<CITATION> . :

These are appeals by the <ORG> and the <ORG> as well as a cross objection by the <ORG>. All of them relate to the same assessment year, they are, therefore, being disposed of by this common order.

2. The Departments appeal in ITA No. 5447/Bom/88 will be taken up first.

3. Ground No. 1 is reproduced below :

"1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in restricting the disallowance under r. 6D of the IT Rules to Rs. 43,792 as against Rs. 49,450 disallowed in the assessment order."

4. We find that the matter is covered in favour of the assessee by the decision of the <ORG> in the case of <CITATION> (1983) 4 ITD 583 (Bom). This ground is accordingly allowed.

5. Ground No. 2 is reproduced below :

"On the facts and in the circumstances of the case and in law the learned CIT(A) erred in directing <ORG> to allow a sum of Rs. 13,041 being expenditure incurred on consultation and feasibility study by the assessee as revenue expenditure."

6. The Assessing Officer noticed that a sum of Rs. 13,041 was paid for consultation and feasibility study which ultimately did not materialise. He treated the same as capital expenditure relying on the decision of <ORG> in the case of <CITATION> . (1986) 53 CTR (Guj) 273 and accordingly disallowed the assessees claim for deduction. Thereafter, the CIT(A) observed that the assessee had got a computerised feasibility study which recommended that the assessee had no need for immediate in house installation of computer and certain alternatives were suggested. Thereafter, he accepted that it was for the purpose of improving the normal running of the assessees business and would be allowable as revenue expenditure. He made no reference to the case relied upon by the Assessing Officer. The <ORG> is now in appeal before us.

7. We have heard the rival submissions. Our attention has been invited to the report of computerisation feasibility study a copy of which is available in the paper book. It is seen that the principal recommendations were that there was no need for immediate in house installation of computer and it may be deferred for two years. There was immediate need for thorough systems study and setting up of a cell for this purpose. Further there was a need to advance long term strategy before going into the detailed designing work. These recommendations were made after carrying out study of the various functional areas of the assessee-company and the attributes of the information which have a bearing on the equipment configuration. Thus, we find that the study was carried out in relation to the assessees existing business and only to manage the affairs better. The facts are, therefore, distinguishable from the facts in the case of <ORG> (supra), where they were considering a study report for expansion of the business into a new line. In the facts of the present case, we accept the assessees claim that the expenditure was of a revenue nature. This ground is also rejected.

8. Ground No. 3, in reproduced below :

"On the facts and in the circumstances of the case and in law the learned CIT(A) erred in directing the Assessing Officer to allow assessees claim of write off of bad debt of sum of Rs. 1,31,607."

9. We find that the matter is covered in favour of the assessee by the decision of the <ORG> in the assessees own case for asst. yr. 1985-86 in ITA No. 9132/Bom/88 dt. 20th June, 1993 in para 7. The facts in the present case are similar. Concurring with the above decision, this ground is rejected.

10. Ground No. 4 is reproduced below :

"On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in directing the Assessing Officer to allow assessees claim of extra shift allowance in proportion of actual number of days during which the factory worked in the relevant previous year."

11. The assessee made a claim that extra shift allowance should be given at the rate of 100% of normal depreciation. Altogether the actual number of days on which manufacturing operations were carried on in three shifts was only 99 days, which is less than 240 days. It was provided in the IT Rules that for the purpose of granting extra shift allowance, the normal number of working days during the previous year shall be deemed to the number of days on which the concern actually worked during the previous year or 240 days, whichever is greater. 99 days is less than 240 days. However, the assessee claimed that the minimum number of days of 240 days stipulated in the IT Rules, should be reduced to 80 days only, since, the previous year of the assessee for this assessment year comprised of only 4 months, This claim was rejected by the Assessing Officer. The CIT(A) discussed the matter in the appellate order and thereafter, at the end gave a decision that "extra shift allowance in this case will be allowed to the appellant in proportion to the actual number of days during which the factory worked". The CIT(A) has not clarified whether the assessees appeal was being allowed or rejected on this ground, and the <ORG> has apparently filed this appeal before us as a measure of precaution.

12. After hearing both sides, we are satisfied that the assessees claim cannot be upheld and the computation by the Assessing Officer must be upheld. We uphold this view since there is no satisfactory basis for reducing the stipulated 240 days to 80 days in the IT Rules, as claimed by the assessee. We hold accordingly and allow this ground.

13. Ground No. 5 reads as under :

"On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding that the assessees claim of write off of bad debt of a sum of Rs. 41,700 as allowed."

14. The Assessing Officer examined details of assessees claim of bad debt totalling to Rs. 41,700. It was an admitted fact that the assessee had not taken any steps to recover this debt. However, Assessing Officer allowed individual claims where the amounts were Rs. 1,000 or lesser on the ground that benefit should be given for smaller amounts upto the above limit as held by the <ORG> in <CITATION> (1985) 11 ITD 443 (Hyd). The sum allowed by him was Rs. 10,027. The balance amount where individual sums exceeded Rs. 1,000 was disallowed by him. The CIT(A), however, allowed the entire claim with an observation that he had gone through the details but without any reference to the order of the <ORG> relied upon by the Assessing Officer.

15. We have heard the rival submission and according to the learned counsel for the assessee approach should be same as for the other amounts of bad debts totalling to Rs. 1,34,607 discussed in ground No. 3. However, we do not find any merit in this contention. In the present case no efforts were made for recovery at all and allowance had already been made for smaller amounts of Rs. 1,000 or less each totalling at Rs. 10,027 by the Assessing Officer in accordance with the <ORG> decision cited by him. We concur with the same and accordingly direct that only Rs. 10,027 should be allowed and the balance should be disallowed. This ground is accordingly treated as allowed.

16. In the result, the <ORG> appeal is partly allowed.

17. The assessees appeal in ITA No. 5001/Bom/88 will now be taken up.

18. Ground No. 1 is reproduced below :

"1. The CIT [hereinafter referred to as CIT(A)] has erred in law and on facts in confirming the disallowance under S. 40A(5) made by the <ORG> by considering :

(a) <ORG> rent allowance as forming part of salary.

(b) Entire medical expenses reimbursed to the employee as forming part of salary.

(c) 25% of the expenditure on motor car as attributable for personal use and hence, perquisite to that extent.

(d) Expenditure on repairs and maintenance of leased flats allotted to its employees as perquisite.

(e) Entire expenditure incurred on provision of gas and electricity for both official and personal use as perquisite.

(f) Entire expenditure on provision of sweepers for both official and personal use as perquisite."

19. Regarding ground No. 1(a) the learned counsel for the assessee accepted that house rent allowance paid formed apart of salary, but not to the extent to which it was exempt under S. 10(13A) of the IT Act. Reliance was placed on the decision of <ORG> in the case of <CITATION> . (1991) 187 ITR 1 (Bom) where a decision was given that gratuity in excess of the amount exempt under S. 10(10) only should be considered for disallowance under S. 40A(5) . We accept the contention. This ground is partly allowed.

20. Ground No. 1(b) is covered in favour of the <ORG> by the decision of the Special Bench of the Tribunal in the case of <CITATION> (1986) 26 TTJ (Bom) 214 (SB) : (1986) 18 ITD 226 (Bom) (SB). This ground is accordingly rejected.

21. Ground No. 1(c), (d), (e) and (f) were considered by the <ORG> in the assessees own case for asst. yr. 1983-84 in ITA No. 6 to 9/Bom/1987 dt. 29th Sept., 1992. The learned counsel for the assessee very fairly accepted that they were decided against the assessee for that year. Concurring with the same, these grounds are rejected for this year also.

22. Ground Nos. 2.1 and 2.2. are reproduced below :

"2.1 The CIT(A) has erred in law and on facts in confirming disallowance under S. 43B made by the <ORG>.

2.2 CIT(A) has erred in law and on facts in stating that appellant has already been allowed benefit for sales-tax set off, hence, no further adjustment is necessary."

