Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Official Citation: 2023 CLD 14
Court / Jurisdiction: Islamabad High Court
Year of Decision: 2023
Decision Date: 2023-06-09
Parties: Aamir Shahzad Khan vs Muhammad Sabir
Ruling Summary: This decision was rendered by the Islamabad High Court on 2023-06-09, officially reported as 2023 CLD 14. In this matter between Aamir Shahzad Khan and Muhammad Sabir, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as 2023 CLD 14
Court Name: Islamabad High Court Judge(s): Babar Sattar Title: Aamir Shahzad Khan vs Muhammad Sabir Case No.: Regular First Appeal No. 362/2021 Date of Judgment:2023-06-09 Reported As: 2023 IHC 354 Result: Appeal Dismissed
Judgment
JUDGEMENT BABAR SATTAR, J.- Through this judgment the appeals listed in Annexure-A will be decided as the subject matter as well as the underlying factual matrix in these appeals is the same. 2. There were agreements for sale of apartments in Khudadad Heights, E-11, Islamabad, dated 19.04.2004 ("Sale Agreement"), entered into by the appellant (Aamir Shahzad Khan) who will be referred to as "Seller" with the respondents in these appeals (who are the appellants in RFA Nos 373,374 and 376 of 2021) who will be referred to as "Buyers".(While the underlying analysis and outcome don't change for purposes of discussion in this judgment the particular facts used are those related to RFA No. 362 of 2021) The Buyers sought specific performance of the Sale Agreement pursuant to which apartments ("Property") were to be constructed as part of a development project Khudadad Heights, E-11, Islamabad("Project"). The Property was sold to the Buyer against the sale consideration in the amount of Rs.2,225,000/-. The Buyer paid down- payment in the amount of Rs.556,250/- and started making payments in lieu of the remaining sale consideration as installments according to the schedule included in the Sale Agreement. Possession of the Property was to be delivered on 31.12.2006 and the installments schedule prescribed that the final payment of sale consideration was to be made on 31.03.2007. The Buyers refused to pay some of the installments due in the later part of 2006. The Seller was unable to complete the construction and development of the Project and deliver possession on 31.12.2006. A dispute arose when the Seller claimed payments of the remaining sale consideration along with penalty. On 15.03.2012 the Seller issued a notice of readiness of the Property ("Notice of Readiness") subject to payment of the remaining sale consideration and penalty. The Buyers responded by
---
## Page 2
claiming that an amount was overdue to the Buyers under clause-18 of the Sale Agreement in lieu of rent as the Seller had delayed delivery by six years and consequently a payment was outstanding from the Seller to the Buyer along with delivery of possession. The Seller then cancelled the allotment of the Property by letter dated 08.05.2012 and the Buyers filed suits for specific performance of the Sale Agreement. The Civil Court dismissed the suits for specific performance filed by the Buyers and decreed the suit for cancellation of the Sale Agreement filed by the Seller. 3. In R.F.As No.372 to 377 of 2021 it is the Buyers who are the appellants and these appeals have not been pressed by the learned counsel for such Buyers on the basis that they would be satisfied if the decretal amount granted to them as return of consideration paid by them is upheld. 4. The Civil Court framed the following consolidated issues by order dated 26.10.2015:- 1. Whether the plaintiff purchased the suit property i.e. flat no 508 exclusive 'A' against the sale consideration of Rs.2,225,000/- and paid installments and is entitled for declaration and performance of the same? OP Muhammad Sabir 2. Whether plaintiff fulfilled all the terms and conditions of the agreement and defendant failed to hand over the possession of the same well in time? OP Muhammad Sabir 3. If issue no 1 is approved in affirmative, then whether the plaintiff is entitled for recovery of Rs.1,125,000/ as outstanding rent mutually decided in the agreement? OP Muhammad Sabir 4. Whether the defendants were authorized to change the number and floor of apartment? OP Amir Shehzad & others 5. Whether the plaintiff Muhammad Sabir failed to pay the balance installments of the suit flat, therefore, his allotment is liable to be cancelled? OP Amir Shehzad & others 6. Whether the suit of Muhammad Sabir is not maintainable in its present form? OP Amir Shehzad & others 7. Whether the suit of Amir Shehzad is false, frivolous vexatious, hence liable to be dismissed with heavy costs? OP Muhammad Sabir 8. Relief. 