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Petitioner: Syed MtAZZAM ALI SHAH VS Respondent: MUHAMMAD SULEMAN and others
Court Name: Sindh High Court Judge(s): Munib Akhtar Title: Syed MtAZZAM ALI SHAH vs MUHAMMAD SULEMAN and others Case No.: Second Appeal No,4 of 2007 Date of Judgment:2011-04-08 Reported As: 2011 CLC 1412 Result: Appeal dismissed
Judgment ORDER ' MUNIB AKHTAR, J.-- This second appeal arises in the following circumstances. On or about 10-6- 1992, the respondents Nos. 3 to 6, as sellers, entered into an agreement with the respondents Nos. 1 and 2, as buyers, to sell their agricultural land (the detailed description of which is not necessary) to the latter. The case of the aforesaid respondents Nos.3 to 6 (hereinafter referred to as the "Sellers") was that the aforesaid respondent Nos.1 and 2 (hereinafter referred to as the "Prior Purchasers") did not abide by the terms of the agreement, and therefore a legal notice dated 11-1- 1993 was served by them on the latter. Since the Prior Purchasers still, according to the Sellers, failed to fulfil their obligations under the aforesaid agreement dated 10-6-1992 (hereinafter referred to as the "Prior Agreement"), they regarded it as cancelled. Thereafter, the Sellers sold the subject property to the appellant (hereinafter referred to as the "Subsequent Purchaser") by means of a registered document dated 2-3-1993 (hereinafter referred to as the "Subsequent Agreement"). I will have occasion later in the judgment to consider in detail the nature of the Subsequent Agreement. It is also pertinent to note that at all material times, the appellant was a minor and acted through his uncle and guardian, who executed the Subsequent Agreement on his behalf as well. For convenience, both are, as appropriate and relevant, referred to as the "Subsequent Purchaser". 2. The Prior Purchasers filed a civil suit in the civil court at Hyderabad in relation to the Prior Agreement. In the plaint as originally filed, the Prior Purchasers claimed that the Sellers had put them in possession of the suit property. Both the Sellers and the Subsequent Purchaser were impleaded as defendants. It is to be noted that while the Prior Purchasers sought declaratory and injunctive relief in their suit, they did not seek specific performance of the Prior Agreement.
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Subsequently, they filed an amended plaint, in which they claimed that the Sellers, acting in league with the Subsequent Purchaser, had dispossessed them from the suit property. The prayer clause was also amended to include relief by way of specific performance. It is pertinent to refer to the first three paragraphs of the prayer clause of the plaint which, as amended, were as follows:--- "(i) It be kindly declared that the defendant No,1 has already entered into a valid and lawful agreement of sale dated 10-6-1992 with the plaintiffs in respect of agricultural land bearing survey numbers 323 7-18, 325/714 and 326/6-0 measuring 20-32 acres, situated in Deh Bhan Bhri Tapo Verato Taluka Hala District Hyderabad and therefore the defendant No,1 is legally bound to honour the said sale agreement and hence the sale agreement dated 2-3-1993 executed by defendant No,1 in favour of the defendant No,5 is illegal, ab initio void, fraudulent and without any lawful effect and does not confer any right upon the defendant No, 5 and is liable to be adjudged as such. (ii) That the defendants are bound to restore the physical possession of the suit-land the plaintiffs and the defendants Nos.1 to 5 are bound to pay the mesne profit, at the rate of Rs,20,000 per year for the suit-land till the possession is restored to the plaintiff and the defendants Nos.1 to 5 are bound to perform the sale agreement dated 10-6-1992, by executing and registering the Sale-deed in favour of the plaintiff for the suit-land alternatively the Nazir of the court may be directed to execute and complete the sale-deed in favour of the plaintiff on behalf of defendents Nos.1 to 5. (iii) That it be kindly further declared that the sale agreement dated 2-3-1993, executed by defendant No,1 in favour of defendant No,5 in respect of the suit-land is illegal, mala fide, void and fraudulent document and does not confer any right upon the defendant No, 5." 3. The Sellers and the Subsequent Purchaser filed their written statements contesting the suit. The Subsequent Purchaser specifically took the plea in his written statement that he did not have any knowledge of the Prior Agreement before the filing of the suit. His case was that he was bona fide purchaser of suit property for valuable consideration without notice. On the pleadings of the parties, the learned trial court framed a number of issues, of which only the following two are relevant for present purposes: "5. Whether the agreement of sale dated 10-6-1992 between the plaintiff and defendant No,1 is valid? 