Anwaar Hussain, J. Predecessor-in-interest of the petitioners, namely, Zafar Ali (hereinafter referred to as "the petitioner/defendant") purchased the suit property from Ghulam Mustafa, the predecessor-in-interest of respondents No.1A and 2 and respondent No.2 (hereinafter referred to as "the respondents/plaintiffs). The dispute pertains to land measuring 64-Kanal comprising Khewat No.17, Khatooni No.45/46, Mouza Chichoki Malian, Tehsil and District Sheikhupura.
Admittedly, the suit property was sold for a total price consideration of Rs.10,080,000/- out of which Rs.1 million was paid as Biyana. This transaction was recorded in agreement to sell dated 05.04.2011 (Exh.D-1) and the cut-off date for payment of remaining price consideration was fixed as 05.05.2011, however, on 11.04.2011, another Rs.3 million were paid and on the back side of Exh-D1, it was recorded that property is mortgaged. Thereafter, through agreement dated 10.06.2011 (Exh.D-2), possession was delivered and receiving of Rs.3 million, already paid by the petitioner/defendant was recorded and the cut-off date was extended to 10.07.2011. Again, an agreement was executed on 09.07.2011 (Exh.D-3) and the cut-off date was extended to 15.08.2011 when a further amount of Rs.4,650,000/- was paid by the petitioner/defendant to the respondents/plaintiffs enabling the latter to make payment to the mortgagee bank and the outstanding amount was reduced to Rs.1,405,000/-. The final cut-off date elapsed and the petitioner/defendant instituted the suit for specific performance of contract, on 07.12.2011 with the averments that the petitioner/defendant had been defrauded as disclosure of mortgage of the suit property was not made in the original agreement to sell (Exh.D- 1). The suit was contested by the respondents/plaintiffs. They also filed a separate suit for possession, cancellation of documents, and permanent injunction on 12.12.2011, with the averments, that the suit of the petitioner/defendant is based on mala fide as the agreements were cancelled, with mutual understanding, in the presence of witnesses at the Dera of Rana Kazim Ali, on 26.11.2011, whereafter the respondents/plaintiffs withdrew an amount of Rs.8.99 Million from their account and paid the same in cash to the petitioner/defendant who deposited the said amount in his account maintained with the same bank, in the same branch, on the same day i.e., 07.12.2011, and instead of reducing the rescission/ cancellation in writing, instituted the suit. The suits were contested and after framing of issues and recording of evidence, through consolidated judgment and decree dated 09.11.2020, the Trial Court held that the respondents/plaintiffs could not prove cancellation of the agreements and the petitioner/defendant was held entitled to return of money but the suit of the respondents/plaintiffs for recovery of possession of suit property was decreed subject to the return of the sale consideration whereas the suit of the petitioner/defendant for specific performance was dismissed. Feeling aggrieved, both sides preferred appeals and the appeal of the respondents/plaintiffs was accepted to the extent that the respondents/plaintiffs proved rescission of the written agreements and return of money and thus they were entitled to recover possession of the property from the petitioner/defendant, without any condition. Hence, the present Civil Revision.
2. Mr. Nauman Qureshi, advocate, submits that the petitioner/defendant was defrauded as in the original agreement to sell (Exh-D/1), there was no mention of mortgage of the suit property and hence, the petitioner/defendant was dragged to continue with making payments to the respondents/plaintiffs for getting the suit property redeemed but the needful was not done by the respondents/plaintiffs. He states that in essence the respondents/plaintiffs claimed an oral agreement (of rescission), without disclosing the names of witnesses in whose presence the said oral agreement of rescission was concluded and hence, their written statement was evasive and their counter claim/suit was liable to be dismissed.
3. Conversely, Barrister Usman Ghani Rashid Cheema, advocate submits that there was no fraud with the petitioner/defendant inasmuch as before the execution of Exh.D-2, which is the first extension in cut-off date of the original agreement to sell, when Rs.3 million were paid by the respondents/plaintiffs within five days after the execution of agreement to sell/Exh.D-1, complete disclosure of bank loan was made. Further contends that a litigant is not obligated to disclose evidence (names of witnesses) in their pleadings in terms of Order VI Rule 2 of the Code of Civil Procedure, 1908 ("CPC")[1]. Further avers that the respondents/plaintiffs produced those witnesses in whose presence the oral agreement (of rescission) was made and the sale consideration was returned to the petitioner/defendant. Further contends that the petitioner/defendant while submitting written statement in the suit instituted by the respondents/plaintiffs took the stance that the amount of Rs.8,702,356/-, which was deposited on the date when the respondents/plaintiffs withdrew Rs.8,990,000/- for settlement and rescission of the agreement, was in fact received by him as the remittance from his son in Malaysia; however, this peculiar fact could not be substantiated. Further contends that claiming that Rs.8,702,356/- was received as remittance and failing to prove the same constitutes a circumstantial evidence corroborating the stance of the respondents/plaintiffs that the amount of sale consideration received by the respondents/plaintiffs along with some appreciation for the existing crops and installation of tubewell, on the suit property, was returned to the petitioner/defendant.
