Supreme Court - The Authority owed a duty to explain and to satisfy the Court, the reasons for such high Cost escalation.

In the Matter of  Indore Development Authority vs Smt. Sadhana Agarwal & Ors 1995 SCC (3) 1, JT 1995 (3) 1  decided on 7 March, 1995 before Supreme Court of India

The Apex court held that " It is well known -that persons be- longing to Middle and lower Income Groups, before registering themselves for such flats, have to take their financial capacity into consideration and in some cases it results into great hardship when the development authorities announce an estimated or approximate cost and deliver the same at twice or three of the said amount."

it also observed that " 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 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 estimated cost of the flats taking into consideration the 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 given out at Rs.45,000/-. But by the impugned communication, the appellant informed the respondents that the actual cost of the flat shall be 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 such high escalation"

Escalation Cost in the Event of Delayed Possession are to be borne by the builder only

In the Matter of  Brig. (Retd.) Kamal Sood V/s DLF Universal Ltd.(FA /557 /2003)  Date of Order 02.04.2007 The NCDRC observed that

         “it was the duty of the builder to plan in advance, obtain necessary permission and thereafter, promise to deliver the possession of flat in the stipulated time. It is unfair trade practice on the part of the builder to collect money from the prospective buyers without obtaining the required permission.Secondly, in such a case, if there is any express promise that the premises would be delivered within the stipulated time, and, if not done so, escalation cost is required to be borne by the builder.”