Priya Nandan Sahay vs Jharkhand State Housing Board and Others

D.G.R. Patnaik, J.—Challenge in this writ application is to the demand made by the respondent Housing Board vide letter dated 10.11.2006 (Annexure-7), whereby the petitioner has been called upon to pay a sum of Rs. 6,41,523/- towards price of the house allotted to him. The petitioner has also challenged the calculation char. (Annexure-7/1), annexed to the demand letter, as being erroneous, arbitrary and illegal.

The main question raised by the petitioner in this writ application is, whether in the facts and circumstances of the case, the respondent Housing Board can calculate and charge compound interest and capitalization value on the balance amount, by adding such compound interest towards the price of the house allotted?

Facts of the case, in brief, are as follows:

The petitioner applied to the Chairman of the respondent Housing Board for allotment of a house on hire purchase basis under the MIG (A) Housing Scheme. He deposited a sum of Rs. 6,500/- by way of advance at the time of submitting his application on 26.6.1975. After completion of the requisite formalities and requirements, a residential house bearing House No. MIG (A)-42 situated at Adityapur, was allotted to him by the Housing Board vide its allotment letter dated 7.4.1977.

The terms of the allotment, as indicated in the allotment letter, declared a tentative price of the house at. Rs. 61,300/- with a stipulation that the allottee would be liable to pay additional price on the basis of the final valuation of expenditure incurred on the construction of the house/or land acquisition and development. It was declared subsequently that the declared tentative price was the final assessed price and after adjusting the advance payment, the balance amount of Rs. 45,975/- was to be paid by the petitioner in 120 equal monthly installments. The amount of monthly installments was fixed together with interest at Rs. 557.81 per month if the installment is paid within the 7th day of every month and at Rs. 617.90 per month, if paid after the 7th day of the month. The absolute ownership of the house was to be transferred only after payment of full price together with interest, though the land was to remain on lease for a period of 90 years.

Delivery of possession of the allotted house, was to be made on the terms of the Agreement after completion of all formalities followed by execution of the Agreement in the prescribed format and on payment of premium.

Upon receipt of the letter of allotment, the petitioner forwarded his Draft Agreement on 13.5.1977 on Non-Judicial Stamp Paper along with the initial deposit of Rs. 8,975/- as per Clause-IV of the allotment letter, to the Housing Board. Upon receiving the Draft Agreement, the Executive Engineer of Jamshedpur was directed by the Estate Manager-cum-Secretary, Bihar State Housing Board, Patna to hand over the possession of the allotted house to the petitioner even without formal execution of the proposed agreement. It was explained that the execution of the agreement may take time in view of the coming into force of the Urban Land (Ceiling and Regulation) Act, 1976. It was also declared in the letter of allotment that the recovery of the price of the house shall commence from the date of handing over of the actual physical possession of the house.

In spite of such understanding, delivery of physical possession of the house was delayed. The petitioner submitted repeated reminders demanding the delivery of possession and ultimately, on 6.2.1978, the actual possession of the house was delivered to the petitioner.

About two years later on 5.4.1980, the Estate Manager-cum-Additional Secretary of the Board, sent a copy of the Draft Agreement along with the relevant amendments in the prescribed format to the petitioner, asking him to submit the same after carrying out the amendments indicated. However, even after resubmission of the Draft Agreement, it was not finally executed by and between the parties, though the terms and conditions stipulated in the Draft Agreement was accepted and acted upon by the parties.

After the delivery of possession and in accordance with the terms stipulated in the letter of allotment, the petitioner commenced payment of the stipulated amount of monthly installments and though, such installment could not be paid by him regularly, yet he had paid altogether a sum of Rs. 58,648.32.

Later, when by his reminder letter dated 15.07.2006 the petitioner requested the Executive Engineer of the Board to make arrangements for Registration of the house in his name, the Revenue Officer of the Board was called upon to make final calculation of the dues, if any. The report of the Revenue Officer confirmed that the petitioner had deposited a sum of Rs. 73,823.32 and that the provisional price of the house, as calculated up to 30.3.1976, was Rs. 61,300/-.

Subsequently, the impugned letter dated 10.11.2006 was forwarded to the petitioner along with a purported final calculation chart dated 16.10.2006, declaring that the sum of Rs. 6,41,523/- had fallen due against the petitioner up to 31.10.2006, after adjustment of the amount already deposited by him and calling upon the petitioner to deposit the same.

