Case Note & Summary
The present dispute arose out of a flat in the Oberoi Splendor project at Andheri, Mumbai. The plaintiff, a practising advocate, filed a suit seeking a declaration that her allotment of the suit flat was valid and subsisting, that the builder’s termination of the allotment was illegal, and that subsequent agreements with third parties were void. Simultaneously, she took out a Notice of Motion for appointment of a receiver and an injunction to restrain the defendants from alienating or encumbering the flat.
The facts reveal that the suit flat was originally booked by defendant no. 2 in August 2006 with defendant no. 1, a well-known builder. Defendant no. 2 made an initial payment and was issued an allotment letter on 30 October 2006. The letter contained clauses making time of payment essential and providing for automatic termination if payment was not made within seven days of a demand notice. Despite demand notices in March and April 2007, defendant no. 2 failed to pay the next instalment. Thereafter, defendant no. 2, along with the plaintiff’s husband who is an estate agent, approached the builder and expressed her inability to make further payments. She requested that the allotment be transferred to the plaintiff. A power of attorney was executed, and the plaintiff paid transfer charges to the builder. On 30 April 2007, the builder issued a fresh allotment letter in favour of the plaintiff, incorporating the same terms and conditions.
Matters took a turn when, in July 2007, the advocate for defendant no. 2 wrote to the builder alleging that the transfer was fraudulent, that the plaintiff’s husband had forged documents and acted without defendant no. 2’s consent. The builder replied, expressing shock and narrating the sequence of events leading to the transfer. Correspondence continued, and defendant no. 2 even filed complaints with the CID. The plaintiff, meanwhile, made some payments but later insisted that the builder execute a sale agreement before she would make further payments. The builder, in turn, insisted that the plaintiff and defendant no. 2 resolve their inter se dispute before it would execute any document.
The builder eventually terminated the allotment by its letter dated 8 November 2011. It then entered into an agreement with defendant no. 3 on 25 November 2011 for the sale of the same flat. Defendant no. 3 subsequently transferred the flat to defendants nos. 4 and 5 by an agreement dated 12 July 2012. The plaintiff thereupon filed the present suit and the Notice of Motion.
The core legal issues centred on the validity of the transfer of allotment in the face of the fraud allegations, the builder’s right to terminate for non-payment, and the protection available to subsequent purchasers. The plaintiff argued that the termination was wrongful and that the allotment in her favour was still valid. The builder contended that there were defaults in payment and unresolved disputes. Defendant no. 2 alleged fraud. The court considered the factual background and the contractual terms of the allotment letter, which stipulated automatic termination on default. The submissions and arguments of all parties were recorded. The judgment on the Notice of Motion was reserved on 21 February 2014 and pronounced on 4 June 2014, but the operative portion and the court’s reasoning are not available in the text provided.
Issue of Consideration
Whether the allotment of the suit flat in favour of the plaintiff was valid and subsisting; whether the termination of the allotment by defendant no. 1 was wrongful; whether the subsequent agreements were illegal and void; whether the plaintiff is entitled to appointment of receiver and injunction
Law Points
- Time for payment of each instalment is essence of contract in flat purchase agreements
- automatic termination of allotment upon failure to pay after notice
- transfer of allotment permissible with builder's consent subject to terms
- builder cannot be compelled to execute sale deed when inter se disputes exist between original allottee and transferee
Case Details
2014 LawText (BOM) (06) 73
Notice of Motion No. 668 of 2012 in Suit No. 641 of 2012
Plaintiff in person; Dr. Birendra Saraf, Mr. Rohan Savant, Mr. Rupesh Geete, Ms. Kalyani Shukla, Ms. Bhagwati Raghani, Mr. Satyendra Kumar for Defendant No.1; Mr. O.R. Tiwari for Defendant No.2; Mr. Gaurav Joshi, Senior Advocate, Mr. Yogesh Adhia for Defendant No.3; Mr. Naushad Engineer, Mr. Dinesh Pednekar, Mr. Malcolm Siganporia for Defendant Nos. 4 and 5
M/s. Oberoi Constructions Ltd., Chandrika Gupta, Defendant No.3, Defendant Nos. 4 and 5
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Nature of Litigation
Civil suit for declaration and injunction. Notice of Motion for appointment of receiver and injunction.
