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2009 DIGILAW 597 (PAT)

Umesh Prasad v. State of Bihar

2009-04-13

MIHIR KUMAR JHA

body2009
Order Heard Counsel for the petitioners as also Additional Advocate General No. III appearing on behalf of Bihar State Housing Board hereinafter referred to as the Board as well as the other Counsel of the Board in the respective cases. 2. Reference in this connection may also be made to the earlier order of this court dated 6.4.2009. 3. Pursuant thereto counsel for both the parties have conveyed their agreement that the issue of escalation of cost and determination of final price of the flat/ houses/plot allotted by the Board to the petitioners be referred to the Chairman-cum-Managing Director of the Board. 4. This Court would find that for a long period there has been on going dispute between the petitioners and other allottees of houses/flats/land on one hand and the authorities of the Board on the other as with regard to escalation and final price of flat/house/plot. The petitioners and other similarly situated persons have felt that they have been subjected to unfair treatment inasmuch as whatever was projected to as the tentative cost either at the time of filing of their application for allotment or at the time of agreement or at the time of executing the agreement for such allotment or even at the time of allotment or at the time of handing over possession such allotted flat/house/ plot has been enhanced by many more times by receiving demand of escalated cost in an astronomical figure shape of its final price and that too without disclosing the reasons. The petitioners therefore have repeatedly kept on approaching this Court by filing individual writ petitions but their miseries are far from over. 5. Considering all these aspects this Court on the last occasion had in fact made a query from counsel appearing for both the parties as with regard to applicability of clause of agreement envisaging the remedy of arbitration in terms of Clause 24 of the respective agreement, which reads as follows:- 24. 5. Considering all these aspects this Court on the last occasion had in fact made a query from counsel appearing for both the parties as with regard to applicability of clause of agreement envisaging the remedy of arbitration in terms of Clause 24 of the respective agreement, which reads as follows:- 24. That on matters not specifically stipulated in the agreement or provided for in the relevant rules and regulations of the Board or in case any dispute, doubt or questions arises between the settlee and the Board then in such event every such case' shall be referred for arbitration in the Managing Director of the Board acting as such at that time and his decision in this regard shall be final and binding on both the parties and shall not be liable to be questioned in any Court of Law." 6. The petitioners have however conveyed their reservation in invoking arbitration clause for the time being on the ground of they are in fact wholly unaware of the factors on which the Board has chosen to fix final price in exercise of its power under Clause 4(a) of the agreement. It has thus been submitted by their counsel that assailing the final price as disclosed in the impugned demand notices issued by the officers of the Board before the Managing Director of the Board the named Arbitrator in Clause 24 of the Agreement will amount to only being subjected to a remedy of an appeal from "Ceaser to Ceaser" 7. This Court does appreciate the handicaps being faced by the petitioners in seeking reference of their despite before the Managing Director of the Board by way of arbitration.: The real difficulty for these petitioners, who are the individual allottees/occupiers of the houses/ flats/land, however is they have never been informed of the reasons for such manifold enhancement of tentative cost and as such the remedy of arbitration may prove to be illusory, Such allottees/ occupants who are still groping in darkness therefore cannot raise dispute within the meaning of Clause 24 of the agreement in an effective manner. In such a situation their grievance before this court of being subjected to an arbitrary demand by the Board does not seem to be artificial. In such a situation their grievance before this court of being subjected to an arbitrary demand by the Board does not seem to be artificial. A person who was supposed to have occupied the flat in the year 1982 with an understanding of its total tentative cost of the flat in the vicinity of Rs.1 lac, is bound to feel cheated when he has been communicated that the final price of such flat in the year 2003 would be Rs. 6 lacs approximately. The Board had also not disclosed any reasons for such escalation probably on account of last sentence (sic of?) Clause 4(a) of all such agreement which reads as follows:- "4(a). That the total disposal price indicated above is according to the present estimate and hence tentative. Increase in the cost of the construction or development or due to increase in cost of land acquisition due to any decision/award of Court of Law or legislation or due to increase in the cost due to final valuation or calculation or otherwise as per the decision of the Board shall be payable by the settlee either in installments thereof or in lump sum within the period decided by the Board. The settlee shall under no circumstances be entitled to demand any accounts relating to the cost or question or dispute it and this shall be fixed by the Board in its sole discretion." 