1999 PLP 296 (CLC)

(12) What should the decree be?"

4. One Muhammad Badruddin Siddiqui, Vice‑Chairman of the plaintiff, the defendants Nos. l, 4 and 6 entered the witness‑box and produced relevant documents in support of their respective contentions. Having consider the evidence and heard the learned counsel I proceed to record my issue-wise findings as under:‑‑

5. Admittedly the agreement, dated 30‑1‑1984 was made by the defendant No. 3 on strength of their agreement with defendants Nos. l and 2 (owners) dated 3‑12‑1983. Mr. Muhammad Shafi, Advocate for defendant No.6 and Mr. Khalid Dawoodpota for defendants Nos. l and 2 argued that the agreement, dated 3‑12‑1983 (Exh.7/1) was only described as an interim agreement and in any event did not confer any rights upon the defendant No.3 to enter into transaction for sale of the property. It has been pointed out that only authority conferred upon the defendant No.3 by the agreement, was to prepare and get lay out plans approved by the concerned authorities. On the other hand Mr. Muhammad Ali Jan and Mr. Ansar Hussain, Advocates for the plaintiff and defendants Nos.3 and 4 respectively, argued that the question of the authority of the latter ought, to be considered upon an over view of all facts and circumstances and not merely the terms of the agreement, dated 3‑12‑1983. Learned counsel contended that the owners had given all authorities to the defendant No.3 (intended purchaser) to prepare lay out plans, demarcate plots and dispose of the same. They relied upon the general power of attorney, whereby the defendant No.4 was granted, inter alia, the authority to book, sell, transfer, mortgage, or otherwise dispose of individual plots or blocks of land. It was further argued that the defendants Nos. 3 and 4 were acting as agents of the defendants Nos. l and 2 and agreements made by them were binding on the latter.

6. It is indeed correct that vast powers were conferred upon the defendant No.4 by the owners through the power of attorney dated 11‑6‑1984. The agreement sought to be enforced, however, was drawn up on 30‑1‑1984 and evidently at that time the defendant No.4 had no authority from owners to dispose of the property. Moreover, the agreement is executed by the defendant No.3, a corporate entity (though acting through its Managing Director i.e. the defendant No.4 whereas the power of attorney was given to the defendant No.4 in his personal capacity. It is settled law that a company is an independent legal person distinct from its share‑holders and therefore, the defendant No.3 could not claim any authority on the basis of that power of attorney. Moreover, in para. 3 of their written statement, the defendants Nos.3 and 4 have categorically asserted that the power of attorney in favour of defendant No.4 was cancelled.

7. Mr. Ansar Hussain, has also been (sic) to point out any relevant fact or refer to a principle of law whereby the defendant No.3 or 4 could be treated as an agent of the defendants Nos. l and

2. On the contrary in his deposition before the Court the defendant No.4 has expressly stated:‑‑

"It is a fact that the agreement of sale Exh.5/3 was executed by me on behalf of Full Range Enterprise Ltd. and not on behalf of owners of the land. It is also a fact that receipts Exhs.5/4 and 5/5 were issued by me not on behalf of owners of the land. "

8. Similarly P.W. Muhammad Badruddin Siddiqui, Vice‑President of the plaintiff has stated in his cross‑examination:‑‑

"I am aware that the defendants Nos. l and 2 are the actual owners of the land in question. The plaintiffs did not enter into any agreement with the defendants Nos. l and

2. It is true that the agreement (Exh.5/3) was executed by the defendants Nos.3 and 4 in their personal capacity and on their own ‑behalf. It is true that at the time of execution of the sale agreement there was an understanding between the plaintiffs and the defendants Nos.3 and 4 that in case the original owners decline to honour the agreement (Exh.5/3) of the defendants Nos.3 and 4 with the plaintiff, the defendants Nos.3 and 4 would refund amount received by them from the plaintiffs. No notice was even given by the plaintiffs to defendants Nos. l and 2 in respect of the agreement."

9. Evidently, apart from the fact that no privity of contract existed between the owners and the plaintiffs, and the legal position that the defendants Nos.3 and 4 were not acting as gents or trustees of the letter so as to create a binding obligation upon them, the above unequivocal statements of the parties to the agreement (Exh.5/3) were absolutely clear in their minds that the agreement could not give rise to any obligation on the part of the owner. It must, therefore, be held that the agreement is not binding on the owners.