5. While the suits were disposed of through three separately written judgments, the judgments and reasoning of the Civil Court are identical and therefore this judgment need not be burdened by separate discussion of the said judgments, which have been challenged in the appeals which are being decided through this consolidated judgment. The Civil Court in relation to Issues No.1, 2 and 5 concluded that the Buyers had not paid the last two installments due before the date on which delivery of possession was due and had therefore defaulted on their obligation and were therefore not entitled to a decree of specific performance. It simultaneously held that the Seller had retained the sale consideration paid by the Buyers and had not returned the same at the time of cancellation of allotment of the Property or thereafter. The Buyers were therefore entitled to the return of three times the sale consideration paid by them. For purposes of convenience the number of installments paid, the total amount of sale consideration paid and the decretal amount awarded by the Civil Court to the Buyers in relation to each appeal are summarized in tabular form are reflected below: Flat 508 in RFA No. 372 of 2021, RFA 362 of 2021 RFA 374 of 2021 Due Date Amount 556,250 (earnest money) 1- 30-06-2004 139,062 2- 30-09-2004 139,062 3- 31-12-2004 139,062 4- 31-03-2005 139,062 5- 30-06-2005 139,062
---
## Page 3
6- 30-09-2005 139,062 7- 31-12-2005 139,062 8- 31-03-2006 139,062 9- 30-06-2006 Not paid 10- 30-09-2006 Not paid 11- 31-12-2006 (also date of possession)Not paid 12- 31-03-2007 Not paid Total Sale Consideration: Rs 2,225,000 Total Sale Consideration Paid: 1,668,746 Decretal Amount: Rs 5,006,262
Flat 506 in RFA 368 of 2021, RFA 375 of 2021, RFA 376 of 2021 Due Date Amount 556,250 (earnest money) 1- 30-06-2004 139,062 2- 30-09-2004 139,062 3- 31-12-2004 139,062 4- 31-03-2005 139,062 5- 30-06-2005 139,062 6- 30-09-2005 139,062 7- 31-12-2005 139,062 8- 31-03-2006 139,062 9- 30-06-2006 Not paid 10- 30-09-2006 Not paid 11- 31-12-2006 (also date of possession)Not paid 12- 31-03-2007 Not paid Total Sale Consideration: Rs 2,225,000 Total Sale Consideration Paid: 1,807,808 Decretal Amount: Rs 5,423,451
Flat 820 in RFA 369 of 202, RFA No. 373 of 2021, RFA 377 of 2021 Due Date Amount 556,250 (earnest money) 1- 30-06-2004 128,125 2- 30-09-2004 128,125 3- 31-12-2004 128,125 4- 31-03-2005 128,125 5- 30-06-2005 128,125 6- 30-09-2005 128,125 7- 31-12-2005 128,125 8- 31-03-2006 128,125 9- 30-06-2006 128,125 10- 30-09-2006 Not paid
---
## Page 4
11- 31-12-2006 (also date of possession)Not paid 12- 31-03-2007 Not paid Total Sale Consideration: Rs 2,050,000 Total Sale Consideration Paid: 1,153,125 Decretal Amount: Rs 4,996,875 6. Issue No.3 was declared to be redundant. In relation to Issue No.4 the Civil Court found that the change in the number of the apartment and the floors on which they were located was a consequence of the recommendation by engineers after the earthquake in 2005. In relation to Issue No.6 the suits were found to be maintainable. And Issue No.7 as to whether the suits filed by the appellants were false and frivolous, was answered in the negative. As a consequence the suits for specific performance were dismissed and the suits for cancellation of the Sale Agreement were allowed and decreed subject to return to the Buyers of three times the sale consideration received by the Seller. The judgments and decrees have been impugned before this Court. 7. The learned counsel for the Seller sought the setting aside of the judgments and decrees to the extent that it enhanced threefold the amount to be returned by the Seller to the Buyers. The learned counsel for the Buyers submitted that the Sale Agreement was entered into in 2004 and almost two decades have passed since the execution of the Sale Agreement. He submitted that under instruction from the Buyers he was not seeking the setting aside of the judgments and decrees and was only seeking payment of the decretal amount as awarded to the Buyers by the impugned Judgments. 8. The learned counsel for the Seller argued his case on the basis of facts as reflected in R.F.A No.362 of 2021. He submitted that the Sale Agreement was terminated on as the Civil Court found that the Buyers had defaulted on their obligations under the Sale Agreement. But the Civil Court misread the evidence and concluded that the Seller never offered a refund of the sale consideration. He submitted that cancellation letter dated 08.05.2012 provided that the Buyers may apply for a refund of the deposited amount in accordance with the terms of the Sale Agreement. He contended that it was for the Buyers to seek a refund from the Seller, which they never did and consequently, the Buyers were not entitled to be granted three times the sale consideration paid by them. He submitted that the schedule of installment payments that formed part of the Sale Agreement required all installments be paid up until 31.03.2007, which the Buyers admittedly failed to pay. They could therefore not claim market rent for delay in delivery of possession as such rent was payable to such buyers who had made installment payments in accordance with the Sale Agreement. He further submitted that clause-2 of the Sale Agreement provided that refund would be made after deduction of ten percent of the total price of the apartment at such time when the apartment was sold to a third party after completion of the project. 