KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD & ANR.versusMIS. PRAKASH DAL MILL & ORS.

                          [2011] 5 S.C.R. 26


A      KARNATAKA INDUSTRIAL AREAS DEVELOPMENT
                    BOARD & ANR.
                                   v.
                 MIS. PRAKASH DAL MILL & ORS.
             (Civil Appeal Nos. 5406-5445 of 2005)
B                         April 06, 2011
       [B. SUDERSHAN REDDY AND SURINDER SINGH
                          NIJJAR, JJ.]

        Karnataka Industrial Area Development Board
C Regulations, 1969 - Allotment of industrial sites by appellant-
  1nd ustri a I Area Development Board - Application by
  respondents - Execution of lease-cum-sale agreement in
  favour of respondent - Fixation of final price by the Industrial
  Board - Thereafter, enhanced demand raised for payment of
D final allotment price - Writ petition by the respondents
  challenging the enhanced price dismissed - However, in writ
  appeal, the Division Bench of the High Court quashed the
  enhanced demands as proposed by the appellant - On
  appeal, held: Division Bench of the High Court correctly
E concluded that the fixation of final price by the Board was
  without authority of law and was violative of Article 14 of the
  Constitution - Even though the Clause 7(b) of the agreement
  gives the Board an undefined power to fix the final price, it
  would have to be exercised in accordance with the principle
F of rationality and reasonableness - Respondents have
  placed on record sufficient material to show that acquisition
  and development of land in the industrial area was made in
  phases - Thus, it cannot be said that all the allottees formed
  one class - Earlier allottees having sites in fully developed
  segments cannot be intermingled with the subsequent
G allottees in areas which may be wholly undeveloped - Also,
  once the allotment has been made, the Board cannot be
  permitted to exercise its powers of fixing the final price at any
  indefinite time in the future - Board sought to fix the final price

H                                  26
KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD              27
              v. PRAKASH DAL MILL

after a gap of 13 years which is not permissible - Constitution A
of India, 1950 - Article 14.
     Appellant No. 1, Industrial Area Development Board
invited interested purchasers to make applications for
allotment of industrial sites. The respondents applied for 8
the allotment of sites at different points of time. The lease-
cum-sale agreements were executed in favour of the
respondents on their complying with the conditions of
allotment. The appellants issued letters to the
respondents, raising the demands with regard to the
penal allotment price and directed the respondents to pay C
the balance of final allotment price within a stipulated
period. The respondents filed a writ petition' challenging
the issuance of the said letters enhancing the price and
for a direction to the appellant to execute the sale deeds
on the basis of the price indicated in the lease deed. The D
High Court dismissed the same. The Division Bench
allowed the appeal and quashed the enhanced demands
as proposed by the appellants. Therefore, the appellants
filed the instant appeals.
                                                               E
     Dismissing the appeals, the Court

     HELD: 1. The High Court correctly concluded that
the fixation of final price by the industrial Area
Development Board is without authority of law. It violates
Article 14 of the Constitution of India being arbitrary and    F
unreasonable exercise of discretionary powers. [Para 20]
(43-C-D]

     2.1 Under Clause 7(b) of the lease•cum-sale-
agreement, the Board reserved to itself the right to fix the G
final price of the demised premises as soon as it may be
convenient to it and communicate the same to the
concerned lessee. Upon communication of the price, the
lessee is required to pay the balance of the value of the
site. Determination of the price by the Board is binding H
    28       SUPREME COURT REPORTS             [2011] 5 S.C.R.


A   on the lessee. Clause 7(b) would not permit the Board to
    arbitrarily or irrationally fix the final price of the site
    without any rational basis. The power of price fixation
    under Clause 7 being statutory in nature would have to
    be exercised, in accordance with statutory provisions; it
B   can not be permitted to be exercised arbitrarily. The
    appellants are required to fix the price within the
    stipulated parameters contained in the Statute and the
    Board Regulations. [Paras 15, 16] [38·0-F; 40-8]

C        Premji Bhai Parmar and Ors. (1980) 2 SCC 129 -
    distinguished.

