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Petitioner: KARTAR LAL PIRWANI VS Respondent: MUHAMMAD WAQAR AZEEM and 3 others
Court Name: Islamabad High Court Judge(s): Athar Minallah, Miangul Hassan Aurangzeb Title: KARTAR LAL PIRWANI vs MUHAMMAD WAQAR AZEEM and 3 others Case No.: R.F.A. No, 155 of 2017 Date of Judgment:2018-06-04 Reported As: 2018 YLR 2219 Result: Case remanded
JUDGMENT
JUDGMENT MIANGUL HASSAN AURANGZEB, J.---Through the instant Regular First Appeal, the appellant, Kartar Lal Pirwani, impugns the order and decree dated 13.09.2017, passed by the Court of the learned Civil Judge, Islamabad, whereby respondent No,3's application under Order VII, Rule 11 of the Code of Civil Procedure, 1908, ("C.P.C.") was allowed and the plaint in the appellant's suit for specific performance and permanent injunction, was rejected on the ground of res judicata. 2. The facts, in brief, are that vide agreement to sell dated 04.06.2015, respondent No,3 agreed to sell plot No,104, measuring 272 square yards situated in Sector D-12/4, Islamabad ("the suit plot"), to respondents Nos,1 and 2. Rs,20.00,000/- was paid as earnest money, whereas the remaining amount of Rs,1,20,00,000/- was to be paid on or before four weeks with a grace period of one week. The terms of the said agreement authorized respondents Nos,1 and 2 to sell the suit plot to a third party. Vide agreement to sell dated 17.06.2015, respondents Nos,1 and 2 agreed to sell the suit plot to the appellant. Rs,35,00,000/- was paid as earnest money, whereas the remaining sale consideration of Rs,1,20,00,000/- was to be paid on or before 05.07.2015. The transactions under the said agreements were not completed. 3. The suit for specific performance of the agreement dated 04.06.2015 filed by respondent No,1 on 01.09.2015 against respondent No,3 was dismissed as withdrawn on 02.12.2015. Thereafter, respondent No,1 filed another suit for specific performance of the said agreement dated 04.06.2015 against respondent No,3. The plaint in this suit was rejected by the learned civil Court, vide order and decree dated 05.01.2017, on the ground that since respondent No,1 had withdrawn the earlier suit, a second suit on the same cause of action was not competent in terms of Order XXIII, Rule 1, C.P.C. The said order and decree has remained unchallenged.
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4. On 31.01.2017, the appellant filed a suit for specific performance of the agreements dated 04.06.2015 and 17.06.2015 against the respondents. On respondent No,3's application under Order VII, Rule 11, C.P.C., the learned civil Court rejected the plaint on the ground that the suit was barred by the principle of res judicata. This was done, vide order and decree dated 13.09.2017, which has been assailed by the appellant in the instant appeal. CONTENTIONS OF THE LEARNED COUNSEL FOR THE APPELLANT: 5. Learned counsel for the appellant submitted that the learned civil Court erred by rejecting the plaint in the appellant's suit on the ground of res judicata; that the learned civil Court did not appreciate that the appellant was not a party to the two suits for specific performance instituted by respondent No,1 against respondent No,3; that the appellant was unaware of the proceedings in the said suits; that respondent No,1 (i,e,, the plaintiff in the said suits) was seeking specific performance of agreement dated 04.06.2015 only; that the appellant, in his suit, was seeking specific performance of agreement dated 04.06.2015 as well as agreement dated 17.06.2015; that in the said agreement dated 04.06.2015, respondent No,3 (the vendor) had empowered respondents Nos,1 and 2 (vendees) to sell the suit property to a third party; that it was on the basis of the said clause in the agreement dated 04.06.2015 that the appellant entered into agreement dated 17.06.2015 for the purchase of the suit plot; that the appellant gave an amount of Rs, 35,00,000/, as earnest money to respondents Nos,1 and 2; that in the suit instituted by the appellant, respondents Nos,1 and 2 gave a statement that they would have no objection if the said suit was decreed; and that the appellant has suffered a grave loss due to the breach of the agreement dated 17.06.2015 by respondents Nos,1 and 2. 6. Furthermore, it was submitted that the agreement dated 04.06.2015 provided that if respondents Nos,1 and 2 resale the suit plot then respondent No,3 would be responsible to execute documents in favour of the new purchaser without any delay; that respondent No,1 could not have filed a suit for specific performance against respondent No,3 without making the appellant a party to the suit; that the said suit for specific performance instituted by respondent No,1 against respondent No,3 was collusive and fraudulent and aimed at causing a loss to the appellant; that the appellant did not join the proceedings in the said suit in any capacity; and that the order of withdrawal of the said suit could not be termed as a "judgment and decree" so as to deprive the appellant of his valuable rights. Learned counsel for the appellant prayed for the appeal to be allowed and for the impugned judgment and decree dated 13.09.2017 to be set aside. CONTENTIONS OF THE LEARNED COUNSEL FOR RESPONDENT NO.3: 7. On the other hand, learned counsel for respondent No,3 submitted that the impugned judgment and decree suffers from no infirmity; that the appellant was well aware of the suit for specific performance filed by respondent No,1 on 01.09.2015; that respondents Nos,1 and 2 had executed a special power of attorney in favour of the appellant authorizing the latter to engage counsel and to do all other things incidental to the proper conduct of the suit instituted on 01.09.2015, including the power to compromise the said suit; that the appellant was also well aware of the withdrawal of the said suit on 02.12.2015; that the withdrawal of the said suit precluded the appellant from filing a fresh suit; that there was no privity of contract between the appellant and respondent No,3; that the appellant was not a party to the agreement dated 04.06.2015; that the appellant could not seek specific performance of the agreement dated 04.06.2015 which was executed between respondent No,3 on the one hand and respondents Nos,1 and 2 on the other; that respondent No,3 was not a party to the agreement dated 17.06.2015 which was executed between respondents Nos,1 and 2 on the one hand and the appellant on the other; that respondent No,3 had already sold the suit plot to a third party; and that the learned civil Court was correct in holding that the suit filed by the appellant for the specific performance of the agreements dated 04.06.2015 and 17.06.2015 was barred by the principle of res judicata. Learned counsel for respondent No,3 prayed for the appeal