6. Whether sale agreement dated 2-3-1993 between defendant No,1 and 5 is illegal and void?" ' The parties led their evidence, and both the present respondent No,1 (i.e., one of the two Prior Purchasers) and the guardian of the appellant (i.e., the Subsequent Purchaser) appeared as witnesses in support of their respective cases. The learned trial court considered the evidence in respect of Issue No,5 and, by means of its judgment dated 23-12-2002, concluded that this issue ought to be decided in the negative, i.e., against the Prior Purchasers and in favour of the SelleRs, Since this issue was so decided, issue No,6 was, more or less consequentially, decided also in the negative. In other words, the learned trial court found that the Prior Purchasers had violated the Prior Agreement, which had therefore been rendered invalid, and that the Subsequent Agreement had been properly and validly entered into between the Sellers and the Subsequent Purchaser. As a result, the suit was dismissed. 4. Being aggrieved by the dismissal of their suit, the Prior Purchasers preferred an appeal, which was heard and decided by the learned VIIth Additional District Judge, Hyderabad by means of the impugned judgment dated 4-1-2007. The learned appellate court considered the evidence led at the trial, and reversed the learned trial court on both the issues aforesaid. It held that the Prior Agreement was valid and subsisting and that the Sellers were therefore "legally bound to honour the said sale agreement". In consequence, the learned appellate court also held that the Subsequent Agreement was "illegal, void ab initio and without any legal effect" and did not confer any rights on the Subsequent Purchaser. The appeal was accordingly allowed. However, the
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learned appellate court decreed the suit of the Prior Purchasers only in respect of prayers clauses (i) and (iii). It will be necessary also to examine this aspect of the matter later in the judgment. 5. The Prior Purchasers did not file any appeal against the decision of the learned appellate court. It is the Subsequent Purchaser who has filed the present appeal, and the Prior Purchasers have not filed any cross-objections. Therefore, insofar as the Prior Purchasers are concerned, the impugned judgment of the learned appellate court has attained finality. This second appeal was earlier heard on 6-4-2009, and dismissed. .Being aggrieved by this dismissal, the Subsequent Purchaser went in further appeal to the Supreme Court, which by means of its judgment dated 22-6-2010 set aside the judgment dated 6-4-2009, and remanded the matter back to this Court for a fresh decision after hearing the parties. 6. Learned counsel for the appellant (i.e., the Subsequent Purchaser) based his case squarely on section 27(b) of the Specific Relief Act, 1877. He submitted that the Subsequent Purchaser was a bona fide purchaser of the suit property for valuable consideration without notice. He emphasized that the Subsequent Purchaser had discovered the fact that there was a Prior Agreement only when the suit was filed. Learned counsel submitted that his case therefore came within the latter part of section 27(b), which, in effect, provided that no specific performance of a contract would be ordered against "a transferee for value who has paid his money in good faith and without notice of the original contract". This was the primary case put forward by learned counsel for the Subsequent Purchaser. He submitted that the Prior Purchasers had to specifically aver in the plaint that the Subsequent Purchaser had knowledge of the Prior Agreement when he entered into the Subsequent Agreement. However, no such averment was to be found in the plaint, either as originally filed or as subsequently amended. Although the present respondent No,1 (one of the Prior Purchasers) testified in his examination-in-chief that the Subsequent Purchaser did have such knowledge, learned counsel submitted that this statement was beyond the plaint and no such evidence could therefore be led at the trial, in accordance with well-settled principles. Without prejudice to this contention, learned counsel submitted that even if the evidence of the Prior Purchasers on the one hand, and that of the Subsequent Purchaser on the other, on the point of knowledge was considered, it was clear that they had failed to establish that the latter had knowledge of the Prior Agreement at the time the Subsequent Agreement was entered into. Once the Subsequent Purchaser denied on oath (which he did in his examination-in-chief) that he had any such knowledge, the onus lay on the Prior Purchasers to establish this fact, which burden they had failed to discharge. Thus, learned counsel contended, on any view of the matter, the Subsequent Purchaser was entitled to the protection afforded by the latter portion of section 27(b). Learned counsel further submitted that the Subsequent Agreement was a registered document, which therefore had priority over the unregistered Prior Agreement. His case was also that the Prior Agreement was merely an agreement to sell, whereas the subsequent agreement was a registered deed of transfer of possession. Learned counsel