2004 PLP 1084 (SCMR)

IFTIKHAR MUHAMMAD CHAUDHRY, J.

This appeal has been filed against the judgment, dated 3rd May 2001 passed by Lahore High Court, Rawalpindi Bench, Rawalpindi, whereby R.S.A. No.23 of 1988 filed by respondent No. 1 has been allowed and judgment/decree, dated 14th December 1987 passed by the District Judge, Sialkot has been set aside as a result whereof judgment/decree, dated 31st May 1981 of the trial Court has been restored.

2. Precisely stating the facts of the case are that appellants filed a suit against the respondents for specific performance of agreement in respect of property description whereof was mentioned in the plaint with the prayer to grant decree in the following terms:

3. It was averred in the plaint that the suit property i.e. one house being No.1747 and a plot measuring 6-1/4 Marlas was owned by the respondent Sarbuland Khan, who agreed to sell the same to them for a consideration of Rs.54,000 out of which Rs.10,000 had been paid as earnest money to him vide agreement to sell (Exh.P.1), dated 12th May 1976. As per this document respondent No.1 promised to execute a registered sale-deed in their favour on payment of Rs.44,000 up to 30th June 1976. Appellants tendered the said amount to respondent No.1 on several occasions but he did not receive the same promising that he will get the sale completed on 30th June, 1976. On the said date appellants reached at the Civil Court, Daska but the respondent did not turn up, therefore, they filed an application before the Sub-Registrar for marking their presence on 30th June, 1976. It was further averred that instead of executing the sale-deed in their favour, the respondent No.1 has sold the plot adjacent to the house to respondent No.2 Muhammad Afzal collusively.

4. The respondents filed a joint written statement repudiating the claim of appellants and prominently mentioned therein that:

(i) Appellants failed to perform their part of obligation and their father wanted to execute fraudulently sale-deed Exh.D.2, dated 5th July, 1976 in respect of the house being one of the component of the deed vide Exh.D.2, dated 5th July, 1976 at total sale price of Rs.10,000 and on coming to know about his fraudulent intention, he refused to execute the same. (ii) On the following day i.e. 6th July, 1976, appellant No.1 (Zulqarnain) entered into another agreement to sell (Exh.D.1) only in respect of plot adjacent to the house i.e. being another component of the subject-matter measuring 6-1/4 Marlas but this transaction also failed due to the conduct of appellants. Thus, on the basis of above facts, it was pleaded that the respondent had no obligation to perform his part of agreement. It is equally important to note that in the meantime respondent had sold plot measuring 6-1/4 Marlas to respondent No.2 who being its bona fide purchaser also claimed protection under section 27(b) of the Specific Relief Act.

5. Learned trial Court after framing issues, arising out of the pleadings of the parties and recording evidence, led by the parties in support of their respective pleas, partially decreed the suit vide judgment, dated 31st May 1981 whereby specific performance was refused but a decree for recovery of Rs.10,000 was passed in favour of appellants and against the respondent No.1, with the observations that appellants had abandoned the agreement to sell (Exh.P.1) and respondent No.2 was a bona fide purchaser of the plot.

6. Feeling dissatisfied from the judgment/decree of the trial Court, appellants filed appeal before the District Judge, Sialkot who vide judgment, dated 14th December, 1987 allowed the same and passed a decree for specific performance of the agreement (Exh.P.1), dated 12th May 1976 in favour of appellants, holding therein that respondent No.2 is not bona fide purchaser. Respondent No.1 feeling aggrieved from the said judgment preferred R.S.A. before the Lahore High Court, Rawalpindi Bench, Rawalpindi, which has been allowed by means of impugned judgment, inter alia, granting relief to respondent No.2 (Muhammad Afzal) in the following terms:

"I have already referred to evidence above. The respondent No.4 did enter the witness-box and stated that he was not aware of any agreement. By now it is well-settled that the burden of subsequent transferee within the meaning of section 27(b) of the Specific Relief Act, 1877 is light and can be shifted by a statement like one made by respondent No.4 on oath. There is nothing in rebuttal. P.W.3 has stated that he had told respondent No.4 his nephew Amin-ul-Malik, who has not been produced. Relying upon the case of Mst. Mehr-ul-Nisa and 6 others v. Malik Muhammad Ishaque and 2 others PLD 1972 SC 25, I do hold that the learned District Judge has committed an error of law while upsetting the finding of the learned trial Court on issue No.9.

