SARDAR EJAZ ISHAQ KHAN, J. In June 1999, Syed Zaheer Hussain Naqvi filed a suit for specific performance of an oral agreement for sale of plot No. 26, Ramna 6, Markaz, Islamabad, against Asif Raza Mir. The suit was dismissed by the learned senior civil judge vide judgment and decree dated 09.10.2004, finding that the oral agreement was not proved, and Syed Zaheer Hussain Naqvi qua appellant in R.F.A. 201/2004 assails this finding.
2. By the same judgment, the defendant Asif Raza Mir was found liable to refund the sum of Rs. 2.8 million received by him from Mr. Naqvi, with profit/markup, and he appeals against this part of the decree qua appellant in R.F.A. 193/2005.
R.F.A. 201/2004
3. The plaint in the suit averred that the oral agreement was made on 14.03.1996 for a consideration of Rs.52,800,000/-, and on the same date the plaintiff wrote a cheque of Rs.500,000/- in favour of the defendant with a receipt signed by the defendant, both of which were tendered in evidence as Ex.P1 and Ex.P2, and were admitted by the defendant both in his written statement and in his oral evidence. The receipt of the said cheque, written on the plaintiff's business letterhead, recorded "advance towards purchase of plot No. 26 Civic Centre, Ramna-6, Islamabad, measuring 96' x 139'= 1390 square yards for Rs.52, 800,000/- (fifty two million and eight hundred thousand only)".
No other terms of the oral agreement were recorded in writing. The plaint did not mention the names of any witnesses of the said oral agreement nor were any witnesses of the oral transaction produced at the trial. The plaint claimed that the terms on which the oral agreement was settled were the following: i) the defendant was to get the plot commercialized by paying a fee of Rs.1,33,000,00/- to the Capital Development Authority (CDA); ii) the plot was to be sold free from all encumbrances; iii) 25% of the balance consideration was payable by the plaintiff on delivery of possession and clearance of all dues including the commercialization charges by the defendant; and iv) the remaining balance sale consideration was payable by the plaintiff within six months of delivery of possession.
4. The plaint further averred that over the next two years the plaintiff paid various amounts aggregating to Rs.2,800,000/-, evidenced by receipts and cheques for the period March 1997 up to December 1998, most of which were admitted by the defendant in his cross-examination, except the receipts exhibited as Ex.P3 (dated 02.08.1997), Ex.P12 (dated 25.11.1996) and Ex.P22 (dated 10.12.1998). The receipt Ex.P3 titled "Receipt in Confirmation of Sale Agreement", and Ex.P12, enumerated the terms of the alleged agreement in considerable detail, generally conforming to the terms alleged in the plaint. Ex.P3 was witnessed by 3 and Ex.P12 by 2 witnesses, none of which were produced at the trial.
5. The parties exchanged legal notices by telegraph preceding the suit, but these are generally not disputed and do not impact the outcome in any material aspect. Ex. D4 and Ex. D8 are two letters purportedly written by the plaintiff, when the deal had fallen through, expressing the plaintiff's inability to complete the transaction, remorse in sending the legal notices, and almost begging for refund of the advances paid by him. These exhibits were vehemently denied by the plaintiff in evidence, claiming that these were forged documents. These exhibits, dated 07.01.1998 and 01.06.1999 are inconsistent with the plaintiff's legal notice dated 04.03.1999, are couched in excessively self-incriminating language, and do not inspire confidence in their genuineness.
Though the learned counsel for the defendant laid much emphasis thereon, we discard them from consideration for the reasons aforesaid[1].
