1988 PLP 2147 (CLC)

SAAD SAOOD JAN, J:‑‑This Intra‑Court Appeal is from the oraer dated 14‑4‑1979 of a learned Single Judge of this Court made in Civil Original No.59 of 1978.

2. A private limited company known as the Pak‑Wheat Products Limited was heavily indebted to a number of persons including certain banks.. The creditors moved this Court for the wining up of the company. Their prayer was allowed by Karam Elahi Chauhan, J. and on 26‑2‑1971 an order for the winding up of the company was made. Major J. A . Perwaiz was appointed as the Official Liquidator. The only asset which the company possessed and out of which its debts could be discharged was a flour mills known as Gulberg Flour Mills situated in the industrial area of Gulbera, Lahore. Soon after the making of the winding up order steps were taken to sell the mills and for this purpose extensive publicity in both wings of the country was made. A public auction was held on 20‑6‑1971 at the spot. It started at 10‑00 a.m. and continued till 2‑00 p.m. The parties participating therein made 85 bids in all. The highest bid was offered by Syed Jamaat Ali Shah in the sum of Rsr32,70,

000. Before confirming the sale the learned Company Judge invited various bidders, creditors and share‑holders of the company in order to 'give chance .to every body in securing confidence from all concerned and to ensure that the mills was disposed of in the best interests of all the creditors and share‑holders'. On behalf of the share‑holders some objections were taken to the legality and propriety of the auction; they were rejected and were never pressed again. After some further negotiations it was decided to sell the mills to a private limited company floated by Syed Jamaat Ali Shah for running the flour mills under the name of the Sunny Flour Mills, hereinafter referred to as the purchaser, on slightly modified terms from those offered at the auction." These terms are to be found in paragraphs 7 and 8 of the order dated 4‑2‑1972 of the learned Company Judge. These paragraphs run as follows: "

7. Coming to the offer of S. Jamaat Ali Shah, he has agreed to pay Rs.32,70,000 in the following manner:‑ (a) Payable at once (including the sum of Rs.1,00,000 already deposited).Rs. 8,17, 500 (b) Payable after one year from the date of taking possession Rs.12,26,250 plus interest at the rate of 9% which comes to Rs.2,20,

725. The total sum payable after one year comes to Rs.14,46,975 (c) Payable after two years from the date of taking possession Rs.12,26,250 plus interest at the rate of 9% which comes to Rs.1,10,362.50 The total sum payable after two years comes to Rs.13.36,612 Total sum thus payable with interest... Rs.36,01,087.50 This figure work has been done keeping the date of possession in view. Errors and omissions are excepted. Since the first instalment has to be paid within one year from the date of delivery of possession and the last instalment within two years from the date of delivery of possession, the figure of interest may vary keeping the said date in view. Time will be of the essence of the agreement.

8. He has also agreed to give an unconditional Bank‑guarantee. Even though his original offer in auction bid was Rs.32,70,000 simpliciter, but by agreeing to pay interest in this way, his offer actually now is in the range of Rs.36,01,087.50. This offer it will be evident, fulfils even the figure demanded by Sh. Zia Ullah as mentioned above. The offer of Messrs Barkat Ali and Company which was at one stage in a way approved by Sh. Zia Ullah in his statement reproduced above did not contemplate payment of interest whereas, the offer of S. Jamaat Ali Shah does so contemplate and from this point of view stands at a better place. In this connection, I want to place on record that S. Jamaat Ali Shah was not agreeable to pay anything over and above the offer given by him in the auction but on pursuasion of various creditors. owners, Directors and share‑holders, especially, Mian Muzaffar‑ud‑Din and Mian Mueen‑ud‑Din, who were present in person alongwith their learned counsel in Court, he agreed to enhance his offer as shown above by consenting to pay interest. With this achievement all creditors. owners, Directors and share‑holders and all the counsel present in Court showed a feeling of satisfaction and thanks towards him in the end." Consequent upon the said order, Syed Jamaat Ali Shah on behalf of the purchaser and the official liquidator, on 15‑2‑1972 entered into an agreement to sell in which the terms upon which the bid was accepted were incorporated.

