I. MAHMUD, J.-'-This is an appeal against the judgment and decree of the District Judge, Quetta dated 14th May 1970; passed against the appellant, awarding damages of Rs. 20,000 to the respondent in lieu of specific performance.
2. The brief facts are that by an agreement of sale dated 10-10-1967, Haji Bahawood-Deen, the appellant agreed to sell to B. G. Desouza the respondent, his shop No. 1-14/11 situate on Jinnah Street Quetta, for the agreed price of Rs. 70,000. On the date of the agreement, it was known to the respondent that the shop was in the occupation of the appellant's tenant: It was agreed that the sale would be completed within the period of six months, during which period the appellant agreed to get the shop vacated by his tenant and also obtained a No Demand Income-tax Certificate to en able registration of the sale-deed.The respondent paid Rs. 10,000 as a deposit in advance and agreed to pay the balance of Rs. 60,000 at the time of the registration of sale-deed. It was further agreed that if the appellant resiled from the agreement, tie would return the deposit as well as pay an additional amount of Rs. 10,000 as damages, and that if the respondent resiled there-- from, the appellant would be entitled to forfeit the deposit of. Rs. 10,000. The agreed period of six months expired on 10-5-58 and as the appellant had failed to get the tenant to vacate the shop the respondent addressed a legal notice to him by registered post dated 16-5-68 to complete the sale within a fortnight from the date of receipt of the notice failing which he would be constrained to take legal proceedings against the appellant. It appears that the notice was returned to the respondent on 7-6-1968 with the remarks "refused". On 2-7-68, the appellant himself addressed a notice to the tenant calling upon the tenant to vacate the shop within 15 days failing which he would take legal proceedings for ejectment. In that notice, he stated that he needed the shop badly for his personal use "or otherwise" ; that despite promises of the Manager to vacate it whenever required, he was being put offevery time on one pretext or another. On the same day, that is on 2-7-68; he also addressed a legal notice to the respondent calling upon him to pay the balance of the purchase price of Rs. 60,000 and get the sale-deed executed and registered in his favour within 15 days, failing which litigation would follow.
3. On 4-7-68, the respondent instituted the suit for specific performance of the agreement of sale and for an order directing the appellant to do ail acts necessary "to put the respondent in full possession of the shop" or in the alternative to pay the agreed sum of Rs. 20,000 to .The respondent. The appellant received no reply to his notice to the respondent dated 2-7-68 and therefore, he sent him a reminder on 12-7-68. A few days after despatching this reminder, the appellant was served with the summons of suit. He appeared in answer to the summons and put in a written statement in which he took up the astonishing plea that he never undertook to deliver possession of the shop to the respondent and that, while he himself was ready and willing to perform the agreement, the respondent had not been ready and willing to get the sale---deed registered in his favour : that accordingly, no cause of action had accrued to the respondent and he prayed that the suit be dismissed.
4. While the suit was pending, the appellant commenced ejectment proceedings against the tenant in September 1968, in the' Court of the Civil Judge and Rent Controller, Quetta. The ejectment proceedings were com--promised and the tenant surrendered possession of the shop to the appellant on 18-4-69. On that day, the compromise was recorded by the Rent Controller who passed an order (Exh. D/9) treating the application as disposed of. On the same day the appellant's counsel addressed a letter to the respondent (Exh. D/5) advising him that the shop had been vacated by the tenant and that if the respondent wished, he may make payment of the balance of the sale price plus the cost of the litigation and get possession of the shop as also the sale deed registered in his favour without further delay. The respondent's counsel sent a reply on 3- 5-69 advising the appellant's counsel that the respondent was ever ready to pay the balance of the sale price of the shop and have the sale-deed registered provided the appellant was also ready to pay the costs of the suit. It appears that no further cor--respondence was exchanged on the subject. It is, however, not disputed that the appellant kept the shop vacant for some time.
According to the appellant, the shop remained vacant for one year and he kept approaching the respondent to take possession of it and complete the transaction, but this is disputed by the respondent. After letting his son use the shop for a hotel business which discontinued after a month, the appellant let it on a monthly rent of Rs. 5'JO to a coal company which is presently in occupation of it.
