' Muhammad Yousaf and another filed a suit for possession through specific performance of the agreement of sale executed on 13-6-1967 between Muhammad Yousaf etc. And Nawab Din.
According to the plaint said Nawab Din owned 30 Kanals and 12 Marlas of land in Chak No,274/R.B., Tehsil and District Lyallpur. He agreed to sell the same to Muhammad Yousaf etc. Plaintiffs/respondents for a consideration of Rs,8,000 and an agreement of sale was executed on 13-6-1967. The said Nawab Din received Rs,1,000 as earnest money from the plaintiffs/respondents.
Thereafter, the land in dispute was transferred in favour of the appellants by way of an oral gift and the transaction of gift was completed despite the notice given by the plaintiffs/respondents to Nawab Din, defendant No,1, while they were willing to perform their part of the said agreement, hence the suit was filed. Nawab Din did not contest the suit and only the present appellants/defendants Nos.2 and 3, transferees of the suit land, opposed the suit of plaintiffs/respondents. The said Nawab Din was proceeded against ex parte. The contention raised by the appellants/defendants before the learned Trial Court were to the effect that they were bona fide purchaser of the suit land by way of gift and had no knowledge of prior agreement by defendant No,1 to sell the property to the plaintiffs/respondents and as such they are proprietors by law against previous contract of sale. The following issues were framed:--
(1) Whether defendant No,1 agreed to sell the suit land to the plaintiffs in consideration of Rs,8,000 through agreement dated 13-6-1967?
(2) Whether the gift of suit land was made by defendant No,1 in favour of defendants Nos.2 and 3 purposely in order to defeat the alleged agreement to sell in favour of the plaintiffs? OPP (2-A) If issue No,1 is proved in affirmative, whether the plaintiffs are entitled to specific performance of the contract? OPP
(3) Relief.
2. The learned Trial Court decided Issue No,1 in favour of the plaintiffs/respondents while Issues Nos.2 and 2-A were decided against them in favour of the defendants/appellants and suit filed by the respondents/plaintiffs was dismissed vide judgment and decree dated 29-7-1968. The respondents/plaintiffs feeling aggrieved instituted an appeal, which was accepted by the learned Additional District Judge, Lyallpur, who set aside the judgment and decree passed by the Trial Court and accepted the appeal of respondents vide his judgment and decree dated 3-1-1970. The appellants filed this appeal against the judgment and decree dated 3-1-1970 reversing the judgment and decree passed by the learned Trial Court dated 29-7-1968.
3. Issue No,1 was decided in favour of plaintiffs as the execution of agreement to sell was proved by Abdul Hameed P.W.1, Allah Rakha P.W.2, marginal witnesses and Munshi Naseer-ud-Din, P.W.3, scribe of the agreement. Further at present there was no dispute between the parties regarding execution of the sale agreement. As issues Nos.2 and 2-A were main contesting issues, the learned counsel for the parties have confined their arguments on these issues only.
4. Ch. Khurshid Ahmad, learned counsel for the appellant has submitted that in view of the stipulation contained in the agreement, Exh.P.1, the respondents were entitled to compensation alone as the same is provided in case of its breach and no specific performance can be ordered.
He further submitted that when there is some specific term to suggest an alternative remedy, in case the vendor fails to perform his part of the contract, then it is the duty of the Court to find out the real intention of the parties while interpreting the terms of the contract and referred to the case House Building Finance Corporation v. Shehanshah Hummayun Cooperative House Building Society and others 1992 SCMR 19 and the case of Messrs Mussarat Shaukat Ali v. Safiya Khatun 1994 SCMR 2189. The learned counsel advancing his arguments further submitted that the appellants/defendants Nos.2 and 3 were bona fide transferees of the suit land by way of gift and they did not possess any knowledge of prior agreement by defendant No,1 to sell the property to the plaintiffs in that case the rights of appellants were protected under section 41 of the Transfer of Property Act as the alienation by way of gift is valid under the provisions of said section. He further submitted that no effort was made to stop the proceedings of mutation and hence the plaintiffs were estopped from filing the suit for specific performance. Concluding his arguments the learned counsel for the appellants has extended the offer that the appellants are ready to pay the compensation as fixed by this Court according to the present market value of the property in dispute, but this offer was declined by the respondents and the matter was finished there and then.
5. On the other hand, the learned counsel for respondents has submitted that in view of the law laid down in the case Khuda Bakhsh v. Abdul Jabbar PLD 1952 Pesh. 32 the respondents were entitled to get the specific performance of the agreement. The learned counsel has also relied upon the judgment referred to above 1994 SCMR 2189.