The petitioner has assailed the impugned demand as being a highly inflated, arbitrary exorbitant demand, disputing the calculation and challenging the same being against the terms of contract.

Shri Rajiv Ranjan, learned Counsel for the petitioner, by referring to the impugned calculation chart, would explain that while the amount stated in the chart under the Heads A or A/1 and B and B/1 are claimed to be the calculation relating to the dues, is erroneous and arbitrary. Learned Counsel explains that such an erroneous calculation has been described as calculation of capitalized price of the house on account of the time gap between the purported date of original fixation of price i.e. on 30.03.1976 and the date immediately preceding commencement of the installment i.e. 31.01.1978. Such capitalization was done by charging interest at the rate of 8% per annum on the remaining /unpaid part of the price. The amounts so assessed by way of capitalization, on the date of commencement of installment. The difference between the assessed amount and the originally fixed price has been calculated and thereafter, a further interest at the rate of 8% per annum has been charged on the said amount of price difference and denoted under Heads A or A/1 of the chart. Likewise, under Heads B or B/1, which has been set out by way of month wise tabulation chart, an additional charge at the rate of 1% per annum towards penal interest on the unpaid dues has been added to the balance amount at the end of each month and to such monthly amounts, a further interest at the rate of 10.5% per annum or 8% per annum, as mentioned in the 4th column of the chart, has been added to arrive at the capitalized value of the balance amount at the end of the month, as shown in the 5th column of the chart under Heads B or B/1.

Learned Counsel argues that is apparent from the calculation as indicated, that the amount calculated is by levying and adding compound interest without there being any legal sanction behind such capitalization or any mode adopted for carrying out such capitalization.

When the petitioner''s objection were not considered, he obtained the relevant information under the RIT Act which revealed that such calculation towards capitalization of price was made purportedly on the basis of a Circular dated 3.2.1994 issued by the then Managing Director of the Housing Board, Patna for bringing into effect an earlier office order issued by the Managing Director on 22.12.1988 relating to the valuation procedure and also pursuant to the minutes of the meeting of the committee of the Housing Board dated 17.04.2006 in which certain decisions were purportedly taken in respect of the valuation procedure.

Challenging the aforesaid Circulars (Annexures-10, 11 and 12), learned Counsel submits that the Circulars cannot be enforced against the petitioner and that too, with retrospective effect, primarily in view of the fact that the decision, as taken vide Circulars, was an exclusive decision of the Managing Director and not that of the Housing Board and in any case, the Circulars of 1988 and of 1994 did never declare that it would be implemented with retrospective effect. Learned Counsel adds further that even the minutes of the Board Meeting dated 17.04.2006 is merely a recommendation of the committee constituted by the Board and, to the knowledge of the petitioner, such recommendation was never approved by the Board and neither did the recommendation express that it should be approved with retrospective effect.

Learned Counsel argues further that in the allotment letter, there was no clause whatsoever postulating interest or levy for capitalization for the period between the date of allotment and the date of agreement. Learned Counsel adds further that even if it is assumed that the capitalization of the price for the period claimed is permissible or agreed upon, yet, the mode of capitalization, which appears to have been done by the respondent Board, was never agreed upon, nor intimated by the respondent Board to the petitioner and neither is there any contract or statutory provision warranting levy of interest for the period between the date of allotment and the date of initial deposit made by the petitioner for capitalization. The petitioner cannot be governed by any unilateral decision of the Housing Board having no statutory force.

Learned Counsel submits further that the delay between the date of initial deposit made by the petitioner and the date of delivery of possession was caused entirely and exclusively by the respondents themselves and as such, the respondents cannot legally proceed to capitalize the price for the aforesaid period.

Denying and disputing the claim of the petitioner, the stand taken by the respondent Board in its counter-affidavit, is that the petitioner had entered into a hire purchase agreement with the respondent Board and is therefore liable to obey the terms and conditions as contained in the agreement (Annexure-4/1) and under which, the petitioner can seek his relief only by invoking the Arbitration Clause, as per Clause-20 of the Agreement. It is sought to be explained that in spite of execution of the hire purchase agreement, the petitioner had defaulted in payment of the monthly installments and after a long interval, the petitioner approached the respondents for assessment of the final price. The assessment which was made in accordance with the deserving parameters, declares that the assessed price of Rs. 6,41,523/- was made after taking into account the tentative amounts. It is claimed that there was no error whatsoever in computing the final price, since the same was made on the basis of the Rules as contained in Annexures-11 and 12 to the writ petition.

