T.Nadu Housing Board vs Service Society & Anr

2. The first respondent (b�Societyb� for short) requested the state government (second respondent) to provide a Low Income Group housing scheme for the benefit of its members who were the employees of Tamil Nadu Electricity Board. The state government directed the Tamil Nadu Housing Board, the appellant herein (b�The Boardb� for short) to execute the said scheme. To meet the requirements of the employees of the Electricity Board as also the staff of the appellant, the state government acquired an extent of 8.38 acres of land in Singanur Village, Coimbatore. The Board formulated a scheme for development of the said land and construction of 145 LIG Houses and 120 LIG flats therein. In pursuance of it, in the year 1976, the Board allotted to several members of the society, LIG Houses, each house comprising a plot measuring about 40b� x 26b� (1040 sq.ft.) and a proposed construction measuring 316 sq.ft. Though the standard measurement of the proposed plots was 1040 sq.ft, the actual extents of some of the plots were different, that is 1000 sq.ft, 1021 sq.ft, 1150 sq.ft, 1235 sq.ft etc. For convenience we will refer to the facts relating to the allottee of LIG House No.49 which comprised a plot measuring 1000 sq.ft. and a house measuring 316 sq.ft.

4. Though clause 17 contemplated the final price being fixed within three years from the date of allotment, the Board did not fix the final price within that period. The Board determined the final price only in the year 1988, nearly 12 years after the allotment and sent a demand letter dated 21.5.1988 informing the allottee that the final cost of the LIG House No.49 was Rs.34,770/- as against the tentative price of Rs.18,000/- and called upon the allottee to remit the difference in cost of Rs.16,770/- (plus Rs.351 payable to the municipal corporation) on or before 30.06.1988. The allottee was required to pay the said amounts on or before 30.06.1988, failing which the amount due would carry interest at 14%/13% per annum from 1.7.1988. The Board also clarified that the increase in the cost was mainly on account of payment of increased compensation for the acquisition of land.

10. The division bench its judgment dated 7.8.2007, held after referring to the two calculation sheets, that the interests of justice would be met if each allottee is directed to pay an additional sum of Rs.13,780/- towards the increased cost of the plot and Rs.5,148/- towards interest in all Rs.18,928/- as on 30.11.1991 with further interest at 9% per annum. The High Court assumed that all plots measured 1040 sq.ft. It did not indicate any reasons for arriving at the said amount nor did it record any finding as to the correctness of the calculations by the society and the Board.

(b) the proportionate share in the cost of development and amenities (like water, electricity, sewage disposal etc.) and (c) cost of construction of the house. Where the construction is taken up in a developed layout, and not in an undeveloped land, item (b) will not be an independent component, but be a part of item (a).

20. We may illustrate. If 5 Hectares (50000 sq.m.) of land is acquired for formation of residential plots each measuring 250 sq.m., it is not possible for the authority to carve out 200 plots (each measuring 250 sq.m). This is because, not less than 25% to 30% of the total sital area will be used up for forming roads, footpaths and drains. Another 10% to 20% may be used for common facilities and amenities like park, playground, community hall etc. The common/service areas are not saleable and the board will have to recover the cost thereof by loading the proportionate cost thereof, on the cost of the residential plots. Therefore if 40% is the area used for roads, drains, parks, playgrounds etc., the saleable area or area that can be used for forming plots would be only 60% and the cost of the total land 50000 sq.m. will have to be recovered from the sale of the said 60% area (30,000 sq.m.) which can be carved into 120 plots of 250 sq.m. If the total value of 5 hectares is Rs.60 lakhs, the value of a plot of 250 sq.m. will not be Rs.30000/- (that is Rs.60 lakhs divided by 200) but Rs.50,000/-(that is Rs.60 lakhs divided by 120). An allottee of a plot measuring 250 sq.m. cannot therefore contend that he is liable to pay only the actual proportionate cost of 250 sq.m. of land out of 50000 sq.m. The proper method is to calculate the total common/service area (used for roads, drains and common amenities) and include the proportionate cost thereof in the price of the plot.

