SC disapproves judicial interference in cost-based projects

NEW DELHI: Disapproving judicial interference in cost-based projects, the Supreme Court has said that courts should not readily grant interim orders staying self-financing scheme (SFS) projects as it would have a cascading effect on its total cost economics.

"Time has come when the Courts should be slow in interfering at interim stage with schemes which are based on costing," a Bench comprising Justice Arijit Pasayat and Justice S H Kapadia said in a recent judgment allowing an appeal by Madhya Pradesh Housing Board.

A trial court in Madhya Pradesh restrained the Board from collecting more money than the estimated cost of a showroom as advertised in a newspaper.

The Board had demanded almost twice the estimated cost from the allottee citing escalation in prices. The allottee had blamed the Board for not completing the project in time and pleaded that it should be restrained from asking for additional money.

Justice Kapadia, writing for the Bench, said "India has a cost-push economy. In a self-financing scheme based on costing, an interim injunction has a cascading effect. Failure on the part of even one contributory in contributing the amount to the cost results in total failure of the scheme.

"The developer, like the Board, makes an initial investment by borrowing funds from the market. Therefore, an interim injunction at the initial stage of the project would result in the total collapse of the entire project. It would also affect the contributions made by other co-purchasers," he said.