JUDGMENT MUHAMMAD KHALID MEHMOOD KHAN, J.---The appellant filed a suit for specific performance of agreement and permanent injunction against respondent No.1, during the pendency of suit respondent No.2 purchased the suit property, the appellant then impleaded respondent No.2 as party to suit. With the permission of court. In the array of defendants/respondent No.2 is not shown as an independent defendant/respondent. However, before trial court respondent No.2 filed written statement and participated in the proceedings. Both the defendants are respondents in present appeal.
2. The appellant is a public limited company having its registered office at Kanda Wala Building, Karachi and Mr. Mehmood Hussain is its principal officer and is duly authorized person. Respondent No.1 is a public limited company (under liquidation) and Mr. Asif Hayat is its Liquidator. Respondent No.2 is Federal Government which has been sued through Secretary of Ministry of Defence. The appellant averred that respondent No.1 issued an advertisement published in Pakistan Times in January, 1980 offering the sale of factory premises situated at 72 Industrial Area Kot Lakhpat Lahore (hereinafter referred to as suit property). The appellant in response to the said advertisement showed its interest for buying the suit property. After long negotiation the parties agreed to sell and purchase the suit property against consideration and Rs.7.00 Million. On 17-8-1980 agreement (hereinafter referred to as MOU) was entered into between the appellant and respondent No. 1. As per agreement respondent No.1 agreed to sell the suit property against Rs.7.00 Million; the appellant paid Rs.100,000 under the said agreement as earliest money, it is asserted that respondent No.1 failed to fulfil their part of agreement. Along with the suit the appellant filed an application for temporary injunction, ad interim injunction was granted but was vacated on 24-1- 1981 and before the appellant file an appeal, respondent No.1 sold the property to respondent No.2 and as such both respondents frustrated the petitioner's sale with collusion of each other. Hence, the suit.
3. Respondent No.1 filed written statement and raised a number of legal as well as factual objections. Main attack of. Respondent No.1 is that there is no concluded agreement between the parties and the agreement dated 17-8-1980 sought to be enforced is only an understanding, hence is not enforceable in law. The terms and conditions referred in the memorandum dated 17-8-1980 does not create a valid agreement. On merits respondent No.1 controverted the appellant's assertions:
4. Respondent No.2 also controverted the assertions of petitioner and denied the allegation of collusion.
5. Learned trial court, out of divergent pleadings of parties, framed the following issues:-- "ISSUES:
(1) Whether the plaintiff was a bona fide buyer of the suit property? OPP
(2) Whether the defendant No.1 entered into an agreement with plaintiff on 17-8-1980? OPD
(3) Whether defendant No.1 received the payment of Rs.100,000from the plaintiff? OPD
(4) Whether defendant No.1 contravened the contractual obligations of the agreement? OPD
(5) Whether defendant No.2 purchased the suit property with mala fide intention? OPD
(6) Whether the plaintiff has no cause of action? OPD
(7) Whether suit is vexatious and defendant No.1 entitled for special cost? OPD (7a) Whether the plaintiff has come to this court with unclean hands? OPD-2 (7b) Whether the contract if entered between the plaintiff and defendant No.1 was discharged by .Factories? OPD-2 (7c) Whether defendant No.2 is a bona fide purchaser for value with notice? OPD-2 (7d) Whether the suit is barred by law? OPD-2
(8) Relief.
6. Both the parties adduced their respective evidence, both verbal as well as documentary. The learned trial court, vide judgment and decree dated 26-6-1989 dismissed the suit. Hence, this appeal.
