon the petitioner to deposit an amount of Rs. 11,46,062/- vide impugned order dated 21.10.2009.

The question which crops up for consideration is as to whether with issuance of advertisement in the year 2007 (12.4.2007), any right accrued in favour of the petitioner for allotment of house in question on the said price which found mention in the advertisement and as to whether as per offer dated 10.1.2008 the petitioner having accepted to pay the escalated price can now question the further escalation which is on the basis of escalation in the cost of construction.

In respect of accrual of right on the basis of advertisement, a Single Bench of this Court in batch of petitions W.P. Nos. 9126/2010, 13841/2009, 8583/2010 and 3068/2010 decided on 9th March 2011 has held that there cannot be any accrual of right in favour of the prospective purchaser in respect of the cost of construction of the house put for sale by the Housing Board.

As to enhancement of price, trite it is that, the enhancement of price/cost must be in commensurate with the actual cost incurred (Please see Bareilly Development Authority and Another Vs. Ajay Pal Singh and Others, , Collector (District Magistrate) Allahabad and Another Vs. Raja Ram Jaiswal, . Regarding interference in a writ petition under Article 226 of the Constitution, it is equally settled that unless arbitrary action in fixing the high price is established, the decision is not amenable to interference (Please see Premji Bhai Parmar and Others Vs. Delhi Development Authority and Others, , Gujarat State Financial Corporation Vs. Lotus Hotels Pvt. Ltd., Medical Representatives'' Colony Raipur and others v. Raipur Development Authority, Raipur: Misc. Petition No. 325/1984, decided on 18.8.1986, P.C. Gupta and ors. v. M.P. Housing Board, Bhopal and ors.: Misc. Petition No. 2769/1983 decided on 28.2.1989).

Furthermore, in Kanpur Development Authority Vs. Smt. Sheela Devi and Others etc., it is held:

We are of the view that each case is to be decided in the facts and circumstances of the case in the light of the scheme published/framed and the terms and conditions mentioned in the Brochure and/or in the prescribed form of application in the matter of escalation/determination of cost of house/flat. However, cases where there is limit for fixing the escalation of cost, normally the price of house or flat cannot exceed the limits so fixed. The determination of cost of house/flat or escalation of cost cannot be arbitrary or erratic. The authority has to broadly satisfy by placing material on record to justify the escalation of cost of a house/flat. Whether the delay was caused by the allottee or the authority itself is also a factor which has bearing in determination of the cost of house/flat. The unforeseen cause or the reason beyond control of the authority in a given case may be another factor to be kept in view. We may also notice that in these cases the tentative cost of houses was fixed at Rs. 48,000/- but final cost was determined at Rs. 2,08,000/-. This increase is not mere escalation but it is a multiplication by almost four and half times, although escalation could not exceed 10% as is evident from the contents of the Brochure read with prescribed form of application for allotment of house itself. Contentions of the KDA run contrary to the contents of its own Brochure on which the respondents acted adjusting their financial affairs understanding that the cost of the houses would be fixed in terms of brochure and that too not exceeding 10% of the estimated cost fixed initially.

In M.P. Housing Board Vs. Anil Kumar Khiwani, ] it is held:

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.

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 Karnataka Industrial Areas Development Board and Another Vs. Prakash Dal Mill and Others, it has been held:

.... ...... ..... The Board can and is entitled to take into account the final cost of the demised premises in the event of it incurring extra expenditure after the allotment of the site. But in the garb of exercising the power to fix the final price, it can not be permitted to saddle the earlier allottees with the liability of sharing the burden of expenditure by the Board in developing some other sites subsequent to the allotment of the site to the respondents.

In the case at hand, apparent it is from the allotment letter dated 10.1.2008 that the petitioner was apprised of the tentative escalated cost of construction with a further stipulation that the same is only tentative price. There is no arbitrariness in the action of the respondents in calling upon the petitioner to deposit the escalated price of Rs. 11,46,062/-, which is in commensurate with the escalation in cost of construction.

In view whereof the impugned order dated 21.10.2009 is upheld.

At this stage, learned counsel for the petitioner placing reliance on clause 9 of the allotment letter dated 21.10.2009 submits that the petitioner may be set at liberty to raise a dispute before the Commissioner, M.P. Housing Board, Bhopal, in respect of fixation of price of the subject M.I.G No. 187.

Since the power to fix the price of its house and the power to escalate the price vests with the Board, it is for the Board to consider the representation preferred by the petitioner in its right earnest.

The petition is finally disposed of in above terms. C.c. as per rules.