8. The aforesaid "Henry VII" clause of the agreement therefore are not only stringent but also one sided. True it is that the tentative price fixed by the Board at the time of allotment could be enhanced subsequently but then there is a clear indication therein that such enhancement has to be in conformity with the conditions mentioned therein and no other element can be allowed to be introduced beyond one as is mentioned in the aforesaid clause 4(a) of the agreement. 9. This part of agreement does bind the allottees but then the question will still be, can any price fixation be made by the Board an authority, and a State within the meaning of Article 12 of the Constitution, which would be per se arbitrary and thus in violative (sic-violation?) of Article 14 of the Constitution? Answer to the said question will be always in negative. Answer to the said question will be always in negative. Reference in this connection may be made to judgment of Apex Court in the case of Sri Sita Ram Sugar Co. vs. Union of India reported in AIR 1990 SC 1277 laying down the requirement of observance of the principles of reasonableness and fair play even in the matter of price fixation,' which emanate from the doctrine of natural justice and are applicable to all State action because any arbitrary action on this score will violate Article 14 of the Constitution. As a matter of fact, the Apex Court again has classified the rationale of price fixation by the State or its undertaking on the basis of essential commodities or servres vis-a.-vis non-essentials. Explaining this aspect the Apex Court in the case of O.N.G.C. vs. Natural Gas Consuming Industries of Gujarat reported in AIR 1990 SC 1851 , has held that in the case of essential commodities or service, while private concerns may be allowed a minimal return on capital invested, public undertakings may have to run at losses, if need be. 10. In the opinion of this court even the restrictions in the unilateral and one sided agreement of the Board with the petitioner have to be read down for its being upheld intra vires Article 14 of the Constitution. In fact the Apex Court in the case of Central Inland Water Transport Corporation Ltd. and Another vs. Brojo Nath Ganguly and Another reported in 1986 Supreme Court .1571 considering a similar nature of agreement between employer and employees while holding certain clauses of agreement to be wholly arbitrary and unreasonable on account of the bargaining power of the State has laid down the law in this regard as would be found from the following passage therein- "......... ..Should then our courts not advance with the times? Should they still continue to cling to outmoded concepts and outworn ideologies? Should we not adjust our thinking caps to match the fashion of the day? Should all jurisprudential development pass by, leaving us floundering in the sloughs of nineteen-century theories? Should the strong be permitted to push the weak to the wall? Should they be allowed to ride roughshod over the weak? Should the courts sit back and watch supinely while the strong trample under foot the rights of the weak? We have a Constitution for our country. Should the strong be permitted to push the weak to the wall? Should they be allowed to ride roughshod over the weak? Should the courts sit back and watch supinely while the strong trample under foot the rights of the weak? We have a Constitution for our country. Our judges are bound by their oath to "uphold the Constitution and the laws". The Constitution was enacted to secure to all the citizens of this country social and economic justice. Article 14 of the Constitution guarantees to all persons equality before the law and the equal protection of the laws. The principle deducible from the above discussions on this part of the case is in consonance with right and reason, intended to secure social and economic justice and conforms to the mandate of the great equality clause in Art. 14. This principle is that the courts will not enforce and will, when called upon to do so, strike down an unfair and unreasonable contract, or an unfair and unreasonable clause in a contract, entered into between parties who are not equal in bargaining power. It is difficult to give an exhaustive list of all bargains of this type. No court can visualize the different situations which can rise in the affairs of men. One can only attempt to give some illustrations. For instance, the above, principle will apply where the inequality of bargaining power is the result of the great disparity in the economic strength of the contracting parties. It will apply where the inequality is the result of circumstances, whether of the creation of the parties or not. It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them. It will also apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be. This •principle, however, will not apply where the bargaining power of the contracting parties is equal or almost equal. This •principle, however, will not apply where the bargaining power of the contracting parties is equal or almost equal. This principle may not apply where both parties are businessmen and the contract is a commercial transaction. In today's complex world of giant corporations with their vast infra structural organizations and with the State through its instrumentalities and agencies entering into almost every branch of industry and commerce, there can be myriad situations which result in unfair and unreasonable bargains between parties possessing wholly disproportionate and unequal bargaining power. These cases can neither be enumerated nor fully illustrated. The court must judge each case on its own facts and circumstances." 