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K.K. Kalsi and ors. Vs. Chandigarh Administration (U.T.) Through Its Administrator and anr. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtPunjab and Haryana High Court
Decided On
Case NumberCivil Writ Petition No. 1042 of 1994
Judge
Reported in(1995)111PLR694
ActsConstitution of India - Articles 14 and 226; Chandigarh Housing Board (Allotment, Management and Sale of Tenements) Regulations, 1979
AppellantK.K. Kalsi and ors.
RespondentChandigarh Administration (U.T.) Through Its Administrator and anr.
Appellant Advocate M.L. Sarin, Sr. Adv. and; Hemant Sarin, Adv.
Respondent Advocate Rajiv Atma Ram and; Sanjiv Bansal, Advs.
DispositionWrit petition allowed
Cases ReferredLucknow Development Authority v. M.K. Gupta
Excerpt:
- v.k. jhanji, j. 1. this shall dispose civil writ petitions no. 1042, 1043, 1307, 1577, 1633, 1662, 1674, 1967, 2867, 3140, 5179, 5490, 4257, 4258, 1996 and 10872 of 1994 as common question of law and facts is involved therein.2. in the year 1989, chandigarh housing board, chandigarh (hereinafter referred to as the board) floated a self financing housing scheme (1989) for general public of two categories of multi-storeyed flats namely categories i and ii. applications were invited for registration of applicants for the allotment of these two categories of flats. in category-i the covered area of the flat was to be 1895 sq. ft. at tentative price of rs. four lacs and in category-ii the covered area of the flat was to be 1440 sq. ft. at tentative price of three lacs. in response to the.....
Judgment:

V.K. Jhanji, J.

1. This shall dispose Civil Writ Petitions No. 1042, 1043, 1307, 1577, 1633, 1662, 1674, 1967, 2867, 3140, 5179, 5490, 4257, 4258, 1996 and 10872 of 1994 as common question of law and facts is involved therein.

2. In the year 1989, Chandigarh Housing Board, Chandigarh (hereinafter referred to as the Board) floated a Self Financing Housing Scheme (1989) for General Public of two categories of multi-storeyed flats namely Categories I and II. Applications were invited for registration of applicants for the allotment of these two categories of flats. In category-I the covered area of the flat was to be 1895 sq. ft. at tentative price of Rs. four lacs and in category-II the covered area of the flat was to be 1440 sq. ft. at tentative price of three lacs. In response to the advertisements, the petitioners applied against Categories I and II flats under the Self Financing Housing Scheme and on being successful in the draw of lots the petitioners were issued acceptance/demand letters by the Board. As per acceptance and demand letters, the schedule of payment for category-I was as under :-

'i) Amount to be paid within 30 days from thedate of issue of this letter Rs. 60,000/-ii) 1st half yearly instalment by 10.5.1991 Rs. 1.00 lacs,iii) 2nd half yearly instalment by 10.11.1991 Rs. 1.00 lacs:iv) 3rd half yearly instalment by 10.5.1992 Rs. 80,000/-v) At the time of possession Balance as percost finally fixed.'

The schedule of payment of category-II was as under :-

i) Amount to be paid within 30 days from the date of issue of this letter. Rs. 45,000/-ii)Ist half yearly instalment by 10.6.1991 Rs. 75,000/-iii) 2nd half yearly instalment by 10.12.1991 Rs. 75,000/-iv) 3rd half yearly instalment by 10.6.1992 Rs. 60,000/-v) At the time of possession Balance as percost finally fixed.'