3. A perusal of the order dated 4‑2‑1972 and the agreement to sell will show that the purchaser was required:‑ (i) to follow a certain time schedule for the purpose of making payment of the consideration. and. (ii) to furnish an unconditional bank guarantee for the payment of the consideration within three months commencing from 14‑2‑1972. It was specifically declared that time would be the essence of the contract both for the purpose of payment of the consideration and the furnishing of the bank guarantee. Unfortunately. the purchaser committed breaches in respect of both these terms. It never furnished any bank guarantee and it did not adhere to the time schedule agreed upon between the parties for the payment of the consideration. It is these breaches committed by purchaser that has led to this protracted litigation

4. Before the various contentions raised in this appeal are considered it will be of advantage to briefly narrate the breaches committed by the purchaser.

5. According to the terms of the agreement the purchaser was required to deposit Rs.8,17,500 at once. This was duly deposited. As regards the bank guarantee the relevant clause in the agreement executed by the official liquidator and the purchaser read as follows That the vendee agrees to furnish the bank guarantee of the balance consideration as ordered by the Court on 9th February, 1972 within three months commencing from 14th February, 1972, failing which, all the amount paid is liable to be unconditionally confiscated and will also be liable for shortfall. The time of three months will be. the essence of this deed." In order to assist the purchaser in arranging for a bank guarantee the possession of the flour mills was delivered to its Executive Director, namely, S. Jamaat Ali Shah on 14‑2‑1972, that is, a day before the execution of the agreement. On 8‑5‑1972, that is, a week before the time limit for furnishing the bank guarantee was due to expire, S. Jamaat Ali Shah moved an application C.M. No.55/L of 1972 in the Court wherein he stated that as the title deeds still vested in the official liquidator the banks had declined to give a guarantee; nevertheless, the purchaser was prepared to make cash payment of the remaining principal amount plus interest by 14‑9‑1972. Although he did not expressly state so in the application, the obvious purpose in making the application was that the stipulation with regard to the furnishing of bank guarantees should not be insisted upon. This application came up before the Liquidation Judge on 9‑5‑1972. The learned Judge issued notices to the official liquidator as well as to the creditors and share‑holders for the consideration of the application. It came up for hearing on 7‑7‑1972 in the presence of the parties. On that day counsel appearing for the purchaser sought amendment of the application on the ground that some of the facts contained therein were not correct. In the amended petition C.M. No.120/L of 1972 which was filed on 12‑9‑1972 the offer to pay the entire consideration by 14‑9‑1972 was withdrawn and inter alia a prayer was made that it should be allowed to make monthly payments towards the instalment due on 14‑2‑1973.

6. It may be mentioned that upon the failure of the purchaser to furnish the bank guarantee within the stipulated period none of the parties, that is, the creditors, share‑holders of the official liquidator, move the Court for the rescision of the contract and forfeiture of the deposits already. made by the purchaser.

7. As regards the consideration, as already noticed, it was to be paid in three instalments. The first instalment of Rs.8,17,500 was to be paid at once, the second instalment of Rs.14,46,975 at the end of the first year and the third instalment of Rs.13,36,612.50 at the end of the second year, the starting point in respect of the second and third instalment being the day of taking over the possession of the mills by the purchaser which in this case was 14‑2‑1972. There is no dispute between the parties with regard to the payment of first instalment of Rs.8,17,

500. It was duly paid in accordance with the terms of the agreement. As regards the other two instalments the purchaser tendered cheques in varying amounts in the Court on different dates. Some of the cheques were dishonoured and a few were post‑dated. A local commissioner was appointed by the Court to inter‑alia examine the position of payments. He presented a very detailed report before the Court. According to the report the purchaser had by the end of the first year, that is, 14‑2‑1973 deposited a sum of Rs.9,38,790 as against the agreed instalment of Rs.14,46,

975. Similarly, by the end of the second year, that is, 14‑2‑1974 he had paid only Rs.3,88,790 as against the agreed instalment of Rs.13,36,612,

50. Thus, by the end of the stipulated period of two years, that is, on 14‑2‑1974,he had paid only Rs.21,45,080 as against the total consideration of Rs.36,01,087.50. There is on record an application made by the purchaser on 11‑10‑1973 seeking extension by one year in the period of payment of the consideration. This application was supported by the official liquidator with the condition that the rate of interest should be enhanced to 11$. It does not appear that the Court made any order on this application. However that may be, the purchaser continued to make payments in Court till 2‑4‑1975 by which date he paid an additional amount of Rs.12,75,

000. Thus on 2‑4‑1975 the total amount deposited by him stood at Rs.34,20,

080. No further payment was made till the order of the learned Judge which is being challenged in this appeal. It may however, be mentioned that in pursuance of the said order the purchaser paid a further sum of Rs.5,65,143.47. Thus, the entire consideration together with interest has since been paid by the purchaser.