Remedy Sought
Appointment of receiver over suit flat; injunction restraining defendants from alienating, encumbering or creating third party rights, or in alternative, another flat.
Filing Reason
Plaintiff claimed that the termination of her allotment by defendant no.1 was wrongful and that subsequent agreements with defendant no.3 and defendants 4-5 were void; she sought to protect her rights over the flat.
Previous Decisions
No previous orders mentioned. The present order disposes of the Notice of Motion.
Issues
Validity and subsistence of the allotment of the suit flat in favour of the plaintiff
Legality of the termination of allotment by defendant no. 1
Whether the agreement dated 25 November 2011 between defendant no. 1 and defendant no. 3 and the agreement dated 12 July 2012 between defendant no. 3 and defendants 4 and 5 are illegal and void
Entitlement of plaintiff to appointment of receiver and injunction
Submissions/Arguments
Plaintiff contended that the allotment in her favour was valid and she had made payments as required; termination was unjustified.
Defendant no. 1 argued that the plaintiff defaulted in payments and there were unresolved inter se disputes between plaintiff and defendant no. 2, who had alleged fraud by plaintiff’s husband; termination was in accordance with terms of allotment.
Defendant no. 2 claimed that the transfer of allotment to plaintiff was effected fraudulently by plaintiff’s husband without her consent, and sought cancellation of the transfer.
Defendant no. 3 and defendants 4 and 5 claimed to be bona fide purchasers for value without notice of any fraud.
Judgment Excerpts
Clause 5 : It has been agreed that the time for payment of each instalment is of essence of contract.
It is further agreed that you shall make payments due to us, immediately on receipt of the demand notice and if payment is not made pursuant thereto, then we shall give you 7 (seven) days notice within which you shall be required to pay the amount demanded with interest on outstanding payment @ 2% (two percent) per month, from the due date till the date of actual payment and if you fail to do so then this allotment shall automatically come to an end.
Defendant No.2 along with Mr. Santosh Pathak (Estate Agent and husband of Plaintiff) approached Defendant No. 1 and represented that Defendant No.2 was not in a position to make further payments and therefore she was desirous of cancelling/selling/disposing of her allotment.
On 2 nd July, 2007, Defendant No.1 received a letter from the Advocate of Defendant No.2 stating that Mr. Santosh Pathak has forged documents, made false representations to Defendant No.1 that he was acting on behalf of Defendant No.2 and had caused Defendant No.1 to transfer the suit flat in the name of the Plaintiff who happens to be the wife of Mr. Santosh Pathak.
Procedural History
In August 2006, Defendant No.2 booked the suit flat with Defendant No.1 and made initial payments. An allotment letter was issued on 30 October 2006. Defendant No.2 defaulted on further payments despite demand notices. In April 2007, Defendant No.2 requested transfer of allotment to the Plaintiff, and a Power of Attorney was executed. On 27 April 2007, the Plaintiff paid transfer charges to Defendant No.1. On 30 April 2007, Defendant No.1 issued an allotment letter in favour of the Plaintiff. In July 2007, Defendant No.2 alleged fraud through her advocate, contending the transfer was without her consent. Correspondence ensued between the parties. The Plaintiff sought execution of a sale agreement, but Defendant No.1 insisted on resolution of the dispute with Defendant No.2. On 8 November 2011, Defendant No.1 terminated the allotment. Subsequently, Defendant No.1 entered into an agreement dated 25 November 2011 with Defendant No.3, and Defendant No.3 transferred the flat to Defendants 4 and 5 by agreement dated 12 July 2012. The Plaintiff filed Suit No. 641 of 2012 and took out the present Notice of Motion No. 668 of 2012 seeking interim relief.