6. The stance of the defendant in his written statement and at the trial was a flat denial of any oral agreement to sell with definite terms. His defence was premised on, what for ease of reference can be referred to as, a "pre-agreement". His stance was that, given that the plaintiff was a property dealer involved in various litigations, the defendant was not willing to enter into an agreement to sell until the plaintiff had paid him the sum of Rs.65,00,000/- (referred to hereinafter as the "pre- advance") by 30.06.1997, and that it was only thereafter that the parties were to sign a written agreement to sell. So while the defence agreed that the property was identified and the final sale consideration was agreed, it flatly denied that the terms of sale alleged in the plaint (reproduced in para 3 above) were ever agreed. The written statement went on to state that that the total sale consideration, claimed to be payable by 25.12.1997, was payable only if the written agreement to sell was executed, which in turn was conditional upon the payment of the pre-advance by 30.06.1997. The defence admitted receipt of Rs.26,51,200/- (and not Rs. 2.8 million claimed in the plaint), but claimed default in the timely payment of the pre-advance in the full sum, and claimed therefore that the pre-agreement also ceased to remain valid and binding on the defendant. The defence evidence does admit that the date for payment of the final sale consideration was extended to 10.01.1998, but conditions it with that the pre-advance had to be paid prior thereto and a written agreement to sell had to be signed. The written statement claimed forfeiture of the sums received towards the pre-advance due to the plaintiff's failure to fulfil the pre-agreement.
7. At the trial, only the plaintiff appeared as a witness and tendered copies of the cheques, receipts and vouchers referred to earlier. None of these, except the receipts Ex.P3, Ex.P12 and Ex.P22 aforesaid, contain any writing that could corroborate the terms of the alleged oral sale agreement per the plaint. The defendant in his cross-examination flatly denied his signatures on these receipts. Ex.P3 and Ex.P12 contain the A terms of the alleged oral sale, and for that reason they fall within the description of a writing recording financial or future obligations pet Article 17 of the Qanun-e-Shahadat Order, 1984, and so their execution after denial by the defendant had to be proved, but none of the witnesses to those receipts were produced nor any reason given as to why they were not. Discounting these receipts from consideration, the plaintiff's stance carries no more weight than the defendant's that the payments made were towards the pre-advance. The reliance by the plaintiff on the legal notices does not help either, for the notices were replied to by the defendant denying the plaintiff's claimed terms. Resultantly, the learned trial court concluded, and we say rightly so, that the plaintiff could not succeed in the dispute that was not only on the existence but also on the terms and conditions of the alleged oral agreement to sell. The trial court found at paragraph No. 12 as follows: Now, it was {for] the plaintiff to prove by a required set of witnesses that in presence of such and such witnesses and such and such time, all this was settled and agreed between the parties vide alleged agreement to sell, but plaintiff has miserably failed to prove all this. There is no other document and witness to corroborate the statement of PW-1. It is strange enough to see that plaintiff inspite of a man [sic!] who deals with the business of real estate and is already facing litigation regarding different properties in civil courts, did not bother to get any written agreement between the parties, especially when there is huge sale consideration involved in the transaction.
No doubt, as per law, oral agreement -is admissible but again it is the duty of plaintiff to prove the same as a whole. In present case, the plaintiff could not prove by any corroborating evidence, the terms of the alleged agreement. I am of the firm view that plaintiff has failed to prove the same, hence, he is not entitled for the specific performance of the same or the execution of the same.
8. Article 117 of the Qanun-e-Shahadat Order, 1984, stipulates that whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist. Article 118 of the same Order stipulates that the burden of proof in a suit or proceedings lies on a person who would fail if no evidence at all were given on either side.
Apart from his own oral testimony, the plaintiff did not produce any witnesses of the alleged oral sale, nor were the receipts containing the terms proved in evidence by producing the witnesses to their execution once their execution was denied. More to the point, we are in complete agreement with the learned trial court that for a transaction of the value of Rs.5 crores back in 1996, it is incredible to accept that the plaintiff, a property dealer, entered into a transaction of this magnitude and parted with approximately Rs. 2.8 million over two years, again a colossal sum in today's value, without securing himself by a written agreement to sell. On a balance of probabilities, the defence that Rs. 2.8 million was paid qua pre-advance towards a pre-agreement is no less worthy of credence than the plaintiff's version, and the burden to prove to the contrary lying on the plaintiff, the plaintiff fails.
