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Petitioner: FAZALUR REHMAN Through Legal Heirs And Others VS Respondent: Mst. BATUL And Other
Court Name: Sindh High Court Judge(s): Abdul Lateef U. Qureshi Title: FAZALUR REHMAN Through Legal Heirs And Others vs Mst. BATUL And Other Case No.: Suit No. 149 of 1988 Date of Judgment:1995-05-28 Reported As: 1997 MLD 880 Result: Suit decreed
JUDGMENT
JUDGMENT This is a suit for specific performance of the contract and for damages. The case of the plaintiff in brief is that defendants who are sisters inter se are co-owner of property plot of land bearing Survey No. 1, Sheet NO.K.G. 8 situated at Ghulam Hussain Qasim Quarters, Kharadar, Karachi measuring 4546 square yards with building and structures thereupon (hereinafter referred to as the said or the suit land). The plaintiff had entered into agreement for the purchase of the said land with the defendants vide sale agreement dated 13-2-1980 @ Rs.800 per square yard for a total consideration of Rs.36,36,800. The defendants received amount of Rs.3,75,000 towards part payment of the said consideration. The said property was, and is still in occupation of M/s. Bengal Oil Mills Ltd. As tenant. The defendants simultaneously with signing of the agreement also executed a power of attorney in favour of the plaintiff in order to enable him to obtain possession from the said tenant directly. Under the agreement the defendants are required to obtain Capital Gain Tax Clearance Certificate from Excise and Taxation Department in order to execute the sale deed in favour of the plaintiff. The time for completing for sale was fixed in agreement as four months which could be extended by another two months by mutual agreement. The balance of the sale price was to be paid to the defendants at the time of registration before the Registrar. The defendants failed to get Capital Gain Tax Clearance Certificate from Excise and Taxation Department till the Gain Tax was abolished by the Sindh Finance Act, 1986. While abolishing the Gain Tax, Government enhanced the stamp duty of registration of sale deed from 6 to 8% and also increased the valuation of the property for the purpose of registration from Rs.800 to Rs.1,800 per square yard. There was lot of exchange of correspondence between the parties. Defendants in first phase of correspondence demanded the
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balance of the sale price, but the plaintiff insisted that they should first obtain Capital Gain Tax Clearance Certificate so the sale deed be executed. After abolition of the Capital Gain Tax there arose another issue between the parties as the plaintiff demanded that due to the delay in obtaining Capital Gain Tax Clearance Certificate plaintiff has been put to loss due to increase in stamp duty and the value of the land for the purpose of registration. Plaintiff also demanded that defendants should share his additional burden. Though there was lot of correspondence between the parties but this issue could not be resolved. The defendants, therefore, vide letter dated 23-9- 1986 which is Exh.8/20 called upon the plaintiff to complete the sale on or before 21st October, 1986. The plaintiff claimed that he had not received the said letter and there was further correspondence between the parties. Vide letter dated 21-12-1987 Exh.8/40 the defendants informed the plaintiff that agreement of sale stood cancelled, revoked and terminated. The plaintiff thereafter filed present suit on 25-2-1988 through his duly constituted attorney Baseer Hasan in whose favour he executed irrevocable power of attorney. During the pendency of the suit plaintiff died and therefore, his legal heirs were joined as plaintiffs in the suit as such, amended plaint was filed. Legal heirs of deceased plaintiff also executed power of attorney in favour of said Basseer Hasan. 3. Defendants admitted in their written statement the execution of sale receipt, receipt of part payment of sale price and execution of power of attorney in favour of the plaintiff to get the possession of the suit property. They however claimed that obtaining of Capital Gain Tax Clearance Certificate was not requirement of law at the time of issuance of contract. It is contended that plaintiff has adopted delaying tactics and did not perform his part of contract within stipulated period. It is further contended that suit is time-barred, and plaintiff has abandoned their claim as they have no money to pay the sale price and they have surrendered their claim in favour of his attorney Baseer Hasan. 4. On the pleading of the parties Court framed following issues:-- (1) Whether the defendants executed Agreement for sale dated 13-2-1988 in respect of the suit property in favour of the plaintiff and the same is still valid and subsisting? (2) What are the terms on which the sale was to be effected by the defendants in favour of the plaintiff particularly relating to payment of balance sale consideration, obtaining of capital gain tax, vacant possession, marketable title and the period for completion of sale transaction? (3) Whether the time was the essence of contract and whether the defendants failed/were unable to execute the sale deed of the property in suit in terms of the contract and if so, what is the effect? (4) Whether the defendants committed breach/avoided to perform their part of the contract and failed to obtain capital