5. On the material issues, the learned District Judge held that under the agreement, the appellant was bound to give vacant possession of the shop to the respondent and complete the sale within the stipulated period of six months expiring on I0-4-68. He disbelieved the defence evidence that time for completion had been extended by mutual consent, and he accordingly held that while the respondent was always ready to perform his part of the agree--ment, it was the appellant who was not in a position to give vacant possession of the shop within the stipulated period of six months, as agreed, because the shop remained in the occupation of the tenant during this period.
That, accordingly, it was the appellant who had committed breach of the agreement. He held further that even on 18-4-1969 when the appellant offered vacant possession of the shop to the respondent, he was not in a position to complete the sale because nowhere had he stated that he had obtained the required No. Demand Income-tax Certificate. Finally, that as the shop was in the occupation of the new tenant at the date of the hearing, no decree for specific performance could be executed against the tenant in view of the bar of section 13 of the West Pakistan Urban Rent Restriction Ordinance, 1959 and that in the circumstances, having regard to the fact that appellant was making "profit" from the enhanced rent, the agreed penalty should be enforced against him. In the result he decreed the suit for Rs. 20,000 with costs against the appellant.
6. Mr. Basharatullah for the appellant submitted that although time was specified in the agreement for completion, it was not of the essence of the contract and that, therefore, the finding of the learned District Judge that the appellant was guilty of breach because he failed to give vacant possession of the shop to the respondent within the stipulated time, cannot be sustained. He referred to section 55 of the Contract Act, 1872 and submitted that in so far as contracts relating to sale of land are concerned, the presumption is that time is not of the essence of the contract. He referred us to three Karachi cases, namely, Malik Ghulam Jilani v. Malik Munir Ahmad Khan and others (PLD 1960 Kar. 517). Haji Sottar Haji Mohamed v. Allah Rakhya Dhanji (PLD 1963 Kar. 786) ; Ghularn Frussain Pakseema v. E6rahim Saley Mayat (PLD1964 Kar. 388). In these cases the learned .Judges have purported to follow the judgment of the Privy Council in Jamshed Khodarm Irani v.
Buriorji Dhunjibhai (AIR 1915 P C 83) which has discussed the principle embodied in section 55 of the Contract Act, 1872, in so far as contracts relating to sale of land in India were concerned. In that case, the Judicial Committee had to construe a contract for sale of land in Bombay and th6 contention raised before it was that time was not of the essence of the contract for the sale of immovable property. Viscount Haldane who delivered the judgment of the Board, observed that section 55 in the Indian Contract Act, 1872 did not lay down any principle as regards contracts to sell land in India, which differed from those which obtain under the law of England as regards contracts to sell land. He observed :-- "Under that law equity, which governs the rights of the parties in cases of specific performance of a contracts to sell real estate, looks not at the letter but at the substance of the agreement, in order to ascertain whether the parties, notwithstanding that they named a specific time within which completion was to take place, really and in substance intended more than that it should take place within a reasonable time."
Viscount Haldane then referred to English case-law in which this doctrine was laid down and which was again formulated by Lord Cairns in Tilley v. Tltornas ((1867) 3 Ch. D 61), and by the House of Lords in the case of Stickney v. Keeble ((1915) A C 396). He stated that it is this doctrine which section 55 of the Indian Contract Act adopts and embodies in reference to sales of land in India.
The doctrine is concisely stated in the language of Lord Cairns in Tilley v. Thomas as follows :- The construction is, and must be, in equity the same as in a Court of Law. A Court of equity will indeed relieve against, and enforce, specific performance, notwithstanding a failure to keep the dates assigned by the contract, either for completion, or for the steps towards completion if it can do justice between the parties, and if (as Lord Justice Turner said in Roberts v. Berry), there is nothing in the express stipulation between the parties, the nature of the property, or the surrounding circumstances, `which would make it inequitable to inter--fere with and modify the legal right.' This is what is meant and all that is meant, when it is said that in equity time is not of the essence of the contract. Of the three grounds . . . . . . Mentioned by Lord Justice Turner, `express stipulation' requires no comment. The `nature of the property' is illustrated by the case of reversions, mines, or trades. The `surrounding circumstances' must depend on the facts of each particular case."