9. Section 29 of the Contract Act, 1872, answers the appellant's learned counsel's submission that, once the trial court had found that the sale consideration was stated in the various vouchers and token money received and the property was identified, it was sufficient to conclude an agreement to sell and for the court to order specific performance. Section 29 lays down the principle of unenforceability of contracts the terms of which cannot be ascertained and reads as follows: Agreements void for uncertainty.---Agreements, the meaning of which is not certain, or capable of being made certain, are void.
Therefore, even if it is assumed for argument's sake that an oral agreement for sale was made for an identified property and the plaintiff made the payments in fulfilment of that agreement, the terms thereof remain uncertain on evidence. The judgments of the superior courts are many to the effect that an oral agreement has to be proved with sufficient certainty and the plaint must specify the witnesses and the circumstances under which the oral agreement was made, and that goes not only for the existence of the agreement but also for its terms and conditions. For instance, see Moiz Abbas v. Mrs. Latifa (2019 SCMR 74), holding that the time and place of oral agreement with names of witnesses is to be pleaded and proved as sine-qua-non for an oral agreement to sell[2].
10. Resultantly, we find no merit in R.F.A. No.201/2004 as prayed for and dismiss the same while modifying the decree on terms stated towards the end of this judgment.
R.F.A. 193/2015
11. Turning now to R.F.A. 193/2015, the trial court ordered the defendant to return the sum of Rs.28,00,000/- finding it proved on evidence that it was paid. The defendant had admitted receipt of Rs.26,51,200/- in his written statement. Now when the receipts the signature on which the defendant denies and which have not been proved by any independent witness are discounted, the sum approximates to that admitted by the defendant. The finding of the learned trial court that the defendant had admitted receipt of Rs 2.8 million is not borne out on the record, for he never admitted receipt of Rs. 2.8 million.
12. The appeal claims that the defendant had the right of forfeiture of the advances received, because the plaintiff did not perform his obligation to transfer the suit property. Ground (iv) of the grounds of appeal is in the following words: "The disputed amount was advanced for certain purpose of fulfilling/qualifying to conclude a written agreement, the respondent as per own admission failed to pay the requisite amount of Rs.65 lacs up to an agreed date, thus the appellant was rightly entitled to forfeiture of the said amount."
13. We are afraid we do not agree. Firstly, the plaintiff never admitted that he was under an obligation to pay Rs.65 lacs as pre-advance; in fact such an admission would have destroyed his case altogether. This was a claim of the defendant which had been denied by the plaintiff in his testimony. Secondly, the right of forfeiture accrues only where there is an express stipulation by the parties to this effect. In Raja Nasir Khan v. Abdul Sattar Khan and another (PLD 1998 Lahore 20), a Division Bench of the Lahore High Court held that, in the absence of terms and conditions in the agreement, question of forfeiting earnest money does not arise. No evidence is on record that a right of forfeiture of the pre-advance money was reserved to the defendant. Rather, by ills own case, the defendant claimed that any contractual obligation were to arise only upon the execution of the agreement to sell, which, according to him, was to be signed after the pre-advance money was paid to him in full, but which in the event was never signed. That is to say, the defendant is now claiming an oral stipulation giving him the right of forfeiture, which, however, remains unproved on his part in the evidence. In the circumstances, the defendant is to be taken to have received this money on trust pending the execution of an oral agreement to sell, and it would be unconscionable for him to retain this money. We are of the view that section 70 of the Contract Act is attracted in this situation, which reads as follows: Obligation of person enjoying benefit of non-gratuitous act.--Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.
14. Section 70 embodies the principle of restitution of unjust enrichment, which is applicable inter alia where, per. the heading of Chapter 5 of the Contract Act, certain relations resembling those created by contract arise between the parties, but which are not contracts enforceable by law. By the defendant's own case, the receipt by him of the pre-advance monies was non-gratuitous - it was made in the expectation of maturing into a written agreement to sell - and therefore he cannot unjustly enrich himself by retaining that money. Section 70 uses the word "compensation", which is broad enough to encompass the beneficial use of that money which the payor remained deprived of. Again, judgments of Superior Courts abound to support this principle. For instance, in Muhammad Ashiq Khan versus Muhammad Sharif and others (2016 SCMR 1248), the Hon'ble Supreme Court cited with approval the following passage out of a judgment by the Indian Supreme Court[3].