         Centre for Public Interest Litigation and Anr. vs. Union
    of India and Ors. (2000) 8 SCC 606; Meerut Developent
    Authority vs. Association of Management Studies (2009) 6
D   SCC 171 - referred to.

         2.2 The High Court has the jurisdiction to satisfy
    itself on the material on record that the authority has not
    acted in an arbitrary or erratic manner. The High Court,
E   in the instant case, has not acted beyond such
    jurisdiction. The judgment of the High Court is within the
    parameters of the jurisdiction vested in it under Article
    226 of the Constitution of India. [Para 17] [41-F]

         Indore Development Authority vs. Sadhana Agarwal
F   (Smt.J and Ors. (1995) 3 SCC 1; Kanpur Development
    Authority vs. Sheela Devi (Smt.) and Ors. (2003) 2 SCC 497
    -referred to.
        2.3 The Board being a State within the meaning of
G Article 12 of the Constitution of India is required to act
  fairly, reasonably and not arbitrarily or whimsically. The
  guarantee of equality before law or equal protection of
  the law, under Article 14 embraces within its realm
  exercise of discretionary powers by the State. The High
H Court examined the entire issue on the touchstone of
KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD. 29
              v. PRAKASH DAL MILL

Article 14 of the Constitution of India. It observed that the A
fixation of price done by the Board has violated the Article
14 of the Constitution of India. It correctly observed that
though Clause 7(b) permi~ the Board to fix the final price
of the demised premises, it cannot be said that where the
Board arbitrarily or irrationally fixes the final price of the B
site without any basis, such fixation of the price could
bind the lessee. In such circumstances, the court would
have the jurisdiction to annul the decision, upon declaring
the same to be void and non-est. A bare perusal of Clause
7(b) would show that it does not lay down any fixed c
components of final price. Clause 7(b) also does not speak
about the power of the Board to revise or alter the
tentative price fixed at the time 'of allotment. The High
Court correctly observed that Clause 7(b) does not
contain any guidelines which would ensure that the 0
Board does not act arbitrarily in fixing the final price of
demised premises. [Para 18] [41-G-H; 42-A-D]

     2.4 Even though the Clause gives the Board an
undefined power to fix the final price, it would have to be
exercised in accordance with the principle of rationality         E
and reasonableness. The Board can and is entitled to take
into account the final cost of the demised premises in the
event of it incurring extra expenditure after the allotment
of the site. But in the garb of exercising the power to fix
the final price, it cannot be permitted to saddle the earlier     F
allottees with the liability of sharing the burden of
expenditure by the Board in developing some other sites
subsequent to the allotment of the site to the
respondents. The respondents have placed on record
sufficient material to show that acquisition and                  G
development of land in the industrial area has been in
phases. Some areas and segments are fully developed
and others are in different stages of development Sites
and plots have b·een allotted at different times and
locations. Thus, it cannot. be said that all the allottees form   H
    30       SUPREME COURT REPORTS              [2011] 5 S.C.R.


A   one class. Earlier allottees having sites in fully developed
    segments cannot be intermingled with the subsequent
    allottees in areas which may be wholly undeveloped.
    Such action is clearly violation of Article 14. The Board
    cannot be permitted to exercise its powers of fixing the
B   final price under Clause 7(b) at any indefinite time in the
    future after the allotment is made. This would render the
    word 'as soon as' in Clause 7(b) wholly redundant. In the
    instant case, the Board has sought to fix the final price
    after a gap of 13 years. Such a course is not permissible
c   in view of the expression 'as soon as' contained in
    Clause 7(b). [Para 19] [42-E-H; 43-A-C]
                          Case Law Reference:
         (1980) 2 sec 129        Distinguished        Para 16
D        c2000) a sec 606        Referred to          Para 12
         (2009) 6 sec 111        Referred to          Para 12
         (1995) 3 sec 1          Referred to          Para 16
E        (2003) 2 sec 497        Referred to          Para 17
        CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    5406-5445 of 2005.
        From the Judgment & Order dated 18.02.2003 of the High
F   Court of Karnataka at Bangalore in W.A. No. 2183 to 2221 &
    1492 of 2000.
       Basava Prabhu S. Patil, Kiran Suri, S.J. Smith, Vijay
  Verma, B. Subramanya Prasad, Ajay Kumar M., A.S. Bhasme,.
G V.N. Raghupathy for the appearing parties.
         The Judgment of the Court was delivered by