8. It may be mentioned here that on 16‑7‑1976 all flour mills of the country were nationalized in pursuance to the provisions of the Flour Milling Control and Development Ordinance, 1976. This Ordinance was later on converted into an Act by the National Assembly. .In accordance with the provisions of the Ordinance the flour mills in dispute was taken over by the Government on 17‑7‑1976. In September 1977 the Act was repealed by the Flour Milling Control and Development (Repeal) Ordinance, 1977. Subsequently, in pursuance of the repealing Ordinance the flour mills was returned to the purchaser.

9. On. 29‑9‑1978 three of the contributories of the company under liquidation, that is, the Pak‑Wheat Products Company, assembled in a general meeting. They took notice of the 'flagrant breaches' committed by the purchaser in the payment of the purchase price and resolved to give the following 'directions' to the official liquidator:‑ "(i) The contributories undertake to pay the lump‑sum within a reasonable time from the date of all the liabilities standing against the petitioner company (in liquidation) on the date of this resolution, as may be determined from the record by the Company Judge/Official Liquidator; (ii) all the amounts which may be required by the Court to be restituted to any person on account of part of purchase money already having been deposited shall be paid in lump sum in cash after deducting' the rent and average profits of the mills for the period it was in use of the defaulting vendee company at the time and place to be communicated by the Official Liquidator with the approval of the Company Judge; (iii) adequate security as required for the above shall be furnished as directed by the Court/Official Liquidator; and (iv) in the event that the proceedings for eliciting the highest bid for sale of the mills in question are to be held again, it be undertaken that a minimum bid of Rs.70,00,000 shall be procured." Apparently the official liquidator ignored the directions given to him by the contributories.

10. On 5‑10‑1978 the appellants, as contributories, moved an application in this Court under sections 174 and 183 of the Companies Act. In this application details of the breaches committed by the purchaser in respect of the terms with regard to the payment of consideration were given and it was stated that in view of the said breaches Syed Jamaat Ali Shah or the purchaser had no right to occupy or use the floor mills after 14‑2‑1974 and, further, that the breaches were of a nature that no promise of ordinary prudence would consider himself bound by the agreement of sale any longer. Accordingly, it was prayed that the official liquidator be restrained from accepting any payment on account of the balance of the purchase price from the purchaser or from Syed Jamaat Ali Shah; that the official liquidator be ordered to proceed on the basis that the agreement had been breached by the purchaser; and that the current stage of the liquidation being conducted by the official liquidator was such that the appellants had a right to pass a resolution with regard to the administration of the company in question in the capacity of the contributories in a general meeting.

11. The learned Single Judge considered the various, breaches committed by the purchaser both with regard to the furnishing of bank guarantee and the schedule with regard to the payment of consideration. As regards the non‑furnishing of bank guarantee the learned Judge observed:‑ "It is no doubt that the time is of the essence of the‑contract for furnishing of the bank guarantee but it is clear that after the institution of civil miscellaneous No.55/L of 1972 the Court did not insist upon such guarantee and the further orders. of the Court passed upto the Ist April, 1975, should be treated as impliedly waiving this condition. On this score, therefore, it is not possible to rescind the contract." As regards non‑adherence to the. schedule of payment the learned Single Judge found that on 14‑2‑1979 a sum of Rs.4,48,770.50 was still due from the purchaser. However, he took notice of the fact that the present management of the purchaser company including the share‑holders, was different from the management which has committed breaches and that the present management had not only spent a large amount of money in buying shares of the purchaser company but also paid Rs.2,00,000 obtained by mortgaging the mills in 'question under a certificate issued by the Court. It also took into account the fact, while the mills stood nationalized it was the responsibility of the Government or of the Corporation that had been set up to manage the mills to pay the rest of the consideration. Taking into consideration all these circumstances, ‑the learned Single Judge thought that it was in the interest of justice that the purchaser ought to be given one more opportunity to pay the balance of the instalments. Accordingly, he split up the remaining consideration into three instalments and directed that these should be paid on 14‑6‑1979, failing which the auction of the mills would stand revoked unconditionally and its possession taken over by the official liquidator. From this order the contributories have come in this infra‑Court appeal.

