SABIHUDDIN AHMED, J. -- All these eleven petitions were heard and decided together as a common question of law i.e. The validity of non-utilization fee on the basis of revised occupancy value and at the rate of 12% of such value was called in question, It is not necessary to recapitulate the facts of each case and if might sufficient to mention that the petitioners or their predecessor-in-interest were allotted various plots by the respondent No. 1 i.e. Karachi Development Authority. A certain amount by way of occupancy value required to be paid by the allottees was mentioned in the respective allotment order and such orders also contained a provision to. The effect that construction on the plot would be raised within a specified period of time and in case of failure to do so, the allottee would be liable to pay non-utilization fee to the extent of a certain percentage of the occupancy value. The rate of such fee varies from 3% to 10% in the respective allotment orders placed before us in all the petitions, It may be pertinent to mention that in certain cases, the amount of such fee demanded by the respondent is enormous as for instance, in C.P. No. 1968 of 1999, where the total occupancy value of the plot was Rs. 491,652/- the quantum of non-utilization fee claimed by the K.D.A, is Rs. 74,85,371/-
2. We have heard M/s. H.A. Rehmani Raja Qasit Nawaz, Aziz Malik and Dasti Muhammad Ibrahim, Advocates for the petitioners as well as Syed Iqbal Ahmad, petitioner in C.P. No. 948/96 who appeared in person. The case on behalf of the respondent was urged by M/s. Nazar Hussain Dhoon.
Syed Jamil Ahmad and Syed Muzafar Imam. Basically the petitioners contended that non- utilization fee could not be claimed by the respondent, inasmuch as the aforesaid respondent, inasmuch as the aforesaid respondent was statutory body and could only impose a tax or a fee under the authority of a statute, It was argued that a fee would only be levied for services rendered and there was nothing to indicate that any particular service was provided by the respondent' in respect of plots whereupon no construction had been raised. The aforesaid fee could also not be treated as a tax, simpliciter because taxes could only be levied under the authority of the legislature and neither the K.D.A. Order, 1957 nor any other law allowed imposition of any such tax.
Alternatively it was contended that in any event the respective allotment order specified the amount of occupancy value of every and provided for levy of non- utilization fee. In the event of failure to raise construction within the given time, at a certain percentage of the occupancy value.
Such orders having acquired the force of binding contracts between the parties, the respondent could not unilaterally revised the quantum of occupancy value and enhance the rate of fee.
3. On the other hand, learned counsel for the respondents tracing the genesis of such fee brought to our notice the allotment regulation of the respondent No. 1 published in the Gazette of Wet Pakistan, dated 27.08.1965, clause 25 whereby provided that if a plot was not utilized within the prescribed the period and extension is given in the period of construction, the allottee would pay a penalty at the rate of 3% per annum of the total occupancy value for every six month or part thereof such extended period. The aforesaid Regulation was however, amended by the Governing Body of. The respondent and published in the Sindh Government Gazette, dated 14.07.1983 an the amended Regulations read as under:- "If any plot is not utilized within the prescribed period and extension is given in the period of construction, the allottee shall pay a penalty at such percentage of such occupancy value as determined by the Karachi Development Authority for or before the such extended period. The period of extension shall be' reckoned to the nearest month."
4. According to the learned counsel the occupancy value as well as the rate of penalty was lawfully revised by the respondent from time to time and in certain cases the petitioners even agreed to abide by .The same, therefore, they could not turn around and question the levy.
5. In the first place, we requested learned counsel to identify as to whether the fee or penalty in question was a statutory levy or whether it was part of a contract between the parties. Mr. Rehmani, argued that it could neither be treated as a tax nor a fee inasmuch there we no law authorizing the respondent No. 1 to collect any tax on the basis of the occupancy value of a non-utilization plot and no special services were being rendered by respondent No. 1, owners of such plots so as to entitled them to receive a fee the only sanction for such fee or penalty emanates from the terms of the allotment and its validity will have to be determined according to principles of the law of contract, other learned counsel for the petitioners also took up more or less similar position. Learned counsel for the respondent on the other hand argued that such non-utilization fee or. Penalty was imposed under the authority of Regulation framed by the respondent No. 1 which had statutory sanction having been framed under Article 15 of the K.D.A. Order. The aforesaid Article 15(1) indeed enables the respondent No. 1 to make Regulations for the purpose of given effect to the provisions of the order but the learned counsel have not been able to refer to any provisions of the order enabling the respondent to levy any tax or cess, which according to the mandate of Article 274 of the Constitution can only be levied by or under the authority of the legislature.
6. On other hand Article 17 of the order stipulates that the funds of the Authority shall be provided by the Provincial Government as Municipal Corporation of the City of Karachi. The only fee leviable by the authority appears to be the betterment fee under Article 105, though it can generate some additional, finances through disposal' of the properties. We are, therefore, quite clearly of the opinion that non-utilization fee could not be collected by way of tax under the authority of a legislature.
