P L D 1964 (W (PLP)

QADEERUDDIN AHMED, J.

This Is a Letters Patent Appeal against the judgment of our learned brother Wahiduddin Ahmed, J., dated the 7th December 1959, by which he decreed, with costs, the suit of the respondents for the refund of Rs. 30,500 which were paid to the appellant as earnest money.

2. The relevant facts are that the respondent agreed, vide Exh. 5/1, to buy from the appellant a piece of land situated in Trans‑Lyari Quarter, Karachi, with the buildings and heredita ments which existed on it and in which the business of manufac turing chocolates and other allied articles was being carried on under the name and style of the Sind Chocolate Works, together with the machinery, other effects of the factory as well as the benefits of licenses, quotas, permits, contracts and orders. It was clarified in clause 1 of the agreement that the business which was being sold was a running concern, and that the patterns, drawings, designs, processes, formulas and manufacturing devices as well as the goodwill of that business were to be transferred. Clause 6 of the agreement shows that the entire stock‑in‑trade which was on the premises and in the godowns as well as that which was in transit was to be sold along with the letters of credit that were established by the appellant. Clause 2 of the agreement discloses that the land, buildings and hereditaments constituted the security of a loan of Rs. 2 lacs which the appellant had taken from the Pakistan Industrial Finance Corporation. The consi deration for the entire transaction was Rs. 3.05 lacs, and the break‑up of the consideration is shown in clause 2 of the agree ment as follows :‑ (t) Rs. 2,65,C00.00 for the sale of the land, buildings and hereditaments including the liability to pay the loan. (ii) Rs. 40,000.00 for the machinery, plant, tools, spare‑parts, etc. It is to be noted that, in the above break‑up, there is no mention of a running business, which omission is capable of lending itself to the interpretation that nothing was payable as the price of that business which was to be transferred incidentally as a party of the whole transaction. The respondent paid Rs. 30,500.00 as earnest money at the time of making the agreement, and the balance of the consideration was payable after the appellant performed his part of the agreement as detailed in the 3rd paragraph of clause 2 and clauses 3 to 8 of the agreement. Clause 9 fixes the time for the performance of the agreement, and is important because its interpretation is in dispute. It is as follows :‑ "The conveyance shall be executed within three months from the date of agreement hereof or earlier." As the agreement was executed on the 4th of May 1954, it was to be performed, in terms of the above clause, on or before the 3rd of August 1954.

3. Differences arose between the parties with regard to the performance of the appellant's part of the agreement. The respondent then cancelled the agreement and instituted the suit, from which this appeal has arisen, for the recovery of the earnest money on the ground that the appellant had failed to perform his part of the contract. The covenants which the respondent considered to be material and which were allegedly breached by the appellant, are set out in paragraph 4 of the plaint, as follows :‑ "(1) The vendor was to make out a clear marketable and unimpeachable title to the property, and to execute the sale deed in respect of the property mentioned in para. (1) of the plaint and to convey the same to the purchaser or his nominee or nominees free from all liens, claims, disputes, charges, rates and taxes of any nature whatsoever. (2) The vendor was to put the purchaser or his nominee or nominees into physical possession of the property. (3)The vendor was to cause the lease of the said land to be transferred in the name of the Purchaser or his nominee or nominees from the Karachi Municipal Corporation. (4) The vendor was to obtain the approval from the Pakistan Authorities under section 3 of the Land Control (Capital of the Federation) Ordinance, 1948, to the transfer of the said property. (5) The vendor was to have transferred in favour of the purchaser a loan of Rs. two lacs taken by the vendor on a deed of hypothecation of the said property and business from the Pakistan Industrial Finance Corporation. (6) The vendor was also to obtain the necessary income‑tax clearance certificate and the Custodian's certificate under the Administration of Evacuee Property Ordinance XV of 1949, and1 (7) The sale deed after obtaining the necessary permission and certificates was to be executed within three months from the date of the agreement or earlier." There is no mention in the above paragraph of the running business, the patterns, drawings, processes, designs, formulas, manufacturing devices or of the contracts, orders, etc. Emphasis was laid on behalf of the respondent during the trial on the failure of the appellant to perform his part of the agreement within the time specified in clause 9 of the agreement.

