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TMI Blog2011 (4) TMI 1513X X X X Extracts X X X X X X X X Extracts X X X X ..... s to make applications for allotment of industrial sites. Pursuant to the same, the Respondents herein, applied for the allotment of sites. It is a matter of record that the Respondents had applied for the allotment of sites at different points of time. Consequently, the Appellant issued letters of intent, indicating that it had resolved to allot all Respondents the sites shown in their cause titles at Tarihal Industrial Estate. The said letter also indicated the tentative price at which the land was sought to be allotted. 3. In response to the offer made by the Appellant No. 1, the Respondents being desirous of purchasing their respective plots indicated their willingness for the abovementioned site. Accordingly, they affirmed their interest to purchase the same. Thereafter, the letters of allotment were issued in favour of the Respondents incorporating the terms and conditions of allotment. Subsequent thereto, lease-cum-sale agreements were executed in favour of the Respondents on their complying with conditions of allotment. 4. One of the conditions mentioned in the lease-cum-sale agreement reads thus: 7(b) As soon as it may be convenient the Lessor will fix the price o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... just and contrary to what was legitimately expected and assured by the Appellant, i.e., only marginal increase, based on the cost of land acquisition. Pursuant to the objections filed individually by the Respondents, the Appellant invited them to Bangalore for a discussion. According to the Respondents, during the course of discussions, they had sought for the detailed break up, based on which the enhanced claim was made. The board had furnished them a statement showing the basis for enhancement of the price. In the break-ups statement, as provided by the Appellant, it was shown that ₹ 34.17 lakhs were indicated to be the cost of future development. The Respondents having expressed their inability to pay the hiked prices, once again brought to the notice of the Appellants that the proposed enhancement was unjust and arbitrary. Thereafter, the Appellant No. 1, on consideration of the objections raised by the Respondents reduced the final allotment price marginally and issued demand notices to the Respondents as follows: Basic final prices fixed in the meeting held on 18.9.1997 Reduction in the final prices approved (Rs. in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in holding that it was arbitrary, unjust and unfair. The Appellant No. 1 was entrusted with the responsibility to develop the industrial area as a whole and it had nothing to do with any class of allottees. She also submitted that the present matter was not one of escalation of price but the fixation of the final price. 10. Learned Counsel further submitted that the final price fixation is in accordance with the allotment letters issued to the Respondents. As per the allotment letter, the tentative price of the land had been fixed at ₹ 40,500/- per acre in Tarihal Industrial Area. The allottees were to exercise option with regard to the mode of payment of the purchase price. The letter clearly indicated that the price was only tentative. The final price was fixed taking into account the cost of acquisition, development expenditure, statutory charges and interest. On the basis of the above criteria, the cost of land per allotable acre worked out approximately to 2.61 lakhs per acre. Therefore, the break-ups of the same was as follows: Therefore, keeping the above cost per acre as the basis, the Appellant Board, at its Board Meeting dated 18th September, 1997 reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 41 of the Karnataka Industrial Area Development Act, 1966. Section 41 empowers the Board to make regulations consistent with the Act and the Rules made there under, to carry out the purposes of this Act. Sub-Section 41(2) provides that the Board can make regulations with regard to (b) the terms and conditions under which the Board may dispose of land . In exercise of this power, the Board has framed Karnataka Industrial Area Development Board Regulations, 1969. Under Regulation 7, the Board has to notify the availability of land for which applications may be made by the intending purchaser. The notice has to specify the manner of disposal, the last date for submission of application and such other particulars as the Board may consider necessary in each case by giving wide publicity through newspapers, having circulation in and outside Karnataka State. Upon receipt of the applications, the allotment letter has to be issued in terms of Regulation 10. According to the learned senior counsel, the exercise of power with regard to the fixation of price by the Board has to be within four corners of the aforesaid statutory provisions. He further pointed out that the lease agreement be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alance of the value of the site. Determination of the price by the Board is binding on the lessee. In our opinion, the aforesaid clause would not permit the Board to arbitrarily or irrationally fix the final price of the site without any rational basis. The power of price fixation under Clause 7 being statutory in nature would have to be exercised, in accordance with statutory provisions; it can not be permitted to be exercised arbitrarily. Undoubtedly, as observed by this Court in the case of Premji Bhai Parmar (supra), Courts would not reopen the concluded contracts. Ms. Suri had placed reliance on the observations made by this Court in Paragraph 10 of the judgment, which are as follows: Pricing policy is an executive policy. If the Authority was set up for making available dwelling units at reasonable price to persons belonging to different income groups it would not be precluded from devising its own price formula for different income groups. If in so doing it uniformly collects something more than cost price from those with cushion to benefit those who are less fortunate it cannot be accused of discrimination. In this country where weaker and poorer sections are unable to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Smt.) and Ors. (1995) 3 SCC 1, in support of the submissions that since the allotment letters indicated only the tentative price, the Respondents could not demand that they be allowed the sites at the original price. In that case, this Court observed as follows: Although this Court has from time to time, taking the special facts and circumstances of 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 or estimated cost for such flats. It is well known that persons belonging to middle and lower income groups, before registering themselves for such flats, have to take their financial capacity into consideration and in some cases it results in great hardship when the development authorities announce an estimated or approximate cost and deliver the same at twice or thrice of the said amount. The final cost should be proportionate to the approximate or estimated cost mentioned in the offers or agreements. With the high rate of inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt examined the entire issue on the touchstone of Article 14 of the Constitution of India. It has been observed that the fixation of price done by the Board has violated the Article 14 of the Constitution of India. It is correctly observed that though Clause 7(b) permits the Board to fix the final price of the demised premises, it cannot be said that where the Board arbitrarily or irrationally fixes the final price of the site without any basis, such fixation of the price could bind the lessee. In such circumstances, the Court will have the jurisdiction to annul the decision, upon declaring the same to be void and non-est. A bare perusal of Clause 7(b) would show that it does not lay down any fixed components of final price. Clause 7(b) also does not speak about the power of the Board to revise or alter the tentative price fixed at the time of allotment. The High Court has correctly observed that Clause 7(b) does not contain any guidelines which would ensure that the Board does not act arbitrarily in fixing the final price of demised premises. Since the validity of the aforesaid Clause was not challenged, the High Court has rightly refrained from expressing any opinion thereon. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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