also submitted that the position of the Subsequent Purchaser was in any case secured in terms of section 53A of the Transfer of Property Act, 1882 since he had put in possession of the suit property in part performance of the Subsequent Agreement. Learned counsel submitted that the learned appellate court had failed to take any of these matters into consideration, and had thus erred materially in concluding that the Subsequent Agreement was illegal, void ab initio and of no legal effect. Learned counsel also submitted that the learned appellate court, in decreeing the suit only in respect of paragraphs (i) and (iii) of the prayer clause, had in effect, made a bare declaratory decree which was not capable of execution, and this was also contrary to well-settled principles. He therefore prayed that the appeal be allowed, the impugned judgment set aside and the decree of the learned trial court dismissing the suit restored.
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7. Learned counsel for the Prior Purchasers submitted that the learned appellate court had come to the correct conclusion that the Prior Purchasers had been able to fully make out their case that the Prior Agreement was valid and subsisting. They submitted that the notice of cancellation, dated 11- 1-1993 that had been sent by the Sellers to the Prior Purchasers was a false and manipulated document, and no credence could be p: 't upon it. They further contended that the Subsequent Purchaser did have knowledge of the Prior Agreement when he entered into the Subsequent Agreement, and the evidence led at the trial fully supported this conclusion. It was also contended by learned counsel that the entire sale consideration was not paid by the Subsequent Purchaser at the time stipulated in the Subsequent Agreement, and this had not been done even up to 2002, when the evidence was recorded. Thus, the Subsequent Purchaser was not entitled to the benefit and protection of the latter part of section 27(b). As regards the declaration made by the learned appellate court with regard to the Subsequent Agreement, learned counsel relied on section 39 of the Specific Relief Act to contend that such a declaration was perfectly lawful and entirely reasonable in the facts and circumstances of the case, i.e., when the learned appellate court had upheld the validity of the Prior Agreement, such a declaration followed as a natural consequence. Learned counsel also contended that the courts were fully empowered to grant any effective or ancillary relief, even if such relief had not been prayed for. Thus, the fact that the suit had been decreed only in relation to prayer clauses (i) and (iii) was of no moment. This was especially so when, according to them, the evidence at the trial had also established that the possession of the subject property initially lay with the Prior Purchasers (under the Prior Agreement) and they had been subsequently dispossessed by the Sellers and the Subsequent Purchaser. Their case was that the Subsequent Agreement was a fraudulent document, and its registration did not, and could not, give it any protection or priority as contended by learned counsel for the Subsequent Purchaser. They therefore prayed that the appeal be dismissed. 8. Learned A.A.-G. Also submitted that the appeal ought to be dismissed. He submitted that although the notice of cancellation of the Prior Agreement was produced in evidence, the Sellers did not testify at the trial in support of their claim that the Prior Agreement had been lawfully cancelled. He submitted further that the onus lay on the Subsequent Purchaser to establish that he did not have knowledge of the Prior Agreement at the relevant time, which onus he had failed to discharge. 9. I have heard learned counsel for the parties, examined the record with their assistance, and considered the case-law relied upon by them. As noted above, the main case put forward by learned counsel for the Subsequent Purchaser rests on section 27(b) of the Specific Relief Act. Section 27, as presently relevant, provides as follows:--- "27. Except as otherwise provided by this Chapter, specific performance of a contract may be enforced against-- (a) either party thereto; (b) any other person claiming under him by a title arising subsequently to the contract, except a transferee for value who has paid his money in good faith and without notice of the original contract;...." ' The general rule is that specific performance of a contract can be ordered against any party to the contract (clause (a)) or any other person claiming under such party by reason of a "title" arising subsequently to the contract (clause (b)). There is however, a limited exception to the latter provision, contained in the last words of clause (b): "except a transferee for value who has paid his money in good faith and without notice of the original contract". This of course, is the part of section 27 relied on by the Subsequent Purchaser, and clause (b) must therefore be examined in some detail so that its scope and extent can be properly determined.