       SURINDER SINGH NIJJAR, J. 1. The instant appeals
  are preferred against the final order and judgment of the High
H Court of Karnataka at Bangalore in W.A. Nos. 2183 to 2221
KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD                 31
  v. PRAKASH DAL MILL [SURINDER SINGH NIJJAR, J.]
of 2000 & W.A. No. 1492 of 2000 dated 18th February, 2003         A
whereby the Division Bench of the High Court allowed the writ
appeal by setting aside the judgment of the High Court in W.P.
Nos. 23578 to 23617 of 1999 dated 7th July, 1999.

     2. We may now briefly notice the relevant facts which are
                                                                   8
necessary for the adjudication of the present case. The
Karnataka Industrial Areas Development Board (hereinafter
referred to as 'appellant No.1} had formed an industrial layout
at Tarihal village in the year 1983, pursuant to which, it invited
interested purchasers to make applications for allotment of
industrial sites. Pursuant to the same, the respondents herein, C
applied for the allotment of sites. It is a matter of record that
the respondents had applied for the allotment of sites at
different points of time. Consequently, the appellant issued
letters of intent, indicating that it had resolved to allot all
respondents the sites shown in their cause titles at Tarihal D
Industrial Estate. The said letter also indicated the tentative
price at which the land was sought to be allotted.

     3. In response to the offer made by the appellant No.1, the
respondents being desirous of purchasing their respective plots E
indicated their willingness for the abovementioned site.
Accordingly, they affirmed their interest to purchase the same.
Thereafter, the letters of allotment were issued in favour of the
respondents incorporating the terms and conditions of
allotment. Subsequent thereto, lease-cum-sale agreements F
were executed in favour of the respondents on their complying
with conditions of allotment.

    4. One of the conditions mentioned in the lease-cum-sale
agreement reads thus:-
                                                                  G
    "7(b} As soon as it may be convenient the Lessor will fix
    the price of the demised premises at which it will be sold
    to the Lessee and communicate it to the Lessee and the
    decision of the Lessor in this regard will be final and
    binding on the Lessee. The Lessee shall pay the balance       H
    32       SUPREME COURT REPORTS                [2011] 5 S.C.R.


A        of the value of the property, if any after adjusting the
         premium and the total amount of rent paid by the Lessee,
         and earnest money deposit within one month from the date
         of receipt of communication signed by the Executive
         Member of the Board. On the other hand, if any sum is
B        determined as payable by the Lessor to the Lessee after
         the adjustment as aforesaid, such sum shall be refunded
         to the Lessee before the date of execution of the sale
         deed."

C       5. The lease-cum-iale agreement, entered into between
  the Board and the respondents, contained covenants that the
  respondents shall pay 99% of the allotment price immediately
  and remaining 1% in 10 equal yearly installments plus lease
  premium alongwith the interest at 12.5%. The respondents
  claim to have complied with all the stipulations and the
D conditions incorporated in the lease-cum-sale agreements. It
  seems that the appellants even after a lapse of 11 long years
  did not execute the regular sale deeds in favour of the
  respondents. On the contrary, the appellants after a gap of 6
  months from the date of expiry of the lease period, issued letters
E to the respondents, raising therein the demands with regard to
  the final allotment price and also directed the respondents to
  pay the balance of final allotment· price within a stipulated
  period. The appellants vide its Board meeting dated 18th
  September, 1997 resolved to fix the final price of the land as
F follows:

          Allotment made at the basic       Basic final prices fixed
          tentative rates as per acre       per acre (in Rs.)
          (in Rs.)
G   1.    40,000/-                          1.08 lakhs
    2.    60,000/-                          1.27 lakhs
    3.    1.00 lakh to 1.25 lakhs           2.01 lakhs
    4.    1.50 lakhs to 1.60 lakhs          2.61 lakhs
H
KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD                    33
  v. PRAKASH DAL MILL [SURINDER SINGH NljJAR, J.]
     6. On receipt of the aforesaid demand, respondents filed         A
their objections individually putting forth their grievances and
declined to pay the increased amount. It was contended by
them that the final allotment price was unreasonable, arbitrary,
unjust and contrary to what was legitimately expected and
assured by the appellant, i.e., only marginal increase, based         B
on the cost of land acquisition. Pursuant to the objections filed
individually by the respondents, the appellant invited them to
Bangalore for a discussion. According to the respondents,
during the course of discussions, they had sought for the
detailed break up, based on which the enhanced claim was              c
made. The board had furnished them a statement showing the
basis for enhancement of the price. In the break-ups statement,
as provided by the appellant, it was shown that Rs.34.17 lakhs
were indicated to be the cost of future development. The
respondents having expressed their inability to pay the hiked         D
prices, once again brought to the notice of the appellants that
the proposed enhancement was unjust and arbitrary. Thereafter,
the appellant No.1, on consideration of the objections raised
by the respondents reduced the final allotment price marginally
and issued demand notices to the respondents as follows:
                                                                      E
       Basic final prices fixed in the    Reduction in the final
       meeting held on 18.9.1997          prices approved (Rs.
                                          in lakhs)
1.     1.08 lakhs                         0.95 lakhs                  F
2.     1:27 lakhs                         1.10 lakhs
3.     2.01 lakhs                         1.80 lakhs
4.     2.61 lakhs                   -
                                          2.40 lakhs.
                                                                      G
      7. Aggrieved by the same, the respondents filed a writ
petition W.P. No. 23578-23617of1999 before the High Court
of Karnataka at Bangalore and prayed for a writ in the nature
of certiorari for quashing the letters enhancing th.e price and for
a direction to the appellant to execute the sal.e deeds on the        H
     34        SUPREME COURT REPORTS                 [2011] 5 S.C.R.


A    basis of the price indicated in the lease deed. The High Court
     in its judgment dated 7th July, 1999 dismissed the writ petition.
     The Division Bench of the High Court in writ appeal vide its
     final order and judgment dated 18th February, 2003 allowed
     the same and quashed the enhanced demands as proposed
B    by the appellant. Hence the instant appeals by special leave
     before us.

          8. We have heard the learned counsel for parties. Ms.
     Kiran Suri, learned counsel appearing for the appellants
C    submits that the High Court committed a grave error in holding
     that Clause 7(b) of the lease-cum-sale agreement doesn't
     confer power on the appellants to revise or alter the tentative
     price. She submits that the appellant No.1 is an industrial board
     established for the purpose of establishment of industrial
     areas. Section 13 of the Karnataka Industrial Areas
·D   Development Board stipulates functions of the Board which
     includes establishing, maintaining, developing and managing
     industrial estates within industrial areas. Thus, power of fixation
     of price of the land vested with the appellant.

E         9. She further submits that enhanced price was fixed after
  taking into consideration, the cost of acquisition, the
  development expenditure, statutory charges and interest. The
  price fixed at the time of the allotment was only tentative since
  the appellants could not foresee the quantum of land
F acquisition compensation that would be fixed in future. The
  price so fixed was uniform to all allottees. She further submits
  that the High Court was not right in holding that the allottees of
  the site in one industrial area cannot be regarded as persons
  belonging to same class. The final price fixed was much less
G than the actual market price and hence the High Court erred
  in holding that it was arbitrary, unjust and unfair. The appellant
  No.1 was entrusted with the responsibility to develop the
  industrial area as a whole and it had nothing to do with any
  class of allottees. She also submitted that the present matter
  was not one of escalation of price but the fixation of the final
H price.
KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD                    35
  v. PRAKASH DAL MILL [SURINDER SINGH NIJJAR, J.]
      10. Learned counsel further submitted that the final price     A
fixation is in accordance with the allotment letters issued to the
respondents. As per the allotment letter, the tentative price of
the land had been fixed at Rs.40,500/- per acre in Tarihal
Industrial Area. The allottees were to exercise option with
regard to the mode of payment of the purchase price. The letter      B
clearly indicated that the price was only tentative. The final
price was fixed taking into account the cost of acquisition,
development expenditure, statutory charges and interest. On the
basis of the above criteria, the cost of land per allotable acre
worked out approximately to 2.61 lakhs per acre. Therefore, the      C
break-ups of the same was as follows:-
                                                    Rs. in Lakhs

