IN THE HIGH COURT OF
SINDH AT KARACHI
SUIT NO.208/2015
Plaintiff : Mirza Shakir Baig,
through
Mr. Asim Iqbal, advocate.
Defendants
: Miss Iffat Chughtai
& others,
through Mr. Khawaja Shamsul Islam, advocate.
Date of hearing : 15.01.2016.
Date of announcement : 22.03.2016
Through this judgment, I
am going to decide a legal controversy, arose regarding application of
plaintiff for return of earnest money (CMA No.1784/2015)
while that (statement of defendants) for decreeing the suit of the plaintiff to
extent of prayer clause(s) (i), (ii) and (v) only.
2. A brief reference to facts
of case, necessary to understand controversy, is hereunder:
The plaintiff filed a
suit for Specific Performance, Declaration, and Injunction & Damages with
following prayer(s):
(i).
Declaration that the final date for the
payment of sale is 15.01.2016 and the defendants are bound to correct the year
/ figure in the receipt dated 18.09.2014 as due to typographical mistake,
erroneously the figure 5 has been mentioned instead of figure 6.
(ii). Declaration that the defendants are liable to transfer/convey
the said property i.e. offices Nos.305, 306, 307 and
308, situated on third floor in the project AL-AMEERA CENTRE on plot No.150, Survey sheet AM, situated in Artillery Maidan Quarters, Saddar, Karachi to the plaintiff and the
plaintiff is entitled for the transfer/conveyance of the same to him, with
valid, subsisting and marketable title.
(iii). Direct the defendants to pay damages to the plaintiff to the
tune of Rs.500,00,000/-.
(iv). Injunction restraining the defendants from
transferring/conveying, alienating, charging, transferring mortgaging the said
property to any other person except to the plaintiff or his nominee.
(v). Specific performance directing the defendants to perform the
verbal contract conveying the said property to the plaintiff as agreed/refusal
to perform the contract direct the Nazir of this honourable Court to execute a
sale deed in favour of the plaintiff or his nominee in respect of the said
property i.e. offices Nos.305, 306, 307 and 308,
situated on third floor in the project AL-AMEERA CENTRE on plot No.150, Survey sheet AM, situated in Artillery Maidan Quarters, Saddar, Karachi.
ALTERNATIVELY
In
the event if the defendants are not
ready and willing to correct the date for the final payment i.e.
15.01.2016 as agreed earlier by the plaintiff and the defendants and
thereafter, this honourable Court is unable to pass a judgment and a decree for
the transfer/conveyance of the said property i.e. offices Nos.305,
306, 307 and 308, situated on third floor in the project AL-AMEERA CENTRE on
plot No.150, Survey sheet AM, situated in Artillery Maidan Quarters, Saddar, Karachi in favour of the plaintiff
then pass a judgment and decree for.
a. Not any agreement was entered between the plaintiff and the
defendants regarding the sale of suit property/offices Nos.305,
306, 307 and 308, situated on third floor in the project AL-AMEERA CENTRE on
plot No.150, Survey sheet AM, situated in Artillery Maidan Quarters, Saddar, Karachi.
b. Return / refund of Rs.25,00,000/-
(Rupees twenty five lakh) already paid in p[art
performance by plaintiff to the defendants with profit, interest, bank charges
at the rate of 20% per annum.
c. Damages in the sum of Rupees equal to the amount of agreed
consideration.
d. Cost of the suit.
e. Any other / further relief that this honourable Court may deem
fit and proper under the circumstances of the case.
