MUHAMMAD ABDUR REHMAN QURESHI vs SAGHEER AHMAD

IJAZ UL AHSAN, J.---This Civil Appeal arises from a judgment of Lahore High Court, Rawalpindi Bench, Rawalpindi, dated 21.04.2009 (impugned judgment), passed in R.F.A. No.47 of 2001, filed by the appellant. Through the impugned judgment, while upholding the finding of the trial Court, the High Court modified the decree to the extent that vendor-Appellant was found entitled to receive an additional sum of Rupees One Million over and above the sale consideration mentioned in the agreement to sell.

2.Parties to the /is had entered into an agreement to sell on 12.12.1994 in respect of an urban property, details whereof have been described in para 1 of the plaint. Total sale consideration was agreed as Rs.62,00,000/-. A sum of Rs.500,000/- was paid as earnest money on the date of execution of the agreement to sell. A further sum of Rs.5,00,000/- was stipulated to be paid by the Respondent towards sale price on 10.01.1995. This amount was paid on 15.01.1995 and the balance was required to be paid on or before 12.04.1995.

3.There was a stipulation in the agreement to sell that the appellant would get the suit property commercialized. This obligation was at a subsequent stage assumed by the Respondent, subject to certain conditions. On account of various reasons, which need not be gone into, the property could not be commercialized. For this, along with other reasons for which the parties blamed each other, the transaction could not be completed within the stipulated time. Time was initially extended to 12.07.1995, then to 31.08.1995. It was further extended to 15.02.1996 and finally to 21.03 A 996 through various written instruments. These are available on the record. It was also agreed between the parties that the appellant would pay the Respondent a sum of Rs.11,41,763/- towards commercialization charges over and above the amount of Rs.3,34,987/- which had already been deposited by the appellant with the concerned authorities. It was also agreed that henceforth the Respondent will be responsible for commercialization of the property and any increase in commercialization fee after December, 1995 will be to the account of the Respondent.

4.The Respondent claims that he approached the appellant on 18.03.1996 having purchased stamp papers valuing Rupees Two Million and requested him to complete the sale transaction by signing the sale deed. The appellant did not oblige and allegedly asked the Respondent to produce stamp papers worth Rupees Three Million which was accordingly done. However, when the Respondent approached the appellant for finalization of the deal and registration of the sale deed, the appellant refused to do so. Therefore, the Respondent claims to have sent a notice to the appellant which was not responded to. This prompted the Respondent to file a suit for specific performance of the said agreement on 11.11.1997. The suit was decreed vide judgment and decree dated 30.11.2000 which was assailed through a Regular First Appeal before the High Court which modified the decree to the extent noted above.

5.The learned Sr. ASC for the appellant submits that the Respondent failed to pay the balance sale consideration within the extended period in consequence of which he had no right to file a suit for specific performance against the appellant. He maintains that time was of the essence of the contract and failure on the part of the Respondent to complete the transaction within the stipulated time was fatal to the contract. He also maintains that the Respondent had failed to perform his part of contract despite several extensions sought by him and, therefore, he was not entitled to the discretionary relief particularly so in view of substantial increase in the price of the property. He further submits that the Respondent waited for 19 months for filing the suit and the delay was mala fide in view of the rising prices of immovable properties in the area where the suit property is located. In support of his contentions, the learned counsel has relied upon Sandoz Limited v. Federation of Pakistan (1995 SCM R 1431) and Muhammad Siddique v. Muhammad Akram (2000 SCM R 533).

6.Learned Sr. ASC appearing on behalf of the Respondent has defended the impugned judgment.

He submits that it was an agreement for sale of an immovable property which was extended from time to time with mutual consent of the parties therefore time was never of the essence. He further submits that the Respondent had all along acted bona fide and did all that he was required to do under the agreement. He has pointed out that it was the appellant who had failed to fulfil his part of the agreement and despite the fact that the Respondent had purchased stamp papers for execution of the sale deed, he failed to do the needful with ulterior motives in order to avoid finalization of the transaction between the parties. He maintains that despite notice which was admittedly received and not responded, breach of contract on the part of the appellant stands established. Therefore, the trial Court as well as the High Court were justified in decreeing the suit for specific performance.