From the rival submissions, the following facts emerge:

In response to the petitioner''s application, submitted along with the stipulated advance amount in June 1975, the respondent had offered the house under reference in this case vide their allotment letter dated 7.4.1976.

The tentative price of the house was fixed as per the letter of allotment, at Rs. 61,300/-.

Though, the allottee was informed that he would be liable to pay additional price against the final valuation of the price incurred on the construction of the house, but subsequently, the petitioner was given to understand that the originally declared tentative price was the final price and after deduction of the amount deposited by the petitioner, the remaining amount of Rs. 45,975/- was to be paid by the petitioner in 120 equal monthly installments. The rate of installment was fixed by adding the amount of interest thereto and such installment was to commence on and from the date of delivery of possession of the house.

It took two long years of delay for the possession of the house to be delivered. The actual possession of the house was given on 6.2.1978 even without execution of any formal agreement between the petitioner and the respondent Board.

In absence of the formal agreement, the parties had accepted and agreed to abide by the terms and conditions stipulated in the letter of allotment and in the proposed draft agreement.

On perusal of the letter of allotment and the terms contained in the proposed Draft Agreement, a copy of which has been annexed to the writ application, there appears no such stipulation for capitalization of the price of the house for the period between the date of allotment and the date of deposit of the first installment of the price of the house. Even if the petitioner had delayed in making payment of the installments and was not regular, then also, as per the stipulation contained in the letter of allotment and the Draft Agreement, the petitioner was liable to pay penal interest at the rate of 1% per annum. Furthermore, since the delay, as per the statement of the petitioner, was occasioned on account of the lapses entirely on the part of the respondent Board, the petitioner could not be penalized by way of capitalization of the price for the period between the date of allotment and the date of initial deposit of installment. There is no stipulation either in the letter of allotment or the terms and conditions of the Draft Agreement under which, the respondent Board could charge compound interest and neither have the respondent brought on record any such statutory Rule which could enable them to legally charge compound interest.

The respondents appear to have relied upon the Circulars (Annexures-10 and 11) and the purported minutes of the meeting of the committee constituted by the respondent Board (Annexure-12) for claiming that the respondents are entitled to calculate the capitalization price in accordance with the procedure laid down in the Circulars.

As rightly pouted out by the learned Counsel for the petitioner, the Circular pertains to the period 1988 and 1994. Neither of the Circulars declare that the procedure for calculation of the capitalization price, as indicated therein, would be applied with retrospective effect. Furthermore, these Circulars do not declare that they contain the decision of the Board. Rather, the Circulars amply suggest that the decision stated therein, are those of the Managing Director of the Board and therefore, cannot be treated as a decision of the Board.

From the documents (Annexure-14) filed by the petitioner, which are the purported notes on the official records of the respondent Board, pertaining to the case of the petitioner, it appears that as per the legal opinion obtained, the Managing Director of the respondent Board had reconciled and accepted that the petitioner is not liable to pay compound interest since there is no provision for it in the allotment letter or in the Draft Agreement. The benefit of such decision was extended, as per the petitioner''s contention, to the other allottees of houses on realization that for the delay in execution of the agreement, after the date of allotment of the house, the allottees could not be put to fault. The respondents have not filed any further statement denying or disputing the submissions of the petitioner on the basis of Annexure-14 and the statement that the other allottees of the house have been exempted from paying the amount of capitalization price over the original price of the house between the date of allotment and the date of agreement.

In the ultimate analysis of the entire facts of the case, I am of the opinion that the respondent Board had no authority under any contract or agreement to levy compound interest to make the petitioner liable to pay the amount of price of capitalization over the original amount, by levying of interest for the period between the date of allotment and the date of initial deposit of the first installment or even to levy and charge compound interest over the unpaid dues.

The petitioner, at best, would be liable to pay the amount of penal interest for the delayed payment of installment together with administrative charges and legal and documentation expenses which constitute the terms of the contract.

Accordingly, finding merit in this writ application, the same is allowed. The impugned demand notice letter dated 10.11.2006 (Annexure-7) and the calculation chart relating to the alleged dues (Annexure-7/1), are hereby quashed. The respondents are directed to recalculate the amount payable by the petitioner, if any, only in terms of the stipulations contained in the original allotment letter and in the Draft Agreement and inform the same to the petitioner within three months from the date of this order. If, after adjustment of the amount already deposited by the petitioner, any further amount remains outstanding, the petitioner shall deposit the same within three months from the date of communication of the final assessment.

Let a copy of this order be given to the counsel for the Respondents.