Case Note & Summary
This appeal arose from an order of the trial court rejecting an application for temporary injunction in a suit for specific performance. The plaintiffs-appellants had entered into an agreement dated 30 August 2006 with defendant no.1, a builder, to purchase a flat for Rs.7,20,000/-. The agreement stipulated that Rs.5,00,000/- of the balance consideration was to be paid at the time of handing over possession, and Rs.1,50,000/- on completion of exterior painting and waterproofing. The plaintiffs also entered into a loan arrangement with defendant no.2 bank. When the bank failed to provide the loan, the builder insisted on full payment and threatened to dispose of the flat. The plaintiffs then filed a suit for specific performance against the builder and the bank, and sought temporary injunction to restrain the builder from creating third party interests. The trial court rejected the application, holding that the plaintiffs had failed to comply with paragraph 7 of the agreement, which set a timeline for completing terms within one month of registration. On appeal, the High Court held that the trial court misconstrued the contract. Reading paragraphs 5 and 7 together, the obligation to pay the balance became due only when the builder was ready to deliver possession. Since construction was only 80% complete and possession could not be handed over, the builder could not demand payment. The plaintiffs had also deposited the entire balance amount of Rs.6,50,000/- in court. The High Court further observed that the bank was a necessary party in such a suit. Accordingly, the appeal was allowed, the impugned order was set aside, and the builder was restrained from creating any third party interest or parting with possession of the flat pending the suit. The Civil Application was disposed of as the appeal itself was finally decided.
Headnote
A) Contract Law - Specific Performance - Interpretation of Payment Clause - Sale of Immovable Property - Payment Schedule Dependent on Possession - The balance consideration of Rs.5,00,000/- was payable at the time of handing over possession and Rs.1,50,000/- on completion of exterior painting and waterproofing - Builder not yet ready with possession - Held that builder cannot demand payment before completion and delivery of possession - Trial court erroneously relied on para 7 ignoring para 5 - Plaintiffs entitled to temporary injunction (Paras 5-7). B) Civil Procedure - Joinder of Parties - Necessary Party - Specific Performance Suit - Bank Providing Housing Loan - In a suit for specific performance of flat sale agreement, the bank providing finance is a necessary party, even if there is a grievance against the bank (Para 5).
Issue of Consideration
Whether the trial court erred in rejecting the application for temporary injunction on the ground that the plaintiff had failed to comply with the terms of the contract, and whether the plaintiff was entitled to injunction restraining the builder from creating third party interests.
Final Decision
Appeal allowed. Impugned order set aside. Defendant No.1 restrained from creating any third party interest and/or parting with possession of flat No.11 pending the suit. Rule made absolute. Civil Application disposed of accordingly.
Law Points
- Interpretation of contract: payment obligation becomes due only when seller is ready to deliver possession
- temporary injunction can be granted to protect subject matter of specific performance suit
- bank providing finance is necessary party in specific performance suit