9. The learned counsel for the Buyers submitted that the execution of the Sale Agreement was admitted and so was the fact that possession of the Property was to be handed over on 31.12.2006 prior to payment of the entire sale consideration. He submitted that it was the Seller's case that the Notice of Readiness of apartment seeking payment of balance consideration was issued on 15.03.2012, (exhibited as D/2 by the Seller), which stated that the apartment was nearing completion and outstanding payments, excluded the last installment, be paid by 15.04.2012. This reflected that the Project and the Property were not completed by 15.03.2012, which is why even at such time the last installment, which under the Sale Agreement was due and payable after the delivery of the Property under the Sale Agreement, was not solicited by letter dated 15.03.2012. He submitted that DW-1 during his cross-examination had admitted that the Seller had not returned the sale consideration. And such admission had been noted by the Civil Court in its judgment. He submitted that the Buyers had been promised the delivery of the Property on 31.12.2006, at which
---
## Page 5
time the second last installment payment was due, and the last installment payment was to be paid three months after delivery of possession of the Property. The Civil Court did not appreciate that the development of the Project had been delayed and there was no possibility of delivery of possession on 31.12.2006, which is why the Buyers withheld the counter obligation to make the last few installment payments, even though the Buyers had continued to make installment payments till the middle of 2006. It was only when it became evident that discharge of the Seller's obligation to deliver possession by 31.12.2006 had become an impossibility that the Buyers withheld their counter obligation to pay the remaining sale consideration. He submitted that even in response to the Notice of Readiness dated 15.03.2012, the Buyers by letter dated 21.03.2012 expressed their readiness and willingness to pay any amounts due, but made a counter-claim seeking payment of rent from the scheduled date of delivery pursuant to clause-18 of the Sale Agreement. Thus, at no time did the Buyers refuse to abide by their obligations under the Sale Agreement. The only thing they sought was performance of counter obligations by the Seller and giving effect to all provisions of the Sale Agreement including the obligation of the Seller to pay market rent in case of delay in delivery of possession. He submitted that in response to the Buyers letter dated 31.03.2012 the Seller simply cancelled the allotment even though over seventy five percent of the sale consideration had already been paid. While doing so, the Seller disregarded clause-19 of the Sale Agreement, which provided for arbitration, which clause had been referred to by the Buyers in their letter dated 21.03.2012. He submitted that the dispute between the parties at such time was that of counter claims for receipt of moneys by the Buyers and the Seller, which they deemed were due to them under the Sale Agreement. Instead of seeking to adjudicate such claims, the Seller unilaterally cancelled the Sale Agreement and sold the Property to a third party at a much higher rate as the market price of the real estate has gone up over the six years that constituted the period of delay in delivery of possession. He submitted that the Seller led no evidence to support his claim that construction was delayed due to the earthquake of 2005 or that the said earthquake required structural changes to be made to the Property or its building plan or layout plan, which caused delay in construction. The Seller also led no evidence as to why the delivery of possession was delayed by five years and five months or to whom the Property was ultimately sold and on what price. He submitted that the receipt of over seventy five percent of the sale consideration, the delay in delivery of possession of the Property by five years and five months, the unilateral termination of the Sale Agreement, and the sale of the Property to a third party at a much higher price while withholding the sale consideration paid by the Buyers reflected malafide on part of the Seller. He submitted that the Buyers case for specific performance of the Sale Agreement was made out and the Buyers suit should therefore have been allowed. But seeking such a relief would result in further delay in the return of the amounts due to the Buyers and the diminution in the value of money retained by the Seller and/or in the case of retrial as third party right had been created, which is why the Buyers had elected not to seek the setting-aside of the judgments and decrees, and were merely pressing for award of the decretal amounts granted to them. 10. Before we address the specific issues framed in the suits and the findings of the Civil Court, it is essential to address the underlining principles, which govern the rights of buyers and sellers in sale agreements, especially those where sale consideration is to be paid in the form of installments. 11. Contracts often involve reciprocal promises that reflect and determine the rights and obligations of contracting parties. It is understood that contractual parties are entitled to quid pro quo. The concept of contracts as bargains is encapsulated by the principle of "reciprocity" or "mutuality" within common law jurisdictions. This element of exchange requires a party to deliver performance in return for performance by the counter-party. The starting point in any claim for breach of contract is to understand the nature of the bargain the parties entered into and the sequence of performance they agreed upon. Contract law doesn't consider reciprocity to be absolute