23. During the hearing before us the learned counsel for the assessee submitted that to the extent sales-tax has been allowed as a deduction in the next year the claim for deduction was not being pressed. For the balance amount he submitted that deduction should be allowed in light of the decision of <ORG> in the case of <CITATION> (1991) 189 ITR 70 (Pat), wherein, it was held that proviso below S. 43B will have retrospective effect being clarificatory in nature, and similar decision of <ORG> in <CITATION> . (1991) 191 ITR 676 (Cal).

24. The learned Departmental Representative on the other hand relied on the decision of <ORG> in the case of <CITATION> (1991) 187 ITR 703 (Del), wherein it was held that the first proviso below S. 43B introduced w.e.f. 1st April, 1988 could not be given retrospective effect w.e.f. 1st April, 1984, and a similar decision of <ORG> in the case of <CITATION> (1991) 189 ITR 81 (Del). The Benches of the Tribunal at Bombay have been following the decision in the case of <ORG> (supra) and concurring with the same, we restore the matter to the Assessing Officer with the direction to consider the deduction under the first proviso to S. 43B , according to law after giving an opportunity of being heard to the assessee. However, no deduction will be allowed for the amounts of sales-tax already deducted in the next year, as conceded by the learned counsel for the assessee before us.

25. Ground No. 3.3 is reproduced below :

"3.1 - CIT(A) has erred in law and on facts in confirming disallowances made by IAC under S. 37(3A) / (3B) of the Act, thereby erred in considering :

(a) expenditure incurred on payments of restaurants as payments to hotels;

(b) expenditure incurred on payments of salaries to drivers as expenditure on running and maintenance of motor cars."

26. The only point pressed before us during the hearing by the learned counsel for the assessee was that 1/3rd of the expenses incurred on payments to restaurants were held in asst. yr. 1983-84 to be attributable to the assessees own employees and, therefore, not includible in the computation for disallowance under S. 37(3A) .

27. After hearing rival submissions, we accept this contention and direct that 1/3rd of the expenditure on restaurants may be taken outside the purview of S. 37(3A) on the basis that they were incurred on the assessees own employees.

28. The assessee has filed an additional ground of appeal according to which the CIT(A) erred in holding that repairs to vehicles ought to be considered for disallowance under S. 37(3A) of the Act. Since a legal question has been raised, the additional ground has been admitted by us.

29. After hearing the rival submissions, on merits we find merit in the contention of the assessee, which is supported by the decision of <ORG> in the case of <CITATION> . (1989) 177 ITR 124 (Bom), wherein, it was held that expenditure deductible under S. 31 is outside the purview of S. 37(3A) . We direct accordingly.

30. Ground No. 4 is reproduced below :

"The CIT(A) has erred in law and on facts in confirming disallowance made by <ORG> in respect of customs penalty of Rs. 1,20,000."

31. The Assessing Officer observed that the assessee paid customs penalty of Rs. 1,20,000 during this year, and the same was inadmissible as a deduction in the light of the decision of Madhya Pradesh High Court in the case of <CITATION> (1986) 53 CTR 445 (MP). The CIT(A) confirmed the disallowance in light of the decision of <ORG> in the case of <CITATION> (1986) 161 ITR 492 (Bom). He noticed that as per order of the Addl. Collector of <ORG> dt. 8th March, 1983, the import of goods to the extent of Rs. 2,58,484 was without proper licence and unauthorised. He, therefore, confirmed the disallowance.

32. The learned counsel for the assessee invited our attention to a copy of the order of the Addl. Collector of <ORG> dt. 8th March, 1983, according to which the CIF value of goods was Rs. 3,58,484 as against Rs. one lakh available for debit in licence produced. It was, therefore, held that importation to the extent of Rs. 2,58,484 was unauthorised. It was ordered by the Addl. Collector of <ORG> that the goods shall be confiscated. However, the importer was given an option in lieu of such confiscation of a fine of Rs. 1,20,000 under S. 125 of the <ORG> Act, 1962. The learned counsel submitted before us that the goods had been imported in good faith and it was only a matter of interpretation that they were not covered by the licence and in any case the assessee was allowed to redeem the goods in question. According to him the payment of fine of Rs. 1,20,000 was admissible deduction in view of the decision of <ORG> in the case of <CITATION> . (1968) 67 ITR 667 (Bom), which had been followed by the Bombay Bench of the Tribunal in the case of <CITATION> . by an order dt. 25th June, 1984 reported in (1985) 22 TTJ (Bom) 494 : (1984) 10 ITD 398 (Bom).

33. The learned Departmental Representative relied on the order of the CIT(A).

34. We have considered the rival submissions. In the case of <CITATION> (supra), which is an order dt. 12th Sept., 1985, <ORG> considered its earlier decision in <CITATION> . (supra) and found that the facts were altogether different. In that case in the course of its business the assessee had purchased bills of lading, etc., from certain parties in respect of import of some goods. It was found at the time of customs clearance that the imports were unauthorised and liable to be confiscated and a penalty was imposed. The assessee paid the penalty for saving the goods being confiscated. It was held by <ORG> that on the facts and circumstances, the actual cost of the goods to the assessee was not only what it had paid to the importers but in addition thereto what it had to pay by way of penalty in order to save the goods from being confiscated. However, the facts in the case of <CITATION> (supra) were that it was the assessee who had got the import licence and imported the goods and it was the fault of the assessee if the goods imported did not conform to the licence. The penalty was levied on the assessee for the default of the assessee itself, and not on the ground of any other persons default.

35. We find that the facts in the present case are similar to the facts in the case of <CITATION> (supra), and in the circumstances, we hold that the ratio of the decision had been rightly applied by the CIT(A). This ground of appeal is, therefore, rejected.

36. Ground No. 5 is reproduced below :

"The CIT(A) has erred in law and on facts in restricting the claims of bad debts only to the extent of Rs. 41,700."

37. This ground has been considered alongwith ground No. 5 of the <ORG> appeal and we have found that the order of the CIT(A) was to be modified, inasmuch as, claim of bad debts individually amounting to Rs. 1,000 only should be allowed. In the light of the same, this ground is rejected.

38. Ground Nos. 6.1 and 6.2 are reproduced below :

"6.1 - CIT(A) has erred in law and on facts in stating that the payments made to customers out of excise duty refund received from Asst. Collector are not deductible.

6.2 - CIT(A) ought to have given clear direction to the <ORG> to allow as deduction the repayment made to customers during the accounting period of four months ended 30th April, 1983 on account of excise duty received from Asstt. Collector."

39. The <ORG>(A) observed that the assessee had made claim for deduction in respect of repayment made by them during the accounting period of 4 months ended to 30th April, 1983 to the customers on account of excise duty received from the Asstt. Collector. The claim had been made, as a result of an order under S. 263 passed by the <ORG>. The <ORG>(A) observed further that the question did not arise out of the assessment order for asst. yr. 1984-85 since no such claim had been made in the course of assessment. He, therefore, declined to consider this additional ground filed before him.

40. The learned counsel for the assessee very fairly admitted before us that the order under S. 263 in question had been quashed by the <ORG> in appeal and in application under S. 256(1) had also been rejected. The issue, therefore, does not survive for consideration any more. For statistical purpose this ground is rejected.

41. In the result, assessees appeal is partly allowed.

42. We now come to C. O. No. 489/Bom/88 filed by the assessee. The only ground taken is that the CIT(A) erred in confirming the interest under S. 216 levied by the Assessing Officer. The CIT(A) observed that the assessee was not able to elaborate its stand that interest under S. 216 was excessive, the ground was, therefore, rejected. No further elaboration was made before us either. We are, therefore, unable to interfere with the order of the CIT(A) in this regard. The cross objection is rejected.


JUDGMENT Mrs. <NAME>, J.