7. Learned counsel for appellant contends that learned trial court has wrongly held that agreement dated 7-8-1980 is not a concluded agreement and as such is not enforceable in law, learned trial court while dismissing the suit was bound to ascertain the intention of parties and substance of the agreement, mere mentioning of memorandum of understanding in the heading of document does not mean that document is an incomplete agreement. There was a public offer for sale by respondent No.1, the appellant accepted the offer, paid the part consideration, balance consideration was agreed to be paid on completion of certain formalities which the respondent No.1 failed to fulfil and as such default/breach is on the part of respondent No.1. Further contends that findings of learned trial court that no formal agreement was executed, has no basis for the simple reason that it was due to breach on the part of respondent No.1. Learned counsel takes refuge under sections 20B and 10 of the Contract Act and also press in Service section 21 of the Specific Relief Act. The argument of learned counsel for appellant is that all ingredients of concluded agreement are available in the document and as such learned trial court has fallen in error while dismissing the suit. He lastly adds that agreement dated 17-8-1980 is proved without any rebuttal on the part of respondent. He relied on Major (Reid). Ahmad Khan Bhatti v. Mst.
Masooda Fatimi (PLD 1981 Karachi 398).
8. Learned counsel for respondent No.1 submits that there is' no concluding agreement between the parties, respondent No.1 has made clear at the time of entering into memorandum of understanding that he has to obtain certain permissions from different quarters and after that a formal agreement will be executed. The concerned department has declined the requisite permission, hence the memorandum of understanding has lost its value. Learned counsel contends that no earnest money was paid, only a cheque of Rs.100,000 was issued which was never encashed. Learned counsel submits that 30 days time was agreed between the parties for obtaining permissions from the concerned quarters and within the period of 30 days the appellant never demanded the performance of any term and as such after expiry of 30 days, no agreement exists between the parties. He contends that even otherwise the appellant has failed to prove on record that there was a concluded agreement between the parties. He has relied on Khani Zaman and another v. Custodian of Evacuee Property, Azad Jammu and Kashmir Government, Muzaffarabad and another (1997 CLC 707), Muhammad Bakhsh through Representatives and 5 others v. Muhammad Jameel and 8 others (2005 YLR 2464) and Rudra Das Chakravarti v.
Kamakhya Narayan Singh (AIR 1925 Patna 259).
9. Learned counsel for respondent No.2 adopts the arguments of respondent No.1, however adds that they are bona fide purchasers for value and there is no question of any collusion as wrongly alleged by the appellant.
10. Heard. Record perused.
11. The dispute between the parties arises out of a document which is available on record as Exh.P-2 with a heading of "Memorandum of Understanding". The appellant's claim is that document is a concluded agreement, whereas respondent No.1 claimed that it is just an understanding and was to be matured on fulfilment of agreed conditions in the shape of formal agreement to sell. The contents of document shows that respondent No.1 is termed as vendor through Liquidator and appellant has been shown as vendee. The price of suit property was agreed as Rs.7.00 Million subject to issuance of necessary permissions and certificates from relevant department for information and satisfaction of vendee. Relevant of memorandum of understanding is read as under:- "(1) The vendor and vendee shall enter into a formal agreement to sell pertaining to the factory within 30 days of signing of this memorandum.
(2) A token amount of Rs.100,000 (Rupees one lac only) is being paid by the vendee to the vendor at the time of signing of this Memorandum which will be deducted from the amount of earnest money to be paid at the time of signing of the agreement to sell.
(3) The vendor shall in the meantime procure the required permission and certificates from the relevant departments for the inspection and satisfaction of the vendee.
(4) The vendor undertakes to make itself available for the signing of the agreement to sell as and when required by the vendee.
(5) This Memorandum will remain in full force and binding till the signing of the agreement to sell."
12. The argument of learned counsel for appellant is that learned trial court has fallen in error while declaring the above said terms of agreement just an understanding. The terms and conditions embodied in the document are complete in nature and from the evidence produced, the intention of parties became clear to the effect that it was settled and finally agreed between the parties that it will become a concluded agreement on completion of agreed acts, the respondent No.1 has only to procure required permissions and as such the intention for parties clearly proves that it is a complete and concluded agreement to sell of immovable property against greed consideration of Rs.7.00 Million. In circumstances, it has to be seen whether proposal and its acceptance is absolute and unqualified or not? Under sections 2(h), 3 and 10 of the Contract Act the main question for determination is whether the parties had reached a concluded agreement or not, the ascertainment of the intention is a question of fact which could be proved by oral as well as documentary evidence. It has to be seen whether the parties are of one mind in all the material terms at the time when the agreement has allegedly been finalized between them and the intention of parties was that matter is a closed and concluded transaction between the parties.