     a)      Cost of acquisition                            0.20
     b)      Development expenditure:
                                                                     D
             Already incurred (as on 31.12.96)              0.88
             Future development (as estimated
             on 31.12.96)                                  0.98
     c)      Statutory Charges:                            0.23
     d)      Interest                                      0.32
                                                           2.61      E
Therefore, keeping the above cost per acre as the basis, the
appellant Board, at its Board Meeting dated 18th September,
1997 resolved to fix the final price of the lands as follows:-

          Allotment made at the basic     Basic final prices fixed   F
          tentative rates as per acre     per acre (in Rs.)
          (in Rs.)
1.    40,000/-                            1.08 lakhs
2.    60,0001-        "'                  1.27 lakhs
                      '                                              G
3.    1.00 lakh to 1.25 lakhs             2.01 lakhs
4.        1.50 lakhs to 1.$0 lakhs        2.61 lakhs
                       '   -'!.

     11. According,~o the learned counsel, the aforesaid
exercise carried oyt by the Board would clearly indicate that        H
the decision has ~~en taken upon consideration of all the
    36         SUPREME COURT REPORTS               (2011) 5 S.C.R.


A relevant parameters for determination of the final price. Learned
  counsel further submitted that the respondents have wrongly
  claimed that they had been allotted plots in fully developed
  area. The development work had just begun in 1982. These
  allotments have been made at a heavily subsidized rate. The
B final price has been fixed to put all allottees at par, irrespective
  of the date, area/phase/segment of the allotment. The
  development costs had been worked out as a whole and the
  allottees had not been segregated into separate groups. The
  respondents having voluntarily entered into lease agreement can
C not now be permitted to question the power of the Board to fix
  the final price. She relied on Premji Bhai Parmar & Ors. Vs.
  Delhi Development Authority & Ors. 1 and Centre for Public
  Interest Litigation & Anr. Vs. Union of India & Ors. 2•
       12. The learned counsel further submits that it is a settled
D proposition of law that price fixation is beyond the scope of
  judicial review in writ petitions. The High Court, therefore,
  exceeded its jurisdiction in allowing the writ appeal in favour
  of the respondents. She relied on the judgment of this Court in
  the case of Meerut Development Authority Vs. Association of
E Management Studies. 3 She then brought to our notice that if
  the impugned judgment prevails then it would cause a loss of
  Rs.1,66,000/- for allotment of every acre.
       13. On the other hand, Mr. Basava Prabhu S. Patil, learned
  senior counsel appearing for the respondents submitted that
F the allotment letters have been issued by the appellant Board
  in exercise of its powers under Section 41 of the Karnataka
  Industrial Area Development Act, 1966. Section 41 empowers
  the Board to make regulations consistent with the Act and the
  Rules made there under, to carry out the purposes of this Act.
G Sub-section 41 (2) provides that the Board can make
  regulations with regard to "(b) the terms and conditions under