1. This is a reference under section 256(1) of the Income-tax Act, 1961, at the instance of the assessee-company. The relevant assessment year is 1969-70, for which the previous year was from April 1, 1968, to March 31, 1969. During the relevant previous year, the assessee had valued its opening stock on the basis of costs plus overheads which was the method adopted by the assessee in the years prior thereto, so that the value of the closing stock for the year ending March 31, 1968, was carried forward as the value of the opening stock on April 1, 1968. The assessee, however, decided to change its method of valuation by valuing the stock at cost price only excluding the overheads. The assessee accordingly valued it closing stock for the assessment year in question, i.e., as on March 31, 1969, at cost price. The Income-tax Officer increased the gross profit rate in view of the difference in the method of valuation of opening stock and closing stock.

2. The assessee took the matter in appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner recalculated the valuation of the closing stock by adding over heads to cost and determined the profit accordingly. In appeal before the <ORG>, the <ORG> held that the correct profit can only be arrived at by valuing the opening stock and closing stock at cost price excluding overhead expenses. It, however, directed the Income-tax Officer to redetermine the value of the opening stock at cost price after excluding all overheads.

3. From the decision of the <ORG>, the following question is referred to us :

"Whether the tribunal was right in directing <ORG> to revise and determine the value of the opening stock as on April 1, 1968, by excluding all overhead expenses ?"

4. It is not in dispute that under section 145 of the Income-tax Act, 1961, the assessee can adopt a method of valuation which has to be followed by it regularly. It is an accepted principle of accountancy that the value of the stock can be determined at cost price or market price, whichever is lower. In the present case, the assessee had adopted the cost price as a basis for valuing its stock. For the earlier previous years, however, the assessee determined the cost price by adding overheads to the cost of the stock, while in the relevant assessment year, it decided to change this methods by determining the cost price without taking into account overheads.

5. We are not here concerned with whether this is the correct method or an acceptable method for determining cost price. At no stage of the proceedings was the question ever raised as to whether it was permissible for the assessee to revalue its stock by not including in the cost price overhead expenses. The <ORG> has not dealt with this aspect, viz., the manner in which the closing stock has been valued in the present case. Therefore, the decision of <ORG> in the case <CITATION> . , is not attracted to the question before us for consideration. The decision of the <ORG> is on the footing that since the closing stick was valued by adopting a certain method, the same method should be adopted in valuing the opening stock. In other, words, the change in the method of valuation, according to the <ORG>, should commence with is to be adopted for valuing the opening stock of nay previous year by the new method which is to be adopted for valuing the closing stock as well. The assumption so made by the <ORG> appears to be contrary to the normally accepted accounting principles. Mr. <NAME> has drawn our attention to a booklet called "Valuation of stock and Work-in-Progress - Normally Accepted Accounting Principles" - brought out by <ORG> and written by <NAME>. At page 4 of this booklet there is a discussion about change from one valid basis to another valid basis. It states :

"2. Where a change from one valid basis to another valid basis as accepted certain consequences normally follow. The opening stock of the base year of valued on the same basis as the closing stock whether the change is to a higher level or to a lower level, the <ORG> normally does not seeks to revise to valuation of earlier years. It neither seek to raise additional assessment, nor does it admit relief under the error or mistake provisions.

3. It is not possible to define with precision what amounts to a change of basis. It is a convenience, both to the taxpayer and to the <ORG>, not to regard every change in the method of valuation as a change of basis. In particular, the <ORG> encourage the view that change which involves no more than a greater degree of accuracy, or a refinement, should not be treated as a change of basis, whether, the change results in a higher or a lower valuation. In such cases the new valuation is applied at the end of the year without amendment of the opening valuation."

6. The same principle has been adopted by <ORG> in <CITATION> . . It has said (headnote) :

"The two principles applicable with regard to the valuation of stock are that the assessee is entitled to value the closing stock either at cost price or market value, whichever is lower, and that the closing stock must be the value of the opening stock in the succeeding year. It is thus, clear, that irrespective of the basis adopted for valuation in the earlier years, the assessee has the option to change the method of valuation of the closing stock at cost or market price, whichever is lower, provided the change is bona fide and followed regularly thereafter."

7. Thus, the value of the closing stock of the preceding year must be the value of the opening stock of the next years. The change, therefore, has to be effected by adopting the new method for valuing the closing stock which will, in its turn, become the value of the opening stock of the next year. If, instead, a procedure is adopted for changing the value of the opening stock, it will lead to a chain reaction of changes in the sense that the closing value of the stock of the year preceding will also have to change and correspondingly the value of the opening stock of that year and so on. This was pointed out by <ORG> in the case of <CITATION> . . In the case before <ORG> also the valuation of opening stock had been done by the company on the basis of valuation for the closing stock to "direct cost", i.e., cost without overheads. This change in method was made bona fide and the assessee said that it would be adopting this method consistently in the future just as in the present case. The court in that case held :

"The change was a bona fide one and was a permanent arrangement which was to be followed year after year, the change would have to be accepted notwithstanding the fact that during the assessment year in question, which was the first year when the change of method was brought about, a prejudice or detriment might be caused to the revenue, because the opening stock was valued at total cost while stock was valued at direct cost."

8. It said (headnote) :

"If the assessee is called upon to apply the new method of valuation to the opening stock of the accounting year as well, the value of the closing stock of the year previous to the accounting year will also have to get altered which is result in a modification of the assessment of that previous year."

9. The same reasoning has been adopted by <ORG> in the case of <CITATION> . . Before <ORG> also, the assessee was valuing its closing stock, in the past years, by what is known as total cost method in which the proportionate over heads for administrative expenses, selling expenses and interest in stock valuation, were taken into account, for the assessment year in question, the assessee adopted the works cost system where the administrative overheads were not taken into account. The court held :

"Change in the method had to be effected with change in the at valuation of the closing stock of the first year and that the <ORG> was right in holing that opening stock should be revalued, was incorrect."

10. Similar question was dealt with by <ORG> in the case of <CITATION> , in a similar manner.

11. Reliance was placed by the <ORG> on a decision of <ORG> in the case of <CITATION> . . In the case before <ORG> both the opening and closing stock were undervalued. The Privy council observed in this connection :

"Mistake cannot be rectified by raising valuation of closing stock only, the valuation of both the opening and closing stock had to be raised."

12. This decision has no application to the question before us which deals with the change method of valuation and the manner in which such change has to be brought about. Whenever, there is a change in the method of valuation. There is bound to be some distortion in the calculation of profit in the year in which the change takes place. But if the change is brought about bona fide and is no reason why such a change should not be permitted. Undoubtedly, the proviso to section 145 of the Income-tax Act, 1961, lays down that :

"Provided that in any case where the accounts are correct and complete to the satisfaction of the assessing Officer but the method employed is such that, in the opinion of Assessing Officer, the income cannot properly be deduced therefrom, then the computation shall be made upon such basis and in such manner as the Assessing officer may determine."

13. This is not such a case. The only question is whether the opening stock is also required to be revalued by excluding all overhead expenses when the assessee has been permitted to revise the method of valuing the closing stock for that year, as the assessee has decided to adopt this new method of valuation henceforth.

14. For the reason set out above, the direction given by the <ORG> to revise and determine the value of opening stock also by excluding all overhead expenses, is not justified. We are not called upon to decide whether the method adopted for valuing the closing stock is in accordance with law and/or accounting practice. The question referred to us is, therefore, answered in the negative and in favour of the assessee. No order as to cost.

15. Certified copy be expedited.


JUDGMENT <NAME>, J.

