P L D 1959 Supreme Court (Pak (PLP)

MUHAMMAD MUNIR, C. J.‑--This judgment will determine Civil Appeals Nos., 86 and 91 of 1958, which are directed against a judgment of the High Court of West Pakistan at Lahore reversing two decrees made by a First Class Civil Judge in two suits. By a lease deed dated the 7th March 1952 the appellants took from the respondents a factory known as Irfan Cotton & Oil Mills for a period of five years on an annual rent of rupees 7,900 payable in four equal instalments. Default having occurred in the payment for the quarter 9th March to 8th June 1953, the respondents filed a suit against the appellants for recovery of rupees 1,

975. Some two months later the appellants filed a counter‑suit against the respondent alleging that the lease under which rent was being demanded had been obtained by fraud and was opposed to public policy. The suits were consolidated and after the different issues arising therein were tried the appellants' claim was decreed while that of the respondents was dismissed. On appeal, the High Court held that no fraud had been proved and that it had not been shown that the object of the lease was unlawful or that the lease was against public policy. The respondents' appeal was therefore accepted and the decrees made by the Civil Judge reversed. When we gave special leave to appeal, we were under the impression that a substantial question relating to the application of the principle underlying section 108 of the Transfer of Property Act arose in the case, but having heard the parties we take the view that no such question arises and that both the appeals must be dismissed on the short ground that the fraud alleged by the appellants has not been proved and that the lease is not shown to be opposed to public policy. The ground for the claim by the appellants was stated in paragraphs 2, 3, 4, 5 and 8 of the plaint as follows:‑ "2. that the plaintiffs took on lease the said Irfan Cotton Mills from the defendants on the assurance by the latter that the factory was in perfect working order and they were authorised and entitled to run the factory without any hitch from the Government or Lahore Corporation authorities, because they had legal licenses. 3. that on the above‑mentioned assurance the plaintiffs executed a lease deed on 7th March 1952, in favour of the defendants for a term of five years fixing as annual rent at Rs. 7,900 and paid them Rs. 7,900 as advance rent for the first year. A counterpart of the lease deed signed by the parties is attached. Original is in possession of the defendants; 4. that the plaintiffs after taking over possession of the factory started to run it. They had worked the factory only for a few months when they received a summons from the Court of the Corporation Magistrate, Lahore, to appear before him to show cause why they should not be punished for running the oil engine of the Irfan Cotton Mills without a licence. The plain tiffs thereupon approached the defendants and requested them to hand over the Corporation licence for the oil engine to them so that they might produce it before the Magistrate; 5. that the defendants assured the plaintiffs that the licence was with Sh. Muhammad Aslam, their Mukhtar‑i‑khas defendant No. 3, who would hand it over to them. The plaintiffs therefore approached the defendant No. 3 for obtaining the licence from him, but he alleged that the licence was mis placed somewhere and he would deliver it to the plaintiffs after search. The plaintiffs thereafter made repeated requests to the defendants to deliver the licence to them but it was never delivered to them by any of the defendants. The result was that the plaintiffs were fined by the Magistrate on 17th January 1953, for working the oil engine without a licence; 8. that it is clear from the above mentioned facts that the plaintiffs were induced by the fraud and false assurance of the defendants that the factory was in perfect running order and they were licence holders and that there was no legal hitch from the Government or the City of Lahore Corporation authorities in running the factory, to execute the lease deed in dispute, to advance first annual rent and to spend Rs. 10,296‑15‑0 on the repairs, replacement and construction of the building and the machinery. The lease deed is therefore based on fraud and cheating and made on the part of the defendants for an unlawful purpose, against public policy and therefore void and the plaintiffs are entitled to the declaration that the lease deed cannot be enforced against them and that the defendants should compensate the plaintiffs for the expenses of repairs, replace ment and construction of the building and the machinery. The plaintiffs surely would never have accepted the lease, if it was revealed to them that the defendants did not hold licences for the oil engine". It will appear from the terms in which paragraphs 2 and 8 were drafted and front the evidence of Haji Abdul Karim, one of the appellants, that the appellants' cause of action was founded on express fraud involved in the