---
## Page 6
equivalence in exchange, as it is for the parties to determine "value" in any exchange. But enforcement of contract law entails, more often than not, enforcement of counter-performance. 12. In breach of contract claims involving reciprocal promises the order of performance becomes relevant to determine which party is guilty of breach. In commercial contracts the sequence of performance will usually be provided explicitly. If not, common sense becomes the most potent tool of interpretation that helps determine the intent of parties with regard to the sequence of performance and risk allocation. Where simultaneous exchange is possible or feasible, the discharge of obligations more often than not is due simultaneously. In case of discharge of services, work-first-payment-later is often the scheme. But there may be agreement for advance payment or provision of security for payment or payment through installments linked to the stages of performance of work. 13. According to Patterson ('Constructive Conditions in Contracts' [1942] 42 CoL LR 903 at 917-920) the policy of the law has been to minimize risks, especially credit risk, that parties assume under a contract: "The order of the time of performance of several promises has long been regarded as determining which promises are dependent and which are independent, and is the subject of many of the rules relating to dependency. Obviously if A performs promptly his promise to convey land to B on July 1st, and B has promised to pay the price on August 1st, A will credit B for one month. Then if A does not convey on July 1st, B's action commenced on July 2nd may be maintained without B's having tendered the price before suing. Yet even this mechanical test of dependency is controlled and supplemented, it is submitted, by a principal of policy which favors the construction of concurrent conditions and thus minimizes the credit burden of the transaction... "The construction of conditions of exchange not only protects a contracting party against impairment of his expectations and enhancement of his credit burden, but also gives him a method of coercing performance... The constructive condition thus supplements the limited remedies for specific performance by a form of legalized self-help. The promisor's privilege of refusing performance until a condition is fulfilled is a continuation of the coercive power which he had before he contracted, the power which any man has to refuse to relinquish his property or to perform his services unless paid or promised such return as he chooses to exact. This coercive power is preserved after the making of the contract in so far as is compatible with the terms of the bargain." 14. One of the question that arises in case of breach of contract where obligations have been part performed is whether the obligations are severable. In the context of building contracts, lump-sum contracts are often construed as not being severable. In such cases, to avoid the harshness of one party not receiving any benefit at all the principle of quantum meruit has been employed by courts. In Sumpter v. Hedges ([1898] IQB 673) the UK Court of Appeal noted that, "there are cases in which, through the plaintiff has abandoned the performance of a contract, it is possible for him to raise the inference of a new contract to pay for the work done on a quantum meruit from the defendants having taken the benefit of that work, but, in order that that may be done, the circumstances must be such as to give an option to the defendant to take or not to take the benefit of the work done." 15. In order to inject fairness into contractual relations the doctrine of substantial compliance is employed by courts to ensure that the outcome in face of breach of contract is equitable. In Hoenig v. Isaacs ([1952] 2 ALL ER 176), the plaintiff had been employed to decorate an apartment and the defendant refused to pay the balance amount due on the basis that some work was defective. The claim was allowed. Denning LJ noted in his opinion for the Court of Appeal that, "it is not every breach of that term (of the contract) which absolves the employer from his promise to pay the price, but only a breach which goes to the root of the contract, such as an abandonment
---