3. Facts as stated are that
defendants are owners of offices Nos.305, 306, 307
and 308, situated on third floor in the project AL-AMEERA CENTRE on plot No.150, Survey sheet AM, situated in Artillery Maidan Quarters, Saddar, Karachi; plaintiff agreed to
purchase the same subject to payment of a total consideration of Rs.18,917,500/- in 16 months/up-to mid of January 2016;
that plaintiff paid an amount of Rs.25,00,000/- as
token money by three pay orders dated 17.09.2014 duly encashed by defendants;
that it was agreed that before singing sale agreement defendants will hand over
duly paid/cleared bills of utility and also NOCs clearance certificates from
concerned authorities and association of building that there are no
remonstrations, dues etc. but the defendants miserably failed to execute sale
agreement and settle terms and conditions which are necessary and also agreed
between the plaintiff and defendants for performance of contract, defendants
did not provide copies of paid bills of utilities nor NOCs and clearance
certificates; that instead of complying with requisite formalities, defendants
maliciously sent notice dated 14.1.2015 to plaintiff for cancellation of verbal
agreement and forfeiture of amount paid; defendants delayed execution of sale
agreement and correction of year / figure in receipt dated 18.09.2014 to usurp
the earnest money; that plaintiff relied said notice and defendants vide letter
dated 26.01.2015 admitted the contents of plaintiff’s reply dated 19.01.2015
that they avoided correction of the year/figure in receipt dated
September 18, 2014 for reasons as mentioned in plaintiff’s reply,
defendants not only stated that they had terminated verbal agreement of sale
but also forfeited the earnest money of Rs.25,00,000/-;
that due to this malafide act of defendants, plaintiff suffered great mental
torture, agony and is still sufferings the defendants have threatened that they
have cancelled so-called verbal sale agreement and forfeited the earnest money
paid by plaintiff, the plaintiff is claiming Rs.500,00,000/-
as damages from defendants jointly or severally.
4. Through application (CMA No.1784/2015) plaintiff prayed:
‘…… to direct the defendants to deposit the earnest / advance
money amount to Rs.25,00,000/- with the Nazir of this
Court, which they have received from the plaintiff in respect of the sale of
suit property i.e offices Nos……..
Furthermore, direct the Nazir of this Honourable Court to invest the same in a
profitable scheme till disposal of the suit.’
However, the defendants through statement
dated 15.01.2016 came with categorical statement that:
‘……. to decree the suit of the plaintiff in terms of prayers
(i), (ii), and (v) provided the plaintiff shall pay total sale consideration of
Rs.189,17,500/- (Rupees One Crore Eighty Nine lacs
Seventy thousands Five hundred) to the defendants within two weeks from today
as admittedly the earnest amount of Rs.25,00,000/- (Rupees
Twenty Five lacs) has already been deposited by the defendants with the Nazir
of this Court in compliance of order dated 23.4.2015’.
The filing of the above statement amounts
to an admission of the claim of the plaintiff to extent of his claim of agreement,
while the application of the plaintiff amounts to confining his claim to the
extent of recovery of earnest money only therefore, same are heard
together.
5. Learned counsel for
plaintiff inter alia contends that
since defendants have committed fraud, they being lawyers were legally bound to
disclose all the facts but they concealed that; in suit for administration
preliminary decree was passed and they were restrained from creating third
party interest inspite of that they entered into an agreement hence such
agreement is ab-initio void and can not be executed,
on these submissions already this Court by order dated 23.04.2015 directed the
defendants to deposit earnest money with the Nazir; that amount may be restored
back to the plaintiff as plaintiff does not want to purchase this property. It is further contended that in case agreement
was void there is series of decisions of apex Court and this Court that at any
stage Court can restore all the benefits to the plaintiff as received by
defendants in pursuance of subject matter agreement. On this proposition counsel
has relied upon PLD 2010 Karachi 17 (Haji Abdul Karim & others vs. M/s.
Florida Builders (Pvt.) Ltd, PLD 2009 Karachi 390 (Rashid Naseem through
attorney vs. Mrs. Amnia Fahim & others), 1989 MLD
4951 (Islamic Republic of Pakistan & others vs. Muhammad Afzal &
others), 1994 CLC 733 (Qureshi Muhammad Anwar & 6 others vs. S.A. Qureshi
& 3 others), 1979 CLC 321 (Eastern Federal Union Insurance Company Ltd vs. Bawany Industries Ltd, Karachi), 1999 YLR 797 (Sultan vs.
Muhammad Ramzan& another), 2009 SCMR 221 (Mustafa Kamal
& others vs. Daud Khan & Others), 2010 CLC
1879 (Muhammad Sabir vs. Maj (Rtd)
Muhammad Khalid Naeem Cheema & others).
6. On the other hand, learned
counsel for defendants vehemently opposed and has contended that instant
proposition is not applicable though restraining order was made, that was in
the knowledge of the plaintiff, in fact no agreement was signed, except by oral
understanding, the plaintiff paid earnest money having knowledge that suit for
administration is pending, subsequently such suit has been disposed of and
title is with defendants, they are ready to perform their part and suit may be
decreed.