1. This is an appeal by certificate granted by <ORG>. The facts of this case are almost indentical to those in the case of General Manager, <ORG> and Anr. etc, v. A.V.R. <NAME> and <ORG> etc. respondents in this case relevant time, as in the other case, were the employees of <ORG> in this case the <ORG> After the closing of <ORG>, all the respondents allotted to <ORG> with the formation of that zone. belonged to either one or the other of the three categories of the different sources from which the staff for the temporary grain shop complex was drawn. In the case of <CITATION> (supra) the employees had prayed under Article 226 of the Constitution in <ORG> for the issue of a writ of mandamus directing the <ORG> authorities to fix the inter as seniority of the writ petitioners as per original proceedings dated October 16, 1952 of the <ORG> Board and not to give effect to the subsequent proceedings dated November 2, 1957 and January 13, 1961 of the Board issued by way of modifications and clarifications of its earlier proceedings of 1952. A learned single Judge of <ORG> in <NAME>'s case had allowed the writ petition. The Letters Patent Appeal was dismissed by a Division Bench. The decision of <ORG> was affirmed by this Court with slight modification and it was held "`that the discrimination envisaged in the impugned directions dated November 2, 1957 and January 13, 1961, excepting in so far as they pertain to personnel of category (1) is arbitrary and violative of Articles 14 and 16 of the Constitution,"

2. In the present case also the learned single judge allowed the writ application and following the Bench decision of <ORG> in <NAME>'s case the writ appeal was dismissed in this case also.

3. We do not consider it necessary to narrate the facts of this case except in regard to a few respondents, as by and large, the facts are also identical to those in <NAME>'s case. The judgment of <ORG> is affirmed except to the extent indicated in the judgment of this Court in <NAME>'s case and subject to the clarification made below.

4. With respect to the case of <NAME> respondent No. 10 who was petitioner No. 10 in the writ petition, it was pointed out before the learned single judge on behalf of the appellant that he was originally appointed as a peon in regular department on 26 6-1942 and was confirmed as such. He was then transferred to <ORG> on 13-10-1944 on promotion as a clerk. It was also pointed out that after reverting from <ORG> the tenth respondent was working in his substantive post of a peon.

5. As respects the cases of respondents 4, 5 and 33 who were respectively petitioners 4, 5 and 34 in the writ petition the appellants case was that they had been drafted into other cadres. They were originally given their seniority in the cadre of <ORG> as it was given to the other <ORG> Shop Clerks. But later they volunterred for promotion as Assistant Station Masters in the years 1955 and 1956 earlier to the receipt of the revised instructions of <ORG> in the years 1957 and 1961. They were confirmed as Assistant Station Masters and thereupon they ceased to have any lien in the cadre of <ORG>. As regards respondent No. 27 who was petitioner No. 28 in the writ petition, certain other facts were pleaded showing that he had also gone to a differrent cadre. The learned single judge did not make any clarification or distinction in the application of the instructions issued in the year 1952 in cases of respondents 10, 4, 5, 27 and 33. Argument put forward by learned Counsel for the appellant is that determination of seniority on the basis of the decision of this <ORG> in <NAME>'s case would be only applicable in the cadre of clerks and not in any other cadre lower and higher. The grievance is justified to some extent. Primarily the instructions issued in the year 1952 which were held to govern the cases of the employees like the respondents were for determination of seniority in the cadre of clerks. It was not meant to override any other instruction, rule or directions concerning the determination of seniority in any other cadre. For instance if a person had become a confirmed Assistant Station Master earlier than any of the respondents 4, 5 and 34, the latter could not count his entire period of working in the clerk's post for getting seniority over the; former. If, however, the seniority determined on the basis of the decision of this <ORG> in <NAME>'s case was to be reflected in determination of the seniority in any other cadre to which any of the respondents might have gone, then the seniority in the cadre of the clerk will have to be determined on the principles laid down in <NAME>'s case.

6. We accordingly dismiss this appeal but subject to the clarifications made above. There will be no order as to costs.


<NAME>, J.

1. <ORG> (hereinafter referred to as <ORG>) announced a scheme called the registration scheme on New Pattern 1979 of intending purchasers of flats to be constructed by the <ORG>. The object of the scheme was to reduce the sale price of <ORG>/Lower Income Group (for short MIG/LIG) and <ORG> flats so as to be within the reach of the common man. To facilitate the payment by such registrants the mode was also made easier. The registration scheme was opened on 1st September, 1979 and was closed on 30th September, 1979. Annual income of MIG category in a financial year 1978-79 was to be taken at Rs. 7201/- to Rs. 18,000/-. An applicant was required to deposit Rs. 4500 / -. The areas where flats were likely to be constructed were mentioned in the scheme and the likely cost of a flat was indicated at Rs. 42,000/-. <ORG> constructed flats at different times. According to <ORG> the term for allotment of petitioners came in 1991. Draw of lots were held from 1983-84 onward for allotment of specific flats to the registrants.

2. According to the petitioners on 18th February, 1991 draw of lots in respect of allotment of flats under the scheme took place for them. Clause 9 of the scheme is important and is reproduced here below :--

"The allotment of flats under this scheme will be by draw of lot like that of <ORG>. All the applicants who register between September 1, 1979 and September 30, 1979 will have equal seniority."

Another salient feature of this scheme was that 40 per cent of the <ORG> flats were to be allotted on cash down basis and 60 per cent of the flats on hire-purchase basis. <ORG> flats were to be disposed of on the basis of 25 per cent on cash down basis and 75 per cent on hire-purchase basis. In case of flats allotted under hire-purchase basis, the cost of the land plus 20 per cent of the balance cost of the flat was to be recovered as initial deposit at the time of allotment and balance amount was to be recovered in monthly Installments spread over a period of 7 years in case of <ORG>, 10 years in case of LIG and 15 years in case of <ORG> flats, though in this writ petition the challenge is not on cash down or hire-purchase scheme or its non-implementation by <ORG>.

3. The petitioners in this writ petition numbering 33 have challenged the quashing of the demand made by the respondent-DDA vide their letter of demand received by the petitioners in September 1991. According to the impugned demand letter the cost of MIG flat on the first floor was Rs. 3,45,300/-, second floor Rs. 3,33,300/-, on ground floor Rs. 4,05,400/-. third floor Rs. 3,17,500/-.

4. The petitioners represented to the respondent-<ORG> that the allotment of the MIG flats both at Jahangirpuri and Paschim Vihar at different floors was made by respondent-<ORG> without asking for their consent/choice and in an area which was not specifically mentioned in the original scheme of 1979. The petitioners further represented that the prices of the fiats now sought to be demanded by the <ORG> were astronomically high and were 10 times more than the prices which were offered by the <ORG>. According to the petitioners this demand, apart from being arbitrary and illegal, was untenable in view of the fact that for registrants of 1979 scheme in draw of lots held on 13th January, 1989 an MIG fiat at Shalimar Bagh at ground floor was allotted by <ORG> on payment of Rs. 1,66,500/- and on the third floor for Rs. 1,49,000/-. Similarly, in a draw of lot held on 5th April, 1989 for the registrants of 1979 scheme, at Sarita Vihar in South Delhi the price for a flat of MIG category was Rupees 2,87,000/- and Rs. 2,79,100/- respectively. It has been further alleged by the petitioners that the draw of lot held on 31st August, 1989 for the said category of registrants the <ORG> has demanded in Dilshad Garden (East Delhi) for MIG flats on ground floor Rupees 2,00,600/-.

5. According to the petitioners there is no justification for the <ORG> to ask more price in 1991 for the same category of registration at a higher price than those stated above. Even otherwise, the said increase is arbitrary, irrational and without any basis. The increase is not on account of cost of construction of change in plinth area as per the scheme, argued the counsel for the petitioners. In any event of the matter, the learned Counsel for the petitioners has argued that three times prices escalated in cost of construction which can be recovered by the <ORG>. According to him this is as per <ORG> rate schedule.

6. According to <ORG>, construction of these houses under the scheme had been taken up in 1980. In 2983 flats some defects were noticed by <ORG>. Since the contractor did not rectify the defects the contract was rescinded. On the other hand, learned Counsel for the petitioners argued that the petitioners had to wait for 12 years when <ORG> allotted flats to them. The delay in allotting the flats for 12 years was not on account of the petitioners but solely on account of <ORG>. According to the petitioners the increase in the cost of flats is illegal, arbitrary, irrational and unwarranted. According to the petitioners they had acted upon the offer made in the Scheme in 1979 and have done all that required to be done on their part and the respondent-authority cannot be allowed at this stage to go back from the scheme and unilaterally abrogate their obligation.