12. On behalf of respondents an objection as to the competency of his appeal has been taken. It is contended that an appeal from the order of the Single Judge does not lie to this Court. To consider this objection it may be stated that the relevant provisions in this regard are to be found in section 202 of the Companies Act and section 3(1) of the Law Reforms Ordinance, 1972. Section 202 reads as follows:‑ "Rehearings of, and appeals from, any order or decision made or given in the matter of the winding up o: a company by the Court may be had in the same manner and subject to the same condition in and subject to which appeals may be had from any order or decision of the same Court in cases within its ordinary jurisdiction." Section 3(I) of the Law Reforms Ordinance is in the following terms:‑ "An appeal shall lie to a Bench of two or more Judges of a High Court from a decree passed or final order made by a Single Judge of that Court in the exercise of its original civil jurisdiction." It is submitted by learned counsel appearing for the official liquidator (hat jurisdiction exercised by a Court while winding up a company is of a special or statutory nature and it cannot be described as original civil jurisdiction so as to attract the provisions of section 3(I) of the Law Reforms Ordinance and that after the repeal of Clause 10 of the Letters Patent by the Law Reforms Ordinance, 1972 no provision exists for an appeal to a larger Bench of the High Court from the decision of Single Judge. In support of the contention that the jurisdiction exercised by the High Court under the Companies Act cannot be described as original civil jurisdiction the learned counsel has referred to a decision of the Supreme Court reported as Ahmad Khan v. Chief Justice and Judges of the High Court West Pakistan PLD 1968 SC

171. In this case while considering what was meant by the expression "extraordinary original civil jurisdiction" Cornelius, C.J. observed:‑ "Speaking with great respect, the mere fact of the matter coming directly before the High Court under a law would not suffice to bring it within the ordinary original civil jurisdiction, however frequent such occasions may be, if the words in clauses 12 and 13 of the relevant Letters Patent be given their full effect. The ordinary original civil jurisdiction was confined to the trial of suits arising within the local limits of that jurisdiction. The extraordinary civil jurisdiction was given for the removal and trial of suits pending or falling within the jurisdiction of Courts subordinate to the High Court. Every other jurisdiction of a civil nature conferred by the Letters Patent would as contended by the learned Attorney‑General, be best described as special jurisdiction or a statutory jurisdiction, since some of those jurisdictions were to be exercised under existing statutes." The above observations of the Supreme Court were followed by this Court in D.F. Hassan v. Habib Bank Ltd. PLD 1984 Lah. 117.

13. There is no merit in the objection raised on behalf of the respondents. A perusal of section 202 ibid, would show that it is in B two parts. The first part creates a right of appeal from an order or decision made or given in the matter of the winding up of a company and the second part fixes the forum where an appeal may be preferred. For the purpose of determining the appellate forum it states that the appeal may be taken to the Court where an appeal would normally lie from a decision recorded in its ordinary jurisdiction. It is significant to note that an appeal from the decision of a Single Judge under the Companies Act does not lie by virtue of the provisions of section 3(1) of the Law Reforms Ordinance but that it is a creation of the section 202 of the Companies Act. Now, to find out the forum we have to see what is the nature of the proceedings under the Companies Act. The words 'ordinary jurisdiction' as occurring in section 202 have not been defined in the Companies Act they obviously refer to civil jurisdiction for under the Companies Act the jurisdiction exercised by the High Court ‑‑ may it be called special or statutory‑‑is essentially of a (sic) would lie before the forum where appeals ordinarily lie in matters decided by a Single Judge in exercise of the civil jurisdiction of the High Court. It is not in dispute that under section 3(1) of the Law Reforms Ordinance an appeal lies before the Bench of two or more Judges of the High Court from a decree of final order passed by a Single Judge in the exercise of its original civil jurisdiction. We should, therefore, think under section 202, too, an appeal from a decision of a Single Judge would lie to a Bench of two or more Judges of the High Court. In the view which we take we are fortified by two decisions of this Court reported as Eastern Company (Private) Ltd. v. Gul Begum PLD 1980 Lah. 69 and Munawar Ahmad v. Official Liquidator PLD 1980 Lah.

