1. ' FAISAL ARAB, J.--- The defendant owns residential property bearing Plot No,44, measuring 1000 square yards situated on 14th Street, Phase V, Defence Housing Authority, Karachi. Under an agreement to sell dated 13-10-2003, the defendant agreed to sell his above mentioned property to the plaintiff for a total sale consideration of Rs,1,20,00,000. The plaintiff made a part payment of 20,00,000 to the defendant and the balance was payable on or before 30-12-2003 at the time of registration of the conveyance deed.
2. ' It is the case of the plaintiff that the time for the performance of the agreement was extended twice. First upto 15-2-2004 and then uptill 15-4-2004 as the defendant had not completed the documentation of his house which was necessary for executing conveyance deed in the office of the Sub-Registrar.
3. ' On the other hand it is the case of the defendant that time was made the essence of the contract and was extended only once and not twice. It is also the case of the defendant that it was the plaintiff who could not complete the transaction within the stipulated time as he did not possess sufficient funds and for such reason time of performance was extended upto 15-2-2004 yet the plaintiff failed to complete the transaction hence he is not entitled to the relief of specific performance of the contract. On the basis of the pleadings of the parties following issues were framed:---
(1) Whether the defendant has entered into sale agreement dated 13-10-2003 for total sale consideration of Rs,1,20,00,000 (Rupees twelve million)?
(2) Whether the time was essence of the contract, dated 13-10-2003?
(3) Whether the defendant extended the time for performance vide agreement, dated 14-4-2004?
(4) Whether the plaintiff is/was competent to mortgage the defendant's property by creating equitable charge on the defendant/suit property in favour of Bank Al-Falah Limited?
(5) Whether the defendant has competently cancelled the agreement, dated 13-10-2003 on account of non-performance of the contract by the plaintiff?
(6) Whether the plaintiff is entitled to be compensated for the injury caused by the defendant to the tune of Rs,10,000,000?
7. What should the decree be?
4. Issue No 1 This issue need not be addressed as it is an admitted position that on 13-10-2003 the defendant executed agreement to sell the suit property to the plaintiff.
5. Issue No,2 ' The plea that time was the essence of the contract is to be taken by a party which was in a position to perform its obligation within stipulated time under the contract. It cannot be taken by a party who has itself failed to complete the documentation which were necessary for registration of conveyance deed within the stipulated period. In the present case the defendant itself failed to complete the requisite documentation within the stipulated time, as is evident from the date on the completion plans of the property in question. The completion plan is dated 22-4-2004 produced in evidence as Exhibit No,9/5. The defendant, therefore, cannot avoid the contract on the plea that time was the essence of the contract. One more reason for holding so is that the parties with their mutual consent had agreed to extend the period of contract and hence the plea that time was the essence of the contract fails. Even otherwise mere fixing time for the performance of an agreement cannot be construed as making time the essence of the contract. Neither it is stipulated in the agreement that time is the essence of the contract nor it is mentioned that upon expiry of the time fixed for the contract, the contract would automatically come to and end. Hence, time was never intended to be made the essence of the contract. This issue is answered in the negative.
6. Issue No,3 ' The first extension in the period for the performance of the agreement is admitted but the second extension claimed by the plaintiff to be upto 15-4-2004 on the basis of Exhibit No,P.6 is denied by the defendant terming it a forged document. After comparing admitted signatures of the defendant on record with the disputed signature on Exhibit No,P.6 this Court is of the firm opinion that loops, the flow, the slant and the formation of letters of the signature on Exhibit No,P.6 clearly resembles with defendant's admitted signatures on record and hence Exhibit No,P.6 is in the handwriting of the defendant. This issue is answered in the affirmative.
7. Issue No,4 ' It has become normal practice that the buyers seek financing from financial institution against the security of the very same property which they intend to purchase. This is done when the bank pays the sale consideration to the seller on behalf of the buyer and the buyer tenders the property as security for the finance provided by a financial institution. This entire exercise i,e, payment to the seller and mortgaging the property under sale is done simultaneously and, therefore, no issue could be made out of it by the seller who in any case is to receive the entire sale consideration. In such eventuality, creation of interest in the property in favour of the financial institution cannot prejudice the seller as he no more retains any right, title or interest in the property sold. This issue is also answered in the affirmative.
8. Issue No,5 ' Under the agreement to sell, the contract was to be performed on or before 30-12-2003. This time was extended twice. First extension was upto 15-2-2004 and the second upto 15-4-2004. Even upon expiry of the second term the necessary documentation was not completed by the defendant and the same was done as late as 22-4-2004. The plaintiff on his part had served legal notice dated 17- 4-2004 on the defendant. In response to this notice defendant outrightly refused to perform his part of obligation on the plea that time was the essence of the contract and that the plaintiff did not possess sufficient funds of his own to buy the suit property.
9. 'In a transaction of sale of an immovable property, seller is required to complete all documentation which is necessary for execution of conveyance deed before the Sub-Registrar in favour of the buyer. Unless such documentation is complete, a contract for sale of immovable property, irrespective of the fact that time is the essence of the contract or not, continues to remain enforceable at the option of the buyer, provided always that the buyer at all material times has shown his readiness and willingness to complete his part of the bargain.
