Karnataka HC Leaves Couple Free To Contest ₹17.44 Lakh Interest Demand For Missing 36-Month Home-Building Deadline In Appropriate Forum

The petitioners obtained a composite housing loan of ₹1 crore from the erstwhile Vijaya Bank, comprising ₹50 lakh for purchasing a site and ₹50 lakh for construction.

Only the site-purchase component was disbursed.

The loan sanction required construction to be completed within 36 months from the first drawal for the site, failing which the bank could charge commercial interest from the date of first release.

The petitioners did not construct, citing BDA-related litigation, the COVID-19 pandemic and other circumstances beyond their control; they sought to close the loan without commercial interest.

The bank demanded ₹17,43,906 as commercial interest for the period from 24 May 2018 to 31 January 2024.

The petitioners challenged the demand and sought consideration of their representations under Articles 226 and 227 of the Constitution.

Article 226 jurisdiction is discretionary; although the existence of a contractual dispute is not an absolute bar to writ jurisdiction, the Court may decline to exercise it where resolution requires determination of disputed facts and an appropriate alternative forum is available.

Section 56 of the Indian Contract Act, 1872, was invoked by the petitioners in support of their contention that circumstances beyond their control made construction impossible; the Court did not determine the provision’s application to the case, observing that this required examination of the facts, the nature of the obligation and the contractual terms.

The loan sanction’s express condition provided for commercial interest from the date of first release if construction was not completed within 36 months.

The Court found that the sanction memorandum expressly set a 36-month construction deadline and stipulated the consequence of non-compliance: commercial interest from the date of first release.

Whether the BDA litigation, pandemic and other circumstances made performance impossible or merely delayed it, and whether Section 56 applied, required factual and contractual examination that the Court considered unsuitable for determination in these writ proceedings.

Given the contractual nature of the dispute and the availability of an appropriate forum, the Court declined to exercise its writ jurisdiction.

It reserved liberty to the petitioners to approach the appropriate forum, including to raise their contention that circumstances beyond their control prevented construction.