86. We would accordingly hold that the present appeal has been validly filed before this Court.

14. In this appeal basically the contentions raised by Dr. Basit who appeared on behalf of the appellants can be divided under three heads. First, this Court was not competent to condone a breach of the agreement committed by a purchaser for under the law that was the function of the official liquidator who alone was empowered to administer the assets of the company in liquidation; second, the Court had not at any stage condoned the breaches; and third, it was not a case where the breaches ought to have been condoned, and in view of the fact that the purchaser agreement should have been rescinded.

15. In support of the contention that the Court was not competent to condone the breaches Dr. Basit referred to section 179 and section 183(5) of the Companies Act. He also relied upon Leon v. York‑o‑Matic Ltd. (1966) 3 AER 277, in re: Karachi Port and Dock Workers Welfare Fund PLD 1972 Kar. 41 and Kunaan Lai v. Official Liquidator 48 Indian Cases

919. It is to be noticed that section 179 enumerates the powers of the official liquidator with reference to the property of the company in liquidation. The powers enumerated in the section are fairly extensive and include the power to sell the immovable and movable property of the company. Section 183 (5) states that if any person is aggrieved by any act or decision by the official liquidator he may apply to the Court and the Court may confirm, reverse or modify the act or decision complained of, and make such order as it thinks just in the circumstances of the case. In Kundan Lai v. Official Liquidator a transaction of sale entered into by the Official Liquidator with regard to the property of the company under liquidation with the function of the District Judge was sought to be avoided in appeal on the ground inter alia that it was detrimental to the interest of the creditors and contributories of the company. In Karachi Port and Dock Workers Welfare Fund a depositor of a banking company under liquidation had prayed for the cancellation of ‑a sale of certain securities made by the official liquidator in favour of the State Bank of Pakistan. In Leon v. York‑o‑Matic Ltd. a creditor sought an injunction against the official liquidator to restrain the latter from completing a sale mainly on the ground that it was being made at a gross under valuation. In none of these authorities the competence of the Court itself to sell the property or directly administer the assets of a company under liquidation was considered, for that reason they do not have any relevance' to the point in issue before us. 16.. Dr. Basit argued that the Companies Act had created the office of official liquidator with a purpose. The Court could not be burdened with the day‑to‑day administration of the property of a company under liquidation which besides being cumbersome could also .entail litigation. It was for this reason that the official liquidator had been armed by the Act with fairly extensive powers. Further the official liquidator acted as an intermediary between the Court and .the persons interested in the assets of the company, namely, the creditors and the contributories. While administering the property the. official liquidator had to keep in mind the interest of the creditors and the, contributories and also have regard to any direction given to him, by a resolution of the creditors or the contributories as envisaged in section 183 (1) of the Companies Act. In case any person was aggrieved by any act of the official liquidator he could apply to the Court for redress. In the event the official Liquidator l was bypassed and the Court itself started performing the functions which properly belonged to the official liquidator the creditors and, contributories would be placed at a great disadvantage inasmuch as they would have nowhere to go to in case they were dissatisfied with the ,order of the Court.