7. We have heard the learned counsel for the parties and carefully gone through the material available on record. Most of the material facts which have been narrated above are not disputed between the parties. The agreement is admitted, so is the receipt of a sum of Rupees One Million as earnest money. As far as the commercialization of the property which was earlier an obligation of the appellant is concerned, the record shows that by mutual agreement the responsibility to get the property commercialized was shifted to the Respondent subject to payment of Rs.11,41,763/- by the appellant. It is not clear whether the appellant was required to actually pay that amount or the same was to be paid by the Respondent to the concerned authorities and adjusted against the balance amount payable to the appellant. The fact remains that the property could not be commercialized within the stipulated time. Who was responsible for this is again a disputed question between the parties. The appellant claims that the final date for execution of the sale deed was fixed as 21.03.1996 but the Respondent failed to pay the balance amount in consequence of which he cancelled the agreement and forfeited the earnest money as per terms of the agreement to sell.

6. It appears that the appellant required the sale price of the property for his own business and in order to finance the foreign education of his children. Although copies of the bank drafts dated 25.03.1996 and 26.03.1996 were shown to him on 16.04.1996, but since the last date for execution of the sale deed i.e. 21.03.1996 had passed and he had cancelled the agreement to sell, he had no reason to accept the same. There is no evidence on record that on 21.03.1996 the Respondent had the requisite funds in his account and that the drafts which were subsequently prepared indicate that the same were either prepared or presented on or before the agreed date.

9. As far as the argument of learned counsel for the appellant that time was of the essence of the contract is concerned, we do not find ourselves in agreement with him for the reason that admittedly time for execution of the sale deed was extended on a number of occasions and at least on a few of the said occasions it was on the request of the appellant. However, in view of the commercial nature of the property business and a widespread trend of rapid increase in prices of immovable properties, a seller cannot be left at the mercy of the buyer to bind him in an agreement to sell and then delay completion of the contract for as long as he may wish hiding behind an archaic legal principle that in contracts involving immovable properties, time is generally not of the essence. This rule was settled many centuries ago when prices of real estate remained constant and stagnant for years on end. It is high time that this rule was revisited and revised keeping in view the changed circumstances and the ground realties of the real estate market. In this day and age, on account of rapid increase in population demand for real estate has increased. Further, on account of various reasons better financial resources are available with prospective purchasers. Big investors have also entered the fray to take the benefit of growing demand for real estate. On account of increasing demand and limited supply, property prices rise rapidly, at times in a matter of months. Therefore, the aforesaid principle that in real estate transactions, time is not of the essence cannot indiscriminately be applied. It must be interpreted and applied specifically considering the facts and circumstances of each case to balance equities, keeping the standards of reasonability in mind and ensuring that injustice is not done to either side.

10. The remedy of specific performance of contract is provided under Specific Relief Act, 1877. It is settled law that jurisdiction of the Courts to grant relief of specific performance is discretionary in nature and the Courts are not bound to grant such relief merely because it is lawful to do so. This principle is enshrined in section 22 of the Act. For ease of reference, the same is reproduced below:-

22. Discretion as to decreeing specific performance. The jurisdiction to decree specific performance is discretionary, and the Court is not bound to grant such relief merely because it is lawful to do so; but the discretion of the Court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a Court of appeal.

The following are cases in which the Court may properly exercise a discretion not to decree specific performance:

1. Where the circumstances under which the contract is made are such as to give the plaintiff an unfair advantage over the defendant, though there may be no fraud or misrepresentation on the plaintiffs part. ILLUSTRATIONS (a)A, tenant for life of certain property, assigns his interest therein to B. C contracts to buy, and B contracts to sell that interest. Before the contract is completed. A receives a mortal injury from the effects of which he dies the day after the contract is executed. If B and C were equally ignorant or equally aware of the fact. B is entitled to specific performance of the contract. If B knew the fact, and C did not, specific performance of the contract should be refused to B.

(b)A contracts to sell to B the interest of C in certain stock-in-trade. It is stipulated that the sale shall stand good, even though it should turn out that C's interest is worth nothing. In fact, the value of C's interest depends on the result of certain partnership-accounts, on which he is heavily in debt to his partners. This indebtedness is known to A, but not to B. Specific performance of the contract should be refused to A.

(c)A contracts to sell and B contracts to buy certain land. To protect the land from floods, it is necessary for its owner to maintain an expensive embankment. B does not know of this circumstance, and A conceals it from him. Specific performance of the contract should be refused to A.