"It is true that grant of decree of specific performance lies in the discretion of the court and it is also well settled that it is not always necessary to grant specific performance simply for the reason that it is legal to do so. It is further well settled that the court in its discretion can impose any reasonable condition including payment of an additional amount by one party to the other while granting or refusing decree of specific performance. Whether the purchaser shall be directed to pay an additional amount to the seller or converse would depend upon the facts and circumstances of a case..."
(emphasis supplied)
15. Another ground taken by the defendant in his appeal was that the return of Rs.2,800,000/- with profit was not prayed for by the plaintiff and therefore the learned trial court could not so order.
There is ample authority to rebut this plea. The precedents are discussed below. a) In Muhammad Hafeez Khan v. Globe Manufacturing Co. Ltd. (1987 CLC 482 [Karachi]), His Lordship S. A. Rahman, J. held that Court had the discretion under section 34, C.P.C. to award interest where the decree was for payment of money, regardless of its being prayed specifically, and that this followed by reading section 34, C.P.C. with Order VII, Rule 7, C.P.C., which empowered to the Court to grant ancillary relief and which "...can be awarded in spite of the fact that it has not been prayed." Citing several judgments, His Lordship held as follows: From the perusal of the judgments of both the lower Courts it appeared that they were of the view that no interest could be allowed to the appellant as he had not made specific prayer for award of interest. This view of both the lower Courts is on the fate of it incorrect. Section 34 of the C.P.C. clearly empowers the Court to award the interest in so far as a decree is for the payment of money; at such rate as the Court deems reasonable to be paid on principal sum so adjudged, from the date of the suit to the date of the decree. b) In Raja Nasir Khan (supra.), the Division Bench of the Lahore High Court held, citing several judgments, that ancillary relief could be awarded in spite of the fact that the same had not been prayed. The Court went to hold as follows: Section 34 may be read in conjunction with Order VII, rule 7, C.P.C. which relates to ancillary relief. It is settled law that an ancillary relief can be awarded in spite of the fact that it has not been prayed.
We are fortified by the judgment AIR 1921 Lahore 125, (Rup Ram v. Harphul).
The learned counsel for the appellant contended that the trial Court granted/awarded interest to respondent No. 1 in spite of the fact that he had not made specific prayer for award of interest, therefore, this part of the judgment of the trial Court is incorrect. This contention has also no force.
Section 34 of the C.P.C. clearly empowers the Court to award the interest in so far as a decree is for the payment of money, at such rate as the Court deems reasonable to be paid on principle sum so adjudged, from the date of the suit to the date of the decree.
It is, therefore, quite plain that even if there was no specific prayer for grant of interest the Court was entitled, rather justified in granting interest. Reliance can be placed on 1987 CLC 482.
16. However, the learned trial Court awarded interest on the payments made by the plaintiff "...from the date of its receipt till the date of payment...", that is, given that there were over 20 payments made over a period of approximately 2 years before the suit was filed, it awarded interest for the period prior to the suit also. This the trial Court could not do in the absence of express stipulation between the parties. In TERNI S.P.A. v. PECO (Pakistan Engineering Company) Ltd. (1992 SCMR 2238), the Hon'ble Supreme Court held that The Pakistan law provides for the grant of interest. The right to interest for the period prior to the date of suit is a matter of substantive law and can he allowed if there is (a) a statutory provision,
(b) an agreement, express or implied between the parties, (c) a mercantile usage, (d) or some equitable consideration to justify such a grant.