22. Whenever allotments are made even before the completion of the development of land and construction, necessarily the cost that is shown by the authority or the board will be tentative. In regard to the land cost, there may be claims for enhancement of compensation before the reference court with appeals to high court and this court. Sometimes the entire process may take 10 to 15 years and till that process is concluded the final cost of the land cannot be determined. An allottee cannot therefore say that the authority cannot increase the cost after 12 years. Similarly cost of developing of land into residential area requires coordination with different contractors engaged for laying roads, laying drains, developing parks and playgrounds, drawing electricity lines, water lines, sewerage lines etc. Many times, disputes with the contractors lead to delays and litigation. Sometimes though the work may be completed within three years, the settlement of bills and ascertainment of cost may take several years. There may also be encroachments, which will have to be removed which apart from being time consuming and involving litigation, delay the development and finalization of cost of development. As a consequence, the development cost may also shoot up beyond the estimate on account of delays, additional claims of contractors, litigations and other factors. The same applies to the cost of construction of the houses also. Therefore an allottee cannot contend that the increase, if any, should be determined within three years and if the increase is not so determined, the tentative cost would itself become the final cost. Such an interpretation of clause 17 would be illogical and unreasonable. If the Board is able to show that there was sufficient cause for the delay in deciding the final price and that it was beyond its control to determine the final cost earlier (or within three years) it will be entitled to final cost even if the claim is delayed by a few years. The allottee cannot refuse to pay it merely on the ground of delay.

23. On the other hand the authority or Board should also be diligent. Allottees belonging to low income groups should not be made to suffer for the defaults or negligence on the part of the staff of the authority. They should take prompt steps to settle claim regarding compensation. They should also be prompt in executing the development works and construct work. They should ensure that the cost is kept to the minimum. If any allottee approaches court and is able to demonstrate that the development and construction work was completed within three years, but the authority failed to fix a final cost, it may be possible to infer that there was no increase from the tentative cost and therefore the final cost was not fixed and therefore the tentative cost should be the final cost. Be that as it may.

24. In view of the complex nature of acquisition, development, construction and allotment, it is necessary to safeguard the interests of the allottees and at the same time ensure that there is no loss to the public exchequer or the authority by making it to bear any part of the cost of development or cost of the plot or cost of construction. Normally a claim by the authority or the board for increase should be accepted if the authority or board certifies that what is claimed is the actual final cost, and supports it by a certificate from an independent chartered accountant or its own Accounts Department showing the break up of the cost. A standard certificate should furnish the following :

25. Let us now examine whether the amount claimed by the board in this case is excessive. As noticed above in regard to a plot measuring 1000 sq.ft. with a residential house measuring 361 ft. the board had indicated the tentative price as 18000 in the year 1976. After the compensation for land was decided by courts and after carrying out the development work and construction, the board determined the final cost as Rs.34,770 in the year 1988 and demanded the difference of Rs.16,770/-. The question is whether this claim is excessive.

26. We find that the allottees/society do not dispute that the cost of the land increased considerably on account of enhancement of compensation. The board showed that the total cost of land inclusive of interest upto 31.3.1987 was Rs.35,02,727 for 8 acres and 16422 sq.ft. The said figure was broadly accepted by the society, in its calculation sheet. The society arrived at the cost of a plot measuring 1040 sq.ft. as 3500 (paid as deposits) plus Rs.8634/- which aggregates to Rs.12,134. But as noticed above, this is the proportionate cost worked out for 1040 sq.ft. out of the total cost of an extent of 33,64,902 sq.ft. (8 acres and 16422 sq.ft.). It is not possible for the allottee to contend that he will pay only the proportionate actual cost of his plot. If the cost of the plot has to be worked out, the cost relating to proportionate share in the common/service areas (roads, parks, playgrounds etc.) should be added. That means at least addition of another 40% to the price worked out for the actual extent of the plot. With reference to the cost worked out by the society, if 40% is added, the increased cost of plot would be around Rs.16,987.60. According to the society the original tentative cost for the plot was Rs.3,000. Therefore the increase in cost would be around 14,000. What is demanded as additional amount is Rs.16,770. The difference is hardly 2770 which may be attributable to the increase in the cost of development/ construction. It cannot therefore be said that the amount claimed under the demand notice dated 21.5.1988 is excessive or unreasonable. Neither party has given the full data or facts or accounts. The allotment was made 35 years back. No purpose would be served by remitting the matter for re-examination. On the facts and circumstances, we are satisfied that the demand is not open to challenge.

28. We accordingly allow the appeal filed by the Board in part and dismiss the appeal filed by the society. We uphold the demand for increase in price on account of final cost made by the board but confirm that the interest payable on the increase should be only 9% per annum as directed by the High Court. The Board will now calculate the amounts due accordingly and after giving credit to the amounts already paid, demand only the balance due. The respective allottees who are members of the society, shall be permitted to pay the same in six quarterly instalments. If there is any error in arithmetical calculations, it is open to the respective allottee to point out the same to the Board for its consideration.