    1.   (1980) 2 sec 129.
    2.   c2000) a sec eoa.
H 3. (2009) a sec 111.
     KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD 37
       v. PRAKASH DAL MILL [SURINDER SINGH NIJJAR, J.]
     which the Board may dispose of land". In exercise of this A
     power, the Board has framed Kamataka Industrial Area
      Development Board Regulations, 1969. Under Regulation 7,
     the Board has to notify the availability of land for which
     applications may be made by the intending purchaser. The
      notice has to specify the manner of disposal, the last date for B
     submission of application and such other particulars as the
      Board may consider necessary in each case by giving wide
      publicity through newspapers, having circulation in.and outside
      Karnataka State. Upon receipt of the applications, the allotment
      letter has to be issued in terms of Regulation 10. According to  c
     the learned senior counsel, the exercise of power with regard
     to the fixation of price by the Board has to be within four corners
     ofthe aforesaid statutory provisions. He further pointed out that
..   the ·lease agreement between the applicants/lessee and the
     Board has to be executed in terms of Form IV contained in the D
     third schedule. The Form isissued ih terms of Regulation 10(c).
     The form being statutory, it was necessary to strictly comply with
     the aforesaid provisions. However, in the contracts entered into
     between the appellant Board and the allottees, Clauses 7(a)
     and 7(b) have been introduced without amending the applicable E
     Regulations or Form IV. Therefore, according to the learned
     senior counsel, the final price fixation is without any statutory
     basis. Learned senior counsel further submitted that in
     calculating the final price, the respondents. have not only
     included the cost of land acquisition which is not disputed, but
     also included future development costs and interest on F
     investments. According to the learned counsel, the Board had
     no power to levy such amounts either under the contract or
     under the regulations. Learned senior counsel submitted that
     the difference between the so called tentative price and the final
     price is excessive and unquestionable. The increase in price G
     can nof be said to be marginal as the allottees are new required
     to pay double the amount which was initially indicated. Under
     Clause 7 of the Regulations, the appellants were required to
     fix the final price as soon as possible. In the present case, the
     price has been finalized after a period of 13 years.                H
    38        SUPREME COURT REPORTS                   [2011) 5 S.C.R.


A         14. Learned senior counsel further submitted that the
    respondents were not entitled to such an arbitrary increase in
    price. This itself shows that the decision making process was
    totally flawed. The respondents had taken into consideration
    factors which were not permissible under the Statute or the
B   Regulations. Thus, the decision has been rendered arbitrarily.
    This is evident from the fact that a sum of Rs.237.14 lakhs is
    sought to be calculated for future development. Learned senior
    counsel submitted that the Division Bench, considering the
    entire issue has recorded the correct conclusions and,
c   therefore, does not call for any interference.

          15. We have considered the submissions made by the
    learned counsel. It is true that under Clause 7(b), the Board
    reserved to itself the right to fix the final price of the demised
    premises as soon as it may be convenient to it and
0   communicate the same to the concerned lessee. Upon
    communication of the price, the lessee is required to pay the
    balance of the value of the site. Determination of the price by
    the Board is binding on the lessee. In our opinion, the aforesaid
    clause would not permit the Board to arbitrarily or irrationally
E   fix the final price of the site without any rational basis. The power
    of price fixation under Clause 7 being statutory in nature would
    have to be exercised, in accordance with statutory provisions;
    it can not be permitted to be exercised arbitrarily. Undoubtedly,
    as observed by this Court in the case of Premji Bhai Parmar
F   (supra), Courts would not reopen the concluded contracts. Ms.
    Suri had placed reliance on the observations made by this
    Court in Paragraph 10 of the judgment, which are as follows:-

         "Pricing policy is an executive policy. If the Authority was
G        set up for making available dwelling units at reasonable
         price to persons belonging to different income groups it
         would not be precluded from devising its own price
         formula for different income groups. If in so doing it
         uniformly collects something more than cost price from
         those with cushion to benefit those who are less fortunate
H
KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD                       39
  v. PRAKASH DAL MILL [SURINDER SINGH NIJJAR, J.]