This principle was echoed in Raja Muhammad Sadiq and 9 others v. WAPDA through Chairman, and 3 others (PLD 2003 Supreme Court 290) by a two member bench of the Hon'ble Supreme Court holding that interest for the period prior to the institution of the suit could only be awarded if it was permitted by the substantive law or if it was agreed in writing, otherwise the decree holder would be entitled to interest from the date of the suit only. As on evidence there is no stipulation proved that the parties agreed to pay interest on pre-advance money, nor any substantive law is cited, interest on the pre-advance money could not have been awarded by the learned trial Court for a date prior to the institution of the suit.
17. Further, the mere mention of "bank rate" in the judgment as the rate at which the plaintiff is to be compensated will most certainly leave the executing court in a quandary as to what interest rate it shall apply. The decree sheet is silent on this count. While the expression 'bank rate' is specified in section 34-A, C.P.C. as, the "...bank rate determined and made public under the provisions of the State Bank of Pakistan, Act, 1956", it does not help at all because the State Bank determines and makes public several rates, including KIBOR for 3 months, 6 months, and I year, the rate payable on treasury securities or other instruments representing Government borrowing, and others. The parties will forever be at war before the executing Court as to which bank rate to apply, and as the executing Court cannot go behind the decree, it will be a never ending saga for the parties (and for the executing and appellate courts that will face this issue) to settle which rate to apply, and that too whether simple or compounded. Not much guidance comes forth from precedent in this area, and as an appellate Court, we consider ourselves under an obligation to end this uncertainty for the parties in this case.
18. Now it is obvious that the learned trial Court gave a judgment in money terms with the objective to compensate the plaintiff for the opportunity cost of the pre-advance money which lay and still lies with the defendant for almost two-and-a-half decades. It is also settled that the rate of interest, in the absence of a stipulation or law to the contrary, is in the discretion of the Court and, appeal being a Continuation of the suit, lies in our discretion. We draw some guidance gratefully from Raja Nasir Khan (supra.), where the Division Bench further held as follows: Court would have ample power under Civil Procedure Code, 1908 and Specific Relief Act, 1877 to grant compound interest to meet the ends of justice and fair play. Where commercial transaction was not finalised on account of defendant and earnest money of plaintiff amounting to more than 2 million remained with him and he had been utilising the same, awarding of compound interest by Court to plaintiff was justifiable and proper order.
Where Court had awarded decree for payment of money it could award interest at such rate as the Court deemed reasonable to be paid on principal sum so adjudged.
In our view, section 34 gives a complete discretion to the Court to award interest if it deems reasonable to do so in the interest of justice and fairplay. We are fortified by the (following] judgments:
(1) Messrs M.Y. Malik and Company and others v. Messrs Splendours? International (1997 SCMR 309).
(2) Nizasn-ud-Din v. Zia-ud-Din (PLD 1984 Kar. 441)
(3) A. Ismail Jee and Sons Ltd. v. Pakistan (PLD 1986 SC 499)
(4) Pakistan v. Wali Ullah (PLD 1965 SC 310).
(5) Khan Iftikhar Hussain Khan v. Messrs Ghulam Nabi Corporation Ltd. (PLD 1971 SC 550).
(6) Mian Abdul Aziz v. Alliance Bank of Simla Ltd. (AIR 1933 Lah. 352)
19. What should be a fair rate of interest[4] in this case? The rates offered by the Government on savings bonds and treasury securities are usually higher than KIBOR[5], which is a measure of inter-bank lending profit rate. Private banks offering deposit and investment instruments too offer a "KIBOR plus" rate of return. However, these rates vary by a wide margin, and it might be arbitrary for us to choose a margin rate over KIBOR, especially reaching out as far back as 2005. Further, since we are awarding compound interest, we consider that taking KIBOR alone provides a decent enough return. Taking a simple interest rate, instead of compound, in our view does not provide adequate compensation in the circumstances of this case. We find it closer to equity and fairness to award compound interest. The calculations used to arrive at the decretal sum are at the Annex to this judgment, which sets out the basis and explanatory notes for the calculation. We note that this sum too is still not truly representative of the return it might have yielded if it were invested in higher yield securities or in real estate, but that has to be discounted by the risk factors inherent in such investments. Overall, we believe that the additional sum arrived at by using the above method gives an objective and verifiable basis for its calculation, yields fair compensation to the plaintiff for his lost opportunity cost[6], and accords with the principles approved by the Hon'ble Supreme Court in Muhammad Ashiq Khan (supra) and by the Division Bench of the Lahore High Court in Raja Nasir Khan (supra.)