Viscount Haldane then added further observations to the statement above quoted as follows :- "The special jurisdiction of equity to disregard the letter of the contract in ascertaining what the parties to the contract are to be taken as having really and in substance intended as regards the time of its performance may be excluded by any plainly expressed stipula--petition . . . . . Prima facie equity treats the importance of such time limits as being subordinate to the main purpose of the parties and it will enjoin specific performance notwithstanding that from the point of view of a Court of Law the contract has not been literally performed by the plaintiff as regards the time limit specified . . . . . But equity will not assist where there has been undue delay on the part of one party to the contract, and the other has given him. Reasonable notice that he must complete within a definite-tune. Nor will it exercise its jurisdiction when the character of property or other circumstances would render such exercise likely to result-in injustice. In such cases, the circumstances themselves, a art from any question of express intention, exclude the jurisdiction . . .
7. The above observations are binding upon us, and they lay down two principles. The first is, the principle that time is not of the essence of a contract for the sale- of immovable property and this principle :has been referred to as raising a presumption. This presumption was evolved by the Court of Chancery in order to give true effect to the intention of the parties and in order to prevent a rigid iqsi9tence on the 'letter of the agreement from defeating the spirit of the agreement. The second principle laid down in they Privy Council judgment discussed above, is that the presumption is rebuttable and would not apply, if to apply it mould the inequitable and unjust having regard to (i) the express stipulation between the parties (ii) the nature and character of the property or(iii) the surrounding circumstances.. . In applying these principles, the object 'of the Court is to ascertain the true intention of the parties and .To give effect to it and the question will always depend on the facts anti, circumstances of each case. Tilley v. Thomas, (referred to above) was one such case. The facts and circumstances of that case (which were similar to .The case under consideration), were such that the Court inferred therefrom that the intention of the parties was that time shall be of the essence of the contract, The facts were, that the defendant Thomas agreed to purchase from Tilley the plaintiff's residential house for his own occupation; a fact known to the vendor. It was agreed that the possession of the house was to be given by a specified date.
The inspection of the title deeds could not be completed by the specified,. Date, because they were in tie possession of the vendor's mortgage with: two result that the purchaser notified the vendor that he had, failed to complete the contract by the specified date and, therefore treated the contract as at an end anti demanded return of the deposit. . The vendor caused the key of the house to be delivered to the purchaser but it was forthwith sent back end the purchaser; refused to accept possession. The vendor then filed a. Suit for specific performance oaf the contract against the purchaser. It, was held that in view of the admitted fact that, the property; sold was a residential house intended by the purchaser for his immediate occupation, it was essential and known to be such, that the purchaser should have possession of the house by the stipulated date for his own immediate residence and that it would be inequitable to enforce specific performance against the purchaser after a breach of it by the vendor.
8. The presumption that time is not of the essence of the contract is much stronger and will be readily inferred by the 'Court in the case of sales or leases of lands or of residential. Premises simpliciter than in the case of transfer of commercial premises as for example, of a shop With vacant possession. And there is high authority for the proposition that the presumption is excluded ,whenever shop premises are transferred with their' goodwill. It is also excluded in the case of transfer of industrial premises and as an illustration, may be cited the case of Harold wood Brick Co. Ltd: v. Farris (l935) 2 K B 198, where the contrast was for sale of land and buildings together with a brick kiln, machinery and plant. The Court ' observed that the subject of the contract was not merely a freehold land but was land with kiln -etc., thereon, and the property was intended for use for trade purposes and that therefore it would be inequitable to treat time ' for completion otherwise then as of the essence of the contract
9. Reverting now to the facts of this case, the contract (Exh. P/1) was not only for the sale of a shop simpliciter butt was for the sale of that shop with vacant possession and that because the respondent wanted to occupy the shop to run his own radio business in it. The respondent's evidence as to the intention with which he entered into the contract (Exh. P/1) is as follows :- "I have always been ready to purchase the shop and aril even pre--pared now to have it on the agreed price, provided I get physical and actual possession according to the terms of the agreement. I have been in occupation of a shop belonging to the Cantonment Board and have been paying Rs. .175 per month as rent from May 1968, which I would not have paid if I had got possession of the shop within tile stipulated time specified in the agreement."