The prices of the flats were tentative and it was also stated in the acceptance-cum-demand letters that the exact cost of the flats shall be worked out at the time of allotment after the flats are completed and that the cost could be increased due to variation in plinth area, scope of work, change in specifications and design, increase in cost of material and labour cost of land etc., or due to any other reasons and the same shall be binding upon the allottees. On completion of flats upto June, 1992 the possession was to be allotted to the petitioners and other allottees. It has been averred in the petitions that the petitioners have deposited the amount as laid down in the acceptance-cum-demand letters and there has been no default on the part of the petitioner in depositing the instalments. It has been further averred that vide notices dated 30.4.1992 and 21.4.1992, petitioners were informed that as a result of increase in covered area, additional items of work, revised design, enhanced cost of land, etc., the tentative cost of category-I flats has been enhanced from Rs. four lacs to Rs. 6.25 lacs and the tentative cost of category-II flats has been enhanced from Rs. three lacs to Rs. 4.75 lacs (again tentative). Because of revision of cost of flats fresh schedule of payment was also given. Certain allottees of categories I and II filed Civil Writ petition No. 10511 of 1992 challenging these notices. This writ petition along with other writ petitions was disposed of by the Division Bench vide judgment dated 2.6.1993 when notice of demand was set aside on the ground that it suffered from the vice of arbitrariness. After quashing of notice, the Board instead of delivering possession of flats to the petitioners sent letters dated 17.1.1994 and 31.12.1993 informing them that draw of lots had been held on 26.12.1993 and they had been allotted flats on 'Hire Purchase Basis'. The petitioners were asked to accept or refuse the allotment within 30 days. It may also be mentioned at this stage that draw of lots held on 29.11.1989 (category-I) was for floors while the present draw of lots held on 26.12.1993 was for flats to be allotted to the petitioners and similarly, draw of lots held on 1.12.1989 (Category II) was for floors while the present draw of lots held on 26.12.1993 was for flats to be allotted to the petitioners. Letters dated 17.1.1994 and 31.12.1993 are being impugned in these petitions on the ground that the Board has acted illegally and totally arbitrarily in unilaterally changing the scheme of categories I and II flats from Self Financing Scheme to Hire Purchase Scheme. It has been further averred that the petitioners had applied for flats in Category-I and II under the Self Financing Scheme and the advertisement clearly mentions that category I and II flats are covered by the Self Financing Scheme, whereas the Hire Purchase Scheme was restricted to Category III and IV. By changing the scheme to Hire Purchase, the petitioner under category I shall have to pay Rs. 5,61,400/- whereas he was supposed to pay Rs. 4,00,000/- while the petitioners under category-II flats shall have to pay Rs. 4,33,100/- lacs whereas they were supposed to pay Rs. three lacs. (Correction carried out vide order dated 5.9.1995 passed in CM. No. 8407/1995.)

3. In response to notice of the writ petitions, the respondent-Board in the written statement has taken the preliminary objection with regard to maintainability of the petitions on the ground that the petitioners had accepted the terms and conditions of the Scheme with respect to the price and other conditions which led to the creation of a valid contract and the remedy, if any of the petitioner's is not by way of writ petitions but by way of Civil suits. It has also been submitted that during the construction of categories I and II flats in Modern Residential Complex at Manimajra under the Self Financing Scheme for General Public on 9th April, 1993 the Board issued a letter revising the prices of the flats of categories I and II at Rs. 6,25,000/- and Rs. 4,75,000/- respectively, (Correction carried out vide order dated 5.9.1995 passed in C.M. No. 8407/95) which were only tentative prices and not final prices. Notices though were quashed by this Court but it was left open to the Board to take action in accordance with terms and conditions of the contract. Accordingly, the respondent-Board has worked out the exact price of categories I and II at Rs. 5,61,400/- and Rs. 4,33,100/- respectively. It has also been averred that though in terms of brochure, allottees including the petitioners were required to pay the balance in lump sum at the time of allotment but the balance amount being substantial petitioners and other allottees have been given time to pay the amount in instalments. Accordingly, 20 per cent of the total price i.e. balance was permitted to be paid alongwith interest at the rate of 16.5 per cent. The Board has admitted that the format and language of hire purchase agreement was wrongly used. There was no decision to convert the status of the scheme and its owner from self financing to hire-purchase and tenant respectively. According to the Board, the impugned annexure spells out the intention to give additional facility to the allottees to pay the balance amount in installments. It remains open to the allottees and also the petitioners to pay the entire balance amount in lump sum, in which case they would become owners of the flats by executing conveyance/lease-deed or have an option to pay the said amount in instalments spread over three years including cash down payment plus ground-rent and interest on delayed payment. In regard to increase in price the Board has submitted that the cost of the flats has gone high on account of cost of material, labour and increase in premium of land payable by the Board to the Chandigarh Administration. It has further been explained by the Board that cost of the land was taken at Rs. 250/- per sq. yard in view of Chandigarh Administration letter dated 9.2.1989 as per which it was decided to allot tentatively 24 acres of land to the Board at the average rate of Rs. 180/- per sq. yard on lease-hold basis for the scheme was framed for the construction of 1608 flats of different categories in the Modern Housing Complex at Manimajra comprising 60 acres of land. Later on in the year 1990, it was decided by the Chandigarh Administration to change the layout and that the Board should construct 2280 flats in order to have the optimum use of land. Thereafter, 672 flats of different categories including 144 of category-I were added. It was decided to allot 60 acres of land on chunk basis for the construction of there 2280 flats since the area of 60 acres was ear-marked for the residential colony including parks, community centre, school, dispensary, commercial area and roads etc. It was again decided that the Board would allot 2.07 acres of institutional area under Community Centre, School, Dispensary at the rate of Rs. 300/- per sq. yard and recover through auction the proceeds of commercial area which were estimated at the rate of Rs, 4,000/- per sq. yard and the same would be set-off against the premium of land of 60 acres and the development charges. The price was accordingly worked out which worked out Rs. 597/- per sq. yard and was taken at the rate of Rs. 600/- per sq. yard for the purpose of calculation. In this regard, copies of the letters exchanged between the Chandigarh Administration and the Housing Board have been annexed as Annexure R-2/3 to R-2/6.