17. Formidable as the argument of Dr. Basit may appear to be there is little merit in it. It is to be noticed that under section 1,78(2) of the Companies Act it is not the official liquidator but the Court which is to be the custodian of a property and effects of a company under liquidation. This is the basic position and all the provisions in the Companies Act which vest the official liquidator with powers or set out his functions conform to this position. Quite obviously this is an office not independent of the Court otherwise there was hardly any justification in making the Court the custodian of the property and effects of the company under liquidation. It will be noticed that even though section 179 of the Companies Act confers fairly wide powers on the official liquidator in administering the property and assets of a company yet his acts before attaining validity require the sanction of the Court, unless of course the Court under section 7.80 of the Act elects to direct otherwise. He is essentially an agent of the Court for the purpose of liquidation. There can be therefore little doubt that the Court may if it so elects allow a sale to be completed despite breaches committed by the would‑be purchaser if it thinks that to do so would be in the best interest of all the persons concerned. There is no substance in the contentions that in such an event the right of the contributories to give direction to the official liquidator or to appeal to the Court to avoid an action of the official liquidator would be defeated. It is to be noticed that although while administering the property and assets of the company under liquidation the official liquidator has to ,have regard to any direction given by the resolution of the creditors or contributories yet he is not bound by any such direction. Apart from that, as already noticed, the Court has to act in the best interest of all the persons interested in the property and assets of the company under liquidation. If there is a resolution of the creditors or contributories there is little doubt that the Court will consider it before putting its imprimatur on any transaction affecting them. Further, all orders made by a Court are appealable under section 202 of the Companies Act. Therefore, the submission that the creditors and the contributories would be placed at a great disadvantage in the event the Court itself starts performing the functions which should ordinarily be carried out by the official liquidator is without any substance.

18. The second submission of Dr. Basit that the Court had at no stage condoned the breaches committed by the purchaser is not borne out by the record. As already mentioned the purchaser had to furnish a bank guarantee within three months from the execution of the agreement to sell, that is, by 14‑5‑1972 and clear off all the instalments within two years from the date of delivery of the possession of the Mills, that is, by 14‑2‑1974. Under the agreement there stipulations were of the essence of the contract. As noted above the bank guarantee was never furnished and on 14‑2‑1974 a very substantial portion of the sale consideration still remained to be paid. Of course there is no specific order of the Court dispensing with the requirement of furnishing the bank guarantee or extending the time for the payment of consideration but then the conduct of the parties, as well as the various orders made by the Court from time to time do show that these conditions were never insisted upon. As far back as 7‑7‑1972 when the time for furnishing the bank guarantee had expired the agreement to sell was not put to an end. On that day in the Court one of the contributories who was closely related to the appellant was present in person, and one of the creditors was represented by counsel. None of the parties asked the Court to put an end to the agreement on account of the failure of the purchaser to strictly abide by the agreement. Subsequently, despite the fact that the bank guarantee had not been filed the purchaser was permitted to make deposit towards the same price. The same is true with regard to the payment of instalments. As already pointed out, on 14‑2‑1973 a sum of Rs.5,08,185 had remained unpaid on account of the first instalment and on 14‑2‑1974 a sum of Rs.9,47,822.50 was still due on account of the second instalment. In other words on 14‑2‑1974 when the entire consideration should have been paid off a sum of Rs.14,56,007.50 was still owing from the purchaser. Yet, even though the purchaser had not paid the entire consideration within the agreed period he was allowed to make payment after the expiry of the last date. Thus, between 14‑2‑1974 and 2‑4‑1975 the purchaser was permitted to deposit a further amount of Rs.12,75,000 towards the sale consideration. The appellants for the first time moved the Court for taking notice of the breaches committed by the purchaser in October, 1978. True, one of the appellants was a minor at the relevant time, but then the company under liquidation was a family concern, the only share‑holders thereof being a father and his four sons. It was not the case of the appellants that the interest of the father and the sons who were major was in any way adverse to that of the son who was a minor or that the father or his elder sons were in any way negligent in looking after the interest of the youngest son. It is difficult to believe that the father and his elder sons were not aware that the purchaser had not furnished the bank guarantee and had failed to pay the instalments strictly in accordance with the agreement. Quite obviously, the share‑holders for whose benefit both the stipulations were incorporated in the agreement to sell were not keen on their strict compliance. So far as the Court is concerned, by an order dated 1‑4‑1975 it issued a no‑objection certificate to the purchaser for pleading/hypothecating/mortgaging the mills with a bank against a loan of Rs.27,00,

000. It is to be noticed that this order was made by the same Judge who had himself settled the terms of the agreement to sell. It is difficult to accept that while issuing the no‑objection certificate he was not aware that the purchaser had neither furnished the bank guarantee nor paid off the entire consideration and that both these conditions were the essence of the contract. The contentions that the appellants were ignorant of the orders made by the Court is neither here nor there for it was clearly their duty to keep themselves informed of the proceedings in the Court. In the circumstances their failure to challenge the various orders of deposit made by the Court after 14‑2‑1974 and the issuance of the no‑objection certificate without any objection on their part indicates that they too were not adverse to relaxation being granted to the purchaser in respect of the said stipulations. Taking all these circumstances into consideration no doubt is left that the breaches committed by the purchaser were condoned by the Court without any objection from the appellants.