4. Arguments heard. Record perused.
5. The legal questions that require determination are articulated as under: i) Whether written agreement to sell can be rescinded orally and if so, what is the standard of proof? ii) Whether a litigant is obligated to disclose names of witnesses in his pleadings to prove oral rescission of an agreement, keeping in view import of Order VI, Rule 2, CPC? iii) Whether an amount of money deposited by the buyer in his own account, in respect of which he could not substantiate his source, can be treated as circumstantial evidence of refund of the sale consideration by the seller, pursuant to an oral recession?
6. As regards the first question, it is worth mentioning that under Section 62 of the Contract Act, 1872[2], parties to a contract may mutually agree to rescind it, and such rescission needs not to be in writing. The critical requirement is mutual consent of the parties. The law does not prohibit oral rescission. While oral rescission is legally permissible, the Courts have stressed that it must be established by clear, cogent, and convincing evidence. The Supreme Court of Pakistan[3] emphasized that oral agreements require strong proof and that the party relying on an oral contract must state specific details such as time, place, and names of witnesses. The Courts[4] have also reiterated that omissions in pleadings such as failure to state the date, venue, and names of witnesses are fatal to the success of a party relying on an oral transaction. Similarly, the Supreme Court cautioned against relying on oral testimony that lacks corroborative or circumstantial support, particularly, where valuable rights are at stake[5]. The above discussion reinforces that the evidentiary burden is high and cannot be met through general or vague assertions. The improbability of undocumented transactions, especially where original transactions were reduced in writing or formally executed, has led the Courts to disbelieve the claims of oral rescission.
7. Moreover, the provisions of Articles 102 and 103[6] of Qanun e-Shahadat Order, 1984 in general and proviso 4 to Article 103 in particular are relevant to the case in hand, since they lay down the basic principle that subsequent oral contract to rescind the earlier written contract may be proved albeit the standard of proof remains the same as required for oral agreement. Taken together, the above referred legal provisions in the light of the judicial pronouncements referred, establish a consistent legal approach: oral rescission is recognized in law, however, strict proof is required in line with legal and evidentiary standards and without such proof--both in pleadings and in evidence--the Courts are unlikely to uphold claims of oral rescission against written agreements.
8. Having above legal position in sight and while answering the second legal question formulated hereinabove it is imperative to observe that learned counsel for the respondents/plaintiffs has vehemently argued that a party is not obligated to give names of witnesses or refer evidence in his pleadings. At first glance, there appears to be a contradiction between the rule under the CPC that pleadings must contain only material facts and not evidence i.e., names of witnesses, dates, times, and places that typically form part of evidence--and the judicial requirement that oral agreements or oral rescission must be pleaded with specific details such as the exact date, place, and names of the witnesses. However, this Court is of the opinion that this is more a matter of functional distinction than the actual conflict. The CPC's directive to plead only facts (and not evidence) is meant to ensure that the pleadings define the scope of the controversy clearly, without burdening them with evidentiary material, which is to be introduced later during the trial. But when a party asserts a claim or defence that is inherently exceptional-- such as rescission of a written agreement through an oral understanding--the particulars of time, place, and witnesses become essential elements of the factual foundation of the defence itself, not just the evidence. It is in such situations that the Courts have consistently held as examined hereinabove, that general or vague assertions are insufficient, and failure to state these particulars can render the entire defence implausible. Thus, in the context of oral transactions, the details about names of witnesses are not merely evidentiary--rather the same constitute material facts necessary to give rise to the defence, and must therefore, be pleaded to pass the threshold of a valid defence under Order VI Rule 2, CPC.
9. In present case, the Trial Court, while rightly holding that the specific performance of contract could not be granted to the petitioner/defendant as the suit property was mortgaged with the bank and such property cannot be sold, reached the conclusion that return of amount of sale consideration could not be proved, whereas the Appellate Court below, while maintaining the finding to the extent of dismissal of the suit of specific performance of the petitioner/defendant, also reversed the findings qua return of sale consideration while holding as under: "21..... whereas respondent/defendant could not bring on record that the amount received in his account on 07.12.2011 was an amount other than the amount alleged by the appellant nor any trail of receiving this amount from a specific person is proved on file."