13. It is an admitted fact between the parties that vendor company was in liquidation and was in need of certain permissions for completing the sale. As per Clause-3 of the memorandum of understanding, it was the duty of vendor to obtain required permissions and certificate from the relevant department and the nature of these permissions is in the knowledge of appellant or not? It is an admitted fact between the parties that land subject matter of sale was transferred to respondent No.1 by the Government for setting up a specific industry.
Exh.D-2/3 is a letter by respondent No.1 for grant of permission by the Industries and Mineral Development, Punjab, Lahore. Exh.D-2/4 is a letter from Director of Industries and Mineral Development, Punjab, Lahore. The offer of sale Exh.D-2/1 published in Daily Pakistan Times on 3-1- 1980 shows, that Liquidator of respondent-company (in voluntary Liquidation), specially mentioned for the notice to public at large as under:- "The sal: will be subject to compliance by the offers of all legal formalities including any Government approval which maybe necessary for them to obtain with respect to the acquisition of said premises. The offer of sale was with the above condition and offerers were bound to comply with the necessary approval of Government for acquisition of the premises."
14. On publication of proclamation, Exh.D-2/1 the Director of Industry addressed a letter Exh.D2/4 on 6-1-1980, the said letter was replied by respondent No.1 on 14-1-1980, this means these two letters remain the core point during negotiation. The appellant knowing the above facts entered into negotiation with respondent No.1. The memorandum of understanding does not find mention the details of required permissions and certificates, nor the appellant has pleaded in the plaint which certificate or permission was agreed to be provided/obtained by the respondent No.1. Admittedly parties remain in negotiation from January, 1980 till the execution of memorandum of understanding i.e 17-8-1980. Exh.D-2/4 is a letter dated 6-1-1980, addressed by the Director of Industries and Mineral Development, Punjab to respondent No.1 immediately after the publication of advertisement for sale, warning the liquidator that they came to know through publication in newspaper Nawa-i-Waqt dated 3-1-1980 that you intend to dispose the building of your factory, and they presume that you either propose to dismantle and remove the machinery or transfer the plot, you are therefore, advised to refrain from removing or dismantling the machinery without the permission of the competent authority or taking any action in violation of terms and conditions of the industrial sanction, issued by the Government of Pakistan. The said letter was replied by the liquidator through Exh.D-2/3 on 14-1-1980, clarifying that sale will be subject to your approval as has been made clear in the offer for sale. The two documents were in existence at the time of initiation of negotiation and for getting the said permission, clause 3 was made the part of MOU and after procurement of certificates/permission, the satisfaction of appellant was necessary. The perusal of letter Exh.D-212 shows that land of factory was, allotted to respondent No.1 for setting up a specified industry and admittedly the appellant intend to install a different industry hence, the said permission was necessary. In the absence of any detail about the permission and certificate it will be presumed that said permission was to be arranged by respondent No.1, but the facts brought on record not proved otherwise.
15. The appellant after entering into Exh.P-2, on 21-8-1980 applied to Director General Housing and Physical Planning department requesting for grant of NOC to enable them to set up the industry on suit plot. The said letter shows that both the parties while entering into MOU taken the responsibility separately for arranging the respective certificates or permissions and that is the reason clause-I of the MOU was agreed, so intention of parties became clear that MOU was just an understanding and regular agreement to sell was to be executed on happening of certain acts which were not within the domain of both the parties.