The Board has denied that the increase has been made arbitrarily, rather it has been submitted that the cost of the flats has been determined on the actual cost basis which includes 10 per cent profit on the cost of H.I.G. flats as per policy of the Board.

4. In the replication, the petitioners have averred that no details of various increase under various categories have been given in the written statement nor ever communicated to the petitioners. Petitioners have denied that the Board utilised its own money for the construction of the flats, rather the Board had surplus amount available with it out of the instalments deposited by the allottees. In regard to charging of profits of 10 per cent and the cost on the flats, the petitioners have submitted that the Board is illegally making profits over and above the departmental charges recovered from the allottees

5. In the additional affidavit filed by Mr. H.S. Sood, Chief Accounts Officer and the documents placed on the record the Board has given the break-up under the different heads for working out the cost of the flats.

6. Learned counsel for the petitioners have contended that the unilateral revision of prices of flats is arbitrary and unreasonable and the petitioners have been asked to bear additional burden of nearly Rs. two lacs without affording any opportunity of hearing in this regard. Counsel have also questioned the jurisdiction of the Board in changing the scheme from Self-Financing to Hire-purchase Scheme. In answer to these submissions, learned counsel for the Board has referred to the additional affidavit and also some of the documents which have been placed on record and contended that the price has been fixed on completion of flats, strictly as per terms of the scheme and is binding on the petitioners as per terms of the contract. He contended that the break-up as given in the additional affidavit and documents makes it clear that the increase is not arbitrary but on account of cost of material, labour, increase in premium and also on account of interest on the amount which the Board had spent from its own funds to complete the construction of the flats at an early date. Board's counsel also raised a preliminary objection in regard to the maintainability of the petitions on the ground that the grievance made in the petitions pertains to terms and conditions of the contract which can be agitated only in civil suit.

7. Before considering the rival contentions of learned counsel for the parties on merits, it is necessary to deal with the preliminary objection raised by counsel for the Board with regard to maintainability of the writ petitions. In Premji Bhai Parmar v. Delhi Development Authority, A.I.R. 1980 S.C. 738,the petitioners therein had applied and got themselves registered for allotment of flats to be constructed by the Delhi Development Authority and after registration when the flats were constructed, brochures were issued by the Authority. The brochure specified the terms and conditions including price on which flat will be offered. Annexure A to the brochure had set out the price of the flat on the ground floor, first floor and second floor and had also set out the premium amount payable for land as also the total cost in respect of the flats on the ground floor, first floor and second floor. On the basis of brochures, petitioners therein applied for the flats. After the lots were drawn, successful allottees paid the price set out in the brochure and took possession of the flats. After having obtained possession they sought to challenge the action of the Authority in collecting surcharge as component of price of flats under the M.I.G. scheme. On the basis of these facts, the Supreme Court held that camouflage of Article 14 cannot conceal the real purpose motivating these petitions, namely, to get back a part of the purchase price of flats paid by the petitioners after the flats have been securely obtained and petition to the Court under Article 32 is not a proper remedy. It was while determining the price of flats, the Authority acts purely in its executive capacity and' is bound by the obligations which dealings of the State with the individual citizens import into every transaction entered into in the exercise of its constitutional powers. But after the State or its agents have entered into the field of ordinary contract, the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines rights and obligations of the parties inter se. No question arises of violation of Article 14 or of any other constitutional provision when the State or its agents, purporting to act within this field, perform any act. In this sphere, they can only claim rights conferred upon them by contract and are bound by the terms of the contract only unless some statute steps in and confers some special statutory power or obligation on the State in the contractual field which is apart from contract.'