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10. The first point to note is that the person claiming the protection of the latter part of clause (b) must have a "title". The "title" referred to can only mean title to the subject property. I defer consideration of this aspect of clause (b), and proceed first to consider the remaining portion thereof, on which the Subsequent Purchaser rests his case, and in particular, the question of the knowledge (or notice) of the transferee about the prior contract. As noted above, learned counsel for the Subsequent Purchaser submitted that the Prior Purchasers had to make a specific averment in this regard in the plaint, and if they failed to do so, they could not lead any evidence to establish such knowledge or notice: In my view, the proper resolution of this issue requires consideration of the following question: is the point of knowledge (or notice) part of the plaintiff's cause of action, or is it part of any defense to be put forward by the defendant concerned? If it is part of the cause of action, then it has to be specifically averred in the plaint, since the plaint must disclose all the facts which, taken together, constitute the cause of action. If a plaintiff fails or omits to disclose any fact in his plaint that is an element of his cause of action, he cannot thereafter be allowed to lead evidence in respect of such fact. On the other hand, if the question of knowledge or notice is simply part of the defense that may be put forward by the concerned defendant, then obviously, the plaintiff is not under an obligation to make such an averment in the plaint. If the defendant does put forward such a defense, then the plaintiff is entitled to lead evidence to establish the contrary, regardless of whether or not any such averment was made in the plaint. 11. In my view, the point of knowledge (or notice) of a transferee of the prior contract sought to be specifically enforced is not part of the cause of action, but simply part of the defense which may be put forward by the concerned defendant. It is correct that it has been held in Mst. Khair-ul-Nisa and others v. Malik Muhammad Ishaque and others PLD 1972 SC 25, a decision relied on by learned counsel for the appellant, that if the transferee appears in court and states on oath that he had no notice of the prior contract, the onus would then shift on the plaintiff (i.e., the prior purchaser) that the transferee did have notice. But this does not mean that the plaintiff must mandatorily make such an averment in the plaint. All that 'is required is for the defendant (i.e., the transferee) to discharge the burden that lies on him regarding notice, if he wishes to avail the protection provided in the latter part of clause (b). If he does so, then the onus shifts on the plaintiff to establish that the defendant did have such knowledge. But obviously, it is for the defendant to decide whether he wishes to put forward such a defense or not. There is no need for the plaintiff to second guess the defendant on this point, by averring that the defendant did have such knowledge. If such a defense is put forward, then the parties are entitled to lead evidence accordingly. If however, no such defense is put forward, the point becomes moot. In my view therefore, the point of the knowledge (or notice) of the transferee is not part of the cause of action, and hence, such an averment need not mandatorily be made in the plaint. It follows that if the defendant concerned does raise such a defense, then the plaintiff is entitled (indeed, if a denial is made on oath, obligated) to produce the necessary evidence at trial. It also follows that the rule that no evidence could be produced beyond the pleadings does not apply, since the plaintiff is only obliged to lead evidence on the point if such a defense is taken by the defendant. Learned counsel for the Subsequent Purchaser also placed reliance on Shah Nawaz v. Abdul Ghafoor and another 2008 SCM R 352 and Abdul Hague and others v. Shaukat All and others 2003 SCM R 74, and Pak United Housing Enterprise v. Ramzan and others 1992 CLC 1678 (DB; SHC) and Muhammad Ramzan v. Muhammad Sharif and, others 1987 M LD 403 (LHC). In my view, the conclusion arrived at by me is not contrary to anything said by the Supreme Court or the Division Bench of this Court in the decisions cited by learned counsel (and also, the decision of the Lahore High Court although that is not, of course, binding on me). Reliance was placed in particular on the Shah Nawaz case (supra), where, in para 5 (at pg. 355), it has been noted that it was not averred in the plaint, nor established in the evidence led by the plaintiff (the prior purchaser), that the transferees had knowledge of the prior contract. It was