7. M/s. Nazar Hussain Dhoon and Syed Jameel Ahmad however, argued that in any event the contract between the parties in terms of the allotment order leases in- question very clearly stipulated forfeiture of lease/ cancellation of allotment or payment of penalty in the alternative in the event of failure of the allottee/lessee to raise construction within a specified period of time, In other words the duty to pay such fee or penalty arose from the term of the contract between the parties and enable the Authority to terminate the .Lease dr recall the allotment order in the event of non-fulfilment of a condition. Indeed Mr. Rehmani and other learned counsel for the petitioners did not seriously question the right of the Authority to collect such amount but strenuously argued that such fee could not exceed the amount mentioned in the agreement it self. There principle objection was directed against the unilateral enhancement of occupancy value and increase in the rate of fee. Mr. Rehmani argued that in C.P. No. D-980 of 1999, the respondents could charge such fee only at the rate of 3% of the original occupancy value of R6. 80,000/- per year and there was no basis for demanding and exorbitant amount of Rs. 25,71,000/- in respect whereof no details have been furnished.
8. We find considerable force in the above contention, for several reasons, In the first place the allotment order dated 14.2.1975 speak of occupancy value of 2000 sq. Yards plot at the rate of Rs: 40/- per Sq. Yards, which works out to Rs. 2,80,000/-, clause (5) of the said order reads as under:- "Please also note that in case of extension in the period of payment or of construction beyond the stipulated period of a written application from you, an interest at 6% per annum or non-utilization fee at 3%v per annum (for every six months or part thereof) respectively shall be charged on the arrears of their dues."
9. It appears quite plainly that in the event of non payment of dues (occupancy value) within agreed time 6% per annum interest on the outstanding amount was to be paid by the allottee.
Whereas in case of failure to raise construction he should be liable to pay non-utilization fee at the rate of 3% of the total occupancy value. Clause 6 of the' allotment Regulations published in the Gazette dated 27.8.1965 (which were then in force), referred to terms and conditions of allotment specified in Appendix 'A' and condition No. 13 of the aforesaid appendix stipulated that the allottee shall complete the proposed building within two years from the date of issue of allotment order or within such extended period as the Director-General or the Director (L&E) may grant, It further provides that extension will be allowed on payment of a prescribed fee at 3% of the total occupancy value. Clause 25 of the Regulation (as it stood at the relevant time) also makes a- similar stipulation. The provisions of the Regulation and the conditions spelt out in Appendix 'A' could not doubt be read as part of the conditions of the contract between the parties as contended by the learned counsel for the respondents. Nevertheless the question shall be as to whether the terms of the contract being explicit, could they be unilaterally varied by the respondents through an amendment in the Regulation. The answer inevitably have to be in the negative.
10. Learned counsel for the respondents have relied upon the amendment in Regulation 25, effected through Gazette Notification dated 14.7.1983 whereby clause 25 of the allotment Regulations has been amended. Such amendment in out view however, could be of little help to the respondents in the instant case.
11. In the first place it has only been made by the Governing Body of the Authority unilaterally and could not be deemed to impair existing contractual terms. Secondly even if is treated as an executive order, it could not be given retrospective effect, so as to impair the rights and obligations accruing under concluded contracts as held, inter alia by the Honourable Supreme Court in Al- Samrez Enterprises v. Federation of Pakistan (1986 SGMR 1917). The fact that the petitioners acquired rights in rem in respect of the plots allotted to them is well-settled and was not seriously disputed on behalf of the respondents in view of the repeated pronouncements of this Court including Hajj Noor Muhammad v. Karachi Development Authority (PLD 1975 Karachi 373). Fourthly, it has already been held by a Division Bench of this Court in the case of Abdul Majeed v. Karachi- Development Authority (1992 M LD 2401) that the respondent No. 1 could not enhance the rate of occupancy value, without approval of the Provincial Government end even if such approval was accorded the new rates could only apply prospectively to allotments made after such approval and being in the nature of executive action could not be applied retrospectively to allotments made earlier.
12. Examining the matter from the stand point of the law of contract, Mr. Rehmani very fairly conceded that though penalties for breach of. Contract may be unenforceable under the English law, the same is not strictly applicable in Pakistan, inter alia in view of the pronouncement of the Honourable Supreme Court in the case, of Government of Pakistan v. Mistry Patel (PLD 1961 SC 80).
In the aforesaid cased the Honourable Supreme Court proceeded to hold that while under English law only pre-estimated liquidated damages for breach of contract Gould be claimed and a penalty terrier was not enforceable.. Section 74 of the Contract Act did not make any such distinction, which reads as under:- "74. When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way penalty, the party complaining of the breach is entitled, where or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for."
13. Accordingly it may be true that the nonutilization fee in terms of penalty envisaged by clause 25 of the Allotment Regulations may be theoretically enforceable but it needs to be kept in view that the aforesaid Section 74 contemplates certain pre-conditions to be satisfied, In the first instance there has to be a sum payable (whether by way of penalty or compensation for breach of contract) in the contract itself and secondly the non-breaching party is entitled only to reasonable compensation subject fo the maximum amount fixed in the contract. The amended clause 25 does mot stipulate any amount and in any case the quantum of fee claimed by the. Respondent, in certain cases running into millions of rupees as against the occupancy value of a few thousands, could not by any stretch of imagination be deemed reasonable. As such the amount claimed could not be lawfully demanded by the respondent.
14. For these reasons we had allowed these petitions to the extent that the demand notices in excess of the amount stipulated under the original contract were invalid vide our short order dated 07.02.2002.