7. Learned counsel for the appellants frankly conceded impugned judgment to the extent of its above portion opted not to press appellants claim, equal to an area of 6-1/4 Marlas of plot which respondent No.1 had sold to respondent No.2. Thus the impugned judgment is maintained to the extent of claim of respondent No.2.

8. Learned counsel then contended that learned Single Judge in the Chambers of High Court has fallen into error in non-suiting the appellants due to alleged novation of contract vide Exhs.D.1 and D.2 executed allegedly on 6th July 1976 and 5th July 1976, respectively. But execution of both these documents have been repudiated by the appellants. Besides it, respondent No.1 had also failed to prove both of them in accordance with law, therefore, for such reason agreement to sell (Exh.P.1), dated 12th May, 1976, holds the field, and its performance is obligatory upon respondent No. 1.

9. Learned counsel for respondent No.1 contended that P.W.2 who appeared on behalf of appellants proved the contents of (Exh.D.1), dated 6th July 1976 and (Exh.D.2), dated 5th July 1976 has been proved by the respondent himself as he tendered the same in evidence: Because their admissibility has not been objected to by the appellants, therefore, learned High Court, rightly believing them to be valid documents justly concluded that appellants have rescinded the sale agreement, dated 12th May, 1976 (Exh.P.1), thus impugned judgment being unexceptionable may not be interfered, in the interest of justice.

10. We have examined the proposition put forward on behalf of both the sides. It is to be noted that the execution of agreement to sell (Exh.P.1), dated 12th May, 1976 is admitted between the parties A perusal of which reveals that time was not the essence of the contract, therefore, it's performance by both the parties, subject to their respective pleas, cannot be denied on the question of time. It is the claim of the appellants that they did not fail to perform their part of obligation arising out of agreement to sell (Exh.P.1) as respondent No.1 intentionally avoided to fulfill his commitments. Contrary to it, it is stressed on behalf of respondent No.1 that appellants did not perform their part of obligation regarding purchase of both the components of subject-matter of the agreement (Exh.P.1) i.e. house and plot, therefore, they expressed their inclination to purchase only house for which a separate sale-deed (Exh.D.2), dated 5th July 1976 was written by them but its, execution could no be finalized as the appellants through their father Bashir Ahmed wanted to have this house from the respondent fraudulently at a low cost of Rs.10,000 only when the appellants learnt about their intentions he did not agree to it and on the following date i.e. 6th July, 1976 they entered into another agreement to sell (Exh.D.1) measuring 6-1/4 Marlas but it could also not been finalized and after writing the same he left it with the petition writer (P.W.2), therefore, according to the provisions of section 62 of the Contract Act, it shall be deemed that the appellants have rescinded the agreement to sell (Exh.P.1), dated 12th May 1976 as such they cannot insist for its performance.

11. Learned Single Judge in the Chambers of the High Court on having believed the assertions of respondent No.1 has concluded that in view of the execution of documents Exhs.D.1 and D.2, dated 6th July 1976 and 5th July 1976 respectively, earlier/original agreement to sell (Exh.P.1), dated 12th May 1976 stands cancelled. But we are of the opinion that before pressing into service the principle of section 62 of the Contract Act which provides that "if the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed", the learned High Court should have examined as to whether appellants have validly rescinded the agreement to sell (Exh.P.1), dated 12th May, 1976 allegedly on having executed documents i.e. D.1 and D.2. Learned counsel for appellants emphasized that in view of the law laid down by the Courts of different jurisdiction, both these documents suffer from legal flaws, therefore, deserved to be ignored. In this context with reference to interpretation of sections 62 and 63 of the Contract Act he has relied upon the judgment reported as Kishen Lal v. Gohli AIR 1938 Lah. 77 wherein while discussing the effect of novation it has been held that "where an original debt is due and subsequently an agreement is made, for the purpose of discharging it, and the parties contemplate that there should be a reversion to the original position if the debtor failed to complete the transaction, there is no true novation and there is no bar to a suit on the original cause of action". With reference to this authority it may be noted that in instant case as well if the execution of the documents Exhs.D.I and D.2 is held to be proper even then it would not tantamount to rescinding the original contract/ agreement to sell (Exh.P.1), dated 12th May, 1976 by the appellants for the reason that the transaction involved in these two documents were never finalized. Learned counsel further relied upon the judgment in the case of New Standard Bank Ltd. v. Probodh Chandra AIR 1942 Cal.