7. I have heard the respective
parties and have also examined the available record. The proposition is
revolving around the application of Section 65 of the Contract Act hence the
same is referred hereunder for understanding and convenience:
“Obligation of person
who has received advantage under void agreement or contract that becomes void :
65. When an agreement is discovered to be void, or when a
contact becomes void, any person who has received any advantage under such
agreement or contract is bound to restore it, or to make compensation for it to
the person from whom he received it.”
The provision is plain in its language and
specifically about legal obligation of the person to restore or
compensate the person, from whom any advantage is received under a void agreement
or that agreement which becomes void. Before proceeding any further, it
would be just and proper to first understand the term ‘void’ defined
and discussed in the case, reported as 2011 SCMR 837, with reference to case
law (PLD 1976 SC 258) as:
There
is great looseness in the use of the words ‘void’ and ‘voidable’ and very often
they are used interchangeably. Nevertheless there is a clear distinction
between things ‘void’ and ‘voidable’ though the two terms are not
infrequently used without special regard for the difference or distinction
particularly where such distinction is of no consequence or where the attention
of the Court is not particularly directed to this distinction. The expression ‘void’ in the strict or accurate sense means
‘absolutely null’ that is to say incapable of ratification or confirmation and
of no effect whatever. The
word ‘voidable’ on the other hand is something which could be avoided or
confirmed and which is not absolutely void. In other words what is voidable has
some force or effect, but which may be set aside or annulled for some error or
inherent vice or defect. ‘ Thus that which is voidable operates to accomplish
the thing sought to be accomplished until the fatal vice in the transaction has
been judicially ascertained and declared’. A common place instance of a void act or transaction in the
sense of an absolute nullity is an agreement by a person under a legal
disability e.g a minor or a person of unsound mind. Such act is void ab initio and is
incapable of ratification or confirmation. Law forbids the enforcement of such
a transaction even if the minor were to ratify it after attaining majority. This
is clearly distinguishable from a case in which a thing or an act is
‘relatively void’ which the law condemns as wrong to the individual concerned
who can avoid it by appropriate proceedings. A common place instance of
such transaction is that which is brought about by undue influence, fraud etc, which remains of full effect unless avoided by appropriate
proceedings’
(Emphases provided)
8. In
the instant matter, it was not the first stand of the plaintiff that he
(plaintiff) was defrauded or that defendants had any legal disability at
the time of verbal agreement rather plaintiff himself had sought a
relief of Specific Performance whereby acknowledging competence and
status of the defendants. However, he (plaintiff) took such stand
later-on. At this point, it would be proper to refer the order dated 23.4.2015,
passed by this Court in this matter, which is:
“1-2) At the outset, learned counsel for the
plaintiff contends that defendants entered into an agreement with regards to
the subject matter property as contemplated in para No.2 of the plaint. They
received Rs.2.5 millions through pay order and
thereafter plaintiff came to know that on same property already suit No.1174/2011 was pending and in that suit, injunction was
granted by order dated 04.11.2011 whereby the defendants were restrained from
creating any third party interest; thus, they have committed forgery,
therefore, the amount received by them till further adjudication may be
deposited with the Nazir.
On the other
hand, learned counsel for the defendants contends that…… but plaintiff failed
to comply with such part of agreement, hence they have forfeited such amount.
Since, learned
counsel for the defendants has filed application under order VII Rule 11 CPC,
it appears that in suit for administration, injunctive order was in
existence and defendants sold out subject matter property during that period,
thus, in peculiar circumstances, when parties are contesting their case,
judicially proprietary demands defendants shall deposit earnest money of Rs.2.5 millions with the Nazir within one month. Nazir
is directed to invest the same in government profitable scheme. This order
would be subject to outcome of this suit; consequently both applications are
disposed of. Needless to mention that entitlement of this amount would be
subject to final judgment of this suit.”
(emphasis
supplied).
The plaintiff
pleads the act of concealment of injunctive order as ‘fraud’ which, per
plaintiff, is sufficient to bring the agreement within meaning of ‘void’.