4. The learned trial Judge has decreed the suit mainly on the grounds :‑‑ (i) that time was of the essence of the contract ; (ii) that the appellant had failed to obtain the approval of the authorities to transfer the land ; and (iii) that undisputedly clear title to the property was not established. He has expressly excused the appellant of the obligation to transfer the loan on the ground that the respondent had withheld his co‑operation. The income‑tax clearance certificate was admitted before us by counsel for the respondent to have been obtained by the appellant within time, vide Exh. 8/1. Counsel further stated that the performance of the other obligations set out in paragraph 4 of the plaint could be disregarded.

5. Mr. Rahimtoolah, counsel for the appellant, has criticized the judgment by advancing four arguments which were (1) that time was not of the essence of the contract ; (2) that clear and marketable title of the appellant to the property had been established ; (3) that proper permission under the Land Control (Capital of the Federation) Ordinance, 1948 to transfer the land had been obtained by the appellant ; (4) that the suit was barred by section 69 of the Partnership Act. The fourth argument was not advanced in the trial Court, nor was it raised in the written statement.

6. Lengthy arguments were addressed to us on the question as to whether time was of the essence of the contract or not. Mr. Rahirntoolah has relied on the law laid down in Jamshed v, Butjorji (AIR 1915 P C 83) and Mr. Iqbal Ahmad, counsel for the respondent has relied on Tiller v. Thomas ((1867‑68) 3 Ch. A. C. 61) and Tadcaster Tower Brewery Com, pany v. Wilson ((1897) 1 Ch. D. 705). The emphasis of Mr. Rahimtoolah was on the applicability and that of Mr. Iqbal Ahmed on the inapplicability of the equitable view of the English law which inclines to condone the failure of the parties to abide by the date of a sale named in a contract if it relates to real estate. We think that this matter of dealing with the problem was not correct because section 55 of the Contract Act, 1872 lays down that it is the intention of the parties, and not the subject‑matter of a sale, which is the deciding factor in determining the importance of time for the performance of a contract. We would like to explain our point of view because the explanation will disclose the connection between the view point of the above‑mentioned three authoritative judgments and the central idea contained In the section.

7. The judgment of the Privy Council relates to the specific performance of a contract for the sale of a land which was situated near Bombay, and declares that the law applicable to the question as to whether time was of the essence of the contract or not was contained in section 55 of the Indian Contract Act, 1872. It further enunciates that the section does not lay down any principle which differs from those which obtained on the subject under the law of England as regards the sale of lands. Viscount Haldane, who delivered the judgment, therefore, proceeded to refer to the English principles of law and to apply them to the facts of that case. The English law was thus discussed as the law parallel to the governing law and also, of course, as the source of the latter law. It would be a mistake to read more in this respect in his Lordship's discussion. .

8. In England, there are two rules which are relevant to the determination of the importance of time in the performance of a contract. One is the rule at law and the other is the rule in equity. The general rule at law is that if the parties name a time for the performance of a contract without stipulating that it is of the essence of the contract, it is still of the essence of the contract ; and the general rule in equity is that time is not of the essence of the contract unless on the whole it is considered just and proper to treat it to be so. Sections 307 and 308 of Volume XII of the American Jurisprudence show that departures have been made from both the general rules so as to tone down the strictness of one and to introduce strictness in the other. The object, of course, 1s that justice be done, in accordance with the real inten tions of the parties. This essence of the law has been embodied in section 55 of our Contract Act, as follows :‑