      it cannot be accused of discrimination. In this country            A
      where weaker and poorer sections are unable to enjoy the
      basic necessities~ namely, food, shelter and clothing, a
      body like the Authority undertaking a comprehensive policy
      of providing shelter to those who cannot afford to have the
      same in the competitive albeit harsh market of demand              B
      and supply nor can afford it on their own meagre
      emoluments or income, a little more from those who can
      afford for the benefit of those who need succour, can by
      no stretch of imagination attract Article 14. People in the
      MIG can be charged,,more than the actual cost price so             c
      as to give benefit to allottees of flats in LIG, Janata and
      CPS. And yet record shows that those better off got flats
      comparatively cheaper to such flats in open market. It is a
· . . well recognised policy underlying tax law that the State has
      a wide discretion in selecting the persons or objects it will
                                                                         0
      tax and that the statute is not open to attack on the ground
      that it taxes some persons or objects and not others. 1.t is
      only when within the range of its selection the law operates
      unequally, and this cannot be justified on the basis of a
      valid classification, that there would be a violation of Article   E
      14 (see East India Tobacco Co. v. State of AP.). Can it
      be said that classification income-wise-cum-scheme-wise
      is unreasonable? The answer is a firm no. Even the
      petitioners could not point out unequal treatment in same
      class. However, a feeble attempt was made to urge that
      allottees of flats in MIG scheme at Munirka which project          .F
      came up at or about the same time were not subjected to
      surcharge. This will be presently examined but aside from
      that, contention is that why within a particular period,
      namely, November, 1976 to January, 1977 the policy of
      levying surcharge was resorted to and that in MIG                  G
      schemes pertaining to period prior to November, 1976
      and later April, 1977 no surcharge was levied. If a certain
      pricing policy was adopted for a certain period and was
      uniformly applied to projects coming up during that period,
                                                                         H
    40         SUPREME COURT REPORTS                 [2011] 5 S.C.R.


A         it cannot be the foundation for a submission why such
          policy was not adopted earlier or abandoned later."

          16. In our opinion, these observations would not be
    applicable in the facts of this case. The appellants are required
B   to fix the price within the stipulated parameters contained in the
    Statute and the Board Regulations. Ms. Suri has also relied on
    a judgment of this Court in the case of Indore Development
    Authority Vs. Sadhana Agarwal (Smt.) & Ors. 4 in support of
    the submissions that since the allotment letters indicated only
c   the tentative price, the respondents could not demand that they
    be allowed the sites at the original price. In that case, this Court
    observed as follows:-

          "Although this Court has from time to time, taking the
          special facts and circumstances of cases in question, has
D         upheld the excess charged by the development authorities
          over the cost initially announced as estimated cost, but it
          should not be understood that this Court has held that such
          development authorities have absolute right to hike the cost
          of flats, initially announced as approximate or estimated
E         cost for such flats. It is well known that persons belonging
          to middle and lqwer income groups, before registering
          themselves for such flats, have to take their financial
          capacity into consideration and in some cases it results
          in great hardship when the development authorities
F         announce an estimated or approximate cost and deliver
          the same at twice or thrice of the said amount. The final
          cost should be proportionate to the approximate or
          estimated cost mentioned in the offers or agreements.
          With the high rate of inflation, escalation of the prices of
G         construction materials and labour charges, if the scheme
          is not ready within the time-frame~ then it is not possible
          to deliver the flats or houses in question at the cost so
          announced. It will be advisable that before offering the flats
          to the public such development authorities should fix the
H   4.   (1995) 3 sec 1.
KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD 41
  v. PRAKASH DAL MILL [SURINDER SINGH NIJJAR, J.]
      estimated. cost of. the flats taking into consideration the A
      escalation of the cost during the period the. scheme is to
      be completed. In the instant case the estimated cost for ·
      the LIG flat was giv~n out at Rs 45,000. But by the
      impugned communication, the appellant informed the
      respondents that the actual cost of the flat shall be B
      Rs 1, 16,000 i.e. the escalation is more than 100%. The
      High Court was justified in saying that in such
      circumstances, the Authority owed a duty to explain and
      to satisfy the Court, the reasons for suc'h high escalation .
     .We may add that this does not mean that the High Court           c
      in such disputes, while exercising the writ jurisdiction, has
      to examine every detail of the construction with refererice
      to the cost incurred. The High Court has to be satisfied
      on the materials on record that the Authority has not acted
      in an arbitrary or erratic manner."                           D