7. The learned Counsel appearing for the petitioners vehemently argued that respondent-authority is constituted under the Act of Parliament for providing amongst other things housing to the population of metropolitan city of Delhi at no profit no loss basis. The authority cannot be allowed to act in a manner of an unscrupulous private developer/builder wholly unrestrained by constraints of public welfare. Moreover, in view of the objective of the scheme to reduce the sale price of <ORG> and Janta Flats, the increase in price is wholly unjustifiable. Even otherwise, the demand made by the petitioners was too exhorbitant and totally unconnected with the reality and actual circumstances let alone matters of public policy.

8. The counsel for the petitioners has also urged that the raising of such high demand for MIG and other categories flats for different section of the population has made the scheme and its objects nugatory as it has become out of the reach of the people who were registered under the said scheme. According to the petitioners Clause 26 of the Scheme which inter alia lays down as under :--

"The above terms and conditions will be followed generally but the <ORG> reserves its right to alter any of them in its discretion as and when considered necessary."

9. According to the petitioners, the above clause was limited to the right of the respondent-authority to revise and modify terms and conditions depending upon the exigencies of layout, cost of construction but will not encompass in its fold power to disregard the scheme altogether and make exhorbitant demand as has been done in this case. Respondent-<ORG> has argued that in view of Clause 26 of the brochure <ORG> reserves its right to alter any terms and conditions in its discretion as and when considered necessary. According to them, the prices demanded are totally reasonable and there is nothing unreasonable about the same. In para 10 of their counter, respondent has admitted that the flats offered by the <ORG> are on no loss no profit basis. They have further stated that there has been tremendous increase in the cost of land, labour, material construction etc. over the years. Therefore, it is totally unreasonable to accept the cost in 1991-92 for the flats to be allotted at the tentative prices prevailing in the year 1979. It is further argued by learned Counsel for <ORG> that on account of tremendous rush under the 1979 Scheme a priority list was prepared according to which flats were allotted from time to time as per draw of lots according to seniority list. The stand of the <ORG> is that prices of the flats have been arrived at after meticulous calculations and after taking into consideration all relevant considerations and there is nothing arbitrary or irrational about the same. Counsel for the <ORG> has also relied upon <ORG> v.

<NAME>, and has argued that on that basis once the petitioner willingly enters into a contract with the public authority fully aware with the terms and conditions the petitioners are estopped from challenging the terms and conditions of the contract. Lastly, respondent has also contended that in view of Clause 15 of the brochure wherein some of the areas where construction was likely to be undertaken or flats were constructed were mentioned, that would not create a bar for construction being undertaken in other areas. The learned Counsel for the <ORG> has also cited judgment of this Court in CW 2265/ <CITATION> and CW 2787/ <CITATION> , to support his arguments.

10. It is in this background that we have to examine the facts of this case. At the outset it should not be forgotten that in the Union Territory of Delhi all land for the purpose of development <ORG> is the only agency. There is no private colonizer as no land is available for construction of houses in the hands of private individual. <ORG> is the monopolistic monolith. Citizens of Delhi have no other option but to look at <ORG> for land for residential, commercial, industrial, non-residential and non-industrial purposes. The land in Delhi has been acquired by <ORG> from time to time. There is an averment by the petitioner in the present case that the land was acquired by <ORG> much prior to the induction of Scheme of 1979 where the flats have been constructed. Time and again we asked the counsel for <ORG> to tell us as to when the land in question was acquired where the petitioners are being allotted respective flats. This was an important factor so as to understand the objective and policy of the <ORG> which time and again has stated in their counter-affidavit that the flats are offered on no profit no loss basis. Nothing was made available before us to indicate that the land was acquired in 1979 or 1980 or thereafter, or any period earlier to that. The irresistible conclusion which we draw is that the land was acquired much before the formulation of the Scheme of 1979. The stereo-type argument advanced by the counsel for <ORG> that <ORG> is a big organisation and acquisition of land is a continuous process does not cut much ice as the land under the scheme of the flats where the petitioners are being allotted the flats was acquired earlier than 1979. We are discussing this aspect in order to understand the basis on which the <ORG> has enhanced the prices of flats in question.

11. There are three essential components which may have bearing in escalation of cost, the land rate which includes cost of acquisition, future cost and additional price which State has to incur on account of enhancement of compensation cost of construction and cost of administrative expenses which may include profit to the contractor if it is to be constructed by the outside agency particularly speaking these are the basic cost which are essential for determining the fixation of price apart from other incidental cost which may not vary the cost to a large extent.

12. The petitioners have filed the rejoinder in which specific instances were given which are :--

(A) Mr. <NAME> registered under the same Scheme called New Pattern Registration Scheme (NPRS) 1979. By the lot drawn on 15th December, 1989 he was allotted flat No. 55, Block 'B', Pocket 7, Sector 10, 3rd floor in Rohini. This category of flat is also M.I.G. and the demand in respect thereof was for Rs. 1,55,700/- cash down. It may be stated that the area of Rohini is a much better locality as compared to Jahangirpuri and some other areas where flats have been offered to the petitioners. A flat offered to the petitioner on 3rd floor, in ' the area of Jahangirpuri is for Rs. 3,17,600/-. The only difference is that the draw in case of the petitioner was held on 18-2-91.

(B) Mr. <NAME>, who is also petitioner No. 10 in C.W.P. No. 3198 of 1991, was offered flat No. 289 A, Ground Floor, Pocket J & K, Dilshad Garden lots were drawn on 31-3-89 for Rs. 1,72,600/-. Mr. <NAME> requested that a flat could be allotted to him somewhere in North Delhi. He deposited the balance of the amount on 28-2-90 amounting to Rs. 1,65,768.78 P. In the draw of lots on 18-2-91 flat No. 251, Ground Floor in Jahangirpuri was offered to him at Rs.4,05,400/-.

(C) Mr. <NAME> was offered in Retired Persons Scheme (RPS Scheme) by lots drawn on 13-11-89 flat No. 61, 'D' block, C/A Shalimar Bagh, 3rd Floor for Rupees 1,66,500/-. This flat is also in M.I.G. category. Mr. <NAME> protested and by demand dated 29-6-89 the authorities scaled down the price to Rs. 1,49,000/-.

(D) Mr. <NAME> was offered on 5-4-89 under Self Financing Scheme V in Sarita Vihar flat No. 322 category 2, 3rd floor for Rs. 2,80,700/-. This flat is not only in much better locality but is of a much bigger area being 101 sq.m. i.e. about one and a half time more than that of M.I.G. flats offered to the petitioners. Even the construction in this respect is much superior. Mr. <NAME> protested and revealed that the Chairman of <ORG> a month earlier approved much lower price, i.e., Rupees 2,27,110/-. By demand dated 15-6-89 the flat was then offered to Mr. <NAME> for Rupees 2,27,100/-."

13. The <ORG> was afforded an opportunity to file additional affidavit to explain the circumstances under which aforesaid flats have been allotted, but nothing substantial was filed to controvert what has been stated by the petitioner, except that meticulous calculations were taken into consideration. The <ORG> has given some figures in additional affidavit filed by them. They have shown the total expenditures on various heads and divided by number of fiats thereby arriving at the cost of one single flat. One of the major components for increase in the price of flat is the revised land rate/land premium charged by the <ORG>. An interesting argument was raised that the land rate/land premium charged from the petitioner is perfectly valid and justified. According to the <ORG> the revision in land rate was well considered policy decision and there is nothing arbitrary or illegal about the same. It is not for us in normal course to go through the policy regarding fixation of land rate or land premium but in the instant case fixation of land rate by the <ORG> is so arbitrary and without any basis that we have to discuss this in detail.

14. Some statement of figures which has been filed by <ORG> along with additional affidavit show that this astronomical increase in the cost of the flats is on account of revision of land rate. In this connection they relied . upon letter No. E14(4)/81/PT.III dated 6-12-90 from Financial Adviser (Housing) which is a circular and reads :--

"Lt. Governor, Delhi has approved the land rates to be charged for the flats (including left out flats as approved by Vice-Chair- man, <ORG>) and fully developed land for allotment to various registrants in respect of plots as under :--

Rates of land to be charged for housing categories (Flats).