55. Effect of failure to perform at fixed time in contract in which time is essential.‑--When a party to a contract promises to do a certain thing at or before a specified time, 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. Effect of such failure when time is not essential.‑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. Effect of acceptance of performance at time other than that agreed upon.‑If, in case of a contract voidable on account of the promisor's failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensa tion for any loss occasioned by the non‑performance of the promise at the time agreed, unless, at the time of such accep tance, he gives notice to the promisor of his intention to do so." The words : "If the intention of the parties was that time should be of the essence of the contract", which occur in the firs paragraph of the above section, need to be kept in mind because neither the language of a contract nor any particular circumstance of a case has been mentioned In the section as specifically indicative of the importance of time. If the parties stated in a. contract that time was of the essence of it but there were sure indications of the contrary intention, then in spite of the language their intention would prevail. The point in an inquiry as to the importance of time for the performance of a contract is the discovery of the intention and not complete reliance on any particular aspect of the transaction. The English principle in equity that generally time is not of the essence of a contract to sell real estate, is based on a rational appreciation of the usual intention of the parties in such transactions. That basis is that the price of a real estate does not ordinarily fluctuate, nor does a real estate deteriorate within a few days' time. If, therefore, a date named by the parties in such a contract is not observed, one can ordinarily presume that the parties intended its per formance within a reasonable time. This, however, does not mean that there is a direct relationship between a contract to sell real estate and the importance of time. This is explained by the English view that tine can be of the essence of the contract if the real estate which is agreed to be sold constitutes business premises or is to be used for trade purposes. See for instance, Harold Wcod Brick Co. v. Ferris ((1935) 2 K B 198). The reason is that business needs are ordinarily subject to quick changes. The same consi deration applies to the sale of public houses. The two judgments on which reliance has been placed by Mr.. Iqbal Ahmed, accordingly relate to the sale of public houses. Time is also con sidered in England to be of the essence of a contract wade to sell reversionary interest. The reason is that such interest is susceptible to quick changes in its value by the passage of time because the enjoyment of the interest being expectant on death, its price is subject to the uncertainty of a living individual's chances of life and death. See, for instance, the Editor's note at the end of Newman v. Rogers ((1793) 4 Bro. C C 391). It follows, therefore, that the importance of time in a contract for sale is primarily not determinable by the subject‑matter of the transaction but by the intention of the parties which may be gathered from the entire circumstances of the case, and that this is our law. The circumstances which can indicate the intention of the parties are their words ; their conduct ; the purpose of the deal ; the satisfaction, if any, of closely connected needs of the parties as well as the character of the subject‑matter of the sale. Our knowledge of the usual intention of the parties in respect of certain sets of circumstances, whether acquired empirically or from the declarations made by men of experience and sagacity, is valuable for making generaliza tions which we may use as 'the starting points of our investigation, but such generalizations are aids to the search, and neither law nor their expression is enunciation of the principles of law. In our country this applies to all those generalizations made by Courts which are based on and embody worldly experience, under standing of human conduct or appreciation of any facts, irrespective of whether the basis is explained in such pronounce ment or not. We venture to state that this distinction between such pronouncements on the one hand and the decision of a question of law or the enunciation of a principle of law on the other hand, has become of immediate practical importance for us by virtue of Articles 63, 100 and 130 of our Constitution, which are as follows : "

63. Any decision of the Supreme Court shall, to the extent that it decides a question of law or is based upon or enunciates a principle of law, be binding on all other Courts in Pakistan." "

100. Subject to Article 63, any decision of a High Court shall, to the extent that it decides a question of law or is based upon or enunciates a principle of law, be binding on all other Courts that are subordinate to it." "

130. No Court shall have any jurisdiction that is not conferred on it by this Constitution or by or under the law."

9. The object of the present inquiry is the determination of the intention of the parties as to time in the circumstances of this case. We have to see for doing justice whether time was or can be reasonably expected to have been intended by the parties to be of the essence of the contract or not. They have stated in clause 9 of the agreement that the conveyance shall be executed "within three months" of the date on which it was made "or earlier". The words "or earlier" are redundant in this context. Even if the last date had been specified and it was added that the contract had to be performed by that date or earlier, it would have been immaterial. This is clear from the language of section 55 ; nor does it make such difference that the appellant has stated in his letter, Exh. 5/17, that "the contract was to be performed on the 4th August 1954". Emphasis was, therefore, laid by counsel for the respondent on the following facts to establish that time was of the essence of the contract :‑ (i) Not only land, buildings, etc. but also a running business was intended to be bought and sold. (ii) The respondent's object was to use the premises for establishing a factory to produce Max Factor's cosmetics. (iii) The appellant had admitted in his letter Exh. 5/4 addressed to the Ministry of Health that time was of the essence of the contract. He meant to say that the subject‑matter of the sale was a running business, the purpose of the transaction was of commercial nature, and the conduct of the appellant disclosed the real intention of the parties. As to the sale of a running business we have pointed out above that there is no mention of it in the break‑up of the price. We have also stated that there is no mention of it in paragraph 4 of the plaint which has been reproduced above. Moreover, the respondent has attached so little significance to it that he instructed the appellant to stop it in consequence of which production ceased. See paragraph 2 of Exh. 5/6. Para graph 3 of Exh. 5/4 indicates that actually there was perhaps no running business worth the name. We were therefore not impressed by the argument that a running business was intended to be bought and sold or that there was truly a going concern.