I do not find myself in agreement to accept such proposition because, if
accepted, it shall eliminate the object, scope and purpose of ‘voidable’ &
‘contingent contract’. The act of vendor, in no case, prejudice
to the rights of the vendee to seek enforcement of his rights, including
one of specific performance if vendor earns title even at later stage or
recovery of compensation etc , if the vendor fails in perfecting title of the
vendee, if there was a fixed time for such purpose. An ‘injunctive
order’ , in law, does not hold the status of a ‘decree’ therefore,
in no way, an ‘injunctive order of restraining one from creating third party
interest’ shall make the agreement ‘void’ unless the vendor was not
legally competent to enter into a contract at such time or was subsequently
declared so. Further, the Contract Act or any other law does not specifically
restrain a competent party in a lis even to
enter into a contract except those, falling within meaning of Section 36
of Contract Act which reads as:
‘Agreement contingent on impossible events void. Contingent agreements to do or not to do anything, if an
impossible event happens, are void, whether the impossibility of the event is
known or not to the parties to the agreement at the time when it is made.
In short, meaning of term ‘void’ cannot
be expanded to one’s own suiting or choices but it shall remain confined to
those acts / transactions which are absolutely ‘null’ that is to
say incapable of ratification or confirmation and of no
effect whatever because no rights and liabilities can be attached
or arise out of a void contract. Thus, I would conclude that
such act of concealment of pendency of suit or passing of an injunctive order
may operate as ‘voidable’ and not ‘void’.
9. Let’s examine the same
stand with reference to term ‘fraud’ which has been defined by Section
17 of the Contract Act, 1872 itself as :-
‘Fraud’ defined. ‘Fraud’ means and includes any of the
following acts committed by a party to a contract, or with his connivance, or
by his agent, (Compare S. 238, infra) with intent to deceive another
party thereto or his agent, or to induce him to enter into the
contract:-
1) The suggestion, as a fact, of that which is not true, by one
who does not believe it to be true;
2) The active concealment of a fact by one having knowledge or
belief of the fact;
3) A promise made without any intention of performing it;
4) Any other act fitted to deceive;
5) Any such act or omission as the law specially declares to be
fraudulent;
Explanation. Mere
silence as to facts likely to affect the willingness of a person to enter into
a contract is not fraud, unless the
circumstances of the case are such that , regard being had to them, it is the
duty of the person keeping silence to speak, (See S. 143, infra) or unless his
silence is in itself, equivalent to speech.
A perusal of this
definition makes it clear that the main ingredient of ‘fraud’ is the intention
to deceive or to induce a person by misrepresentation or active concealment to
enter into a contract on a false belief. (para-6, PLD 1977 Lah. 1377). It is also a matter of record that the
defendants served the plaintiff with a legal notice dated 14th
January, 2015 wherein concluding that:
“……therefore, in view of the above facts, circumstances and
legal position, if you failed to pay the balance amount on or before 15th
January, 2015, the receipt dated 18th September, 2014 containing the
terms and conditions should be revoked for all times and the earnest amount
received by us would stand forfeit and we should be well within our right to
sale out the property to any third party.
However, you are requested to please make
arrangement for payment of balance amount and produce before us the draft sale
deed of each office premises so that the transaction be completed immediately.
(emphasis supplied)
The above act of
the defendants was / is prima facie sufficient to establish that their
act of entering into contract was not with an intention to deceive the
plaintiff but they were ready to perform their part subject to payment of
remaining consideration by the plaintiff as was / is their obligation within
meaning of Section 37 of the Act. A silence or concealment of some immaterial
fact (not prejudicing Section 10 of the Contract Act) shall not qualify the
term ‘fraud’ more particularly when it does not stand in the way of
performance of contract in due discharge of obligations of respective
parties. Further, the act of serving
said notice was even otherwise sufficient to establish that contract was
/ is perfect and defect, if any, after such notice was no more available
with the plaintiff to use as an excuse to avoid his obligations, falling upon
him within meaning of Section 37 of the Act. Reference to the case of Pakistan
Industrial Development Corporation v. Aziz Qureshi (PLD 1965 (W.P)
Karachi 202, wherein it is held that:
‘It is true that there is no principle of natural justice
involved in canceling the contracts for an alleged breach, but it is also a
settled principle that where a particular breach in a contract can be remedied
without any corresponding injury to any person, a reasonable notice should be
given to remedy it.’