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observed (and this was expressly regarded by the Supreme Court as being important) that a question to this effect was put to the transferee in cross-examination, and he denied any such knowledge. In my respectful view, this decision is not authority for the proposition sought to be advanced by learned counsel, namely, that an averment regarding knowledge must mandatorily be made in the plaint. Rather, what the Supreme Court has decided is that once it is established in the evidence that the transferee had no knowledge (and, as noted, this was done on the basis of a question put to the transferee in cross-examination), and there is no evidence produced by the plaintiff to the contrary, then the only possible conclusion is that the transferee was without notice. In my respectful view, this decision extends the principle laid down earlier by the Supreme Court in the Khair-ul-Nisa case (supra) as to how a transferee, who claims the protection of the latter part of section 27(b), can discharge the burden cast on him regarding notice. It does not however, establish the proposition sought to be advanced by learned counsel for the appellant. 12. I turn now to consider the issue of "title" which, as noted above, the transferee must have if he is to enjoy the benefit of the protection provided by the latter part of section 27(b). For this purpose, it is necessary to consider the nature of the Subsequent Agreement. Learned counsel for the Subsequent Purchaser provided translations of both the Prior and the Subsequent Agreements. There is no dispute that the Prior Agreement is an agreement to sell. Learned counsel for the Subsequent Purchaser sought to argue that the Subsequent Agreement was of a different nature, being a registered deed of transfer of possession. It is well-settled that the court is entitled to look at the substance of the agreement, and is not bound by how it is labeled, or how a party thereto may wish to describe it. The legal nature and effect of an agreement is a question of law for the court to decide. In my view, the Subsequent Agreement was, in substance, nothing other than an agreement to sell. It had all the indicia of such an agreement. Thus, the agreement provided that Subsequent Purchaser had paid earnest money, amounting to Rs,150,000, to the SelleRs, The balance amount was to be paid by deposit in a bank account nominated by the Sellers by a specified date (28-4-1993) and on that date, the Sellers would 'execute a registered document (obviously a sale-deed) before the sub-Registrar, Hala. The Sellers handed over possession of the subject property to the Subsequent Purchaser on the date of the agreement. The agreement further provided that in case of'breach, the defaulting party would be liable to pay an amount equal to the earnest money to the other. All of these terms are typically to be found in any agreement to sell. Indeed, essentially these very terms (other than that relating to possession) are to be found in the Prior Agreement. The handing over of possession is not, of course, decisive in altering the nature of the transaction. In my view therefore, tl e Subsequent Agreement was no more than an agreement to sell. It is well-settled that such an agreement does not confer any title in or to immoveable property on the buyer. Learned counsel contended that the Subsequent Purchaser had acquired an "equitable title" or an "imperfect title", and that was sufficient for purposes of section 27(b). In my view, the Subsequent Agreement did not amount to, or confer or convey, any such title. Learned counsel placed reliance on certain observations in para 23 of Shaukat Ali Mian v. Trust Leasing Corporation Ltd. 2002 CLD 1071 (LHC; DB). Those observations are based on entries in Black's Law Dictionary (6th ed.), in particular, the entry relating to "equitable title". This view, I would respectfully submit, is contrary to the well-established law of the land. Black's Law Dictionary of course, is concerned with American law, and the law of that country, and indeed, English law, in respect of immovable property needs to be referred to with some caution, since many of the principles and doctrines applicable there are not part of the law as it has developed in the subcontinent. The law of this country does not recognize legal and equitable estates in the same property, as does English law and (apparently) American law. Thus, in P&T Co- operative Housing Society Ltd v. Ch. Manzoor Sahi PLD 1961 Kar 53, the position was explained as follows, in relation to sections 53A and 54 of the Transfer of Property Act (at para 17, pg. 67):---
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"The basis of the application of the doctrine of part performance in England is the recognition of the existence of a legal and equitable estate in the same property. This is an incidence of equity and has a long history behind it. This duality of estates was brought into play in cases of contracts for the sale of immovable property which had not been completed in all respects as required by law and in such cases it was laid down that as soon as such a contract was made the equitable estate in the property passed to…
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