10. The last paragraph of the agreement between the plaintiff and defendant No.3 (Exh.5/3) reads as under:‑‑ "That the party No. l in case of cancellation of the sale agreement with the original owners for any reason beyond the control of party No.1, the amount paid by party No. 2 shall have to be refunded forthwith." These stipulations have been affirmed and explained by the plaintiffs' witness in the excerpt from his deposition quoted in para.8 above. Its effect is two‑fold. In the first place it shows that parties had no doubt that in sale agreement between them was contingent upon the transfer of property by the owners in favour of the defendant No.3 and not otherwise and the owners had the legal power to cancel their agreement with the defendant No.3. This only fortifies the position that the plaintiffs could not seek specific performance against the owners. Secondly, in the event of the owners not transferring the property to defendant No.3, the plaintiff would only be entitled to claim refund of the money paid. However, instead of reconciling to the legal position and claiming refund from the said defendant, the plaintiff, by joining hands with the defendant have only claimed specific performance and on a per annum basis and not refund. Even at the stage of arguments Mr. Muhammad Ali Jan did not claim such relief, as understandably, the plaintiff was no longer interested in pressing his genuine claim against defendants Nos.3 and

4. Therefore, no relief can be granted on this score as well.

11. Evidently, the defendant No.3 could have entered into a contract for sale of property either if they were the owner of the same or had authority from the owner to make such contract. Admittedly they were not the owners and, as discussed above, did not even possess such authority from the owner at the relevant time. In his deposition as well the defendant No.4 has admitted that no power of attorney has been executed in his favour at the time of the agreement by the owners and that he had executed the agreement on behalf of the defendant No.3 and not the owners of the land, though Mr. Ansar Hussain has for reasons? best known to him taken an entirely contrary position during the course of agreements. This issue must, therefore, also be decided in the negative.

12. It is evident from the provision of para. 4 of the General Power of Attorney (Exh.7/3) dated 11‑6‑1984 that power to sell was conferred upon the defendant No.4, however, such power could only be exercised prospectively and under para. 15 the donors undertook to ratify whatever the attorney did "by virtue of this general power of attorney" and not any transaction made earlier. Evidently the donor of the power of attorney consciously chose not to ratify the agreement, dated 30‑1‑1984 and hence it must be held that the power of attorney did not authorise the transaction.

13. Since as discussed above there was no validly irrevocable contract in favour of the plaintiff, the plaintiffs' readiness and willingness to perform their obligations under the agreement become inconsequential.

14. Though it may not be strictly necessary to do so, since considerable arguments were addressed by the Advocates for the parties, and the questions involved are of sufficient general importance. I have decided to record my findings. Mr. Muhammad Ali Jan, Advocate for the plaintiff argued that the defendant No.6 was always aware of the equity of specific performance existing in favour of the plaintiff and referred to the evidence of defendant No.4 in support of his contention. Moreover, he contended that while the negotiations between the owner and the defendant No.6 admittedly took place through the defendant No.4 the sale‑deed was executed without informing the latter. No public notice was given inviting claims over the property which speaks of the mala fide conduct of the defendant No.6 as well as his failure to take reasonable care, He argued that mere denial on the part of the defendant No.6 as to the existence of a previous contract is not sufficient and the defendant was required to take reasonable care in ascertaining whether an equity of specific performance existing in favour of the plaintiffs. Failure to cause a public notice issued would at least show, even if the contention that the defendant No.6 had no notice the agreement, that he did not take reasonable care. In support of his contention learned counsel relied upon a judgment of the Lahore High Court in Abdul Rehman and others v. Noor Ahmad and others PLD 1974 B.J.

25. In this case Muhammad Afzal Zullah, J. (as His Lordship then was) observed, with reference to section 41 of the Transfer of Property Act, that protection to bona fide transferees in good faith, could be availed of only if such transferees, apart from payment value would be that:‑‑

(a) That he acted in good faith; , (b) That they had no notice of the original contract; and??? (c) In the above two aspects they took reasonable care.

15. The above principles, in the aforesaid case, were also applied in the context of section 27(h) of the Specific Relief Act and it was held that Specific Performance of Contract for sale of immovable property was also enforceable to a subsequent transferee not taking reasonable care.

16. Mr. Muhammad Shafi, learned counsel for the defendant No.6, however, relying upon the judgments of the Honourable Supreme Court in Mr. Khairunnisa and others v. Malik Muhammad Ishaque and others PLD 1972 $C 25 and that of Division Bench of this Court in Pak United Housing Enterprises v. Ramzan and others 1992 CLC 1678 argued that though onus to prove good faith and absence of notice of previous contract was on the subsequent purchaser but such onus stood discharged upon the transferees statement on oath that he had no such notice and shifted back to the plaintiffs. Moreover, even if the defendant No.6 had not taken reasonable care it could not be assumed that he did not act in "good faith" in view of section 3(20) of the General Clauses Act.

17. Having carefully considered the judgments cited at the bar and the relevant statutory provisions I am of the view that there is a distinction between the requirement of section 27(b) of the Specific Relief Act and section 41 of the Transfer of Property Act, it may be pertinent to quote the aforesaid Provisions, which read as under:‑‑-- "Section 27(b).‑‑ Any other person claiming under him by a title against subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract. " "

41. Transfer by ostensible owner.‑‑‑ Where, with the consent, express or implied, of the persons interested in immovable property, a person is the ostensible owner of such property and transfers the same for consideration, the transfer shall not be voidable on the ground that the transferor was not authorised to make it; provided that the transferee, after taking reasonable care to ascertain that the transferor had power to make the transfer, has acted in good faith."