20. Resultantly: a) While dismissing R.F.A. 201 of 2004 as prayed for, we modify the decree stating that Asif Raza Mir (defendant in the suit) shall pay Rs 16,901,525/- (calculated per the Annex to this judgment) to'
Syed Zaheer Hussain Naqvi (plaintiff in the suit) within 30 days of this judgment, failing which, further interest at Rs. 6,603/- per day shall accrue on the decretal sum until payment. b) R.F.A. 193 of 2005 is dismissed.
21. There is no order as to costs.
ANNEX - R.F.A. 201/2004; R.F.A. 193/2005 Principal Sum 2.651,200 YearInterest Rate as on 31-DecAmountCompound 2004-- -- 2,651.200 20059.58% 253.9852:905,185 200611.00% 319,570 3,224,755 200710.43% 336,3423,561,097 200816.11% 573,6934,134,790 200912.80% 529,2534,664,043 201014.12% 658,5635.322.606 201112.34% 656.810 5,979.416 20129.75% 582,9936,562,409 201310.48% 687,7407,250.149 20149.90% 717,765 7,967,914 20156.79% 541,021 8,508,935 20166.44.% 547,9759.056.911 20176.50% 588,6999,645.610 201811.35% 1,094,77710,740,387 2019,13.44% 1.443,50812.183.895 20207.67% 934,50513,118.399 202111.80% 1.547,97114,666,370 202215.24% 2,235,15516,901,525 Total 14,250,32516,901,525 Notes:
1. Interest rates are KIBOR (offer side) for 1 year at 31 Dec of each year "
(https://www.sbp.org.pldecodata/kibor index. asp)" except for 2022, for which half-annual KIBOR is taken, as the judgment is given in June 2022.
2. No interest is taken for 2004, as the judgment in the first instance was given in October, 2004, giving one month to pay.
3. For the period after this appellate judgment until the date of payment, the rate of interest per day to be added is to be calculated as follow's: ID = DS * WP/365 Where ID = Interest per day (Rs.) 6,603 DS = Decretal Sum 16,901,525 WK = Weekly KIBOR (as of 3 June 2022)14.26%
4. The interest per day is to accrue from a date which is 30 days after the date of this judgment, so as to give 30 days for the defendant to pay.
1. they were also not considered by the learned trial Court.
2. Also, 2019 SCMR 524, 2013 SCMR 1300
3. Nirmala Anand v. Advent Corporation Pvt. Ltd. and others [AIR 2002 Supreme Court 2290], later heard by a 3 member bench.
4. Messrs Farooq Brothers v. UBL and others, Shariat Petition No.30-L of 1991 declared section 34, C.P.C. repugnant to the injunctions of Islam but directed in the same breath that '...they shall be deleted accordingly...', but also found, overall, that the underlying principle of compensation ought to be replaced with an Islam-compliant methodology. We take it to mean that legislation is to follow. This is also prescribed under Article 203-D(3)(a), whereby, for Islamabad, the President is to take steps to amend the C.P.C. In any event, the said judgment is not yet effective, given the combined reading of the proviso to sub-article (2) of Article 203-D, sub-Article (3)(b) of the same Article, and sub-Article (1) of Article 203-F. The judgment was announced on 28.04.2022, and the six month period for an appeal by the Federal Government expires on 28.102.022, and the judgment will not take effect before the latter date.
5. Karachi Interbank Offered Rate, a rate set by the State Bank for inter-bank lending. It was introduced by the State Bank of Pakistan in 2004. It is the base rate at which all lending and investment transactions are benchmarked. The Islamic banking also takes this as a "background" reference rate.
6. given that the property in question is today valued at approximately Rs. 1 billion