8. Premji Bhai Parmar's case (supra) was noticed by the Supreme Court in its subsequent judgment in Bareilly Development Authority and Anr. v. Ajay Pal Singh and Ors., A.I.R. 1989 S.C. 1076 and it was held that 'when the contract entered into by the State is non-statutory and purely contractual the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines the rights and obligations of the parties inter-se. In this sphere, the parties can only claim rights conferred upon them by the contract in the absence of any statutory obligations on the part of authority in the said contractual field. It is also settled that no writ or order can be issued under Article 226 of the Constitution of India so as to compel the authorities to remedy a breach of contract pure and simple.' In Bareilly Development Authority's case (supra) the note given in the brochure issued in that case clearly stated that the cost is only estimated cost and it would increase or decrease according to the rise in the price at the time of completion of the houses/flats. Many persons got themselves registered for allotment of houses/flats. A notice was subsequently issued by the Development Authority increasing the price of houses, the amount of instalment and interest. The allottees were asked to send their written acceptance of the revised price/instalments to the Development Authority. Most of the allottees of the allottees except few gave unequivalent and unconditional written consent. In these circumstances the Supreme Court held that it was in the realm of concluded contract pure and simple and more so petitioner therein was highly educated and had accepted the revised terms of Bareilly Development Authority and therefore, he was not given any relief. In Mahabir Auto Stores and Ors., v. Indian Oil Corporation and Ors., A.I.R. 1990 S.C. 1031, the Apex Court reiterated the well settled principle of law that every action of the State or an instrumentality of the State in exercise of its executive power must be informed by reasons. Hon'ble Mr. justice Sabysachi Mukherji, Chief Justice of India speaking for the Bench observed'. Every action of the State Executive authority must be subject to rule of law and must be informed by reason. So, whatever be the activity of the public authority, in such monopoly or semi-monopoly dealings, it should meet the test of Article 14 of the Constitution. If a Government action even in the matters of entering or not entering or not entering into contracts, fails to satisfy the test of reasonableness, the same would be unreasonable'. In Km. Shrilekha Vidyarthi etc. v. State of U.P. and Ors., A.I.R. 1991 S.C. 537, the judicial review of State action in contractual matters were held permissible on the ground of illegality, procedural impropriety and arbitrariness. The learned judges of the Apex Court held that 'no doubt, it is true, as indicated by us earlier, that there is a presumption of validity of the State action and the burden is on the person who alleges violation of Article 14 to prove the assertion. However, where no plausible reason or principle is indicated nor is it discernible and the impugned State Action, therefore, appears to be ex-facie arbitrary, the initial burden to prove the arbitrariness is discharged shifting onus on the State to justify its action as fair and reasonable. If the State is unable to produce material to justify its action as fair and reasonable, the burden on the person alleging arbitrariness must be held to be discharged. The scope of judicial review is limited as indicated in Dwarkadas Marfatia's case (A.I.R. 1989 S.C. 1642) (supra) to oversee the State action for the purpose of satisfying that it is not vitiated by the vice of arbitrariness and no more. The wisdom of the policy or the lack of it, or the desirability of a better alternative is not within the permissible scope of judicial review in such cases, it is not for the Courts to recast the policy or to substitute it with another which is considered to be more appropriate. Once the attack on the ground of arbitrariness is successfully repelled by showing that the act which was done, was fair and reasonable in the facts and circumstances of the case.' In Sanjay Place Group Housing Association and Ors. v. Agro Development Authority and Ors., J.T. 1992(2) S.C. 361, the appellants therein who were allotted flats by the Agra Development Authority challenged the additional demand raised by the Authority before the Allahabad High Court. The Allahabad High Court dismissed the writ petition with the finding that a suit would be an appropriate remedy. However, before the Supreme Court the view of the Allahabad High Court in not entertaining the petition on the ground that the suit would be an appropriate remedy was not considered to be proper. In Food Corporation of India v. M/s. Kamdhenu Cattle Feed Industries, (1993)1 Supreme Court Cases 711, the Apex Court held 'In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of which non-arbitrariness is a significant fact. There is no unfettered discretion in public law: A Public Authority possesses powers only to use them for public good. This imposes the duty to act fairly and adopt a procedure which is 'fair play in action'. Due observance of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the State and its instrumentalities, with this element forming a necessary component of the decision-making process in all State actions. To satisfy this requirement of non-arbitrariness in a State action, it is, therefore, necessary to consider and give the weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart from affecting the bona fides of the decision in a given case. The decision so made would be exposed to challenge on the ground of arbitrariness. Rule of law does not completely eliminate discretion in the exercise of power, as it is unrealistic, but provides for control of its exercise by judicial review.' In United India Periodicals Pvt. Ltd. v. M/s. M &N; Publications Ltd. and Ors., (1993)1 Supreme Court Cases 446, the Apex Court has held that State action in commercial/contractual transactions with private parties must be in consonance with Article 14. Decision making process of public considerations would vitiate the decision, even if it without bias. The Court observed 'Unlike policies, contracts are legally binding commitments and they commit the authority which may be held to be a State within the meaning of Article 12 in many cases for years. Public authorities are essentially different from those of private persons. Even while taking decision in respect of commercial transactions a public authority must be guided by relevant considerations and not by irrelevant ones. If such decision is influenced by extraneous considerations, which it ought not be have taken into account, the ultimate decision is bound to be vitiated, even if it is established that such decision had been taken without bias. There is nothing paradoxical in imposing legal limits on such authorities by courts even in contractual matters because the whole concept of unfettered discretion is inappropriate to a public authority, who is expected to exercise such powers only for public good.'

