2017 PLP 4 (CLCN)

The appellant entered into an agreement with respondents Nos. 1 to 3 for the purchase of Plot No.43/9-G, Block-6, Survey Sheet No.35/P/1, PECHS, Karachi, admeasuring 2000 square yards for a total sale consideration of Rs.100,000,000/- 10% earnest money was paid. It was later also agreed between the parties that upon making 1/3rd payment, a portion of the plot would be handed over to the appellant. Then upon payment of settled part payment, a portion was handed over to the appellant. For the remaining portion, the time for performance was due on 30.11.2006. On 20.11.2006 i.e. ten days before the expiry of last day of the performance, the appellant served a legal notice calling upon respondents Nos. 1 to 3 to transfer the portion of the plot for which payment has already been made. From this notice, it is evident that there was no demand to seek transfer of the remaining portion in terms of the agreement i.e. no demand was made to complete the whole transaction under the agreement. Thereafter on 01.02.2007 after more than two months the appellant served a notice on respondents Nos. 1 to 3 revoking the agreement and sought refund of the amount which was paid towards the portion of the property that was handed over to the appellant as well as the earnest money. As the respondents did not return the amount, the appellant filed Suit No.261/2007 for recovery of the entire amount that was paid to respondents Nos. 1 to

3. The respondents Nos. 1 to 3 also filed Suit No.701 /2007 for forfeiture of the earnest money. Both the suits were consolidated and common issues were framed. The learned single Judge then partially decreed the suit of the appellant by ordering refund of the amount which was paid for the portion of the suit property after ordering forfeiture of the earnest money i.e. 10% of the total sale consideration.

2. The counsel for the appellant contended that as respondents Nos.1 to 3 had applied to PECHS for bifurcation of the plot and in this regard the original title documents were submitted with PECHS, therefore, the respondents Nos.1 to 3 were not in a position to complete the sale transaction and the learned single Judge ought not to have ordered forfeiture of the earnest money. He argued that such a conduct on the part of respondents Nos.1 to 3 was not taken into consideration by the learned single Judge while deciding the suit and the fact that the title documents were not in possession of the respondents Nos.1 to 3 to complete the transaction was also ignored. In support of his contentions, he relied upon the cases reported in PLD 1968 Lahore 501, 2007 CLC 1746, AIR 1933 Bombay 71 and PLD 1983 SC 113.

3. It is an admitted position that time was not made the essence of contract under the agreement. When the first notice was issued by the appellant on 20.11.2006, the appellant did not call upon the respondents Nos. 1 to 3 to complete the transaction under the agreement but only sought transfer of a portion of the property for which payment was made which was only part of the total sale consideration. The 2/3rd payment for the remaining portion was yet to be made. Even otherwise time to complete the transaction which was 30.11.2006 had not arrived by them. The appellant at no stage called upon the respondents Nos.1 to 3 to complete the sale transaction under the agreement. Time being not the essence of the contract, it was obligatory on the appellant to first call upon the respondents Nos.1 to 3 to complete the transaction through a notice. The appellant ought to have made the time essence of the contract by fixing a reasonable time for the completion of the transaction but the same was never done prior to putting an end to the contract on 01.02.2007. Had the appellant made the time essence of contract through notice only then the appellant would have been justified in putting an end to the contract. The Hon'ble Supreme Court in the case reported in PLD 1962 SC 1 held that where time is not the essence of contract then the same should be made essence of the contract by giving reasonable time to the seller to complete the transaction through a notice. In the present case no demand for completing the transaction was made on behalf of the appellant and unilaterally the appellant put an end to the contract vide notice dated 01.02.2007. The fact that the respondents Nos.1 to 3 had tendered title documents to PECHS for bifurcation of the plot is of no legal consequence. Had the appellant called upon the respondents to complete the sale transaction, the respondents could have easily collected the title documents from PECHS and completed the sale transaction or in case of failure to do so would be liable for the consequences of not honouring the contractual commitment, but the respondents Nos.1 to 3 were never called upon to complete the transaction. The respondents Nos.1 to 3 could not be made liable to return the earnest money as no breach of contract can be attributed to them. They were not even called upon by the appellant to complete the sale transaction under the agreement. The law compels the seller to complete the sale transaction by honouring his contractual commitment if called upon to do so. Likewise if buyer backtracks from his contractual commitment and puts an end to it of no fault of the seller then earnest money is to be forfeited. As the appellant himself was at fault in not coming forward to seek completion of the sale transaction, the learned single Judge rightly ordered forfeiture of the earnest money. Both High Court Appeals are dismissed in limine along with the Listed applications. ZC/S-26/Sindh Appeal dismissed.