(emphasis supplied)
Further, the Section 10 of the Contract
Act, 1872 states that all agreements are contracts if they are made with the
free consent of the parties competent to contract for lawful consideration and
with a lawful object and are not expressly declared in the Act to be void. In
the instant case, it is never the claim of the plaintiff that defendants
are/were not competent to enter into contract; agreement was without free
consent or that consideration of same (agreement) is illegal hence within
meaning of the Section 10 of the Act, the agreement was / is valid and
legal hence I find myself quite safe in saying that this plea of the plaintiff
is of no help for him to take silence of the defendants in disclosing fact of injunctive
order as sufficient enough to declare the agreement as ‘void’ particularly
when agreement is still capable of enforcement and vendors are agreed for doing
so.
10. In view of above discussion, it
is pertinent to conclude that before insisting the provision of Section 65 of
the Act one shall be required to establish that either agreement, at its
time of execution, was void or it (agreement) became void subsequently
i.e absolutely ‘null’, which is not
the case in hand.
11. At this point, it is germane to
mention that the law has nowhere left the vendor from a right in the
event where vendee avoids his obligation while insisting restoration of
advantage (earnest money) from vendor as it shall amount to place the vendee
at an advantageous place which the law does not permit. The Section 38 of
the Contract Act specifically addresses such situation while saying :
‘Effect of refusal to accept offer of performance. Where a promisor has made an offer of
performance to the promisee, and the offer has not
been accepted, the promisor is not responsible for
non-performance, nor does he thereby lose his right under the contract.
The later provision of said Act i.e Section 39 speaks about the ‘effect of refusal of
party to perform promises wholly’ which
includes a right of ‘forfeiting the earnest money’ within meaning of Section 55
of the Act. In the instant matter, the defendants did communicate their
intention to perform their part while requesting the plaintiff to place draft
deeds for immediate execution thereof but it was avoided by the plaintiff.
In the
case of West Pakistan Tanks Terminal (Pvt.) Ltd. V Collector (Appraisement)
2007 SCMR 1318, it is held that:
‘10. (sic) The law
is well-settled that one cannot be allowed to take advantage of his wrong
act or fraud played by him and in fact applying the law applicable to
the lawfully taking away of consignments from the bonded warehouse, if applied
in such cases, would amount to placing a premium on the fraud played by an
importer involved in the act of smuggling.
(emphasis supplied)
In case of Sheikh Allah Rakha v Sheikh Muhammad Yousaf
(1990 MLD 1592), it is held that:
“15. Having concluded about the ownership rights of Allah Rakha the next question worth notice is as to whether the
provisions of Cantonments Act or Rules can be construed having force of embargo
on the right of Allah Rakha to make further transfer.
The contracts are formed under the provisions of Contract Act. Section 10 of
the Contract Act states that all agreements are contracts if they are made with
the free consent of the parties competent to contract for lawful consideration
and with a lawful object and are not expressly declared in the Act to be void.
Section 23 ibid provides inter alia that the consideration or object of an
agreement is lawful unless it is forbidden by law or is of such nature that if
permitted it would defeat the provisions of any law.”
“19. The question remains as to whether in such a circumstance
the respondent / plaintiff was entitled to refund of the earnest money. There
is no dispute with the proposition that earnest money is the part of purchase
price when the transactions move on. It is forfeited when the contract is
breached by reason of fault or failure on the part of vendee. (Kunwar) Chiranjit Singh v Har Swarup AIR 1926 PC 1 is
authority for the aforenoted proposition. The same
rule was followed in the Trustees of Karachi v. Ghulam Ali Habib Rawjee PLD 1961 Kar. 625.
(emphasis supplied)
In case of ‘Bashir Hussain Siddiqui v
PAN Islamic Steamship Co. Ltd. PLD 1967 Kar. 222’
it is held that:
‘In these circumstances the plea of the tonnage capacity of the
shop appears to be an after thought. However, this circumstance by itself
would not absolve the respondents to establish that they were always ready and
willing to perform their part of the contract. In law, unless this
fact is proved, a party is not entitled to claim any damages.