16. For example if the respondent No.1 succeeds to get permission or certificate but these are not to the satisfaction of appellant no agreement to sell could be executed and the parties have to extend the time or Exh.P-2 come an end, hence Exh. -2 could not be termed a concluded agreement enforceable in law. Now it has to be seen whether the respondent No.1 done the same acts in furtherance of Exh.P-2 or not? Exh.D-2/2 dated 25-8-1980, shows that respondents No.1 after 8 days of execution of Exh.P-2 addressed a letter to Director General Housing and Planning department as under:- "I have to advise you that I was appointed as liquidator for Elmac Ltd., by the shareholders and creditors of Elmac Ltd., a copy of the minutes of the creditors meeting held on December, 20th 1979 at Karachi is attached.
I have negotiated the sale of the building and land belonging to Elmac Ltd., with Treet Corporation Ltd., which proposes to set up a modern plant for manufacturing double edge stainless steel razor blades as sanctioned by PICIC.
Notification of the Communication and Works Department for Elmac to occupy the land was granted vide its letter No.F.15(2)/66-D&S dated 29th March, 1966 (Copy attached). A copy of the agreement entered into by Elmac Ltd., with the Government as required by condition of the permission is also attached.
I trust you have no objection to my selling the land and building to Treet Corporation Ltd., for the purpose mentioned above. Kindly confirm.
Thanking you."
17. The letter was replied by the Director General Housing and Planning Department on 4-11-1980 Mark "A" as under:-- "It is regretted that the proposed transfer of the land to Messrs Treet Corporation Ltd. Is not acceptable, in view of the provisions of the agreement executed on 2-12-1967 between the Government and the company."
18. The-respondent No.1 promptly acted for getting permission of - the concerned department.
Likewise the appellant applied for issuance of NOC, on 21-8-1980 Exh.D2/5, this act of appellant further proves that both the parties have agreed to arrange their respective certificates permissions. It is not the case of appellant that they have arranged NOC, for change of industry but their case is that it is the respondent No.1 who failed to obtain the required/permissions. It is a proven fact on record that appellant itself has failed to get approval in terms of advertisement, no doubt the appellant applied for issuance of NOC, but it is not pleaded that NOC was issued in their favour nor any document to this effect is available on record. Non-claiming and not producing the NOC, the appellant's default is evident and as such if we assume that respondent No.1 has failed to arrange the permissions and certificates even then if we presume MOU is a binding agreement it could not performed due to non availability of NOC favouring appellant to set up new industry. It is again not the case of appellant that they were ready to purchase the property even without issuance of NOC by the competent authority, the above said facts undoubtedly proved that parties rightly entered into MOU as both have to get the permission from a third party, these facts are further affirmed from the fact quantum of amount paid to respondent No.1 as per Exh.P-2.
19. The appellant while agreeing for purchase of suit property entered into a MOU and issued a cheque of 1/70th % of the agreed consideration of Rs.7.00 Million, as token only with the intention that if they succeed to get permission, they will enter into agreement to sell being the final enforceable document.
20. This is not the case of appellant that they were not in the knowledge of details of documents, but they are claiming that it is the respondent No.1 who has failed to perform its part of agreement.
The facts brought on record show, it is the appellant who was investing a huge amount for establishing an industry/unit for manufacturing of double edge razor, and for setting up the industry and permission for this need, that is the reason very small amount was paid to respondent No.1 being a token by calculating the risk of non-issuance of required NOC. The appellant, entered into a transaction safely with a negligible loss and Exh.P-2 was executed on appellant's request and final transaction was deferred till the issuance of required certificate and permissions by both the parties.
21. The claim of appellant that Exh.P-2 is a concluded agreement is negated on other Count as well.
Suppose, the liquidator/vendor succeeded to get required permissions even then if the concerned department refused to allow the change of nature of industry on the suit property, the appellant has to suffer a loss, which no sane businessman affords.
