The Karnataka Industrial Areas Development Board was wrong in raising the price of industrial plots arbitrarily, the Supreme Court stated while dismissing its appeal against the high court ruling. The board had allotted plots after receiving payment. But 13 years later, it asked the allottees to pay more. This was challenged by the allottees. The board claimed that it has power under the rules to raise the demand. The high court rejected this stand. The Supreme Court also underlined that though the rules may grant undefined power to fix the final price, the power would have to be exercised “in accordance with the principle of rationality and reasonableness.”
Karnataka Industrial Areas Development Board & ANR. Vs. M/s. Prakash Dal Mill & Ors.
SURINDER SINGH NIJJAR, J.
1. The instant appeals are preferred against the final order and judgment of the High Court of Karnataka at Bangalore in W.A. Nos. 2183 to 2221 of 2000 & W.A. No. 1492 of 2000 dated 18th February, 2003 whereby the Division Bench of the High Court allowed the writ appeal by setting aside the judgment of the High Court in W.P. Nos. 23578 to 23617 of 1999 dated 7th July, 1999.
2. We may now briefly notice the relevant facts which are necessary for the adjudication of the present case. The Karnataka Industrial Areas Development Board (hereinafter referred to as `appellant No.1) had formed an industrial layout at Tarihal village in the year 1983, pursuant to which, it invited interested purchasers 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 of the demised premises at which it will be sold to the Lessee and communicate it to the Lessee and the decision of the Lessor in this regard will be final and binding on the Lessee. The Lessee shall pay the balance of the value of the property, if any after adjusting the premium and the total amount of rent paid by the Lessee, and earnest money deposit within one month from the date of receipt of communication signed by the Executive 3 Member of the Board. On the other hand, if any sum is determined as payable by the Lessor to the Lessee after the adjustment as aforesaid, such sum shall be refunded to the Lessee before the date of execution of the sale deed.”
5. The lease-cum-sale agreement, entered into between the Board and the respondents, contained covenants that the respondents shall pay 99% of the allotment price immediately and remaining 1% in 10 equal yearly installments plus lease premium alongwith the interest at 12.5%. The respondents claim to have complied with all the stipulations and the conditions incorporated in the lease-cum-sale agreements. It seems that the appellants even after a lapse of 11 long years did not execute the regular sale deeds in favour of the respondents. On the contrary, the appellants after a gap of 6 months from the date of expiry of the lease period, issued letters to the respondents, raising therein the demands with regard to the final allotment price and also directed the respondents to pay the balance of final allotment price within a stipulated period. The appellants vide its Board meeting dated 18th September, 1997 resolved to fix the final price of the land as follows: Allotment made at the Basic final prices basic tentative rates as fixed per acre (in Rs.) per acre (in Rs.) 1. 40,000/- 1.08 lakhs 2. 60,000/- 1.27 lakhs 3. 1.00 lakh to 1.25 lakhs 2.01 lakhs 4. 1.50 lakhs to 1.60 lakhs 2.61 lakhs
6. On receipt of the aforesaid demand, respondents filed their objections individually putting forth their grievances and declined to pay the increased amount. It was contended by them that the final allotment price was unreasonable, arbitrary, unjust 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 Rs.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 Reduction in the final in the meeting held on prices approved 18.9.1997 (Rs. in lakhs)1. 1.08 lakhs 0.95 lakhs2. 1.27 lakhs 1.10 lakhs3. 2.01 lakhs 1.80 lakhs 6 4. 2.61 lakhs 2.40 lakhs
7. Aggrieved by the same, the respondents filed a writ petition W.P. No. 23578-23617 of 1999 before the High Court of Karnataka at Bangalore and prayed for a writ in the nature of certiorari for quashing the letters enhancing the price and for a direction to the appellant to execute the sale deeds on the basis of the price indicated in the lease deed. The High Court in its judgment dated 7th July, 1999 dismissed the writ petition. The Division Bench of the High Court in writ appeal vide its final order and judgment dated 18th February, 2003 allowed the same and quashed the enhanced demands as proposed by the appellant. Hence the instant appeals by special leave before us.
8. We have heard the learned counsel for parties. Ms. Kiran Suri, learned counsel appearing for the appellants submits that the High Court committed a grave error in holding that Clause 7(b) of the lease-cum-sale agreement doesn’t confer power on the appellants to revise or alter the tentative price. She submits that the appellant No.1 is an industrial board established for the purpose of establishment of industrial areas. Section 13 of the Karnataka Industrial Areas Development Board stipulates functions of the Board which includes establishing, maintaining, developing and managing industrial estates within industrial areas. Thus, power of fixation of price of the land vested with the appellant.
9. She further submits that enhanced price was fixed after taking into consideration, the cost of acquisition, the development expenditure, statutory charges and interest. The price fixed at the time of the allotment was only tentative since the appellants could not foresee the quantum of land acquisition compensation that would be fixed in future. The price so fixed was uniform to all 8 allottees. She further submits that the High Court was not right in holding that the allottees of the site in one industrial area cannot be regarded as persons belonging to same class. The final price fixed was much less than the actual market price and hence the High Court erred 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 Rs.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:-
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