Recently, the Apex Court in Indore Development Authority v. Sahana Agarwal and Ors., J.T. 1995(3) S.C. 1 observed '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 of estimate cost of such flats'. Entertaining of the writ petition by the High Court was found to be proper and in this context, it was observed '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 erractic manner'.

9. Thus, on a conspectus of the aforementioned decisions of the Apex Court, it stands settled that Article 226 of the Constitution is not a proper remedy or forum for re-opening of contracts for avoiding its burdens or for getting back the purchase money paid under the contract. But at the same time the Courts can certainly examine whether decision making process' was reasonable, rational not arbitrary and violative of Article 14. Once the procedure adopted by the authority is held to be against the mandate of Article 14 the Court cannot ignore such action saying that the authority concerned must have some latitude or liberty in contractual matters and any interference by court amounts to encroachment on the exclusive right to the executive to take such decision.

10. This being the position in law, it shall be necessary to find out the justification for increase in price of flats. The brochure published while floating the scheme provides the terms and conditions including eligibility, mode of allotment, mode of payment and surrender/cancellation of flats. Under the heading 'mode of payment' the tentative prices to be paid by the allottees have been given alongwith the details of first, second and third instalments and balance to be paid at the time of possession. It further finds mention that the exact price of the flats shall be worked out at the time of allotment after the flats are completed. It has also been provided that the price can be increased due to variation in plinth area, scope of work, change in specifications and design, increase in cost of materials and labour, cost of land etc. or due to any other reason and the same shall be binding upon the allottees. It further reserves the right of the board to increase or decrease the number of flats depending upon the actual feasibility at site during the course of construction, right to change the facilities and specifications shown in various plans appended in the brochure; right to make variations in the sizes of the individual rooms and overall covered area as per actual construction; right to make modifications in the design scope of work, specifications and price without assigning any reasons. Allottees are not entitled to any interest on the amount of initial deposit. The brochure also provides that the allottees shall not be entitled to sell, mortgage, transfer or otherwise part with the possession of the whole or any part with the possession of the whole or any part with the possession of the whole or any part of the flats till they become owners or for a period of 10 years from the date of actual possession, whichever is later, except a lease for a period not exceeding five years. The right, title or interest of the allottees could be mortgaged in favour of the Government, Life Insurance Corporation or any Scheduled Bank or any Corporate body in order to raise loan for the payment of price of built-up house to the Board, subject to first charge on the property for the un-paid portion of the purchase price and other dues outstanding towards the allottees remaining in favour of the Board, which otherwise could be done only with the prior permission of the Board. The Board has placed on record the proceedings of the meeting of the Board held on 28.1.1992 where the Board considered the Agenda with regard to re-scheduling of instalments of categories I and II of self Financing Flats at Manimajra. The re-scheduling of the instalments was felt necessary because of the increase in the cost of flats on account of enhanced cost of land, revised design, increased covered area, additional items of work and assuming too low cost estimates of construction at the time when the scheme was floated. The Board in principle approved the revision and desired that the revised cost be intimated to all the allottees. It was also envisaged that the Board would not recover the total revised cost in lump sum and would limit it to the recovery pattern as being adopted in the new Housing Scheme where 80 per cent of the cost is being recovered upto the time of physically handing over the possession and balance in six monthly instalments over a period of next three years. Initially, the recovery was spread over 1-1/2 year, but under the revised Schedule it was decided to keep the period as 2-1/2 years. In the meeting held on 28.1.1992, the revised cost of the unit was estimated at Rs. 6,25 lacs and Rs. 4.75 lacs for categories I and II respectively, but later when this increase was quashed by the High Court the cost was again worked out and the demand which now has been raised from the allottees of categories I and II is Rs. 5,61,400/- and Rs. 4,33,100/- respectively. A comparative statement of the original tentative advertisement cost and also the final cost in respect of categories I and II flats and also the interest charged to be paid by the Board to the allottees on their deposit, has been placed on record. In the comparative statement, the cost of the flat has been divided into eight components, namely, building portion, public health, electrical installation, departmental charges at the rate of 10 per cent, land cost, interest on building cost, interest on land cost and profit at the rate of 10 per cent. Learned counsel for the petitioners have not seriously disputed the increase against items, namely, building portion, public health and electrical installation, but increase with regard to departmental charges, cost of land, interest on building and land cost and also charging of the profit has been impugned by the learned counsel for the petitioners being arbitrary and they have contended that the reasons given for increase against these items is only an eye-wash and should not be taken into consideration.