6. So far as the execution of agreement is concerned it is not at all disputed as the same stands proved by the evidence of P.W.1, P.W.2, P.W.3 and P.W.7 and the issue No,1 concerning the same was answered in affirmative in favour of the respondents/plaintiffs. The only question left for determination for this Court is whether the gift made by defendant No,1 in favour of appellants/defendants Nos.2 and 3 was made to avoid and defeat the agreement of sale in question and the same can legally be enforced or not.
7. I have heard the learned counsel for the parties at length. The learned trial Court while dismissing the suit of the plaintiffs held that the remedy of specific performance of the agreement being a discretionary relief and no specific term having been laid down in the agreement to compel the defendants to perform the agreement of sale in all circumstances the payment of compensation in such situation was adequate relief in the present case to be given to the plaintiffs. According to the terms of agreement the plaintiffs were entitled to recover Rs,1,000 as damages from defendant No,1 besides the return of earnest money i,e, the same amount given by the plaintiffs to him at the time of agreement in case the agreement to sell is resiled by the defendant and on account of this contention the learned Trial Court formed the view that the agreement provides adequate pecuniary compensation for its breach by defendant No,1 and it could therefore exercise option of paying damages instead of specific performance of the agreement of sale. Under the Contract Act when a vendor failed to complete the contract of sale of immovable property, the purchaser has two remedies open to him (i) treat the contract rescinded and sue either in equity for restitution of his former position or to sue at law for any money that he was parting with or (ii) treat the contract on foot and ask for damages for breach or to seek remedy for specific performance. The basic point which should be kept in mind is that ordinary damages for breach of contract are recoverable if the seller has no title to the property at the date of contract and fails to complete the sale before the date fixed for completion. The compensation can be awarded for material defect in the title and not material defect in the property. There is no backing out of the agreement unless performance of the contract becomes impossible or impracticable, in either of which events, the Court has been empowered by way of mandatory rule or by exercise of discretion to avoid the specific performance of the agreement.
8. In case Khuda Bakhsh v. Abdul Jabbar and others PLD 1952 Pesh. 32 it was held as follow:-- "Under section 27(b) it is clearly for the transferee to establish the circumstances under which he would be entitled to retain the property. Prima facie once the vendor had contracted to sell the property in favour of another person, the subsequent transferee will have no right to get the property until it is shown that he had no notice of the prior agreement. Under section 103 of the Evidence Act the burden of proof of any particular fact lies on that person who wishes the Court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person. Again under section 106 of the Evidence Act, when any fact is specifically within the knowledge of any person the burden of proving that fact is upon him. Keeping in view these two sections, it is obvious that it would be within the knowledge of the subsequent transferee whether he had any notice of the previous contract or not, and neither he had paid the money in good faith, and on account of that reason it would be for him to prove that he had no notice of such a contract, and that he was a bona fide purchaser for consideration. It is of an utmost importance that the Courts should gather from all material facts brought on the record as to whether the subsequent transferees were only introduced on account of the malicious motive to defeat the right of a person to enforce a contract or they were the honest transferees of the property. It cannot be forgotten that if the intention in entering into the subsequent transactions was to defraud a person and defeat his legitimate right, the parties would take all possible precautions to conceal the real nature of the transactions. The Courts have got to see that no party succeeds on account of his cunningness and his ability to hide the real intention of the parties to a certain transaction which on the face of it seems to be perfectly valid and good in law."
9. It was held in case referred to above (1994 SCMR 2189) that: "Section 19 of the Specific Relief Act clearly provides that the person suing for specific performance of a contract can also ask for compensation for its breach either in addition to or in substitution for relief of specific performance." ' and further that: "the plea of abandonment of the right to obtain specific performance was to be decided taking into consideration the conduct of the parties and the evidence led on this point."
' There is neither anything in the conduct of respondents nor in the evidence of the parties to show that the respondents have ever given up their right to sue for specific performance and when there is no such thing their Lordships in the given case further pleased to hold that-- "the appellant under the law was not compelled to sue for specific performance, but was also well within her rights to ask for compensation either in addition or in substitution for the relief of specific performance. The appellants, therefore, have right to seek for compensation in addition to the relief of specific performance "
10. The terms of agreement to sell Exh.P.1 dated 13-6-1967 reveal that the vendor agreed to complete the sale by 1-9-1967. In para. 5 of the agreement it is also mentioned that the vendor shall not be entitled to sell or mortgage the property to any other person. It is also on the record that the respondents through their counsel sent a registered A.D. Notice Exh.P.W.7/2 to Nawab Din, vendor, on 27-7-1967, through which they requested Nawab Din to get the sale-deed registered as they had already arranged the remaining amount. It was also mentioned in the notice that Mst.