18. It may be observed that under section 41 of the Transfer of Property Act when a person ostensibly being the owner of the property transfers the property for consideration to the transferee and such transfer is questioned on the ground that the transferor had no legal power to vacate the same, the transferee may be exempted from its consequences, provided, he establishes that he has taken reasonable care to ascertain the power of the transferor and has acted in good faith. This is known as the Caveat ‑ emptor Rule and requires the transferee apart from acting in good faith to take all reasonable care to apprise himself of any defect. in the transferor's title or clog on his power to effect the transfer. On the other hand, section 27‑B, of the Specific Relief Act contemplates that equity of Specific Performance may not be enforced against a person who has subsequently purchased the property and paid his money in good faith and without notice of the original contract. It may be observed that the duty to ascertain contemplated by section 41 of the Transfer of Property Act is not stipulated in the Specific Relief Act. Apparently, there is rationale for this difference. Under the Transfer of Property Act the purchaser can, with reasonable diligence, discover a defect in the plaintiffs' title or a legal clog on his power of disposition by making an inquiry from relevant public authorities. However, it is not possible to do so in cases here only agreements are sought to be enforced because no public records of mere agreements to sell properties are available and such agreement can indeed be oral as well. Therefore, by the mandate of Legislature the burden on the transferee under the Specific Relief Act is less onerous and Specific Performance against him can be refused if it is shown that he acted in good faith and was not aware of a pre‑existing equity in favour of some other person. Therefore, respectfully disagreeing with the view taken by the Lahore High Court and following the precedents of the Honourable Supreme Court and a Division Bench of this Court I am inclined to hold that the defendant No.6 was only required to prove that he was not aware of the agreement between the plaintiffs and the defendant No.3 at the time of execution of the sale‑deed.

19. The defendant No.6 stated on oath that he was not aware of any such agreement and the seller i.e. the defendant No.l has also stated the same. Learned counsel for the plaintiffs relied upon the deposition of the defendant No.4 who contended that he had informed the defendant No.6 about the agreement and by the agreement, dated 24‑7‑1985 the said defendant had undertaken to settle plaintiffs' claim. This agreement (Exh.6/2), however, was made on 24‑7‑1985 i.e. after the execution of the sale‑deed and does not show that the defendant No.6 had notice of the agreement, prior to the execution of the sale‑deed.

20. In view of my findings on the above issues the remaining issues have become immaterial. For the foregoing reasons this suit is dismissed.

21. In this suit Messrs Full Range Enterprises, the defendant No.3 in Suit No.566 of 1985 have sought cancellation of the sale‑deed dated 3‑6‑1985 between the original owners Moosa and Khamiso (defendants Nos.1 and 2 in Suit No.566 of 1985) and the purchaser M.A. Samad, the defendant No.6 in the earlier suit and defendant No.3 in this suit. According to the learned counsel for the parties the evidence in Suit No.566 of 1985 was to be treated as evidence in this suit. Mr. Muhammad Shafi, Advocate for the defendant No.3 has raised an objection that this suit is barred by limitation but according to the learned counsel the suit was required to be filed within three years of the execution of the sale‑deed i.e. on or before 2‑6‑1988, whereas the plant was presented on 29‑9‑1988. Mr. Ansar Hussain, however, contends that such plea was not taken in the written statement and the defendants are precluded from raising this issue in arguments. He further contends that in any event the plaintiff had no notice of the sale‑deed and has contended in para. 18 of the plaint the cause of action arose on 14‑12‑1987 when the plaintiff came to know that the defendants Nos. l and 2 had failed to perform their obligations under the contract with the plaintiff, executed the sale‑deed in favour of defendant No.3 and despite his agreement dated 24‑7‑1985 refused to refund the amount paid to other claimants. With respect to the first contention of Mr. Ansar Hussain it might sufficient to say that under section 3 this Court is bound to consider the question of limitation even though it has not been set out by way of defence. As regards the second arguments, it is true that there is no material on record to indicate that the plaintiffs were aware of the execution of the sale‑deed at the time of its execution and I am inclined to take the view that time would run from the date of their knowledge. However, the agreement, dated 24‑7‑1985 relied upon by the plaintiff itself shows that at least on that date the plaintiffs had become aware of the transaction and, therefore, the suit for cancellation of the sale‑deed should have been filed on or before 23‑7‑1988. This suit must therefore, be dismissed on the ground of being barred by limitation. H.B.T./R‑59/K???????????????????????????????????? ??????????????????????????????????????????????? Suits dismissed.