CAG rejects argument about a mutual understanding

The Karnataka Housing Board (KHB) suffered a loss of more than Rs. 7.2 crore owing to its failure to correctly measure the floor area of buildings it rented out in a prime location in Bangalore.

One of the pre-requisites for renting out properties owned by state-owned boards and corporations is that the floor area of the buildings should be correctly measured and incorporated in the agreement.

However, the KHB did not follow this practice while renting out its buildings in the Combined Board Administrative Building Complex in Bangalore to 18 organisations including banks, Indian Airlines, State and Central government departments and private organisations. The board periodically renewed the agreements without correcting this flaw till October 2009.

No checking

Official records available with the Comptroller and Auditor General of India (CAG) revealed that the KHB neither checked with the approved plan of the building nor measured the premises.

As per the latest report of the CAG, when the KHB measured the premises later, it was revealed that except in the case of five organisations, the floor areas incorporated in the agreement with other occupants was far lower than the actual floor area.

The report said the KHB sent notices to all the occupants demanding higher rent retrospectively from October 2009.

But only one organisation paid higher rent and the remaining did not execute fresh agreements to facilitate recovery of higher rent.

While the board sustained a loss of Rs. 5.93 crore up to September 2009 due to the inclusion of a lower floor area in the agreements with 13 organisations, it could not enforce recovery of differential rent aggregating to Rs. 1.39 crore from 12 organisations even retrospectively from October 2009 due to its failure to enter into fresh agreements.

The CAG rejected the State government’s contention that the organisations had requested the board at the time of entering into the agreements not to consider common areas like steps, veranda while calculating the rent. The government said the reduced area was included in the agreements after mutual understanding.

The report pointed that a scrutiny of the official notices on the file related to the case showed that though there was a reference to the mistake initially, it said nothing about the mutual understanding.