(d)A's property is put up to auction. B requests C, A's attorney, to bid for him. C does this inadvertently and in good faith. The person present, seeing the vendor's attorney bidding, think that he is a mere puffer and cease to complete. The lot is knocked down to B at a low price.

Specific performance of the contract should be refused to B.

A perusal of the aforesaid provision clearly authorizes the Courts to decline specific performance on equitable ground.

11. In Ghulam Nabi v. Muhammad Yaqoob (PLD 1983 SC 344) the aforesaid provision was considered by this Court and it was held as follows:- "The jurisdiction under section 22 is discretionary only in the sense that it cannot be claimed as a matter of right. As enjoined by the section itself, the exercise of the discretion is not to be arbitrary but sound and reasonable, guided by juridical principles and capable of correction by a Court of appeal. The exercise of the discretion to grant or refuse to grant relief will, therefore, depend upon the circumstances of the case and the conduct of the parties."

12.In the case of Arif Shah v. Abdul Hakeem Qureshi (PLD 1991 SC 905) it was observed as under:- It may be noticed that according to the above quoted section, the jurisdiction to pass a decree of specific performance is discretionary and the Court is not bound to grant such relief merely because it is lawful. It may further be noticed that the above section gives two illustrations which are not exhaustive to demonstration in which case the Court may decline to exercise discretion. of granting the specific performance of a contract namely; (i) where the circumstances under which the contract is made are such as to give the plaintiff an unfair advantage over the defendant though there may not be fraud or misrepresentation on the plaintiffs part; (ii) Where the performance of a contract would involve some hardship on the defendant which he did not foresee whereas its non performance would not involve such hardship on the plaintiff.

13.In the case of Mussarat Shaukat Ali v. Safia Khatoon (1994 SCM R 2189), this Court observed as follows:- "The relief of specific performance being an equitable relief, it can, be refused by the Court only if the equities in the case are against the plaintiff. The Court while refusing to grant a decree for specific performance to a plaintiff must find some thing in the conduct of plaintiff which disentitled him to the grant of equitable relief of specific performance or the Court reaches the conclusion that on account of delay in seeking the relief, the circumstances have so materially changed that it would be unjust to enforce the agreement specifically (emphasis supplied).

14.In Rab Nawaz v. Mustaqeem Khan (1999 SCM R 1362), this Court held that, "undoubtedly there are many instances in which though there is nothing that actually amounts to fraud, there is nevertheless a want of equity and fairness in the contract which are essential in order that the Court may exercise its extraordinary jurisdiction in specific performance. In judging of the fairness of a contract the Court will look not merely on the terms of the contract but at all the surrounding circumstances"

15.The ratio of the aforesaid precedents is that where circumstances under which a contract is made are such as to give the plaintiff an unfair advantage over the defendant, though there may not be fraud or misrepresentation on plaintiffs' part, the relief of specific performance may be denied.

16.Perusal of section 22 of the Specific Relief Act, 1877 as interpreted by this Court makes it abundantly clear that the Court has discretion to decline specific performance of an agreement even in the absence of an obvious impediment in this behalf and despite the fact that such agreement may possess all necessary particulars entitling the specific performance of the contract. It declares that specific performance is essentially an equitable relief which can lawfully be declined if the Court comes to the conclusion that it is unjust and inequitable to do so. For determining where the relief of specific performance is to be granted, the circumstances under which the contract is executed and the conduct of the parties at that time and thereafter may be taken into consideration. The illustrations given in section 22 of the Act pertain to unforeseen circumstances and hardships that may be inflicted upon a party through specific performance in contradistinction to lack of such hardships as a consequence of failure to specifically perform the contract. Illustrations are not exhaustive but indicative of the discretion available with the Courts which must be exercised on the basis of settled judicial principles. It may be emphasized that the discretion must be relatable to the circumstances in which the agreement came about, subsequent conduct of the parties and the consequences of grant or refusal of the relief of specific performance.