10. The second consideration that the respondent intended to establish a factory to produce cosmetics may have a factual basis, but it had so little bearing on the transaction that there is no mention of it in the agreement. Moreover, the intention of the respondent to instal the factory must have been flickering when the contract was made because his negotiations with the producers of the cosmetics were far from finalised. The contract between the parties to this suit was made on the 4th of May 1954, and the time specified in clause 9 for the completion of the transaction was only three months, but the respondent left for England on the morning of the 5th of August 1954, for finalizing his deal with Messrs Max Factor and concluded an agreement with them towards the end of 1954. Additionally, he has stated in his cross‑examination, as follows: "I established this Factory (Max Factor) at Landhi adjoining my Coca Cola Factory which went into production in July 1955. The Landhi land was obtained in 1951 but it was converted into Sikni land in 1957 although an application (for this purpose) was made in 1954. The machinery of Chocolate and Max Factor Factory was not common." The above statement indicates that a strained attempt has been made to connect cosmetics with the chocolate factory. We are, therefore, not inclined to agree with the contention that importance should be attached to the time factor owing to the contemplated installation of a cosmetic factory.

11. The third contention raised on behalf of the respondent that the appellant had admitted in his letter Exh. 5/4 that time was of the essence of the contract has been explained by counsel for the appellant by pointing out that the letter was written to obtain an early permission to sell the land. The relevant part of the letter is as follows :‑ "As time is of the essence of the contract and ascertain essential raw materials have already been imported for the concern it will be in the best interest of the industry to let the purchaser utilize the same without any further delay." The statement that raw material had been imported for the new factory is not borne out by the circumstance that the respondent had not even concluded his contract with Messrs Max Factor and did not conclude it for about six months more after the date of the letter. The mention of "The interest of the industry" supports the explanation offered by Mr. Rahimtoolah that the object was merely to say all that could be said to induce early action. In these circumstances, the statement that time was of the essence of the contract was obviously not intended to convey the genuine intention of the parties. We do not wish to be under stood as approving mis‑statements or loose statements made by the respondent because the moral aspect of his conduct is not the subject of our inquiry. All that we wish to emphasize is that there is no warrant for interpreting the contract on the basis of what the respondent said in an entirely different context.

12. The conclusion of the above discussion is that there is nothing in the contract to make time of its essence or, in the circumstances on which reliance has been placed to give impor tance to the specified time. The first contention of the appellant's counsel, therefore, succeeds.

13. But his success in that respect does not help him because his three other contentions, which have been set out in paragraph 5 above, have no substance in them and must fail. The second and third contentions can be conveniently considered together. The appellant was required in terms of the agreement to make out "a clear marketable and unimpeachable title to the property" and to convey it to the respondent "free from all liens, claims, disputes, . . . . . " etc. The respondent has urged, and the appellant has admitted, that the following letter, which is Exh. 5/3, was written to the appellant by the Secretariat of the Chief Commissioner, Karachi, on the 8th December 1953 :‑ "Reference your letter No. SCW/137/53, dated the 30th December 1953, on the above subject, I am to inform you that necessary sanction to the registration of the plot In question has been conveyed to the Registrar but your factory will have to be removed from this area in due course." There can be no manner of doubt that the intention of the Government, expressed in the above letter, is a clog on the title of the appellant. It means that the enjoyment of the factory is precarious. Counsel for the appellant did not deny this interpre tation of the letter, but contended that the letter was an old document which had been disclosed to the respondent and that the respondent bad entered into the agreement with the knowledge of its existence. This stand of counsel is inconsistent with his contention that clear and marketable title had been established. The learned trial Judge has disbelieved that the respondent had been in advance informed of the defect in the title, and has observed as follows :‑ "In view of the admission of the defendant (appellant) that this letter was not specifically brought to the notice of the plaintiff (respondent) and the statement of Mr. Kenneth De' Souza that no such fact was disclosed to him as the broker, there is not the slightest doubt in my mind that the defendant (appellant) suppressed these facts from the plaintiff (respondent)." We respectfully agree with the above conclusion.