11. The price of the flat which was originally advertised or given in the brochure included departmental charges at the rate of 10 per cent and also cost of land which at that time was taken at the rate of Rs. 250/- per sq. yard and also interest which the Board anticipated on building cost and land cost at the rate of 13.5 per cent and also the profit at the rate of 10 per cent. The departmental charges at the rate of 10 per cent are being charged on the amount calculated under the items, namely, building portion, public health and electrical installation. Considering the number of flats to be constructed and the area which was to be developed was 60 acres. 10 per cent departmental charges cannot be said to be unreasonable particularly when while determining the original price of the flat the departmental charges at the rate of 10 per cent were envisaged by the Board. As regards the increase in land cost, it has been explained that in the tentative advertised cost of Rs. 3.00 lacs the land cost was taken into account at the rate of Rs. 250/- per sq. yard. The Chandigarh Administration has allotted undeveloped 60 acres of land on chunk basis at the rate of Rs. 180/- per sq. yard and the area under flats is only 20.96 acres. The actual cost of developed land which the Board has worked out comes to Rs. 597/- per sq. yard and for the purpose of calculation it has been rounded off to Rs. 600/- per sq. yard. It has been explained that although the entire cost of land measuring 60 acres stands paid in total, but interest is yet to be paid to the Chandigarh Administration for providing services in the entire residential complex in Manimajra such as construction of roads, providing of street lighting, sewerage, storm water drainage and water supply lines etc. The balance amount which remains to be paid under these heads on completion of the work has been estimated at Rs. 13.31 lacs. In addition to the work, the Board has incurred an expenditure of Rs. 41.85 lacs for providing tubewells, boundary-wall and horticulture. Thus, total expenditure on account of development of land works out to Rs. 242.00 lacs. In view of this explanation, increase in the land cost cannot be questioned on the ground of arbitrariness. As regards the charging of interest on land cost and building cost, it has been explained that the Board has charged interest on land cost at the rate of 15 per cent annum from 1.6.1990 to 31.12.1990 in respect of category I and from 1.6.1990 to 10.1.1991 from the allottees of category II for which period no amount was received from them. In the additional affidavit, the Board has given the break-up of the interest charged on building cost. It has also given the details of concession of interest which has been given to the allottees on the amount which remained unutilized. No interest has been allowed on the earnest money but interest has been given on Rs. 14106/- at the rate of 16 per cent per annum from 1.1.1991 to 30.9.1991 as this amount remains unutilized. Interest has also been given on Rs. one lac at the rate of 16 per cent per annum from 11.5.1991 to 30.9.1991 as this amount too remains unutilized. This is in respect of category I flats. Likewise, to the allottees of category II flats interest has been allowed on Rs. 10386/- and Rs. 75000/- at the rate of 16 per cent per annum from 11.1.1991 to 30.9.1991 and 11.6.1991 to 30.9.1991 respectively. Charging of interest at the rate of 16 per cent cannot be termed as arbitrary because the interest is being charged at this rate due to revision of interest by Housing Urban Development Corporation of India limited (HUDCO) from time to time. However, the allottees have also been allowed interest at the rate of 16 per cent per annum on the amount which had remained unutilized with the Board. In this view of the matter, grievance in this regard cannot be entertained. Coming to the last item i.e. charging of profit at the rate of 10 per cent, the Board has placed on record the minutes of the meeting of the Board held on 28.2.1984 whereby the powers were delegated to the Chairman for fixation of consideration money in respect of various dwelling units constructed by the Board. In exercise of the said powers delegated upon the Chairman, it was decided by the Chairman that the profit on LIG, MIG and HIG applicants be charged at the rate of 6%, 8% and 10% respectively irrespective of the cost. This decision of the Chairman was later on placed before the Board in its meeting held on 21.5.1990 and the same was approved by the Board accordingly. The profit thus is being charged on the basis of decision in the year 1985 and approved by the Board in 1990. Profit was one of the components when the price of the flat was originally determined and therefore, due to increase in cost of construction and land cost, there is a corresponding increase in the amount of profit which in my considered view is not arbitrary. The judgment in Sanjay Place Group Housing Association and Ors. v. Agra Development Authority and Ors., J.T. 1992(2) S.C. 361 is of no assistance to the petitioners because in that case the demand of assumed profit which the Agra Development Authority would have earned was quashed as the perusal of contractual terms on which flats were booked and allotment made clearly indicated that the authority was entitled to receive only actual costs. The demand was found to be inconsistent with the terms of the agreement. In the present case, the brochure containing the terms gives no indication that the Board was entitled only to receive actual costs. However, I find merit in the other contention of counsel for the petitioners, i.e. if at all the Board has to charge profit then the same has to be calculated on the building cost and not by adding to the total cost of construction, land cost and interest on building and land cost. The procedure presently followed for fixation of price of flats is as follows :-