Rates of fully developed land for allotment to various registrants in r/o plots (excluding <ORG>)

1. EWS Rs.

500/- per sq. m

1. EWS Rs. 825/-

psm.

2. LIG Rs. 660/- --

do--

2. LIG R.

do--

3. MIG Rs. 970/- --

do--

3. MIG Rs. 1400/- --

do

4. SFS Rs. 975/- --

do--

4. SFS Rs 1700/- --

do In r/o flats, equalisation charges on plinth area at the following rates will also be charged.

Zones Rates

1. South & Central Rs. 100/- per s.m.

2. North and West Delhi Rs. 50/-

--do-

Category Area Pre-determined rates per sq. mtr.

EWS Rs. 498/-

LIG 32&48 Rs. 662/-

<ORG> 69&90 Rs. 996/-

MIG 140& above Rs. 8486/-

The above rates will take effect immediately."

15. It shows that rate which has been charged from the petitioners are at the rate of Rs.996/- for MIG and Rs.662/-for LIG with effect from 6-12-90. This also finds corroboration from page 69B of the paper book where in relation to ground floor flat in Jahangirpuri the land rate has been shown at the rate of Rs. 930/- per sq.mtr. We fail to understand that when initially the <ORG> in the brochure has estimated cost to be worked out as Rs. 42000/ - for MIG category this estimated cost obviously had taken into account all possible items of expenses including the land which had been acquired, cost of construction and other administrative expenses. According to the petitioner the land had been acquired much earlier and the land rate prevalent till 6th December 1990 had been Rs. 62/- per sq.mts. We cannot understand how the land premium had been raised from Rs. 62/- per sq.mtr. till 6-32-1990 to Rs. 930/- per sq.mtr. after that date. No material whatsoever in spite of our insistence as to what were the factors which were taken into consideration by Lt. Governor who happened to be the Chairman of the <ORG> and the Vice-Chairman of <ORG> for enhancing the land premium and before unilaterally issuing letter dated 6-12-90. Neither any reply nor any material was shown to the <ORG> except on harping that it is a policy decision and the <ORG> cannot go into this process. We are afraid we cannot sit with folded hands in writ jurisdiction and let the petitioners to be at the mercy of <ORG>, which under the garb of its position as a <ORG> wearing the hat of the power of the <ORG> can exploit the citizens. It will be fallacious to assume that the citizen is not even in a position to know as to how and on what basis the revision of land premium and land rate has been applied to his case. That will make mockery of law.

16. The main thrust of the argument of the learned counsel for the respondent was that the petitioner was not entitled for a flat in the year 1981 as per seniority list. Secondly even though the construction of the flats may have been delayed on account of disputes between the respondent and the contractor but the amounts so spent on account of delay of construction was totally not passed on to the petitioners. Thirdly, according to the learned counsel for the respondent no allottee could claim that he has an entitlement to a particular set of land rate which was prevailing at different times. According to him, it is a matter of policy decision to be determined by respondent authority as to what rate would apply for which year and court cannot go into the method of costing.

17. <NAME> learned counsel for the <ORG> has argued that the Court cannot go into the pricing policy of the respondent <ORG> as the same has been arrived at after due deliberation by respondent-authority. In his support he has cited the case <CITATION> , . We are afraid that this proposition cannot be of any help to the respondent as in that case the challenge was to a surcharge levied by the <ORG> as part of purchase price of the flat and petitioners before <ORG> were already allotted flats and <ORG> observed in that case that the real purpose of the petitioners to file the petition before <ORG> was to get back a . part of the purchase price of the flats paid by the petitioners after flats have been secured by them. Therefore, <ORG> in paragraph 8 thus observed :--

....Even if there may be any merit in this contention, though there is none, such a relief of refund cannot be the subject-matter of a petition under Article 32. And Art. 14 cannot camouflage the real bone of contention. Concerning for this submission that the authority has the trappings of a <ORG> or would be comprehended in other authority for the purpose of Article 12 , while determining price of flats constructed by it, it acts purely in its executive capacity and "is bound by the obligations which dealings of the <ORG> with the individual citizens import into every transaction entered into in the exercise of its constitutional powers. But after the <ORG> or its agents have entered into the field of ordinary contract, the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines rights and obligations of the parties inter se. No question arises of violation of Art. 14 or of any other constitutional provision when the <ORG> or its agents, purporting to act within this field, perform any act. In this sphere, they can only claim rights conferred upon them by contract and are bound by the terms of the contract only unless some statute steps in and confers some special statutory power or obligation on the <ORG> in the contractual field which is apart from contract". Petitioners were under no obligation to seek allotment of flats even after they had registered themselves. They looked at the price and flats and applied for the flats. This they did voluntarily. They were advised by the brochure to look at the flats before going in for the same. They were lucky enough to get allotment when the lots were drawn. Each one of them was allotted a flat and he paid the price voluntarily. They are now trying to wriggle out by an invidious method so as to get back a part of the purchase price not offering to return the benefit under the contract, namely, surrender of flat. The <ORG> in its affidavit in reply in terms stated that it is willing to take back the flats and to repay them the full price. The transaction is complete, viz., possession of the fiat is taken and price is paid. At a later stage when they are secure in possession with title, petitioners are trying to get back a part of the purchase price and thus trying to reopen and wriggle out of a concluded contract only partially. In a similar and identical situation <ORG> this <ORG> in <CITATION> ., has observed that those who contract with open eyes must accept the burdens of the contract along with its benefits. Reciprocal rights and obligations arising out of contract do not depend for their enforceability upon whether a contracting party findings its prudent to abide by the terms of the contract. By such a test no contract would ever have a binding force. The jurisdiction of this <ORG> under Article 32 of the Constitution is not intended to facilitate avoiding of obligations voluntarily incurred. It would thus appear that petitions ought not to have been entertained. However, as the petitions were heard on merits the contentions canvassed on behalf of the petitioners may as well be examined."

<ORG> further observed :--

".....What is forbidden by Art. 14 is discrimination amongst persons of the same class and for the purposes of allotment of flats scheme-wise, allottees of flats in the same scheme, not different schemes in the same income bricket, will have each such class there is unequal treatment or unreasonable or arbitrary treatment, the complaint that Art. 14 is violated cannot be entertained."

18. In the aforesaid case <ORG> was considering the levy of surcharge on the basis of the arguments advanced that <ORG> is meeting out discriminatory treatment inasmuch as no surcharge was levied on the fiats in MIG Scheme constructed and allotted prior to November 1976 and the January 1977 MIG flats involved in these petitions were constructed and were available for allotment in November, 1976 and the lots were drawn in January 1977. According to the petitioners before <ORG> there was another scheme of MIG fiats Munirka where allotment took place at and about the same time where no surcharge was levied. The amount of surcharge was only a couple of thousands rupees. While considering these circumstances of this case <ORG> held that levy of surcharge was not violative of Article 14 of the Constitution, whereas in the present case the revision of land premium or land rate is an exercise by the <ORG> under its statutory rights not depending on the terms of contract. Petitioners have, as a matter of fact, have fulfillled their objections under the contract. It is evidenced by <ORG> of its obligation under the contract taking the shield of its pre-contractual position of strength emanating from its power as a statutory authority.