      17. These observations make it clear that the High Court
has the jurisdiction to satisfy itself on the material on record
that the authority has not acted in an arbitrary or erratic manner.
In our opinion, the High Court, in the present case, has not
acted beyond such jurisdiction. Ms. Suri then relied on the case       E
of Kanpur Development Authority Vs. Sheela Devi (Smt.) &
Ors. 5 In the aforesaid case, this Court reiterated the jurisdiction
of the High Court to satisfy itself, that there was material on
the record to justify the escalation of cost of a house/flat. The
Court can take notice as to whether the delay was caused by            F
the allottee or the authority itself. In our opinion, the judgment
of the High Court is within the parameters of the jurisdiction
vested in it under Article 226 of the Constitution of India.

    18. The Board being a State within the meaning of Article          G
12 of the Constitution of India is required to act fairly,
reasonably and not arbitrarily or.whimsically. The. gu~rantee of
equality before law or equal protection of the law, under Art!cle
14 embraces within its realm exercise of discretionary powers
s.   (2003) 12 sec 497.                                                H
    42        SUPREME COURT REPORTS                  [2011] 5 S.C.R.


A   by the State. The High Court examined the entire issue on the
    touchstone of Article 14 of the Constitution of India. It has been
    observed that the fixation of price done by the Board has
    violated the Article 14 of the Constitution of India. It is correctly
    observed that though Clause 7(b) permits the Board to fix the
B   final price of the demised premises, it cannot be said that
    where the Board arbitrarily or irrationally fixes the final price of
    the site without any basis, such fixation of the price could bind
    the lessee. In such circumstances, the Court will have the
    jurisdiction to ann1.1I the decision, upon declaring the same to
c   be void and non-est. A bare perusal of Clause 7(b) would show
    that it does not lay down any fixed components of final price.
    Clause 7(b) also does not speak about the power of the Board
    to revise or alter the tentative price fixed at the time of
    allotment. The High Court has correctly observed that Clause ·
    7(b) does not contain any guidelines which would ensure that
0
    the Board does not act arbitrarily in fixing the final price of
    demised premises. Since the validity of the aforesaid Clause
    was not challenged, the High Court has rightly refrained from
    expressing any opinion thereon.

E        19. Even though the Clause gives the Board an undefined
    power to fix the final price, it would have to be exercised in
    accordance with the principle of rationality and reasonableness.
    The Board can and is entitled to take into account the final cost
    of the demised premises in the event of it incurring extra
F   expenditure after the allotment of the site. But in the garb of
    exercising the power to fix the final price, it can not be permitted
    to saddle the earlier allottees with the liability of sharing the
    burden of expenditure by the Board in developing some other
    sites subsequent to the allotment of the site to the respondents.
G   The respondents have placed on record sufficient material to
    show that acquisition and development of land in the industrial
    area has been in phases. Some areas and segments are fully
    developed and others are in different stages of development.
    Sites and plots have been allotted at different times and
H   locations. Thus, it cannot be said that all the allottees form one
KARNATAKA INDUSTRIAL AREAS DEVELOPMENT BOARD 43
  v. PRAKASH DAL MILL [SURINDER SINGH NIJJAR, J.]
class. Earlier allottees having sites in fully developed segments A
cannot be intermingled with the subsequent allottees in areas
which may be wholly undeveloped. Such action is clearly
violation of Article 14. We are also of the opinion that the Board
can not be permitted to exercise its powers of fixing the final
price under Clause 7(b) at any indefinite time in the future after B
the allotment is made. This would render the word"'as soon as"
in Clause 7(b) wholly redundant. As noticed earlier, in the
present case, the Board has sought to fix the final price after a
gap of 13 years. Such a course is not permissible in view of
the expression "as soon as" contained in Clause 7(b).                   c
      20. In our opinion, the High Court correctly concluded that
the fixation of final price by the Board is without authority of law.
It violates Article 14 of the Constitution of India being arbitrary
and unreasonable exercise of discretionary powers.
                                                                        D
    21. In view of the above, we find no merit in these appeals.
The appeals are accordingly dismissed.

N.J.                                         Appeals dismissed.