17. In Liaqat All Khan v. Falak Sher (PLD 2014 SC 506), the aforenoted principle was reiterated in the following terms:- "18.A plain reading of above reproduced statutory provision leads to a definite conclusion that the relief of specific performance claimed by respondents Nos.1 to 4 in their suit is, purely discretionary in nature and the Court is not bound to grant such relief merely as it is lawful to do so. At the same time, the discretion to be exercised by the Court shall not be arbitrary, but it should be based on sound and reasonable analysis of the relevant facts of each case, guided by judicial principles and capable of correction by a Court of appeal. Moreover, in sub-paragraphs Nos. i, ii and iii of section 22(ibid) some instances have been given, where the Court can refuse to exercise its discretion to pass a decree for specific performance. A careful reading of these instances, which are self-explanatory, further amplify vast powers of the Court in the matter of exercise of its discretion for ordering specific performance or otherwise. When the above reproduced provision of law is read in conjunction with the case-law cited at the Bar by both the learned Senior Advocates Supreme Court, the things as regards powers of the Court in exercising its discretion, become even more clear that there is no two plus two, equal to four formula available with any Court of law for this purpose, which can be applied through cut and paste device to all cases of such nature. Conversely, it will be the peculiar facts and circumstances of each case, particularly, the terms of the agreement between. the parties, its language, their subsequent conduct and other surrounding circumstances, which will enable the Court to decide whether the discretion in terms of section 22(ibid) ought to be exercised in favour of specific performance or not. Besides, some well articulated judgments on the subject, have further broadened the scope of exercise of such discretion of the Court by way of awarding reasonable compensation to the parties, keeping in view the other surrounding circumstances, such as rate of inflation, having direct bearing the value of suit property, inordinate delay/ passage of time, and change in the circumstances or status of the subject property etc. To further amplify the aspect of exercise of discretion, here a reference may also be made to the language of section 19 of the Specific Relief Act, 1877, which reads thus:- 19.Power to award compensation in certain cases. Any person suing for the specific performance of a contract may also ask for compensation for its breach, either in addition to, or in substitution for, such performance.

If in any such suit the Court deddes that specific performance ought not to be granted, but that there is a contract between the parties which has been broken by the defendant and that the plaintiff is entitled to compensation for that breach, it shall award him compensation accordingly.

If in any such suit the court decides that specific performance ought to be granted, but that it is not sufficient to satisfy the justice of the case, and that some compensation for breach of the contract should also be made to the plaintiff, it shall award him such compensation accordingly.

Compensation awarded under this section may be assessed in such manner as the Court may direct. .Explanation---The circumstance that the contract has become incapable of specific performance does not preclude the Court from exercising the jurisdiction conferred by this section."

18. Scope of section 22 of the Act has been broadened by providing for awarding reasonable compensation to the parties in order to avoid injustice and balance the equities, keeping in view all relevant circumstances which may include factors like the rate of inflation, rate of return on investment, appreciation or depreciation of the value of real estate, passage of time and change in the circumstances or status of the suit property. In order to facilitate the Court to balance equity and exercise its discretion judicially, the statute had provided the requisite power to the Courts in terms of section 19 of the Act. For ease of reference, the same is reproduced below:- "19.Power to award compensation in. certain cases.

Any person suing for the specific performance of a contract may also ask for compensation, for its breach, either in addition to, or in substitution for, such performance.

If in any such suit the Court decides that specific performance ought not to be granted, but that there is a contract between the parties which has been broken by the defendant and that the plaintiff is entitled to compensation for that breach, it shall award him compensation accordingly.

If in any such suit the court decides that specific performance ought to be granted, but that it is not sufficient to satisfy the justice of the case, and that some compensation for breach of the contract should also be made to the plaintiff, it shall award him. such compensation, accordingly.

Compensation awarded under this section may be assessed in such manner as the Court may direct.

Explanation--The circumstance that the contract has become incapable of specific performance does not preclude the Court from exercising the jurisdiction conferred by this section."

19. Keeping in view the afore-noted principles of law and the factors to be kept in mind while exercising discretionary jurisdiction for grant or refusal of the relief of specific performance, we find the following facts and circumstances in the present case to be material in deciding the controversy: (i)The agreement to sell was executed on 12.12.1994 for a total consideration of Rs.6.2 million; (ii)A sum of Rs.0.5 million was paid as earnest money; (iii)A further sum of Rs.0.5 million was agreed to be paid on 10.01.1995 however the same was actually paid on 15.01 .1995;

(v) The balance consideration of Rs. 5.2 million was agreed to be paid on 12.04.1995. Admittedly, on the said date the amount in question was neither paid nor tendered; (v)The agreed date for completion of the contract was extended from time to time. The record indicates that it was extended at least three different times.