## Page 7
of the work when it is only half done. "Denning LJ observed that, "the position, I think, in some aspects is analogous to a case where a man agrees to sell land and, before completion finds that he is unable to make title to a small part of it which is of no great significance in relation to the whole. In such a case the vendor can substantially perform what he has agreed to do but cannot perform it wholly, and the Court of Chancery has never hesitated to grant specific performance at this instance against the purchaser subject to a proper and reasonable deduction being made in the purchase price." 16. The doctrine of substantial performance was explained by Corbin in 'Conditions in the law of Contract (1919) 28 Yale LJ 739, 759 (as reproduced in Contract Cases and Materials; HG Beale, WD Bishop & MP Furmston, Butterworths (3rd Edition) 1995, PP 493): "It is correct to say that substantial performance of a condition is sufficient; but it is frequently correct to say that absolutely exact and complete performance by the plaintiff as promised is not a condition precedent to the duty of the defendant. If substantial performance by the plaintiff was sufficient to charge the defendant, then such substantial performance was the only condition and the requirement has been exactly fulfilled. The question of the plaintiff's duty to pay damages for his own partial non-performance is a different question altogether substantial performance of A's promise may be sufficient to enable him to maintain action against B, and yet at the same time be insufficient to prevent B from having an action against A." 17. In Hong Kong Fir Shipping Limited vs. Kawasaki Kisen Kaisha Limited ([1962] 1 ALL ER 472), the charterers had sought to charter a vessel for a 24-month period, which period was reduced to 17- months due to repairs. Meanwhile freight rates fell and the charterers purported to terminate the contract. The High Court held that the charterers did not have the right to do so and the Court of Appeal agreed. Upton LJ noted that, "the question to be answered is does the breach of the stipulation go so much to the root of the contract that it makes further commercial performance of the contract impossible, or, in other words, is the whole contract frustrated? If yea, the innocent party may treat the contract as at an end. If observations were equally cogent: "does the occurrence of the event deprive the party who has further undertakings still to perform of substantially the whole benefit which it was the intention of the parties as expressed in the contract that he should obtain as consideration for performing those undertakings? This test is applicable whether or not the event occurs as a result of the default of one of the parties to the contract, but the consequences of the event are different in the two cases. Where the event occurs as a result of the default of one party, the party in default cannot rely on it as relieving himself of the performance of any further undertaking on his part and the innocent party, although entitled to, need not treat the event as relieving him of the performance of his own undertakings. This is only a specific application of the fundamental legal and moral rule that a man should not be allowed to take advantage of his own wrong..." 18. Distinctions regarding application of principles regulating contracts are made depending on the nature of contracts and whether they involve goods or services or immovable property. Yet when it comes to injecting reasonability and fairness within contractual relations, equity demands that the broad entrenched principles apply to the law of contract as a whole instead of selectively applying such principles to different branches of law dealing with contractual relations. Where there occurs a breach of a foundational condition stipulated in the contract, it is for the innocent party to treat the breach as repudiation and rescind the contract and elect to sue for damages. Or such innocent party may, at its option, prefer to affirm the contract and treat it as continuing, while reserving its rights to sue for damages for the breach of the offending party or waiving its right to damages by accepting altered performance. 19. Where contracts have time stipulations, a performing party may withhold part performance to force the counter-party to perform in case of reciprocal promises, but cannot repudiate or
---
## Page 8
terminate the contract until the time prescribed for performance has elapsed (with some exceptions, of course, such as anticipatory breach in case of frustration of purpose of impossibility of performance).Withholding performance or refusing to perform some part of an obligation till the counter-party performs or is willing to perform his/her obligations is seen as a self-help remedy to seek enforcement of obligations by the counter-party. Under a sale of goods contract for example, the buyer can refuse to pay at the agreed time for delivery if the seller is unable to deliver the contracted goods. The agreement to pay would be seen as a reciprocal obligation (and not an independent obligation) contingent upon…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.