The last sentence makes it clear that the respondent had agreed to, purchase the appellant's shop because of his' desire to occupy it and it was only because the appellant failed, to deliver it to him by the stipulated time; that he took another shop on lease. The situation of the shop on Jinnah Road Quetta, which' is undoubtedly the principal shopping centre of the Province, is also a material surrounding circumstance and the sale price of Rs. 70,000 offered by the respondent took into account the fact that the shop was in the principal commercial area of the city and; when compared to the letting value of the shop, which fetched only Rs. 250 per month, the sate consideration, must seem large. The stipulation in the contract (Exh. P/1) that it had to be completed within six months has, therefore, to be considered in this background. In my opinion the facts and circumstances show that time was intended to be of the essence of the contract and` the contrary presumption relating to sales of immovable property above discussed, relied upon by Mr. Basharatullah has been rebutted. In my view, a Court of equity would not have applied that presumption without doing injustice to the respondent. Even Mr. Basharatullah confessed that the appellant was in breach unless .Be could invoke the benefit of the presump--petition. As he relied on the Karachi cases above mentioned these Will now be examined.
10. In Malik Ghulam Jilani v Malik Munir Ahmad and others, the question was of the construction of a lease agreement by which a land-- lord had agreed to construct a cinema and lease it to the plaintiff' for a period of ten years. The agreement prescribed a complicated method of payments to the landlord, and as the plaintiff was in breach the landlord claimed to repudiate the contract, therefore the plaintiff filed a suit for specific performance. The plaintiff' apparently admitted that he had been late in making tile prescribed payments, but his submission was that time was not the essence of the contract. The landlord challenged the applica--bility of the presumption on the ground that the lease was not only of the cinema building but of the running business of his cinema. Waheednddin, J. /as lie theft was) examined the lease agreement and held that the landlord's interpretation of the lease agreement was not correct. He therefore observed; after examining the authorities at page 528 "I have already shown that the defendant dill not lease out a running business to the plaintiff. In my opinion the transaction in question was also not of a commercial nature. The defendants were only expected to receive rent ------..It was a simple lease---------------."Thus, the agreement under constitution before Waheeduddin J. Was totally different from that in the instant case, anti I agree with Mr. Akbar Khan that the ratio of the case does not support Mr. Basharat--ullah's argument Similarly, the two other authorities cited by Mr. Basharatullah Haji Sattar Haji Mohammed v. Allah and Ghulam , Hussain v. Ebrahim Saley do not support the appellant's case because the contracts construed in those cases were contracts of sale simpliciter. In the former of these two cases, the appellant had purchased a residential building from a Hindu evacuee and as it was in the occupation of the respondent, he could not get vacant possession. So he entered into an agreement with the respondent to sell that very building to him at a loss of Rs. 1,000. It was agreed that the balance of the sale price would be paid within six months and the appellant/vendor would execute the sale-deed. The balance was not paid by the respondent -to .The appellant within the stipulated period of six months, with the result that 'the appellant-vendor forfeited the earnest money. Thereupon, the respondent-purchaser filed the suit for specific performance which was decreed .By the, 'trial Judge. The Court confirming the decree, held that no circumstance has been made out by the appellant-vendor to justify the inference that the intention of the Parties was that time was to be of the essence of the contract and that therefore the presumption applied. In the next case of Ghulam Hussain the respondent agreed to purchase a land in Karachi with buildings and structures on it in which the business of manufacturing a chocolates and other allied articles was being carried on under the name of the Sind Chocolate works together with the machinery, as well as licences contracts and orders- However, the admitted fact was that the defendant---s object in purchasing the property was to run a cosmetic business and that he had not agreed to purchase the chocolate works, as a running business. The period of completion of three months having expired the respondent/ purchaser cancelled the agreement and instituted the Suit for recovery of earnest money. The trial Court in decreeing the suit held that time was of the essence of tic contract. Oil a betters Patent Appeal, Qadeeruddin Ahmed, J of the Division Bench after examining the law very carefully came to the Conclusion that the contract was not For the Sale of a running business but of land and buildings, machinery thereon simpliciter and after examining the contract and the circumstance to the case, he came to the conclusion that time was riot of the essence. However, the appeal was' t not allowed on other grounds.