87. In this case it was held that the use of the words "the original contract need not be performed" imply that the performance of the same could still be required. Therefore, this section will not apply where the agreement to substitute a new contract for the original one is made after the breach of original contract". However, in this very judgment it was further held that "if the parties to a contract agree to substitute a new contract the original contract is discharged and whether all rights and liabilities under the old contract have been extinguished by novation is a question of fact depending on the circumstances of each case". Applying the ratio decidendi of this case in the facts of instance case, it is retreated that it was obligatory upon the respondent No.1 to establish that appellants by executing document Exh. D.2, dated 5th July 1976 had agreed to substitute the original agreement to sell (Exh.P.1), dated 12th May, 1976 but as admittedly in instant case there is alleged breach of agreement (Exh.P.1), therefore, it would not be a case of a novation of a contract. Learned counsel next relied upon the judgment in the case of Jainarain v. Surajmull AIR 1949 Federal Court

211. In this judgment the scope of section 62 of the Contract Act has been further widened by making observation that "if after a contract is concluded, one of the parties starts fresh negotiations, with a view to introduce new terms, and this is done under mistake but has no effect in altering the conduct of the other party then even if the subsequent negotiations fail the party which attempted to reopen the concluded contract can enforce it specifically." He also relied upon the judgment in the case of Vishram Arun v. I Shankariah AIR 1957 Andh Pra.

784. In this report it was held that "for a novation of the contract it is necessary that a right under, the original contract is relinquished/substituted by a valid and enforceable contract to be effective as novation. If the new agreement or contract suffers from legal flaw such as want of registration, stamps etc on account of which it becomes un-enforceable, the original contract will not be extinguished and the rights and liabilities of the parties will be determined on that basis". Learned counsel next relied upon the judgment reported as Karachi Municipal Corporation v. Nawab-ud-Din PLD 1961 Kar.

599. In this case it was held that "section 62 applies only to those cases where no breach has been committed in respect of the original contract and then the original contract is substituted by a new contract". Whereas in instant case it is the assertion of respondent No. 1 that appellants have committed the breach, therefore, they entered into the new contract. Thus we are of the opinion that for such reason section 62 of the Contract Act would not be attracted. Learned counsel further relied upon the judgment reported as Mst. Khatoon Begum v. Mst. Barkatunisa Begum PLD 1987 Kar. 132." In this report observation in the case of Vishram Arjun (ibid) were reiterated. He also referred to Muhammad Amin v. Star Oil and Ice Mills Ltd. PLD 1973 Kar. 409 and Nawab Brothers Ltd. v. Project Director 1981 CLC

638. In light of the principle discussed in above judgments it may be noted that as far as document Exh.D.2, dated 5th July, 1976 is concerned it could not be finalized in view of the assertion of respondent No.1 that father of appellants wanted to play fraud with him. As far as document Exh. D.1, dated 6th July, 1976 is concerned it was also not validly executed because the original agreement (Exh.P.1), dated 12th May, 1976 was executed on behalf of all the three appellants, whereas this document has been allegedly executed only by Zulqarnain (appellant No. 1). Moreover, its contents have neither been proved nor it has been established by the respondent No.1 that it was duly stamped and was got registered because admittedly its valuation was more than Rs.100 as such it was required to be registered compulsorily under section 17 of the Registration Act. Therefore, we are of the opinion that execution of documents Exhs.D.1 and D.2 would have no effect of novation on the original contract i.e. Exh.P.1 executed by all the three appellants and respondent No.1. As such the appellants can legitimately enforce the same at their discretion to the extent of House No. 1747 because they themselves have abandoned their claim regarding the plot measuring 6-1/4 Marlas as noted herein above. Thus for the foregoing reasons instant appeal is allowed and respondent No.1 is directed to execute the sale-deed in favour of the appellants in respect of the House No.1747 subject to payment of Rs.54,000 agreed between the parties vide agreement to sell (Exh.P.1), dated 12th May, 1976 and an additional amount of Rs.1,00,000 (Total amount, of Rs.1,54,000) being granted as compensation to the respondent because during pendency of the proceeding the price of the property has appreciated. No order as to costs. M.H./Z-8/S Appeal allowed.