gain tax clearance certificate from the Excise and Taxation Authority and if so, what is the effect? (5) Whether the defendants were required to obtain capital gain tax clearance certificate before execution of a sale deed in favour of the plaintiff? (6) Whether on abolition of the capital gain tax under Sindh Finances Act, 1986, the rate of the stamp duty and registration charges stood increased by 2% and 1% respectively, if so, its effect? (7) Whether on abolition of capital gain tax under the Sindh Finances Act, 1986 the Government fixed the value of the properties of different areas on different rates for the purposes of charging the stamp duty, if so, its effect? (8) Whether the plaintiff is entitled to specific performance of the contract of sale of property in suit and also to the payments of Rs.72,736, 3,63,680 and Rs.45,460 or any other amount as compensation and/or damages on account of enhancement of stamp duty, and registration charges due to delay in the performance of the contract by the defendants? (9) Whether the plaintiff, in the alternative or otherwise, is entitled to the payment of Rs.62,71,000 by way of compensation and refund of the earnest money with interest thereon? (10) To what relief, if any, the plaintiff is entitled?
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(11) What should the decree be? (12) Whether the plaintiff was ready/willing to complete sale or used defendant's difficulties with Excise Department simply to delay sale and if so its effect? (13) Whether the suit is time-barred? (14) Whether the plaintiff has assigned/transferred his right to the attorney, if so, its effect? 5. I have gone through the evidence on record and also considered the arguments of the counsel appearing for the parties. My findings and reasons recorded on said issues are as under. 6. Plaintiff's have examined their attorney Baseer Hasan, Ghulam Dastagir, Sub-Registrar and Shabbir Hussain, Assistant Inspector Taxation. The defendants examined attorney Ibrahim. 7. Issue No. l is in two parts. First part is whether defendants executed agreement for sale dated 13- 2-1980 in respect of the suit property in favour of the plaintiff. There is no dispute with regard to this issue. Execution of sale agreement is admitted by the defendants in the written statement as well as by their witness Ibrahim. Agreement has been produced by the plaintiff as Exh.5/1. 8. Second part of the issue is whether the same (sale agreement) is valid and subsisting. Defendants have raised number of pleas to show that this agreement was neither subsisting nor valid at the time of institution of the suit. Separate issues have been framed on this plea and findings on the second part of this issue to be dependent on my findings on other issues. However, for the reasons to be recorded while dealing with other issues my finding is in affirmative on this part of Issue No. l . ISSUE N0.2: 9. The term on which sale was to be effected has been spelt out in sale agreement Exh.5/1 Article 3 of the sale agreement reads "vendors shall make out a marketable title to the said property free from all encumbrances, charges", burdens, liens and claims of any nature whatsoever. 10. Article 5 reads: "vendor shall obtain Capital Gain Tax Clearance Certificate from Excise and Taxation ' L' Division required for registration of the sale-deed of the said property in favour of the purchaser. 11. Article 6 reads "the sale of the said property will be completed within a period of four months from the date hereof, provided time for completion of the sale will be extended by mutual consent for a period not exceeding two months, thereafter and time as provided will be of the essence of this agreement". 12. In regard to payment of sale price Article 7 provides "on completion of the sale in the manner aforesaid the vendors shall execute the sale-deed of the said property in favour of the purchaser and/or his nominee or nominees and on such execution the purchaser shall pay to the vendors, the entire balance of the consideration, after deducting the earnest money paid, before the Registering Authority by Bank pay order and the vendor shall appear before the Sub---Registrar, Karachi to admit execution of the sale-deed and to acknowledge receipt of the consideration". 13. As regards vacant possessions Article 4 of the agreement reads that "the vendors have informed the purchaser that the entire property is let out to M/s. Bengal Oil Mills Ltd., and is being used as godowns and that on completion of sale in the manner hereinafter appearing, the vendor shall cause the tenants to attorn to the purchaser. If required by the purchaser, the vendor, pending completion of the sale, will authorise the purchaser by power of attorney to take steps against the tenants only for ejectment and/or to negotiate with the tenants for vacating the property and the purchaser will bear and pay all costs, charges and expenses including Advocate's fees for ejecting the said tenants and after ejectment of the tenants of vacation by the tenants the purchaser shall take over possession of the property as tenants without rent. Article 8 provides the possession of the property shall be by attornment of the tenants or as stated in para.4 hereof and all the documents of property in possession of the vendor shall be delivered to the purchaser. Issue No.2 stands replied in the above terms of the Sale Agreement.