11. 'The result of this discussion is that the authorities cited on behalf of the appellant do not' support his case. I must, however, point out here that the proper construction of section 55 of the Contract Act had come up for consideration before the Supreme Court in Abdul Hamid v. Abbas Bhai Abdul Hussain Sodawaterwala (PLD 1962 SC 1). There, the vendee had sued for; specific, performance of an agreement for the sale of an Immovable property situated in Karachi. His claim was successfully resisted by the vendor on the ground that he (the vendee) had failed to Complete the transaction within ten days of the receipt of a notice sent to him on 4th September 1950, making the time fixed as of the essence of the contract.---. The vendee---s appeal was allowed by their Lordships who observed that time was not of the essence of the contract between the parties Therefore, I have carefully examined the judgment of their Lordships in order to consider whether it .Is of any assistance to the appellant's case. In my humble opinion, tile judgment is distinguishable on the facts. In the first place, the contract between the parties in that appeal was a contract of sale simpliciter. Secondly, the facts were peculiar.. There were two agreements between the parties. Under the first agreement the vendee was required to. Complete the sale within two months but by the second agreement this period. Was extended to 18 months, therefore S. A.
Rahman, J. (as he then was), observed "the inference seems obvious that the time fixed was not of the essence of the contract originally" The, judgment is distinguishable on this ground also. Thirdly not only had the vendor received payments. Form the vendee in addition to the earnest money, but after having been put into possession, the vendee had incurred expenditure on improving the property, therefore the equities were in his favour. But in the present case, the equities are in the respondent's favour. Finally, in view of the vendor's delays in obtaining an income-tax clearance certificate and other certificates, the time schedule stipulated in the agreements had expired; therefore their Lordships held that in the absence of express provision, the intention of the parties was to complete the contract in a reasonable period. And that the unilateral fixation of a period of ten days by the respondent was not. Reason--able. But in the instant case, the period for the completion of the transaction had been fixed, therefore having examined the judgments of their Lordships, I am satisfied that the case: is distinguishable on every., material particular.
12. But there is another reason why the presumption evolved by the Courts of equity that iii a contract relating to sales of land, time is not regarded as of the essence, ought not to be applied on the facts of the present. Case. The passage quoted from the opinion of Viscount Haldane to Janzshed Khodarajn Irani's case in paragraph 6 above is authority, chat equity will clot assist where there has beet, undue delay on the pact of one party to the contract and the other has given him reasonable notice that he must complete within a definite time. The respondent gave notice to the appellant dated 16-5-68 (Exh. P. 3) calling upon the' appellant to complete the contract within two weeks failing which legal proceedings will be taken. This notice was expressly relied on in the plaint by the respondent and the only plea advanced by the appellant in his written statement Was that this notice had not been served on him. The notice was posted' by the respondent's counsel and in view of Mr: Akbar Khan's evidence, the trial Court rightly held that the notice must be deemed to have been served 1n this view of the matter, even if time was not expressed in the contract to be of the essence, it was made so by the subsequent notice. I am, therefore, of the view that the finding by the learned District Judge that the appellant had committed breach of the contract in failing, to deliver vacant possession of the shop to the respondent within the time stipulated is correct.
13. Mr. Bashartullah next submitted that it was the ,respondent who was in breach of the contract because he was not ready, and willing to complete, despite the appellant's offer to deliver vacant possession of the shop to him on 18-4-1969 during the pendency of the suit, by his letter (Exh. D/5).
He submitted that the respondent having treated the contract as still subsisting, by avering .In paragraph 3 of the plaint that he had always been and still is willing to perform the agreement on his part he ought to have come forward and, taken delivery of the vacant shop and paid the balance of the purchase price. There would have been force in this contention had, not the appellant demanded from the respondent in his letter Exh. D/5. Costs of the litigation as a condition to handing over vacant possession of the shop. This in my opinion was unreasonable and an unjust demand to which respondent rightly replied in his letter Exh. D/8 declining to comply unless the appellant himself agreed to pay the costs of the suit which the respondent stated he was compelled to file through no fault of his. The demand by the appellant for costs of the litigation from the respondent, in the circumstance, was clearly unjustified because the appellant himself having expressly agreed to get the tenant to vacate the shop within six months took no effective steps to apply for his ejectment although he was obliged under law to do so. See Fazle Ahmed v.