19. As regards the contention that the breaches committed by the purchaser should not have been condoned the legal position is to be found in sections 55 and 63 of the Contract Act. Section 55 states:‑ "When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract. If, it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time: but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure. If, in case of a contract voidable on account of the promisor's failure to perform his promisee at the time agreed the promisee accepts performance of such promisee at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non‑performance of the promise at the time agreed, unless at the time of such acceptance, he gives notice to the promisor of his intention to do so." Section 63 reads as follows:‑ "Every promisee may dispense with or remit, wholly or in part, the performance of the promise made to him, or may extend the time for such performance, or may accept instead of it any satisfaction which he thinks fit." Reading these two provisions together there can be little doubt that the breaches committed by the purchaser both with regard to the furnishing of bank guarantee and payment of instalments within the stipulated period could be waived. The waiver could be express or by conduct of the promisee. Of course, before a promisee could waive the breaches he should be in the knowledge of all the relevant facts and in a case where the promisor has by fraud and misrepresentation kept the promisee from knowing the true position there can be no waiver. These propositions are so well established that it is unnecessary to take notice of the large number of authorities cited at the bar in their support.

20. On the point that this was not a fit case for the condonation of the breaches of the agreement Dr. Basit, pointed out that there had been an inordinate delay on the part of the purchaser in paying off the consideration. In this context he stated that even though the whole of the consideration ought to have been paid by 2‑4‑1974, a fairly substantial amount was still owing from it even in October, 1978 when the appellants moved the Court for the rescission of the agreement. It was thus not a case where any indulgence ought to have been shown to the purchaser particularly in view of the fact that the price of the property had considerably appreciated in the intervening period. He also referred to the conduct of the purchaser in presenting cheques which were dishonoured or post‑dated and in making applications which had the effect of misleading the Court. He argued that a party which had been guilty of fraud and misrepresentation was not entitled to any concession from the Court.

21. It is unnecessary to reiterate that while administering or disposing of the property of the company under liquidation the Court has to look into the interest of both the creditors as well as the contributories and must strike the best bargain. It was not disputed that in February, 1972 when it was decided to sell the property to the purchaser, the best offer was that of the purchaser. For how long that offer continued to remain the best has to be seen in the light of the conduct of the parties. Admittedly, the purchaser did not furnish any bank guarantee at all and that he did not pay the entire consideration within the stipulated period of years. Yet neither the appellants nor any of the creditors came forward to seek rescission of the contract. On the other hand, the purchaser was allowed to deposit varying amounts in Court towards the sale consideration till April, 1975, without any protest from either the creditors or the contributories. In the circumstances it may not be improper to infer that even till April, 1975 the offer of the purchaser was the best.

22. Now, as already noticed the flour mills had been sold to the purchaser for Rs.32 70,000 but as the consideration was to be paid in instalments spread over a period of two years interest at 9$ was added to the consideration and the purchaser was required to pay Rs.36,01,087.50 by 14‑2‑1974. By 2‑4‑1975 he had paid Rs.34,20,

080. This left a balance of Rs.2,88,040.61 on that day. This of course included a substantial amount of interest calculated ac compound rate till 2‑4‑1975. It will thus be seen that by that day the bulk of the consideration had already been paid. Apparently, all the contributories and creditors were satisfied with this position as none from them moved the Court for a long time for rescission of the agreement on account of the purchaser's failure to strictly abide by the agreement.