(emphasis supplied)
12. It
is a matter of record that the plaintiff at no times submitted draft
deeds nor showed his readiness to take title subject to payment of
remaining consideration, hence he (plaintiff) in absence of such stand legally
cannot take an exception to his own obligations. Moreover, plaintiff avoided
his obligation with reference to plea of some oral understanding
regarding payment of remaining consideration in 16 installments upto 15th
January, 2016 and not upto 15th January, 2015 as mentioned in
the receipt which legally cannot be accepted and even trial of such
issue would not change the facts that:
i)
date is
categorically mentioned as on or
before 15th January , 2015;
ii)
the
plaintiff, at no times (prior to service of notice of
defendants) took such plea of incorrect mentioning of date for completion of
agreement;
At this juncture, a reference to ‘receipt’
being material is made hereunder:-
‘Received from Mirza Shakir Baig the sum of Rs.25,00,000/-…………………
admeasured 3290 square feet or thereabout which we have agreed to sell for a
total consideration of Rs.189,17,500/- for all
aforementioned three offices worked…. All the balance sale consideration of
these three offices and two car parkings, amounting
to Rs.1,65,37,500/- will be paid on or before 15th
January , 2015 at the time of signing of sale agreements and related documents
/ sale deeds before the concerned sub-registrar, Karachi in favour of the
nominee …… All upto-date dues, property tax, water & sewerage tax, KMC
utility bills….. shall be cleared by us / sellers, including obtaining all
necessary N.O.Cs, from the concerned departments. …’
The receipt, no where, speaks about
payment of ‘remaining consideration’ in installments therefore,
it shall not change the position. The operative part of the case of Elahi Bakhsh v. Muhammad Iqbal 2014
SCMR 1217 , being relevant to make such point clear, is referred
hereunder:
‘The question that arises for the adjudication of this Court
is whether an oral statement of a party to an instrument which varies or tends
to vary its terms could be admitted into evidence? The answer to this
question is a plumb no because Article 103 of Qanun-e-Shahadat Order 10 of 1984 excludes oral statement as
between the parties to any such instrument or their representatives. The rationale behind this Article is that
inferior evidence is excluded in the presence of superior evidence that an
agreement finding expression in writing is an outcome of deliberate and well
thought out settlement; that a party acknowledging a fact in writing is
precluded to dispute it an that an agreement reduced into writing is immune
from mischief, failure and lapse of memory. It, therefore, follows that oral statements of P.Ws 1 and P.Ws 2
which tend to vary the terms of the deed mentioned above are inadmissible in evidence.
No conclusion could be drawn much less a judgment rendered on the bass of these
statements. If these statements are excluded, we are left with bare words of
the respondent. Bare words, we afraid, cannot dislodge the presumption of truth
attached to a registered deed. Any finding based on such statements is no
finding in the eye of law.
8. The argument that application of this
Article can be attracted to the instrument executed between the parties to the
litigation and not their witnesses being against the letter and spirit of the
Article cannot be given any weight when the Article clearly provides ‘that
no evidence of any oral agreement or statement shall be admitted as between the
parties to any such instrument or their representative in interest for the
purpose of contradicting, varying , adding to or subtracting from its terms’.
(emphasis supplied)
Thus, suffice to say that in peculiar
circumstances of the instant case, the plaintiff is not entitled for
restoration of earnest money.
13. Without prejudice to above, as
the defendants still standing by their statement, in question, which
does qualify an admission to the claim of the plaintiff to extent of
agreement and such readiness of the defendants to perform their obligations
even stands till date (much later to that of 15th January, 2016)
which the plaintiff claimed to be target date . Therefore, I find it in
all fairness to decree the suit of the plaintiff to extent of prayer clause
(i), (iii) and (v) while dismissing the suit for rest of the prayers, but with note
of caution that plaintiff shall have to obtain the clear title within a period
of ‘one month’ and failure shall result in forfeiture of earnest money
which, being deposited with Nazir, shall be returned to the defendants without
notice to plaintiff. However, the failure of defendants to make title of
plaintiff perfect on payment of remaining consideration shall result in
restoration of such earnest money to plaintiff without prejudice to other
available legal remedies. Accordingly Suit is decreed. Let such decree be
drawn.