'Sr. No. Items Remarks___________________________________________________________________________________i) Total cost of constructionincluding public health andelectrical installations).ii) Add 10% departmental charges on (i) This is the ceiling limitabove, prescribed by the HUDCO to ensure that the over-head arekept to a reasonable limit.iii) Total of (i) and (ii) above.iv) Cost of land Cost of land is charged at the samerate at which the land is allotted by the Chandigarh Administration.v) Interest on (iii) above for half Rate of interest is the same as is the period from the date of starting paid by the HUDCO for the particular construction to the date upto which category of houses. The HUDCO has consideration is fixed. given option to recover managementcost by adding 1/2 to 1% forvi) Interest on cost of land for the category 'B' and 1 to 1.5% for MIG full period from the date of starting and HIG categories of houses. Butconstruction to the date of fixation this is not being availed of and of consideration. the same rate of interest as ischarged by the HUDCO is charged while fixing the consideration.vii) Total of (iii) to (vi) above. ----viii) Add profit as below:- The profit being charged byEWS category: Nil the Chandigarh Housing BoardLIG category: 5% is as HUDCO FinancingMIG category: 8% pattern/guidelines. The profitHIG category: 10% being charged by the Board in thecase of HIG is lesser as comparedto Punjab Housing Board which is charging 15% and is at par with that of Haryana Housing Board, ix). Consideration of the dwelling unit(vii + viii)

Consideration as above is worked out upto a specific date and the same remains valid for all the successful applicants including those kept on the waiting list. In respect of other applicants such as, for allotment out of discretionary quota, if allotment letters are not issued upto the date upto which the consideration is already fixed the consideration is revised by adding element of interest and watch and ward charges @ Rs. 50/- p.m. to the figure arrived at against column (ix) above.'

12. The procedure followed shows that the profit is added on the amount which is total of item (i), (ii) and (iv) to (vii), i.e. building portion, public health, electrical installation, departmental charges, cost of land, interest on land and building cost. There seems to be no logic or rational basis for adding items mentioned at Sr. Nos. (iv), (v) and (vi) i.e. cost of land, interest on land cost and building cost towards the cost of construction of flats for determining the profit. If this is allowed to stand, it would result in charging by the board the profit also on the interest which the allottees are required to pay from the date of starting construction to the date upto which the price of the flat is finally determined. Moreover, as per the case of the Board itself, cost of land is charged at the same rate, at which the land is allotted by the Chandigarh Administration. Counsel was unable to show any justification to charge profit on cost of land except by contending that the procedure followed is the one suggested by the HUDCO. I fail to understand as to how the procedure followed by ore Authority can bind the Board. Accordingly, the procedure adopted by the Board in charging profit is wholly arbitrary and cannot be sustained to this extent.

13. The next grievance made by the learned counsel for the petitioners is that if the Board is allowed to change the scheme from Self-financing to Hire-purchase, the petitioners would become tenants of the Board rather than owners of the flats whereas if the scheme remains as Self-financing the petitioners would become owners as soon as the possession of the flats is delivered to them on free-hold basis. It has also been contended that the action of the Board in unilaterally changing the scheme from Self-financing to Hire Purchase is totally arbitrary and violative of Article 14 of the Constitution.