23. There is no dispute that the purchaser did not make any payment after 2‑4‑1975 till the appellants moved the Court in October, 1978 for taking notice of the breaches of the agreement. The question therefore, is whether the Court should have rescinded the contract when the bulk of the consideration had already been paid or given an opportunity to the purchaser to pay the remaining amount as the learned Single Judge has done in this case. In this context it may again be noticed that even though the last date for paying the consideration expired on 14‑2‑1972 the appellants kept quiet till October, 1978 before coming to the Court. Even after the expiry of the last date the purchaser was allowed to make deposit in the Court. This was sufficient if there is an impression of the purchaser that the terms of the agreement would not be strictly insisted upon. Apart from that the money deposited by the purchaser was utilized by the Official Liquidator in clearing off debt owing from the company under liquidation. Had this not been done the interest on the debt would have considerably enhanced the liabilities of the company under liquidation. Even some of the appellants had themselves been drawing amounts on different dates for their own use, knowing fully well that the only source from which the money had become available was the deposits made by the purchaser. It will thus appear that the reticence of the appellants for along period after the breaches were committed was not entirely without benefit to them. Apart from that consequent upon the nationalization of Flour Mills, the mills in question remained vested in the Federal Government and the Corporation established by it for a period of more than one year. During this period it was the liability of the Federal Government and the Corporation to make the payment of the balance consideration. The purchaser can hardly be blamed for their lapse. Taking all these circumstances into consideration it cannot be said that the learned Single Judge had no justification for giving another opportunity to pay the rest of the consideration or in doing so he had acted contrary to the interest of the contributories or the creditors.

24. As regards the plea of fraud and misrepresentation there is little substance in it. It is true that on 8‑5‑1972 the purchaser had made an application (C.M. No.55/L of 1972) for dispensing with the requirement of furnishing a bank guarantee and had made an offer to pay off the entire consideration by 14‑9‑1972 but then this application was not pressed on 7‑7‑1972 on the ground that it did not correctly state some of the facts. It can therefore hardly be treated as case of misrepresentation for it was just a proposal to vary the terms of the agreement with regard to the furnishing of the bank guarantee and it was withdrawn before the Court could make any order thereon. In the amended petition (C.M. No. M/L of 1972) which was subsequently filed on 12‑9‑1972 requests of entirely different nature were made. No one was therefore misled by the application of 8‑5‑1972. As regards the post‑dated cheques six of them were presented in Court sometimes before 15‑10‑1973. There is an order of the Court dated 15‑10‑1973 with regard to these cheques:‑ "Let notice of this application be issued to the Official Liquidator who should offer his comments. To come up tomorrow.

2. The appellant had on the last date of hearing tendered six cheques out of which three were to be presented for payment today. He submits that since there are no funds available in the bank, therefore the cheques may not be presented for payment today. If the cheques are presented and they are shown as dishonoured. it is submitted that the applicants will suffer gross loss in reputation and goodwill. Since the last target date for the payment of the entire amount is still ahead namely 14th Febraury, 1974, the cheques hereinbefore mentioned may not be presented for encashment today." In his reply which he filed on 16‑10‑1973 the Official Liquidator prayed to the Court that if any extension was granted to the purchaser it should be made clear to him that no further extension would be allowed and that the rate of interest charged would be raised to 11%. Apparently no further order was made with regard to encashment of cheques on 16‑10‑1973. However that may be. in the circumstances when the purchaser himself brought the true position with regard to the post‑dated cheques to the notice of the Court it can hardly be said that he had played a fraud on the Court. On 8‑7‑1974 the purchaser submitted another post‑dated cheque for R.s.7,00,000 bearing the date 31‑i2‑19.74 before the Court. It was subsequently dishonoured. Further three other cheques bearing the dates 18‑1‑1973, 5‑2‑1974 and 30‑6‑1974 too were dishonoured. However that may be. it was not the case of the appellants that the purchaser had at any stage been given credit for the dishonoured cheques or that on the basis of the said cheques the purchaser had taken up the position that he had paid off the entire consideration. Admittedly, the purchaser had from time to time presented a number of cheques before the Court. The mere fact that some of them were dishonoured would not per se amount to committing fraud upon the Court. Unless it is shown that by tendering cheques which were subsequently dishonoured the purchaser had attempted to gain some advantage the plea of fraud as canvassed by the appellants cannot be accepted.

25. For the reasons stated above the appeal is dismissed with costs. H. S. T./S‑212/L Appeal dismissed.