14. Mr. Rahimtoolah has further argued that the threat was removed by the permission which had been granted by the Government under section 3 of the Land Control (Capital of the Federation) Ordinance, 1948, to transfer the land to the respon dent : that permission is contained in the letter, Exh. 5/5, dated the 26th July 1954, as follows :‑ "With reference to your letter dated the 23rd June 1954, on the above subject, I am directed to convey the approval of the Government of Pakistan under section 3 of the Land Control (Capital of the Federation) Ordinance, 1948, to the transfer of the Sind Chocolate Works situated on Survey No. 11 Sheet No. K‑28(C) in Trans‑Lyari Quarter, to Mr. Ebrahim Saley Mayat." Counsel's argument was that the above approval superseded the warning that was conveyed to the appellant in 1953, vide Exh. 5/3. We are unable to agree with this view for two reasons. Firstly, the mere omission to repeat the warning does not amount to its revocation. Secondly, the language of the approval itself indicates that the transfer of the Chocolate Factory was approved of and not the transfer of the land itself. Mr. Rahimtoolah contended that, under the said section, approval to the transfer of land only could be granted and not to the transfer of the factory. The mention of the factory, therefore, was a flaw of expression which did not affect the substance of the document. We were inclined to agree with this view until Mr. Iqbal Ahmed, counsel for the respondent, drew our attention to the facts which formed the background of the letter. The appellant has stated as his own witness (D. W. 1) as follows :‑ "Next morning I and the plaintiff (respondent) along with Mr. DeSouza went and saw Mr. Muhammad Akbar. The plaintiff went inside and then took us after some time to him. As soon as I entered, Mr. Muhammad Akbar told me that 'Agha Saheb, this land cannot be transferred'. But I told him that he had decided this without hearing me, and presented the application (for permission to transfer the land) which was already in my pocket and asked him to send me an official reply. After one month and three days I received Exh. 5/5 in reply. This letter came to me after I had seen the Minister in charge." As explained by Mr. Iqbal Ahmed, the above evidence of the appellant indicates that the Government had decided not to grant permission to transfer the land, but the appellant brought pressure to bear on the Department. The language of the approval suggests that he urged that it was factory which was the real subject‑matter of the sale, but as it was attached to land it could not be transferred without the approval of the Government. This or similar assurances given on behalf of the appellant appear, according to counsel to have led to the issuance of the letter Exh. 5/5. It is correct that approval of the Government for the transfer of the factory was not needed, but then the Government knew this as well as the manner in which approvals were granted under the law ; therefore, it is not easy to presume against the background of the above evidence that Exh. 5/5 merely contained a mis-descrip tion of the property. The impression of this difficulty is strengthened by the further fact that the defect which existed in the letter of approval was brought to the notice of the appellant, vide the respondent's letter Exh. 5/7 dated the 29th of July 1954, yet as pointed out by the learned trial Judge, the appellant did not pursue the matter and has failed to obtain the necessary clarifica tion. The learned Judge has observed in that connection as follows :‑ "According to him (i.e. the appellant) he saw the Minister concerned who informed him that this sanction was in respect of the land and he (the appellant) orally informed the plaintiff (respondent) about it. This fact, however, is denied by the plaintiff (respondent) and in the absence of any letter to that effect in the correspondence which passed between the parties, I am afraid, it is not possible for me to hold that any such information was conveyed to the plaintiff (respondent). I find that the defendant (appellant) did not approach the Central Government for further clarification on this and the action of the plaintiff (respondent) in the circum stances of the case was perfectly justified." We fully agree with the above finding of our learned brother. Our conclusion is that the appellant has neither established clear and marketable title to transfer the property ; nor has he obtained satisfactory approval of the Government of Pakistan under section 3 of the Land Control (Capital of the Federation) Ordinance, 1948. The respondent need not depart from the terms of the agreement and take unnecessary risks.

15. The fourth contention raised by Mr. Rahimtoolah, apart from being open to the objection that it raises for the first time a mixed question of law and fact, is untenable on that argu ment itself which was advanced by counsel in support of it. He contended that the agreement to sell the property was originally made between the firm of the respondent and the appellant, but later on the name of the respondent was substituted for that of his firm because the Pakistan Industrial Finance Corporation did not like to deal with firms. This substitution, according to counsel, was merely for show, because the actual purchaser was the respondent's firm, which was not registered under the Partner ship Act; therefore, the suit of the respondent was hit by section 69 of the Partnership Act. We reject this argument as devoid of any force, and do not consider it necessary to explain its hollowness.

16. The conclusion of all the foregoing discussion is that although time was not of the essence of the contract, the appellant has failed to establish satisfactory title to the property as well as to obtain the necessary approval of the Government of Pakistan to its transfer. We, therefore, dismiss the appeal with costs. K. B. A. Appeal dismissed.