Rajendra NathRoy Choudhuri and others (AIR 1926 Cal. 339). In fact the appellant applied for ejectment after the expiry of the agreed period. It will be observed that the appellant gave notice to quit to the tenant by his letter dated 2-7-68 Exh. D/10 and the ejectment application was filed some two months later on 21-9-1968, pursuant to which the tenant gave up possession of the shop to the appellant on 18-4-1969. Moreover, the appellant had not obtained the "No Demand Income-tax Certificate" which he was bound to produce to enable the sale deed to be registered despite the express demand for this certificate by the respondent's advocate in his letter dated 3-5-1969 Exh.
D/8. The appellant did not care to inform the respondent's advocate that he had obtained the income-tax clearance certificate. The fact that the appellant had kept the shop vacant for some time does not, in my opinion, excuse his liability for breach of contract on his part. I am, therefore, of the view that the contention of Mr. Basharatullah that the respondent was not ready and willing to complete the contract, must be rejected.
14. As the respondent was ready and willing to complete the con--tract and as the appellant had committed breach, it follows that the respondent was entitled to damages and that was also the view of the trial Court which awarded Rs. 20,000 as damages. However, the trial Court failed to notice that as the appellant was in breach, he was liable to refund to the respondent the sum of Rs.
10,000 received by him as earnest money, the more so as the written statement did not contain a claim that the appellant was entitled to forfeit the earnest money. It means that his claim for damages must be limited to Rs. 10,000.
15. The only point which remains for consideration is whether the appellant is entitled to Rs. 10,000 as damages. We have had very little assistance on this aspect of the case. Mr. Muhammad Akbar relied on the stipulation in the contract (Exh. P/1) that the appellant would be liable to pay Rs.
20,000 as damages in the event of a breach of contract by him. But the respondent had to prove damages in view of section 74 of the Contract Act and the agreed amount of damges merely meant that he could not be awarded more than Rs. 20,000 as damages. When we referred, Mr. Muhammad Akbar to section 74 of the Contract Act, he contended that the appellant's breach had caused heavy loss to the respondent. We therefore asked learned counsel to give us the particulars of this heavy loss, but he merely submitted that a shop in Jinnah Road would attract far more business than a shop in the Cantonment, and that the evidence in respect of the expenses thus incurred by the respondent was the uncontro--verted evidence that he was paying Rs. 175 as rent for his shop in the cantonment, whilst the appellant had relet his shop at Rs. 500 per month. As the respondent did not care to give evidence about his estimate of the loss consequent upon the appellant's breach, he is precluded from claiming special damages, but I have no doubt that a shop on Jinnah Road would attract much more business than a shop in the cantonment. Now difference between the rent of two shops is Rs. 3,900 per year and, in my humble opinion, this difference would be a reasonable man's estimate of the pro--spective loss of earnings to the respondent on account of the appellant's breach of contract, therefore the only question is the number of years for which the respondent is entitled to value his loss.
16. Mr. Basharatullah submitted that if the appellant was in breach, he would be liable only for the respondent's loss of earnings for one year because the respondent had illegally rejected the appellant's offer to take possession of the shop in April 1969. But, as I have shown earlier, this offer was coupled with an unjust and illegal condition that the respondent should pay costs of the litigation to the appellant, therefore the respondent was entitled to make a reasonable counter- offer which he did. But as the appellant ignored this counter-offer, it cannot be said that the respondent had failed to mitigate damages, and, on the other hand, as the appellant's offer was coupled with an illegal condition, I am not able to accept Mr. Basharatullah's submission, therefore the question remains of the period for which the respondent can value his loss. As we received no assistance on this question, I would point out here that in fact only Rs. 10,000 have been awarded as damages to the respondent, because, in any event, he was entitled to the refund of Rs. 10,000 which he had paid as earnest money, and as Rs. 19,000 would be the equivalent of 1 rather less than 3 years loss of profits, I do not think the award of this amount would be unreason--able. I would therefore dismiss the appeal with costs.
DORAB PATEL, J.-I agree.