11. Judged in the aforesaid background, this court must hold that the Board is duty bound to inform the applicability of the individual reasons/factors leading to escalation of cost by way of final pricing of such flat/house/plot to the petitioners, specially when Clause 4(a) confines such escalation in only following circumstances:- (a) increase in the cost of construction, (b) increase in the development charges, or (c) increase of the cost of land acquisition due to any decision/award of court of law or legislation, or (d) increase due to the final valuation or calculation, as per the recision of the Board. 12. As noted above in none of the impugned demand notice intimating the escalated final price, the authorities of the Board have even whispered the applicability of any of the aforesaid circumstances and as such these demand notices cannot be approved by this Court. At the same time it would be impossible for this Court to undertake an exercise of an accountant to examine the calculations of the escalated cost in each and every writ petition. Such exercise in fact has to be made by the authorities of the Board as they are in custody of facts and figures on which one or more of the aforesaid requirement of Clause 4(a) of the agreement can be made applicable in the cases of the petitioners. 13. Such exercise in fact has to be made by the authorities of the Board as they are in custody of facts and figures on which one or more of the aforesaid requirement of Clause 4(a) of the agreement can be made applicable in the cases of the petitioners. 13. In that view of the matter this Court would direct the Chairman-cum-Managing Director (C.M.D) of the Bihar State Housing Board to re-examine the individual cases of the petitioners by holding an enquiry and pass a reasoned order within a fixed time frame on separate individual representation to be filed by the petitioners wherein he would be required to go into the different elements of increase in cost in the light of the aforesaid parameters under Clause 4(a) of the agreement. It would be the part of the scope of such enquiry of the C.M.D. to find out whether the final price determined and demanded by the officer of the Board is permissible in terms of Clause 4(a) agreement. 14. This Court would also notice the grievance of the petitioners that it is on account of delay caused by the Board in fixing the final price that they have been subjected to demand of huge amount of interest on the escalated final price and therefore the C.M.D. of the Board while passing the final order in individual cases would also address himself to the justification of charging interest only on legitimate payable amount of final price by the petitioner. Mr. Lalit Kishore learned A. A. G.III appearing for the Board, has assured this court, that the Board itself will not charge any excess amount of interest but at the same time the petitioners or any allottee who are found to have deferred payment of payable amount despite demand notice served on them cannot avoid payment of interest over the same at the rate prescribed in the agreement. 15. While this Court would not like to prejudge the issue of payments of interest it goes without saying that only such escalated amount of final price would qualify for payment of interest which would be now found payable in terms of the order of the C.M.D., Board and that too from the date on which the impugned' demand notices was issued and not for any earlier period. 16. 16. That being so, this Court would find that each and every matter relating to escalation of cost beyond tentative price including the liability of interest has to be individually adjudicated by the Chairman-cum-Managing Director of the Housing Board within a fixed time frame of four months from the date of filing of individual representation by the petitioners alongwith a copy of this order. 17. It goes without saying that if in terms of such decision of the Chairman-cum-Managing Director of the Board it is found that in a particular case the full payment has already been made by any petitioner and he has also completed the other requirement in terms of the agreement, the C.M.D. would also direct for execution of a registered document for transferring the ownership of flat/house/ land within a fixed time frame. Similarly if any petitioner would make payment of the balance amount as determined by C.M.D. in his order, he too will be entitled to get his registration completed provided he has also completed the other necessary formalities for execution of the registered document. 18. This court expects that whatever decision now would be taken by the Chairman-cum-Managing Director in each of the individual cases, would at least settle the question of final price of the flat/house/ land allotted to the petitioner. It is however made clear that in the event of any further dispute on the part of the petitioners on the issue of determination of final price by all or any them, the remedy for the same would be only by way of seeking reference in terms of Arbitration and Conciliation Act 1996, as stipulated in Clause 24 of the Agreement. 19. Let it be made clear that as the authorities of the Board did not disclose the reasons for individual enhancement of the escalation cost in the demand notice and also before this court in the individual counter affidavit (barring in one case), the exercise to be made by the Chairman-cum-Managing Director in passing the final order would not be one as an arbitrator but only as a head of the organization and obviously in such cases, the arbitrator if need be, will have to be appointed in terms of Section 11 (6) of the Arbitration and Conciliation Act, as has been also agreed in course of submissions by counsel for both the parties. 20. 20. With the aforesaid observations and directions these writ applications are finally disposed of. 21. Let a copy of this order be given to Mr. Lalit Kishore, Additional Advocate General NO.-III