alleged representation that the factory was in a perfect running order and that the respondents held the requisite licence. If the appellants were aware of the fact that a licence to run the factory was necessary and that it could not be run without such licence, they would, if such licence was not produced, have inquired from the office of the Corporation whether a licence for the factory had been obtained. There is, however, no evidence that any inquiry from the Corporation was made, and it is impossible to accept the appellants' statement that they had inquired about the licence and were satisfied with the reply that it had been misplaced and would be delivered if found after search. The bye‑laws provide that a licence has to be obtained before the first day of April every year but it is admitted that the appellants applied for no licence until they had been convicted under sections 396/397 of the Corporation Act and the operation of the mill stopped under section 218 of the Act. The story therefore of inquiries about a licence at the time of the execution of the lease is wholly unacceptable and unless that story be believed there can be no question of any express fraud. As regards the object of the lease being unlawful and opposed to public policy, the only argument addressed to us and in the High Court was that the respondents had twice been challaned under sections 217/218 of the Corporation Act, first on 28th December 1951, and again on 4th March 1952. The copies from the criminal register No. 1 maintained by the Corporation Magistrate, Lahore, do not show that the respondents were ever convicted. The case now made out is that it being an offence to run a factory without a licence in the locality in which the factory is situate, the respondents leased a continuing offence to the appellants and that therefore the lease being opposed to public policy is not enforceable. It has, however, not been shown that before the execution of the lease there was any prohibition against the working of the factory or, that the respondents had been convicted for running it or that the Chief Executive Officer had served any notice under Explanation 1 to section 218, sub section (1), of the Act. Section 218, subsection (1), clause (f) read with bye‑law 1 (1) made under section 396 (29) and 397 of the Corporation Act would show that it is for the Chief Executive officer to determine whether a certain operation is dangerous to life, health or property or likely to create a nuisance and it is only on his forming such opinion that the necessity to take a licence arises. The appellants made no endeavour to ascertain whether that officer had or had not formed such opinion in respect of the operation in question and the two inconclusive challans do not amount to an expression of such opinion. The appellants would have had an arguable case if proof had been forthcoming that the Chief Executive Officer had expressed such opinion in regard to the operation in question, and that that fact was within the knowledge of the respondents, but not within the knowledge of the appellants. In that case an argument under section 108 of the Transfer of Property Act could perhaps have been built. A case of fraud such as the appellant raised in the present case is essentially different from a case of the kind contemplated by section 108 which provision can be invoked only if the plaintiff specifies the material defect in the property with reference to its intended use, alleges that the defendant was aware of such defect and not the plaintiff and that the plaintiff could not with ordinary care discover such defect. In the case before us the material defect was not specified and it was nowhere alleged that the respondents were aware of the defect and not the appellants and that the appellants could not with ordinary care discover the defect. The whole case was founded on the allegation that the respondents had made an express representation, which was false and amounted to fraud and cheating. Similarly, the appellants not having proved that a licence for the working of the factory was necessary because the Chief Executive Officer had formed the opinion that the running of the factory was dangerous to life health or property or likely to create a nuisance, it cannot be held that the running of the factory was opposed to public policy. It is true that the appellants have been ordered to close the Factory under section 218 of the Corporation Act and have also been convicted for running the Factory without a licence, but there is no evidence of the respondents having ever been treated in this manner. The appellants could have run the Factory if the Chief Executive Officer had taken a different view and merely because after the lease he held the operation as falling under section 218 (1) (f) does not make the lease in its inception opposed to public policy. For these reasons, we dismiss these appeals, but in view of the hardship caused to the appellants we direct the parties to bear their own costs throughout. A. H. Appeals dismissed.