(vi)The obligation to get the property commercialized was initially on the appellant but subsequently with mutual agreement of the parties this responsibility was taken over by the respondent, although the appellant deposited a part of the commercialization fee; (vii)The balance of approximately Rs.11,41,673/ - was to be paid by the appellant to the respondent who in turn was to deposit the same with the concerned authorities in order to get the property commercialized. It is not clear why the respondent who owed a sum, of Rs.5.2 million by way of payment of balance consideration could not pay the same and deduct the said amount from the balance consideration of Rs.5.2 million.

(viii)The fact remains that the property was not commercialized till 31.3.1996 on which date the last extension for execution of the sale deed expired.

(ix)The parties are at variance on the question of responsibility for delay in completion of the transaction and consequences of the same.

(x)The suit for specific performance was filed about one year and nine months after the appellant had refused to perform the contract. No plausible explanation for this delay and inaction had been offered by the Respondent.

20.The Respondent claims that he approached the appellant with the balance consideration, had purchased the requisite stamp papers for execution of the sale deed but the later refused to accept the balance consideration or to execute the sale deed. It is the case of the appellant that he rightfully refused to execute the sale deed for the reason that the time for completion of the contract had expired and therefore in terms of the said agreement between the parties it stood terminated and the earnest money stood forfeited.

21.It is also an admitted fact that the Respondent issued a legal notice to the appellant calling upon him to execute the sale deed however he did not respond to the same, presumably on account of the fact that according to him the time for execution of the sale deed had expired. It is also an admitted fact that the Respondent waited for about one year and nine months before filing the suit of specific performance which is also a material factor reflecting adversely on the conduct of the Respondent.

22.The Respondent deposited the balance amount pursuant to an order passed by the Court on 20.8.2000. Likewise the appellant also deposited a sum of Rs.1 million received by him as earnest money pursuant to an order dated 22.2.2001 passed by the High Court while the matter was pending before it.

23.The position that emerges is that specific performance of an agreement dated 12.12.1994 is being sought in 2017 i.e. 22 years later when the value of the property in dispute has multiplied exponentially.

We have been informed that value of the property which at the relevant time was Rs.6.2 million has skyrocketed to at least Rs. 60 million which translates into a tenfold increase in the value of the property. Even if for the sake of argument, we were to agree for a moment that a case for grant of relief of specific performance was made out (regarding which we have various reservations), the question of exercise of discretion in favour of the Respondent would still need to be considered in light of the principle that such exercise of discretion may not lead to miscarriage of justice and an unfair advantage to the Respondent. It is axiomatic that one who seeks equity must do equity. We are not convinced that conduct of the Respondent has ex fade been above board and that he has acted fairly and equitably. In fact, in the present case, in our opinion all equities are squarely in favour of the appellant and stacked against the Respondent. The value of the property has multiplied manifold. We are not convinced that the deal fell through solely on account of acts or omissions on the part of the Appellant. It would therefore neither be just nor proper to force him to sell his property at such low a price and bear such a huge financial loss. This is one reason (out of many) why the suit filed by the Respondent seeking discretionary equitable relief must be dismissed. We are however mindful of the fact that a substantial amount belonging to the Respondent has remained blocked since the year 2000 which could have been utilized by him in other business activities or even if these had been deposited with a commercial bank, the same could have earned substantial returns. Therefore, in order to ensure that the Respondent is also not put to a disadvantage, we consider it appropriate to award adequate compensation. Considering the rate of return granted by commercial banks and keeping in mind the depreciation in the value of money and the effect of inflation, we find that a sum of Rupees Ten Million (over and above refund of earnest money by the Appellant and return of the entire amount deposited by the Respondent together with accruals (if any) would constitute adequate compensation for the Respondent. This would in our opinion balance the equities and represent a just and fair resolution of the dispute between the parties.

24. For reasons recorded above, we allow this appeal. As a consequence, the appellate judgment dated 21.04.2009 as well as the judgment and decree of the Civil Court dated 30.11.2000 are set aside. The amount of Rs.5.2 million deposited by the Respondent and Rs. 1 million deposited by the appellant with the respective Courts shall be refunded to the Respondent together with returns that may have accrued on the said amounts since the same were deposited. Over and above the said amount, the appellant shall pay a sum, of Rs.10 million to the Respondent by way of compensation.

The said amount shall be paid by the appellant through a pay order in the name of Respondent within a period of three months from the date of this order.

25. It is made clear that in case the aforesaid amount of Rs. 10 Million is not paid by the Appellant within the period specified above, the instant appeal shall be deemed to have been dismissed with all legal consequences to follow. There shall be no order as to costs.