Sardaran and her sons are creating hurdles in getting the sale-deed registered as they wanted to enhance the sale money. This notice was not delivered and the same was received back by the counsel with the report that it could not be delivered due to the fact that the addressee had left the village and was not traceable. The report Exh.P.W.7/1 appears to be dishonest because on 29-7- 1967 said Nawab Din also sent a notice Exh.P.W.7/5 to the respondents, i,e, just after two days of the notice Exh.P.W.7/2, mentioning therein that in spite of the fact that he conveyed his intention to get the sale-deed registered, but the purchaser/respondents were postponing the matter. An offer was also made in the notice to the effect that they should receive Rs,2,000 and cancel the agreement as he was no longer desirous of selling the suit land to them. After receiving this notice the respondents again sent a notice Exh.P.W.2/1 controverting the allegation contained in the notice dated 29-7-1967 and reiterated their inclination to purchase the property in dispute or in the alternative to file a suit for specific performance of the contract. This notice was again received back un served with similar report as on Exh.P.3/1. It is interesting to note that all these notices were exchanged before the expiry of date as mentioned in Exh.P/1 for registration of the sale-deed, which was 1-9-1967. Again on 1-9-1967 respondents appeared before Sub-Registrar and submitted an application Exh.P.2 to the effect that they were present in Tehsil for getting the sale-deed registered as per agreement of sale whereas the vendor did not turn up. This application was disposed of by the Sub-Registrar vide his order dated 1-9-1967 Exh.P.3 with the remarks "Muhammad Yousaf identified by Muhammad Khalid, Advocate, submitted application before me (Sub-Registrar) and the same was consigned to the record".
11. As held in case Bashir Ahmad and 4 others v. Muhammad Ramzan and another 1988 CLC 1600 that:-- "Section 55 of the Contract Act rather helps the purchaser (promisees). The option to rescind the contract is given to him rather than the promisor like the respondents. Mr. Jahania did not appear to be much correct in claiming that the respondents were promisees in this case. They were promisors and had no occasion to invoke section 55 (ibid), conversely the appellants who has the choice of rescinding the contract chose to enforce it and they could do it with impunity. Similarly the contention that the appellants (promisees) did not apply for performance at proper place and within usual hours of business within the contemplation of section 48 of the Contract Act was indeed irrelevant. They brought the present suit only to enforce the contract and that is what the contract itself authorised them to do. Institution of the suit itself would be enough application for specific performance of the contract. The plea that the part payment through the cheque and the receipt failed, would be of no material consequence because the appellants are even now willing to pay the same. The finding of the lower Court on the point was reversed and since it was a question of fact, they could not assail it in the present regular second appeal. Perhaps to cut short the matter they signified intention before the Court to pay the balance amount now. Because the time was not of the essence, it is open to them to tender the balance subsequently. Mr. Jahania for the respondents urged that now when the prices of land had gone sky-high, to pay them only the small balance of Rs,37,000 agreed upon ten years ago would be inequitable. It is true that the prices have gone quite high, but the obligations arose out of the respondents' own written commitment. They have been using not a small amount of Rs,35,000 taken by them from the appellants years ago. This was a benefit which they arrogated so that if they have to suffer a little correspondingly now, they should make no grievance. Equally there was no force in the plea that specific performance may be refused to the appellants under section 22 or section 24 of the Specific Relief Act. Money is no compensation in contracts for sale of immovable property.
Explanation to section 12 of the Specific Relief Act is quite clear on the point. The corollary was that it could be specifically enforced and the promisor could not insist for payment of damages or pecuniary compensation."
' Reference is also made to the case Hakim Ghulam Rasood v. Sh. Imdad Hussain and another PLD 1968 Lahore 501. Wherein it was held:-- "It was next contended on behalf of the respondent that the compensation in money furnished an adequate relief to the appellant and, therefore, he was not entitled to a decree for the specific performance of the contract. Under section 12 of the Act, 'unless and until the contrary is proved the Court shall presume that the breach of a contract to transfer immovable property cannot be adequately relieved by compensation in money'. This rule would prima facie apply here but it argued that, as there is a condition in the contract for the payment of damages in default of performance, whether by the vendor or by the vendee, it must be held that the parties considered that the enforcement of these damages would be adequate in case the contract is not performed.