10. It is imperative to point out that the return of sale consideration purportedly happened on 07.12.2011, subsequent to the rescission of the written agreements, statedly agreed upon by the parties on 26.11.2011. In this regard, the respondents'/plaintiffs' side, while defending the suit for specific performance of contract, submitted written statement to the following effect: It is worth mentioning that names of witnesses who were present on 26.11.2011 as also the bank officials who were available on 07.12.2011 are not recorded in the written statement or in the plaint of the suit of the respondents/plaintiffs. Only one name i.e., Rana Kazim Ali at whose place, statedly, the oral rescission of written agreements took place on 26.11.2011 is mentioned. Notably, Rana Kazim Ali was not produced as witness by the respondents/plaintiffs but appeared as DW-2 and stated that no such rescission took place at his place. This witness was subjected to lengthy cross- examination but his statement could not be shaken by the respondent/plaintiff side.
11. Even if it is left aside and ignored that the names of the witnesses in whose presence the rescission was agreed upon by the parties on 26.11.2011 or the payment was made on 07.12.2011 are not required to be recorded albeit the jurisprudence developed thereof settles otherwise, it is worth mentioning that two individuals namely, Muhammad Ahmed and Rehmat Ullah came forward and appeared as PW-3 and PW-4 to contend that it was in their presence that the oral rescission of written agreements took place at the place of Rana Kazim Ali, however, their statement too is tainted with clear contradiction inasmuch as PW-3 stated as under: (Emphasis supplied)
The statement of PW-3 nails the case of the respondents/plaintiffs as he was approbating and reprobating and denied his presence at the place of rescission and stated that he only heard that the transaction took place at the place of Rana Kazim Ali. Hence, his evidence was hearsay and cannot be relied upon. Similarly, Muhammad Hussain Sajid/respondent No.2 appeared as PW-5 and stated that Rana Kazim Ali was available at the time of negotiation pertaining to return of sale consideration although Rehmat Ullah (PW-4) categorically stated that no one else was present except the said witness, PW-3/Muhammad Ahmad and one Rana Zahid. Importantly, Rana Zahid never appeared as a witness. PW-5 stated as under: (Emphasis supplied)
Whereas, PW-4 Rehmat Ullah stated as under: The contradiction between statement of PW-5 with the pleadings completely destroys the stance of the respondents/plaintiffs inasmuch as in the plaint of their suit and also written statement filed in suit of the petitioner/defendant, the respondents/plaintiffs stated that rescission took place on 26.11.2011 and payment was made on 07.12.2011, whereas from the above quoted statement of PW-5 it appears that payment was made on the same day as statedly parties went to the bank, within fifteen minutes (from the place of Rana Kazim Ali), on the day when the rescission took place.
Moreover, as per PW-5 surprisingly the name of Rehmat Ullah/PW-4 is not mentioned as a witness of rescission at the place of Rana Kazim Ali but stated to be present at the time of payment in the bank only. These contradictions in statement of the PWs indicate that the oral rescission of written agreements could not be proved.
12. Adverting to the third question, the respondents/plaintiffs assert that on 07.12.2011, they gave Rs.8.99 million in cash to the petitioner/defendant, who deposited the same in his own bank account and could not prove any other source of such amount. This circumstance is relied upon by the respondents/plaintiffs and acknowledged as proof of the oral rescission of the agreements by the Appellate Court below. However, this assertion is highly improbable in the given factual matrix of the case inasmuch as the parties had executed not one but three written agreements, with all material terms including cut-off dates, which reflect that the respondents/plaintiffs were evidently very conscious about reducing every step in writing. Under these circumstances, it belies logic that the parties would agree to such an unreasonable arrangement and after payment of a substantial amount in cash, neither written receipt or cancellation was taken, nor was any stamp paper executed or attested at the time of rescission or payment. The respondents/plaintiffs claim that the parties agreed to reduce rescission into writing after arranging and making payment with the understanding that after the payment in presence of witnesses the final cancellation would be reduced to writing at the Kachehri, as evident from para 8 of the written statement filed by the respondents/plaintiffs, reproduced herein above, which is identical to their stance in their plaint.