19. Learned counsel for <ORG> has also cited <CITATION> . and <CITATION> . These authorities do not help the case of the respondents as <ORG> was considering the validity of S. 3(3-C) notification dated 28-11-1974 regarding prices fixed for various grades of sugar with reference to geographical-cum-agro-econo-mic consideration and average cost profiles of factories located in respective zones. In that case <ORG> was of the opinion that on account of exhaustive study by experts and conclusions reached by Government, it was not shown to be either discriminatory or unreasonable or arbitrary or ultra vires and price fixed on account thereof was a matter of policy and not within the province of the <ORG>. <ORG> further laid down that judicial function is exhausted when there is found to be a rational basis for conclusions reached by concerned authority. From the aforesaid observations in <ORG> case (supra) it is dear that the scope of judicial review in cases like the present one relating to fixation of price is limited but as stated earlier it would be only when it is found that there is a rational basis for the conclusion reached by <ORG> for fixation of price as has been done in the instant case, in our opinion, the respondent-authority had no basis for arriving at the rates fixed what to talk of rational basis. The authority <CITATION> , is not at all applicable to the case of the respondent as the question before <ORG> was whether <ORG>, Jalgaon could enter into an agreement with a private developer for financing and execution of project. Counsel for the respondent has also cited <CITATION> . We are afraid that this authority does not help the case of the respondent. Rather, it supports the case of the petitioners, as <ORG> held that in fixation of prices of essential commodities <ORG> should be guided by presumption of constitutionality and object of the action and effect of the action on prices a legitimate consideration in upholding the order, reasonable profit of dealer is not a sine qua non but interest of consumer a primary consideration. In this case <ORG> was dealing with case of fixation of price under the Essential Commodities Act where the ultimate interest of the consumers was the primary consideration for upholding the order of fixation of prices of essential commodities. Therefore, this authority, if at all helps, helps the case of the petitioners. The benefit of fixation of price must pass to the petitioners.

20. . Learned counsel for the petitioners cited <CITATION> , and argued that DDA is estopped from charging any higher price than mentioned in the brochure when the petitioners registered themselves and he argued that the time has gone when promissory estoppel as a doctrine has to be used only as a measure of defense. According to him in view of the judgment of <ORG> in that case the respondents are duty bound and they are estopped in law from charging any other price except for reasonable increase on account of cost of construction.

21. Learned counsel for the petitioners also cited <ORG> v. <ORG> (1956) 1 All ER 256 and (1854) 3 House of Lord's Cases 471 in support of his proposition.

22. Learned counsel for the respondent has also cited <CITATION> . This authority is of no help to the case of the respondent as <ORG> was examining altogether different issue involved in the matter. To fortify his argument the learned counsel for the respondent has cited <CITATION> , (1992) 42 DLT 295, which is a short judgment and has followed another judgment of this <ORG> in Civil Writ No. 2265/91 ( <CITATION> ). In <NAME> case in paragraph 7 the <ORG> while discussing the justification for escalated rates has stated as under :--

"As regards the question of payment on escalated rates, we find that Clause 14 of the Scheme specifically states that the plinth area of the flats indicated and the estimated price mentioned in the brochure are illustrative and are subject to revision/modification depending upon the exigencies of layout, cost of construction etc. The petitioner has entered into a contract with <ORG> being fully aware of the terms and conditions of the contract."

23. After this the <ORG> in paragraphs mentioned that the case is covered by the judgment of <CITATION> , , and on this short ground dismissed the petition.

24. Before dealing with <ORG> case we would like to mention the brief facts of <NAME> case in this regard. The <ORG> did not take into consideration in <NAME> case the true import, effect and scope of Clause 14 of the Scheme which is as follows :--

"It may please be noted that the plinth area of the flats indicated and the estimated prices mentioned in the brochure are illustrative and are subject to revision/modification depending upon the exigencies of layout, cost of construction etc."

25. The Division Bench in <NAME> case did not consider the arbitrary revision of land premium rates hiked by respondent-authority from Rs. 62/- per sq. mtr. to Rs. 930/- per sq. mtr. Even the land rates are not mentioned in Clause 14 on the basis of which the authority could revise the rate of the flat in question. As a matter of fact, in <NAME> case the Court was considering as to whether 40 per cent flats which were allotted on cash down basis under the scheme and 60 per cent of the flats on hire-purchase basis which were not put so. No assurance was given to any registrants that he will be allotted a flat on hire-purchase basis. Therefore, this authority is also of no help to the respondent-DDA. Another fallacy in the argument of learned Counsel for the respondent that there is no seniority of the registrants of the scheme is contrary to their own Clause 9 of the scheme which is reproduced as under :

"The allotment of flats under the scheme will be by draw of lot like that of <ORG>. All the applicants who register between September 1, 1979 and September 30, 1979 will have equal seniority."

26. Counsel for the respondent has argued that in view of <ORG> case , the writ petition itself is not maintainable. The learned Counsel overlooked the fact that <ORG> (for short <ORG>) dealt with cases where allottees after voluntarily accepting the conditions imposed by the <ORG> have entered into the realm of contract purely and simple with the <ORG> and hence allottees could only claim the right conferred upon them by the said contract and was bound by the terms of the contract. In the <ORG> case , the note given in the brochure clearly stated that the cost shown therein is only an estimated cost and would increase or decrease in the price only at the time of completion of the house/flat. Many persons got themselves registered for allotment of flats/houses. A notice was subsequently issued by the <ORG> increasing the price of houses, the amount of Installment and interest. The allottees were asked to send their written acceptance of the revised price/Installment to the <ORG>. Most of the allottees except few unequivocally accepted the revised demand. It was in these circumstances that <ORG> held that it was in the realm of contract pure and simple, more so the petitioner before <ORG> was highly educated and has accepted the revised terms of the <ORG>, therefore, and he was not entitled to any relief as the contract entered into between the <ORG> and the persons aggrieved was non-statutory and purely contractual and, therefore, the rights were governed only by the terms of the contract. <ORG> held that no writ or order can be issued under Article 226 of the Constitution of India. The flats were constructed within three to four years in that case.

27. Here we are confronted with the situation where the enhancement of one component of post is on account of land rate/land premium from Rs. 62/- per sq. mtr. to Rs. 930/- per sq. mtr. The same has been done by <ORG> without notice to the registrants. No notice was issued to the petitioners informing them of the revision of prices, no acceptance was asked for by the <ORG> from the petitioners as was done in the case of <ORG>, rather nothing has been brought on record by <ORG> as to how this land rate/land premium has been raised from 1989 to 1991 from Rs. 62/- per sq. mtr. to Rs. 930/- per sq. mtr. The revision of land rate/land premium is without any reasons, none has been disclosed to this <ORG>. We cannot understand as to how, on one fine morning, the Lt. Governor of Delhi who is also the Chairman of <ORG> by stroke of pen could enhance the land rate from Rs. 62/-per sq. mtr. to Rs. 930/-per sq. mtr. effecting the cost of the flats of the petitioners who registered themselves since 1979. How this revision of rales which adversely affected their rights could be notified at their back without petitioners having any say. This revision cannot be said to be in the realm of non-statutory and purely contractual matter. Can <ORG> without wearing the hat of the <ORG> or exercising its statutory powers enhance this huge amount without notice to the registrants is a main question. The <ORG> has not asked from these unfortunate petitioners who are waiting since 1979 that <ORG> is revising the land premium to such an extent, whether the petitioners are still interested in the Scheme or not. To agree with the proposition advanced by the <ORG>, will amount to give license to a public authority to play havoc with the citizens of Delhi. It will amount to giving a license to <ORG> to charge whatsoever amounts taking the plea of non-statutory contracts. Are courts so powerless under Article 226 of the Constitution, that when such a mischief so apparent is committed under the statutory powers, that the citizen can be non-suited on the pretext that it falls in the realm of contractual obligations and this <ORG> under Article 226 of the Constitution is a silent spectator.

