Case Note & Summary
The appeal before the Supreme Court arose from writ petitions filed by intended allottees of flats in Navlakha Housing Complex Scheme No.31 in Indore, challenging multiple upward revisions of the estimated cost of flats by Indore Development Authority, constituted under the M.P. Nagar Tatha Gram Nivesh Adhiniyam, 1973. In 1977, the Authority issued an advertisement inviting applications for LIG and MIG flats on hire-purchase basis, specifying estimated plinth areas of 500 sq.ft. and 805 sq.ft. respectively, and registration deposits of Rs.1,000 and Rs.2,000. The advertisement stated that the price was estimated and the definite price would be intimated at the time of allotment, with a probable completion period of two years. Pursuant to this offer, respondents registered and paid deposits. By letter dated 5 November 1979, the Authority informed that, under a scheme sanctioned by HUDCO, 12 LIG flats of 500 sq.ft. and 162 MIG flats of 750 sq.ft. would be constructed, with estimated costs of Rs.45,000 and Rs.70,000 respectively, and revised registration fees to Rs.3,000 and Rs.5,000. Thereafter, by letters dated 7 October 1980 and 25 October 1980, the Authority revised the estimated cost to Rs.60,000 for LIG and Rs.95,000 for MIG, citing increased market prices of construction materials. Respondents alleged they had no option but to accept these arbitrary unilateral demands. Subsequently, by letters dated 26 January 1984 and 26 December 1984, the Authority further increased the cost to Rs.1,16,000 for LIG and Rs.1,30,000 for MIG, attributing the rise to increased material prices, architectural changes, and for LIG, an enlarged area of 714.94 sq.ft. instead of 500 sq.ft. Although construction was completed in 1982, possession was delayed due to a separate writ petition concerning irregular allotments of 56 flats. The respondents filed a writ petition in the High Court challenging the 1984 cost escalation. The High Court held that the Authority had acted arbitrarily and dictatorially, found the escalation of more than 100% unexplained, and directed the Authority to deliver possession of flats at the October 1980 estimated rates (MIG Rs.95,000, LIG Rs.60,000) within one month. The respondents were given possession in 1984 pursuant to that direction, and the Authority claimed interest at 150% on unpaid amounts. Before the Supreme Court, the Authority contended that it never made a commitment on final cost; only estimated and probable cost was given, with revisions communicated from time to time. It relied on the advertisement and Note(1) stating that price was estimated and definite price would be intimated at allotment. The Authority also pointed out that respondents accepted the revised instalments. The respondents argued that the revisions were arbitrary and unilateral, leaving them no choice. The Supreme Court examined similar issues in Bareilly Development Authority v. Ajai Pal Singh, (1989) 2 SCC 116, and Delhi Development Authority v. Pushpendra Kumar Jain, JT 1994 (6) SC 292. In Bareilly, the Court held that there was no misstatement or fraudulent concealment in the brochure and that allottees who accepted changed terms could not seek allotment on original terms. In Pushpendra Kumar Jain, the Court stated that mere identification or selection of an allottee does not clothe a legal right to allotment at the price prevailing on the date of drawal of lots, and that estimated prices in the brochure are illustrative and subject to revision. The Court cautioned that while development authorities may revise costs, they have no absolute right to hike the cost arbitrarily; each case depends on facts. The provided excerpt of the judgment does not contain the final operative order, so the ultimate decision is not available in the text.
Headnote
A) Constitutional Law - State Action and Arbitrariness - Development Authority as State under Article 12 - Constitution of India, 1950, Article 12 - The matter involved price escalation by a Development Authority constituted under the M.P. Nagar Tatha Gram Nivesh Adhiniyam, 1973. The Court observed that Development Authorities are State within the meaning of Article 12 and their conduct in escalating prices and delaying delivery affects citizens, especially lower income groups; such conduct must not be arbitrary. Held that State action in fixing prices must be reasonable and non-arbitrary (Paras 8-9). B) Administrative Law - Estimated Cost vs Final Price in Hire-Purchase Scheme - No Legal Right to Original Estimated Price - M.P. Nagar Tatha Gram Nivesh Adhiniyam, 1973 (no specific sections cited) - The advertisement and Note(1) stated that the price was on estimated basis and definite price would be intimated at the time of allotment. The Development Authority revised the estimated cost from Rs.70,000 to Rs.95,000 for MIG and from Rs.45,000 to Rs.60,000 for LIG in 1980, and further to Rs.1,30,000 and Rs.1,16,000 in 1984 citing increased material costs and larger area. Held that mere identification or selection of allottee does not clothe a legal right to allotment at the price prevailing on date of drawal of lots; allottees who accepted revised terms cannot insist on original terms (Paras 6, 9). C) Administrative Law - Arbitrary Escalation - Reasonableness of Price Revision - Constitution of India, 1950, Article 12 - The High Court found the escalation of more than 100% unexplained and directed delivery at 1980 rates. The Supreme Court cautioned that while development authorities have power to revise estimated cost, they do not have an absolute right to hike cost arbitrarily; the court reiterated that estimated price in brochure is illustrative and subject to revision, but any revision must be based on reasonable factors such as layout, cost of construction, etc. Held that each case depends on facts and circumstances (Paras 5, 9). D) Precedent - Reliance on Earlier Supreme Court Decisions - Binding Precedent on Housing Scheme Price Revision - Constitution of India, 1950, Article 12 - The Court referred to Bareilly Development Authority v. Ajai Pal Singh, (1989) 2 SCC 116, and Delhi Development Authority v. Pushpendra Kumar Jain, JT 1994 (6) SC 292. In those cases, the Supreme Court held that there was no misstatement or fraudulent concealment in brochure, and allottees who accepted revised terms could not seek allotment at original terms. The Court in Pushpendra Kumar Jain stated that estimated prices in brochure are illustrative and subject to revision. Held that these precedents guide the present analysis (Para 9).
Issue of Consideration
Whether the Development Authority could revise the estimated cost of flats after registration; whether such revision was arbitrary; whether allottees had a legal right to allotment at the originally estimated price.
Law Points
- Estimated cost in brochure is not final
- definite price to be intimated at allotment
- allottee has no absolute right to original estimated price
- development authority can revise cost but not arbitrarily
- acceptance of revised terms bars challenge
- State action must be non-arbitrary under Article 12