This explanation is neither consistent with the past conduct of the parties nor in accordance with normal commercial prudence. If the parties were so particular and diligent in reducing agreement to sell followed by agreements qua extension in cut-off date into writing simultaneously with each payment, then the idea of waiting to go to the Kachehri after receipt of the money to execute the rescission/cancellation later, without any immediate documentation or written acknowledgment, is both improbable and suspicious. It raises strong doubts about the veracity of the oral rescission story, put forth by the respondents/ plaintiffs as defence in the suit for specific performance of agreement instituted by the petitioner/defendant. Moreover, there is no explanation as to what stopped the parties to reduce the rescission into writing, prior to going to bank, and just execute the same by putting their signatures at the time of actual refund of the money. Further, if the respondents/plaintiffs really made the payment in cash on 07-12-2011, why would they not insist on some form of written acknowledgment even on a plain paper receipt, especially when they were previously meticulous in formalizing extensions and partial payments? The entire narrative is circumstantial evidence indicating that the story of oral rescission is contrived and lacks credibility.
As a corollary, mere fact that some amount was deposited by the petitioner/defendant in his bank account on the same day, when the respondents/plaintiffs withdrew an amount from the same branch, does not in itself constitute corroboration of an oral rescission of written agreements, which otherwise could only be proved by clear and cogent evidence that the respondents/plaintiffs failed to lead.
13. At this junctue, it is appropriate to address the argument of the petitioner/defendant side that fraud was committed with him as factum of mortgage of property was not disclosed. This Court is of the opinion that there was no fraud with the petitioner/defendant as immediately after the execution of first written agreement/Exh.D-1, within few days a substantial part of the sale consideration was paid by the petitioner/defendant to the respondents/plaintiffs and the factum of mortgage was disclosed. The petitioner/defendant could have demanded a refund of Rs.1 million paid earlier instead of continuing with making further substantial payments and taking possession of suit property. His conduct in proceeding with the transaction despite knowing the encumbrance negates allegation of deceits. Even otherwise, moving on with the agreement after disclosure of mortgage estops the petitioner/defendant to raise this plea subsequently.
14. In nutshell, the oral rescission of the written agreements (to sell) stands unproved. Accordingly, the questions framed above are answered in the terms that a written agreement cannot be rescinded orally unless such rescission is established through clear, cogent, and credible evidence.
Mere oral assertions or vague statements without consistency and corroboration are insufficient to prove rescission. Mentioning the time and place of oral rescission as also names of witnesses, does not offend Order VI, Rule 2, CPC as such detail is factual foundation of the actual defence. Similarly, mere deposit of money by the buyer in his own bank account without credible proof of source does not amount to proof of refund of sale consideration or a oral rescission of the written agreement(s).
Such piece of circumstantial evidence (deposit by the buyer) must be weighed with other evidence and circumstances, and in present case the said evidence (contradictory statements of PWs) and circumstances strongly discredit the claim of the respondents/plaintiffs.
15. In view of the above discussion, the present petition is partially accepted and the impugned judgment of the Appellate Court below is set aside and that of the Trial Court is upheld. As a corollary, the respondents/plaintiffs are entitled to recover possession of suit property subject to payment of sale consideration to the petitioner/defendant.
16. Disposed of in above terms.
[1]Order VI of CPC-- 1 ....
2. Pleading to state material facts and not evidence. --- Every pleading shall contain, and contain only, a statement in a concise form of the material facts on which the party pleading relies for his claim or defence, as the case may be, but not the evidence by which they are to be proved and shall, when necessary, be divided into paragraphs, numbered consecutively. Dates, sums and numbers shall be expressed in figures.
2.
62. Effect of novation, rescission and alteration of contract.--If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed.
3. Hafiz Qari Abdul Fateh through LRs v. Ms. Urooj Fatima and others (2024 SCMR 1709).
4. Allah Ditta and another v. Liaqat Ali and 2 others (2005 YLR 245); Anwar Khan v. Mst. Bholi Bibi (2022 MLD 25); and Muhammad Ajmal (Deceased) through LRs. v. Abdul Khaliq and others (2023 MLD 654).
5. Muhammad Nawaz through L.Rs. v. Haji Muhammad Baran Khan through LRs and others (2013 SCMR 1300)
[6]103. Exclusion of evidence of oral agreement: When the terms of any such contract, grant or other disposition of property, or any matter required by law to be reduced to the form of a document, have been proved according to the last Article, no evidence of any oral agreement or statement shall be admitted, as between the parties to an instrument or their representatives-in- interest, for the purpose of contradicting, varying, adding to, or subtracting from, its terms: .....
Proviso (4). The existence of any distinct subsequent oral agreement to rescind or modify any such contract, grant, or disposition of property, may be proved, except in cases in which such contract, grant or disposition of property is by law required to be in writing, or has been registered according to the law in force for the time being as to the registration of documents.