14. Counsel for the Board has fairly conceded that the Haryana Housing Board Act, 1971 as extended to Union Territory of Chandigarh, Chandigarh Housing Board (Allotment, Management and Sale of Tenements) Regulations 1979 and Capital of Punjab (Development and Regulations) Act, 1952 or the brochure issued by the Board give no power to the Board to change the nature of the scheme from Self-financing to Hire purchase. However, Mr. Rajiv Atma Ram, counsel for the Board, has contended that there is no change in the scheme from Self-financing to Hire purchase, but in fact the petitioners and other allottees have merely been given an option to pay the balance amount in instalments. In case the petitioners want to pay the entire amount in lump sum, the Board shall have no objection. As regards the format and language used in the allotment letters whereby the petitioners and other allottees have been asked to pay the additional amount, he submitted that it has wrongly been used as there was no decision to convert the status of the scheme from Self-financing to Hire purchase. He added that subsequently letters in this regard were issued to the allottees.

15. The allotment/demand letters whereby the petitioners and other allottees have been allotted flats and have been asked to pay the additional amount are in the format of Hirepurchase agreement. The same incorporate all those Clauses as prescribed for Hirepurchase agreement under the Chandigarh Administration Board (Allotment, Management and Sale of Tenements) Regulation, 1979. No letter has been placed on record whereby the allotment/demand letter was withdrawn and a fresh allotment/demand letter in terms of self-financing Scheme has been issued to the petitioners. The liability to make payment of the balance amount either in lump sum or in instalments can arise only when the petitioners and other allottees are served with a proper and valid demand/allotment letter, which in this case is yet to be served. In this context, it may be noticed that Regulation 42 of the Chandigarh Housing Board (Allotment, Management and Sale of Tenements) Regulations, 1979 provides that during the subsistence of Hire purchase period, the hirer shall remain the tenant of the Board and shall have no other rights except those under the tenancy. He can, however, sub-let the premises with the prior permission of the Board, whereas under Regulation 45 when the property is disposed of by way of sale, the allottee/lessee shall become the owner only after the full price and all other dues have been paid and the transfer of the property has been effected through a conveyance/lease deed executed in such from as may be prescribed by the Board and the common portions and common services. If any, have been taken care of. It is thus, obvious from a reading of the Regulations that the hire purchase tenancy is totally different from the one whereby ownership of the property is transferred by way of sale. Accordingly, the demand raised under the demand/allotment letters as served on the petitioners cannot be sustained.

16. It was then urged by the R.K. Handa, Advocate, in Civil Misc. No. 1631 of 1994 filed in C.W.P. No. 1967 of 1994 that in terms of order dated 12.8.1994 petitioner paid a sum of Rs. 5,61,400/- and accordingly made a request for delivery of possession of the flat but she received no intimation regarding the same. The possession slip was issued to the petitioner only on 7.10.1994 and she was told orally that a sum of Rs. 44,598/- was also due on account of interest, ward and watch charges etc. However, the break-up of the amount was not given to her. He further contended that on 14.10.1994 when the petitioner went to the site for taking delivery of possession of flat, she found the same to be incomplete as the work of fittings in the toilets and electric switches was yet to be carried out. He thus contended that the petitioner has suffered damages as the Board has delivered possession of an unfinished flat without carrying out electrical and public health work in completing the toilets etc.

17. The grievance made by Mr. Handa that on incomplete flat was delivered to the petitioner relates to defect or deficiency in the construction and delivery of flats. These matters cannot be made the subject matter of the writ petitions under Article 226 of the Constitution of India. If the petitioner or any other allottee has suffered any damages on account of delivery of incomplete flats or have complaints regarding defect of deficiency in the service performed by the Board, the efficacious remedy is to approach the Consumer Courts. In this context, a judgment of the Apex Court in Lucknow Development Authority v. M.K. Gupta, (1994)1 Supreme Court Cases, 243, may be noticed.

18. As regards the charging of interest in excess, the petitioners may make representation to the Board in the light of judgment given in the present case.

19. In the result, the writ petitions are allowed to the extent that the respondents shall re-determine the price of the flats. The profit at the rate of 10 per cent shall be charged only on the amount spent towards the cost of construction including public health, electrical installation and departmental charges. The demand/allotment letters whereby additional demand has been raised, being in the format of Hire purchase agreement, shall also stand quashed leaving it open to the Board to serve the petitioners or other allottees with allotment/demand letters incorporating the terms and conditions meant for transfer of ownership of the flats by way of sale. No costs.


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