In section 20 of the Specific Relief Act, it is provided: 'A contract otherwise proper to be specifically enforced may be thus enforced, though a sum be named in it as the amount to be paid in case of its breach, and the party in default is willing to pay the same'. This is further explained by illustration to section 20 which reads: 'A contracts to grant B an under lease property held by A under C and that he will apply to C for a licence necessary to the validity of the under lease and that, if the licence is not procured, A will pay Rs,10,000. A refuses to apply for the licence and offers to pay B Rs,10,000. B is nevertheless entitled to have the contract specifically enforced if C consents to give licence'. In Ranger v. Great Western Railway Company. 5 HLC 94 Lord Granworth explained: 'A Court of equity is in general anxious to treat the penalty as being merely a mode of securing the due performance of the act contracted to be done, and not as a sum of money really intended to be paid'. Halsbury has expressed the rule thus:. 'where the contract contains a stipulation that in the event of non-performance a certain sum of money shall be paid that fact is not in itself decisive in considering whether or not specific performance should be granted, nor does the distinction between penally and liquidated damages affect the answer to this question. The answer is to be found by considering the intention of the parties that is, whether the party bound to performance has an alternative choice given to by the contract to perform or to pay the agreed sum, or whether he is bound to do a certain thing with a penal sum or sum by way of liquidated damages attached as security. In the latter case the Court, notwithstanding the penal clause enforces performance, if the contract be such that without the penal clause it would have been proper for specific performance. Whether the contract contains a penalty clause the contracts has his right in law upon the contract for the money payable under the clause and also his right in equity to specific relief; he can, at his election, obtain either form of relief, but he cannot obtain both forms'.
' It was further argued that the agreement contained alternative contracts and that it was for the vendor either to have fully performed the contract by the payment of penalty or by the doing of the act. The question whether a contract is alternative or not is a question of constructions, and consequently each case depends upon its own circumstances, though the guide is always primary intention of the parties. The general rule of equity is that if a thing is agreed upon to be done, though there is penalty annexed to secure its performance yet the very thing itself must be done.
On the other hand it is certainly open to parties entering into contract to agree that in case of breach of the contracts only a fixed sum of money shall be paid by way of compensation."
' Their Lordships were further of the view that: "We are of the opinion that the vendee has nowhere either given up the claim for specific performance or to have agreed in the alternative to claim damages alone in case of breach and he in the circumstances of , the case is entitled to the specific performance of the contract."
12. It was also held in case Muhammad Yaqoob v. Muhamamd Nasrullah Khan and others PLD 1986 SC 497 that: "In order to obtain relief by way of specific performance of the contract the plaintiff has first to allege and prove that he was ever ready and willing to perform his part of the contract from the date of the contract to the date of the suit as the contract really was and not in the way he thought the contract to be."
13. From the above discussion at least it is quite clear that said Nawab Din defendant No,1 intentionally avoid the registration of the sale-deed in spite of the fact that the respondents/plaintiffs were willing to perform their part of the contract. The said defendants in order to further avoid the suit for specific performance transferred the land in dispute through an oral gift to the appellants/defendants Nos.2 and 3 and the mutation to this effect was got entered on 9-9-1967. The same was sanctioned on 29-9-1967. The appellants/defendants could not be considered as bona fide transferees for value because no consideration was involved in the transaction of gift and in presence of notices referred to above P.W.7/5 served on the defendants, in which the names of the appellants were particularly mentioned, it cannot be said that they had no knowledge about the agreement of sale already executed between the parties at the time when the gift was made in their favour. Even none of the appellants/defendants appeared in the witness-box either to defend the suit or to rebut the claim of the respondents/plaintiffs instead they putforth their mother for this purpose. Therefore, the appellants have miserably failed to prove that they have no notice of the orignal contract, which under the law was necessary for them to establish, and, thus, they have also lost their claim to retain the property as bona fide transferees and in no way the respondents/plaintiffs could be non-suited by holding that they were entitled to compensation in lieu of the specific performance of the contract for the reason that the same being adequate relief on the conditions stipulated between the parties. From the above, it can safely be concluded that the defendant No,1 gifted away the suit land designedly to avoid and defeat the agreement of sale and the same is legally enforceable.
14. As result of the above discussion, this R.S.A. Is dismissed and the judgment and decree dated 3- 1-1970 passed by the Additional District Judge, Lyallpur is upheld. The suit of the plaintiff is decreed to the effect that the plaintiffs shall be entitled to get the agreement in question specifically enforced on further payment of Rs,7,000 to the appellants/defendants as directed, in the judgment and decree by the lower Appellate Court dated 3-1-1970. The parties shall bear their own costs.