Case Note & Summary
The appeals arise from a common order dated 28.06.2016 passed by the City Civil Court, Mumbai, rejecting the Notice of Motion filed by the appellants (shop purchasers) seeking interim injunction restraining the respondents (builders/developers) from dealing with, disposing of, alienating, assigning or creating third party rights in respect of certain shop premises in the proposed construction of Building No.8. The appellants are purchasers of shops under the Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, 1963 (MOFA). By an agreement dated 27.01.1992, the respondents agreed to allot a shop admeasuring 290 sq. ft. (carpet area) on the ground floor of the new building on ownership basis at a lumpsum cost of Rs.10,000/-, payable Rs.5,000/- at the time of agreement and the balance Rs.5,000/- at the time of possession. The agreement also provided for liquidated damages of Rs.5,00,000/- if possession was not delivered by 31.12.1992. The appellants paid the initial amount but the respondents neither delivered possession nor paid the liquidated damages. The appellants filed a suit for specific performance and damages, and sought interim injunction. The trial court rejected the motion, holding that the appellants had an alternative remedy of liquidated damages and that no prima facie case was made out. The High Court, hearing the appeals, noted that the agreement was under MOFA and created a charge on the property under Section 10 of the Act. The court found that the appellants have a strong prima facie case, balance of convenience is in their favour, and they would suffer irreparable loss if injunction is not granted. The court allowed the appeals, set aside the trial court order, and granted interim injunction restraining the respondents from alienating or creating third party rights in the suit shop premises pending the suit. The court clarified that the respondents may proceed with construction but cannot create third party rights over the suit shop.
Headnote
A) Property Law - Interim Injunction - Prima Facie Case - Agreement for Sale - The appellant purchasers entered into an agreement with the builder-respondents for allotment of shop premises on ownership basis under the Maharashtra Ownership Flats (Regulation of the promotion of construction, sale, management and transfer) Act, 1963 (MOFA). The agreement created a charge on the property in favour of the purchasers. The trial court rejected the notice of motion for interim injunction. On appeal, the High Court held that the purchasers have a strong prima facie case, balance of convenience is in their favour, and they would suffer irreparable loss if injunction is not granted. The court allowed the appeals and granted interim injunction restraining the respondents from alienating or creating third party rights in the suit shop premises. (Paras 6-10) B) Property Law - Charge under MOFA - Section 10 - The agreement dated 27.01.1992 between the appellant and respondents, being in respect of a flat/shop under MOFA, creates a charge on the property under Section 10 of the Act. The purchasers have paid part consideration and are ready and willing to pay the balance. The builder's failure to deliver possession or pay liquidated damages does not extinguish the purchasers' rights. The charge continues and the purchasers are entitled to protect their interest by way of injunction. (Paras 6-8) C) Civil Procedure - Interim Injunction - Balance of Convenience - The respondents have not disputed the agreement or receipt of part payment. The suit is for specific performance and damages. If injunction is not granted, the respondents may alienate the property to third parties, rendering the suit infructuous. The balance of convenience is in favour of granting injunction as the respondents can still proceed with construction but cannot create third party rights over the suit shop. (Paras 9-10)
Issue of Consideration
Whether the appellant shop purchasers are entitled to an interim injunction restraining the respondents from dealing with, disposing of, alienating, assigning or creating third party rights in respect of the suit shop premises pending the suit.
Final Decision
Appeals allowed. The order dated 28.06.2016 passed by the City Civil Court, Mumbai is set aside. The Notice of Motion is allowed. The respondents are restrained by way of interim injunction from dealing with, disposing of, alienating, assigning or creating third party rights in respect of the suit shop premises in the proposed construction of Building No.8, pending the hearing and final disposal of the suit. The respondents are at liberty to proceed with the construction but cannot create third party rights over the suit shop.
Law Points
- Interim injunction
- Prima facie case
- Balance of convenience
- Irreparable loss
- Charge under Section 10 of MOFA
- Specific performance
- Liquidated damages