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ISSUE N0.3 14. It is contended by the defendants that the time was essence of contract. As pointed above the time fixed for the -completion of the sale under the agreement as per Article 6 of Agreement was initially 4 months which could be extended by two months with the consent of parties and it was further laid down that the time was essence of the contract. Admittedly, the sale was not completed within this stipulated time. However admittedly the period of completion of the contract was extended by mutual agreement of the parties vide endorsement on Exh.5/4 to the end of November, 1980. In their letter Exh.5/i0 dated 31-8-1981 the defendant's Advocate informed plaintiffs that his clients would be obtaining the required Capital Gain Tax Clearance Certificate and further asked the plaintiff to send the draft of the proposed sale deed for approval. It is admitted h) Mr. Ibrahim attorney and witness of defendants that for the first time the defendants applied for Capital Gain Tax Clearance Certificate on 6-3-1982. It is also admitted that defendants were unable to obtain Capital Gain Tax Clearance Certificate from the authroities till this tax was abolished on 30-6-1986 by the Sindh Finance Act, 1986 because the Taxing Authorities were demanding Rs.22,00,000 as Capital Gain Tax from the defendants which they were unable to pay. By their letter dated 23-11-1986 produced by the defendants as Exh.8/24 the defendants extended the time for completing sale-deed uptill 21st October, 1986. The plaintiffs claim that they did not receive this letter. By their letter Exh.5/37 dated 21-12-1987 the defendants informed the plaintiff that the sale agreement has been cancelled, revolved and terminated due to their continuous negligence, default and failure to complete obligations and formalities. 15. It is admitted by Mr. Ibrahim witness for the defendants that all the letters written by their Advocate produced either by them or by the plaintiffs were issued under the instructions of the defendants and were correct. 16. From the above correspondence it is clear the time for completion of the contract was extended by the defendants from time to time either explicitly or by implicitly and there is no evidence to show that this extension was with the consent of the plaintiffs, except in case of first extension. The question that now arises is whether under such circumstances the time can be considered as essence of contract as mentioned in original sale agreement. 17. It is settled law that in case of contracts for sale of immovable property the presumption is the time is not the essence of the contract unless the parties make it so by the express agreement in the contract itself. No doubt in the instant case under Article 6 of the sale agreement period of four months was fixed for the completion of the sale which could be extended by two months with mutual consent. This agreement of sale was executed on 13-2-1980. The period of six months as stipulated expired on 13-8-1980. However, as pointed earlier by the endorsement on Exh.5/4 the parties extended this time up to the end of November, 1980. This time was being extended from time to time. As pointed earlier the completion of the sale agreement was dependent upon obtaining the Capital Gain Tax Clearance Certificate by the vendors. According to Mr. Ibrahim, witness and attorney for the defendants, they applied for this Certificate for the first time on 6-3- 1982. Admittedly, the defendants could not obtain this certificate which was done away with on 30- 6-1986 under the Sindh Finance Act of 1986. There was also exchange of the proposed sale deeds between the parties under their letters dated 1-11-1981 Exh.5/15 and under letter dated 6-2-1982 Exh.5/17 letter dated 30th September, 1986 which is Exh.5/24, the defendant's Advocate extended time for completion of sale up to 21st October, 1986. By letter Exh.5/28 which is also dated 23-3-1986 the defendants extended time up to 15th October, 1986. The plaintiff denied to have received this letter and therefore a copy of this letter which showed the date of completion on 21-10-1986 was sent to them alongwith letter dated 9-3-1987 which is Exh.8/30. By this time the period fixed in the letter dated 23-11-1981 Exh.5/20 had already expired. The defendants have riot produced any evidence to rebut the contention of the plaintiffs that they did not receive this letter of 23-11-1986.