28. We once again emphasise that in Delhi it is the <ORG> alone which deals with lands in Delhi. There is no other authority whether public or private which is authorised in the law to sell or dispose of land whereas in Uttar Pradesh the land does not belong to any single authority like <ORG>. Even in Bareilly there are other authorities/individuals owning lands for residential, agricultural and commercial purposes. The <ORG> has put further rider that once a person applies in any scheme for owning a flat/plot, he becomes disentitled for applying or owning any flat or plot of land in the Union Territory of Delhi. Look at the fate of these registrants who came from poor or middle class strata of <ORG>, applied in response to the scheme of <ORG> in 1979 for <ORG>, <ORG> and <ORG> category flats. <ORG> did not allot them flats till the year 1991. They could not have applied in any other scheme of allotment nor could have purchased any other flat and today they are in a situation that initially a flat which was costing to them Rs. 43,000/- as per the scheme, the <ORG> is charging exhorbitant amount of over Rs. 4 lacs. Is a citizen to suffer for non-construction of flats by the <ORG> or for delay in construction on account of substandard flats, or for any reason whatsoever. If this is accepted then that would be perpetuating illegalities and same cannot be sustained in the eye of law. We take strong exception to the stand of <ORG> that if the petitioners are not interested to get the allotment of flats on the increased rate, they are free not to take it. It smacks of not only monopolistic arrogance but exploitative stance of public authority. We strongly deprecate these kinds of arguments advanced before us by the <ORG>. Counsel for the <ORG> has also brought to our notice a recent decision of the Full Bench in case <CITATION> in Civil Writ Petn. No. 623 of 1993, in support of his contentions. We are of the opinion that the question involved in that case is not a similar to the one raised before us. This Court had the occasion to deal with the issue raised before it in <CITATION> , AIR 1985 Delhi 417, which reads as under (at pp. 431 and 434 of AIR) :--

"20. We shall proceed now to consider the applicability of the above principles to the situation before us. But, for doing that, we should first try to see what exactly it is that is happening here. The <ORG> is a public authority which is entrusted, inter alia, with the responsibility of providing houses to the citizens of Delhi. The statute and the regulations lay down the modalities by which the <ORG> can dispose of properties by way of sale or hire. The drawing up of scheme, the modes of registration and allotment, the fixation of a price and the mode of its payment, the execution of a deed and the conditions of transfer are all provided for in these "regulations. There is nothing in the regulations that compels the <ORG> to provide houses free of cost or at concessional rates or even at the cost of construction. It is open to the <ORG> to fix such price for the flats as it may deem fit. In doing so, it can keep a margin of profit for itself .take into consideration its overall working, consider the picture of town planning as a whole and off set deficits in one scheme while completing another and so on. In short, it is as free in fixing the price of flats as any private contractor will be, except only for the limitations of fair play and the need to avoid arbitrariness and discrimination that fetter the hands of a public authority which is amenable to Art. 226. So long as it conforms to these regulations, its actions cannot be challenged. But once some regulation is infringed or any arbitrariness or invidious discrimination creeps in, its action is liable to challenge under Art. 226. For example, if the <ORG> does not fix a price or the principles for its determination or if properties are sought to be allotted otherwise than the lots when there are more claimants than houses or plots or there is arbitrariness in allotment, the action of the <ORG> can be challenged in a writ petition. Perhaps even where the price is fixed arbitrarily and withput any basis for it, it can be challenged in writ proceedings. This is a pre-contractual statutory stage. Thereafter, when the <ORG> announces a scheme in conformity with these regulations and applications are received allotments are made and accepted, the general public scheme yields place to individual contracts between the <ORG> and each allottees. Now we reach the contractual stage in the domain of private law. It replaces the earlier stage of statutory obligations which was in the domain of public law. Here, any action by any one or more of the allottees to enforce the terms of the contract or to complain of their breach on the part of the <ORG> will lie, at general law, by way of a suit and not by way of a writ petition. To put it in other words, any complaint or grievance pertaining to the pre-cpotractual statutory stage can be aired under Art. 226 but any complaint or grievance pertaining to the contractual stage can be agitated only in a civil suit.

25. But it is argued for the <ORG>, this is also, at worst, only a breach of contract by the <ORG>. AH that be said is that the <ORG> agreed originally to give the flats at cost but now they refuse to do so and demand a higher price. For this it is open to the petitioners to sue the <ORG> for specific performance of the contract on the original terms or for damages for breach of contract or for other appropriate relief. A writ wilt not be maintainable. This argument, we think, is untenable; it attaches undue importance to the form and ignores the substance of the stand taken by the <ORG>. In all these matters, the <ORG> should look at the real effect of what has been done. The decided cases referred to above show that, if what is done is really an enforcement of the contractual terms, the affected party cannot be allowed to camouflage its grievances in the garb of fundamental rights or by attributing to the action of the authority a statutory flavour and seek redress by means of a writ petition. It should equally follow. We think, per contra that where what the authority has done is in effect a variation of the incidents of the pre-contractual stage, it cannot be rendered immune from proceedings under Article 226 merely because it can be dressed up or described as a mere breach of contract. So, in our opinion, where the <ORG> revises the earlier policy of price fixation and substitutes a new one, it is truely interfering with a step in the statutory stage amenable to writ jurisdiction and a writ petition cannot be dismissed as not maintainable merely on the ground that the result of the action also results in a breach of the original contract for which remedy is available in the ordinary civil <ORG>s. Looked at in the proper perspective, this is a case where the grievance of the petitioners falls under the second category of cases referred to in <NAME> case, ."

29. The unilateral revision of land rate/ premium whereby affecting the price of flats without any reasons is arbitrary and unreasonable. The action of the <ORG> in revising the estimate on that basis otherwise than on the terms of the original contract is, therefore, illegal and is liable to be quashed. We hold that by revising land rate/land premium the <ORG> in fact has varied the terms of pre-contractual stage, therefore the respondent is not immune from proceedings under Article 226 of the Constitution. We hold that this writ is maintainable as it deals with the stage which alter the parameter of statutory stage in the contract.

30. Even otherwise, the income groups on the basis of which <ORG> formulated the said scheme remains unchanged. That is to say, still the petitioners would fall in the same MIG/LIG categories as in the year 1979. When the petitioners applied for registration under the Scheme in 1979 they had a reasonable as well as legitimate expectation that they will be allotted the flats within a span of reasonable time. By no stretch of imagination 12 years taken by <ORG> can be construed as a reasonable time for allotment of flats to the petitioners. Having come to the conclusion that the revision of land premium is irrational, arbitrary and unreasonable the next question we have to answer is as to what should be the cost which should be paid by the petitioners to the <ORG>. <ORG> has not produced before us the cost of the individual flat worked out by them, though they have given some details, according to them, of the total expenditures incurred by the <ORG>. We feel it is not proper for us to go into this aspect of costing in this writ petition. This is the job of the <ORG>. But should we allow the <ORG> to work out the final cost and ask the petitioners to wait for more time, that would be unfair to , them in law as well as in equity.

31. Considering all the relevant circumstances including the Scheme of 1979 and the price of flats charged from various registrants under this scheme in the year 1989, we are of the opinion that the petitioners should be required to pay four and a half times the price of the flat as was mentioned in the year 1979 scheme. This demand would be on provisional basis subject to further directions as hereinafter given. Accordingly, we issue mandamus directing the <ORG> to handover possession of the flats to the petitioners on their making payment at the rate of Rupees 1,89,000/- for MIG flat, Rs. 81,000/ - for LIG flat and Rs. 36,000/- for Janta flat. The demand letters issued earlier are set aside and fresh demand letters shall be issued to the petitioners who shall make payment in terms of the demand calculated on the basis of the price above mentioned. In terms of those demand letters possession shall be handed over to the petitioners forthwith. We make it clear that the terms mentioned in the demand letters except for the price fixed by us shall remain the same.

32. We further direct that the <ORG> shall constitute an Expert Committee to go into the costing of these flats taking the land rate at Rs. 62/- per sq. mtr. The Expert Committee will take the actual cost of construction spent by the <ORG> on construction of the said flats. If <ORG> after working out the cost on the basis of aforesaid works out cost to be more than the price that has been provisionally fixed by us the <ORG> shall give such revise cost and its intimation to the petitioners who within one month from the date of intimation shall pay the same to <ORG>. We further direct that till the revised demand is paid by the petitioners, the petitioners shall not alienate, transfer or otherwise create any charge on their respective flats in question.

33. With these directions, the petition is allowed. The parties arc left to bear their own costs.

34. Petition allowed.