22. Now we examine the evidence produced by appellant in support of its claim, the appellant examined Atta-ul-Haq Ansari as P.W-1. He deposed that respondent No.1 offered them the sale of suit property, the appellant accepted that and in these circumstances Exh.P-2 was executed. The appellant issued a cheque of Rs.100,000 on 17-8-1980 and the acknowledgment of said amount is Exh.P.2. He admits that negotiation between the parties started in January, 1980 and from January till the date of execution of memorandum of understanding the appellant continue to negotiate the modalities of transaction with respondent. He admits that he is not aware what was the result of negotiation, on what terms parties remained in negotiation. He admits that on behalf of appellant Riaz-ul-Hassan Ghori remained associated in negotiation. He deposed in cross- examination that appellant never addressed any application to Government for the change of user. He further deposed that respondent No.1 has not shown any title document to them.
Respondent No.1 has to show the ownership, title document along with NOC which respondent No.1 never shown to them. The document Exh.P-2 was signed by Riaz-ul-Hassan Ghori. He came to know about the facts of this case from record and is not personally aware about the facts. He admits that cheque of Rs.100,000 was not encashed. He deposed that if the cheque was not encashed it was due to vendor's fault. He himself admits that after MOU an agreement to sell was to be executed. He admits that he was not aware at what stage agreement to sell was to be executed. He admits that Riaz-ul-Hassan Ghori is alive and he is residing at Lahore Cantt.
Statement of P.W.1 is sufficient to negate the appellant's claim. P.W.1 is telling lie when he deposed that they had never applied to concerned authorities for issuance of any NOC for setting 'up a factory whereas document Exh.D-2/5 which is not denied by the appellant, show that appellant applied immediately after 4 days of execution of memorandum of understanding for issuance of NOC for installation of a double edge razor plant/ industry on the suit property. P.W-2 admits that he is not aware about any negotiation which according to him continue from January to August between the appellant and respondent No.1. He admits that Riazul-Hassan Ghori participated in these negotiations, who is alive and is residing in Lahore Cantt. But the appellant has not produced him. Non-production of said material witness is sufficient to infer that appellant tried to hide the real facts from the court. It is established principle of law that specific performance of document could not be granted where parties have intended that it is not to be considered to be concluded contract until it has been confirmed by 3rd party. The MOU shows that a formal agreement to sell was to be executed after issuance of certain permissions/certificates that too to the satisfaction of vendee. Admittedly the respondent No.1 was refused by the competent authority to sell the factory without their permission and as such the MOU become incapable for further performance. This fact was in the knowledge of appellant which they never pleaded in their pleadings or evidence.
23. Under law the contract for the sale of immovable property is a contract that sale of property shall take place on the terms settled between the parties. The essential terms of sale immovable property are payment of sale price of property or promise to pay the same by the purchaser to seller, the delivery of possession of property sold by seller, to the purchaser, meaning thereby the sale agreement does not attach any condition which was to be fulfilled or complied with by a 3rd party. Lc Exh.P-2 is not an agreement to sell rather it is an understanding of parties to enter into an agreement to sell after fulfilment of necessary conditions. The conditions were in the knowledge of appellant and they after knowing the said facts entered into the MOU and it is proved on record that appellant was to obtain a permission from the department for change of industry and to set up new industry but they failed to get the NOC. The conversion of proposal into a contract must be absolute and unqualified in terms of section 7 of the Contract Act. The question whether the contract between the parties is absolute and concluded agreement is a question of fact which can only be proved from the evidence oral and documentary and which in this case is lacking rather in this case it is proved that appellant knowingly entered into a MOU agreeing to enter into formal agreement to sell on fulfilment of certain conditions.
24. As it was a core dispute between the parties whether Exh.P-2 is a concluded agreement or not, it is proved that Exh.P-2 is not a concluded agreement. Exh.P-2 is an understanding only which is not enforceable in law as both the parties have failed to obtain requisite permissions enabling them to enter into a concluded agreement.
25. The upshot of the above discussion is that appellant has miserably failed to establish that a concluded agreement capable of enforcement in law was entered into between the parties and as such learned trial Court has rightly dismissed the suit. This appeal, thus, fails and-dismissed with costs..