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17-A. The question the time was essence of contract was considered in PLD 1962 Supreme Court 1 in the case of Abdul Hameed v. Abbas Bhai, Abdul Hussain Soda Water Wala. In this case on 7th January, 1949 the vendor entered into sale agreement with vendee under which the payment was to be made within two months subject to vendee's obtaining Certificate from Income Tax. Authorities and Custodian Evacuee Property. On 4th September, 1950 the vendor notified the vendee that he had obtained the requisite certificate. The vendee asked the vendor to produce the document for their inspection which he refused. Thereupon the vendor filed a suit for specific performance. The vendor resisted the suit on the plea that there was delay on the part of the vendee to perform his part of contract. In that case their lordships had held that income Tax Certificate and Custodian Certificate were not the documents required under section 55 of Transfer of Property Act. The vendee was not entitled to insist on examining such document, but he had only to be satisfied that the vendor had the same. Their lordships have further held, that the delay in obtaining certificate was caused by the vendor therefore vendor was not entitled by notice to the vendee to fix the period of only 10 days for completing execution of conveyance. The vendor at this stage was not entitled unilaterally to fix the time of 10 days for the performance of contract. The delay if any in the carrying into effect the contract had been due to his conduct. The appeal of the vendee against dismissal of the suit by the trial Court was allowed. Their lordships have also quoted from Greensevin reported in 1913 Ch.D 589. The observation of Fry, J.-- in that case is reproduced in the following passage:-- "What right then had one party to limit a particular time within which an act was to be done by the other? It appears to be that he had no right to do, so unless there had been such delay on the part of other contracting party, so as to render it fair, that if steps were not immediately taken to complete, the person giving notice should be relieved from his contract." Their lordships further held that equity will only grant specific performance if under all the circumstances it is just and equitable to do so. 18. In 1983 SCM R 559, it has been held by their lordships that where time was essence of contract, party guilty of preventing completion of contract within time, could not plead, that time was essence of contract. In the instant case also though the time was fixed in the agreement for the completion of contract, the vendors could not fulfil their obligations for nearly six years. 19. In 1992 M LD 1135 (Karachi) the learned Judge of this Court has observed "under the agreement of sale the transaction had to be finalised by 30-6-1975 but there were two endorsements at the bottom of the sale-deed which showed the time was extended up to 30-8-1975 and up to 30-9- 1975. This by itself would show that the time was not essence of contract". In PLD 1960 (W.P.) Karachi 517 it has been held "that the question whether time is essence of contract depends upon the intention of the parties, the surrounding circumstances and nature of contract. The mere fact, that certain time is specified for the payment of the amount in consideration of which the property is transferred, will not show the time as essence of contract. So far the contract relating to land are concerned, the time fixed for completion of transaction is not considered as essence of contract". 20. As pointed earlier, no doubt the time was fixed in the agreement for completion of the contract but even under endorsement on the letter Exh.5/4, this time was extended beyond the fixed period viz. Up to November, 1980. Subsequently, the, time was extended up to 21st October, 1986, as such time cannot be considered to be the essence of the contract in the instant case. ISSUE NO. 4 21. Article 5 of the agreement required the defendants to obtain Capital Gain Tax Clearance Certificate from Excise and Taxation Department. Admittedly, they never obtained this Gain Tax Clearance Certificate till this requirement was done away with by the Sindh Finance Act, 1986. The evidence of Mr. Ghulam Dastagir witness No. l for the plaintiff Exh.6 shows that the production of Capital Gain Tax Clearance Certificate was necessary for the registration of the Department as per