10. ' In the contracts where time is of the essence of the contract and the, seller fails to complete the documentation within stipulated time, the buyer has the option either to sue the seller for damages in lieu of the performance of the contract or may seek specific performance of the contract and also claim damages in addition to the relief of specific performance. This course is to be taken by a buyer only when time is the essence of the contract. Where, however, time is not the essence of the contract and the seller fails to perform within the stipulated time, then the buyer has to first serve notice upon the seller calling upon him to perform the contract within a reasonable time. If the seller still fails to perform, then the buyer may either put an end to the contract, seek damages in lieu thereof or may seek the relief of specific performance of the contract as well as damages in addition to the relief of specific performance. The difference between the two kinds of contracts is that in cases where time is not the essence, of the contract, the contract cannot be unilaterally put to end by any of the contracting parties without first serving and giving reasonable time to the other side for performance.
11. ' Likewise, in cases where time is the essence of the contract and the buyer avoids or fails to perform the seller can treat the contract as have come to an end and can lawfully refuse performance if approached by the buyer after the expiry of the period fixed for performance.
12. However, in cases where time is not the essence of the contract and the buyer avoids or fails to perform within stipulated time, then in such eventuality the seller must first serve notice of his readiness to complete the transaction and call upon the buyer to complete the transaction. If after receiving seller's notice of readiness, the buyer still fails to complete the transaction within reasonable time, then the contract automatically comes to an end and thereafter creates no obligation on the seller to perform his obligation under the contract. The seller thereafter may sue the buyer for any damage that may have been caused to him upon refusal of the buyer to complete the transaction.
13. ' Thus, in cases where time is not the essence of the contract, the seller is bound to intimate the buyer that the seller is prepared to complete the transaction before the seller could treat the contract as having come to an end. Once the seller gives such intimation, then it is for the buyer to act with necessary dispatch and seek completion of the transaction. The sellers after intimating the buyer of his readiness to perform his part of the contract, is not expected to run after the buyer and continue to remain bound indefinitely by the contract of sale at the option of the buyer. When the buyer becomes aware of the fact that the seller is now ready to perform his part of the contract, then in such circumstances the buyer has to come forward to get the transaction completed within reasonable time. If he does not, then the buyer loses his right to seek specific performance. Any inaction on the part of the buyer when seller has demonstrated his readiness to complete the transaction, would by itself reflect that buyer is not ready and willing to perform the contract thereby disentitling himself for the discretionary relief of specific performance of the contract.
14. 'In the present the defendant failed to complete necessary -documentation even within the extended periods. This became evident when plaintiff served notice dated 17-4-2004 demonstrating his readiness and willingness to complete the transaction yet the defendant refused to perform vide his letter, dated 22-4-2004 though on that very day the defendant was able to complete the documentation as is evident from the date mentioned on the completion plan of the suit property filed as Exhibit No,9/5. The defendant therefore, had no legal justification to put an end to the contract vide his letter dated 22-4-2004. On the other hand, the plaintiff has sufficiently established that he is/was ready and willing to perform his part of the bargain and therefore, he is entitled to the relief of specific performance of the agreement, dated 13-10-2003.
15. This issue is, therefore, answered in the negative.
16. Issue No,6 ' The plaintiff has neither laid adequate foundation in the plaint for claiming damages nor led evidence to establish that any damage or loss was sustained by him on account of breach of the contract on behalf of the defendant. This issue is, therefore, answered in the negative.
17. Issue No,7 'It 'is an admitted position that the plaintiff did not possess funds of his own to buy the suit property and had arranged financing from a bank. The plaintiff has not yet secured such loan and therefore, no liability of interest has, accrued upon him. The plaintiff is now getting the suit property at the rates settled four years ago. On the other hand the defendant would get the price of his house today that was settled four years ago. The defendant refused to perform merely because time settled for performance had expired. Though such refusal was not legally justifiable, it was a reaction of an ordinary lay man. There was no dishonesty in such refusal on the part of the defendant. Therefore, the interest which the plaintiff saved for four years on the finance which he arranged from a bank should be paid by him to the defendant in order to compensate the defendant to certain extent for the increase that has taken place in value of the real estate during the past about four years. The element of interest for four years at the rate of 12% per annum on the balance sale consideration of Rs,10,000,000 comes to about Rs,4,800,000. This interest in any case had accrued had the transaction been completed in 2003. This element of interest on equitable consideration discussed above shall also be paid by the plaintiff to the defendant along with the balance sale consideration of Rs,10,000,000.
18. 'In view of the above discussion, this suit for specific performance of the contract is decreed in favour of the plaintiff. The plaintiff is directed to deposit within 30 days the balance consideration of Rs,10,000,000 along with Rs,4,800,000 being the element of interest with the Nazir of this Court.
19. Thereafter, within the next 10 days the defendant shall execute the conveyance deed in favour of the plaintiff and hand over all the title documents to the plaintiff as well. Upon doing so, the defendant shall receive Rs,14,80,000 which the plaintiff is required to deposit with the Nazir. In case the defendant fails to execute the conveyance deed, Nazir of this Court would be fully authorized to execute the conveyance deed on behalf of the defendant. However, if the plaintiff fails to deposit Rs,14,800,000 within the stipulated 30 days period, this would demonstrate that the plaintiff is not ready and willing to complete the transaction and in such eventuality this suit shall be deem to have been dismissed.