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orders of Secretary to the Government of Sindh which is produced as Exh.6/1 dated 15-3-1979 and as per instructions issued by the Commissioner, Karachi Division which is produced as Exh.6/2 Mr. Syed Shabbir Hussain witness No.2 for the plaintiff Exh.7 who was working as AETO in the Taxation Department states that production of Capital Gain Tax was necessary for the registration of sale- deed from 1979 to 1986. Under the circumstances, because of this failure of the defendants to obtain the requisite Certificate uptill 30-6-1986, the option vested with the plaintiff to cancel the contract and sue for damages but instead the plaintiff had kept the contract alive and has sued for the performance of contract. 22. In view of the above facts my finding is in affirmative on the issue to the extent that the defendants failed to obtain the Capital Gain Tax Clearance Certificate for nearly six years and its consequence will be that thereafter they could not fix any time unilaterally to be the essence of contract. ISSUE N0.5: 23. The contention of the defendants is, that they were not legally required to obtain the Capital Gain Tax Clearance Certificate before the registration of the sale-deed. In fact both the plaintiffs witnesses Mr: Ghulam Dastagir and Syed Shabbir Ahmed have admitted in the cross-examination that they do not know of any law which prevents the registration of the sale deed without obtaining the prior Capital Gain Tax Clearance Certificate. However, both the witnesses have asserted that no sate-deed was registered without the Capital Gain Tax Clearance Certificate from 1979 to 1986. They have relied upon the order of the Chief Secretary Government of Sindh which has been produced as Exh.6/1 which shows that the Martial Law Administrator Zone-C, had been pleased to order that Capital Gain Tax wherever levyable shall be recovered from the assessee before registration of the sale-deed. He also produced order of the Inspector General Registration Exh.6/2 whereby in view of the order of Martial Law Administrator Zone-C all the Registering Authorities in Karachi were directed not to register any sale-deed without Clearance Certificate. Besides even under the agreement of sale under Article 50 the defendants were required to obtain this Certificate. Defendant's witness Ibrahim has admitted in his cross---examination that the defendants had undertaken to obtain Capital Gain Tax Clearance Certificate from the Excise Department before registration of the sale---deed. In view of the documentary and oral evidence my findings on this issue is in affirmative. ISSUES NOS.6 and 7: 24. In para.21 of the affidavit-in-evidence, the plaintiff's witness Baseer Hasan has stated, that while abolishing the Capital Gain Tax the Government of Sindh under Finance Act, 1986 raised the rate of stamp duty to 8 % as against 6 % . The Government also fixed the valuation of properties in different areas at different rates in the valuation table for the purpose of charging stamp duty irrespective of the price agreed between the parties. This assertion is not denied by Mr. Ibrahim witness for the defendants in his affidavit in evidence which is Exh.8/1-B. In para.19 of the plaint similar assertion has been made by the plaintiff. This para. Is replied by para. No. 19 of written statement in which it is only stated that the stamp duty at 8% was not payable on the valuation fixed by the Government irrespective of agreed price. It is asserted that these could be challenged. In other words the allegation of the plaintiff that the stamp duty were raised to 8 % and that the Government had fixed value of property at different rates in different areas in valuation table has not been specifically denied. Mr. Ghulam Dastagir, Sub-Registrar Exh.6 has stated that after abolition of Gain Tax, Government introduced valuation table for the purpose of valuation of properties of different areas and of different categories to assess stamp duty and registration fee as per section 27-A of Stamp Act, 1899. He has produced a notification dated 1st July, 1986 as Exh.6/3. He further stated that subsequently valuation Table was again revised vide notification dated 18th November, 1986 Exh.6/4 and in the years 1989 and 1990 it was again revised vide Exhs.6/5 and 6/7.
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Mr. Ghulam Dastagir has further stated that the Sub-Registrar is bound to follow the Valuation Table issued by the Government and assess Stamp Duty accordingly. His this statement is not challenged in the cross-examination. The document Exh.6/7 produced by him is a notification of the Government of Sindh dated 6-6-1990 whereby the Stamp Duty in Urban Area was raised from Rs.8 to Rs.9 and in the Rural area from Rs.6 to Rs.7. No evidence in rebuttal has been produced by the defendants. ISSUES NOS. 8 and 9: 25. The plaintiff has prayed for the specific performance of the contract of sale or property in suit and also for the payment of Rs.7,2,736, Rs.3,63,680 and Rs.45,460 as compensation on account of enhancement of Stamp Duty and Registration Charges due to delay in the performance of contract by the defendants and in alternative he has prayed for the payment of Rs.62,71,000 by way of compensation and refund of the earnest money with interest thereupon. 26. I have already held that the defendants could not obtain the Capital Gain Tax Clearance Certificate as required under the agreement of sale until it was abolished…
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