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to be dismissed. 8. We have heard the contentions of the learned counsel for the contesting parties and have perused the record with their able assistance. FACTUAL BACKGROUND: 9. The record shows that on 04.06.2015, an agreement to sell was executed between respondent No,3 (Raja Muhammad Khalil) on the one hand and respondent No,1 (Muhammad Wagar Azeem) and respondent No,2 (Sultan Safdar) on the other, whereby respondent No,3 agreed to sell the suit plot to respondents Nos,1 and 2 for a total sale consideration of Rs . 1 ,40 , 00 , 000/- . Respondents Nos,1 and 2 had paid Rs,20,00,000/- (i,e, Rs,19,50,000/- through pay order dated 04.06.2015, and Rs,50,000/- in cash) as earnest money, whereas the remaining amount of Rs,1,20,00,000/- was to be paid on or before four weeks from the date of the said agreement with a grace period of one week. The said remaining amount was to be paid within the said period at the time of the transfer of the suit plot in the office of the Capital Development Authority, Islamabad. 10.In the said agreement, it was provided that if respondent No,3 refused to go ahead with the deal or failed to get the suit plot transferred in favour of respondents Nos,1 and 2 or their nominees within the prescribed period, respondent No,3 would pay double the amount of the earnest money to the said respondents who would also be competent to complete the deal through a Court of law. It was also provided that if respondents Nos,1 and 2 backed out from the deal or failed to pay the remaining sale consideration within the prescribed period, the deal would be considered as cancelled and the earnest money would be forfeited. The said agreement contains an unusual clause which is reproduced herein below:- `And that the second party if allowed to re-sell the said Plot-on any price to any body else, desired by him. In this respect the first party will have no objection, If the second party re-sells the said Plot before transfer, the first party will be responsible to execute fresh documents as [per] the requirement of the second party in favour of the new purchaser immediately with the written consents of the second party without any hesitation or any delay." 11.The four-week period from the date of the execution of the said agreement dated 04.06.2015 was to end on 04.07.2015, and the grace period on 11.07.2015. Prior to the expiry of the four-week period, another agreement to sell dated 17.06.2015 was executed between respondents Nos,1 and 2 on the one hand and the appellant on the other, whereby respondents Nos,1 and 2 agreed to sell the suit plot to the appellant for a total sale consideration of Rs,1,55,00,000/-. As per the contents of the said agreement dated 17.06.2015, the appellant had paid Rs,35,00,000/- as earnest money, whereas the remaining sale consideration of Rs,1,20,00,000/- was to be paid on or before 05.07.2015. It is an admitted position that the transactions contemplated under the abovementioned agreements dated 04.06.2015 and 17.06.2015 did not materialize. THE FIRST SUIT: 12.On 01.09.2015, respondent No,1 instituted a suit for specific performance and permanent injunction against respondent No,3 before the Court of the learned Civil Judge, Islamabad, praying for inter-alia the specific performance of the agreement dated 04.06.2015. Neither was the appellant impleaded as a party in the said suit, nor is there any mention of the agreement dated 17.06.2015 in the said suit. On 18.02.2016, respondent No,3 filed a written statement in which he admitted the execution of the agreement dated 04.06.2015. Furthermore, it was pleaded that respondent No,3 had applied to the Capital Development Authority for the transfer of the suit plot but despite reminders by respondent No,3, respondent No,1 did not pay the balance sale consideration; that respondent No,1 was a property dealer and he had said that he would pay respondent No,3 the balance sale consideration after selling the suit plot to some one else; that since the balance sale consideration was not paid within the agreed period, respondent No,1 breached the terms of the agreement dated 04.06.2015 and consequently, the earnest money
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stood forfeited; and that the suit plot had been sold by respondent No,3 to one Muhammad Sulaiman. Be that as it may, on 02.12.2015, the said suit was dismissed as withdrawn after the learned civil Court recorded the statement of the learned counsel for respondent No,1 that respondent No,1 does not want to pursue the case due to a settlement arrived at between the parties. There is no record of any compromise or settlement arrived at between the parties to the said suit. THE SECOND SUIT: 13.On 29.12.2015, respondent No,1 instituted another suit for specific performance and permanent injunction against respondent No,3 praying for interalia the specific performance of the agreement dated 04.06.2015 before the Court of the learned Civil Judge, Islamabad. In this suit also, there was no mention of the agreement dated 17.06.2015. The appellant was also not impleaded as a party in this suit. Instead of filing a written statement, respondent No,3 filed an application under Order VII, Rule 11, C.P.C. for the rejection of the plaint on the ground that suit was barred under Order XXIII, Rule 1, C.P.C. Vide order and decree dated 05.01.2017, the learned civil Court allowed the said application and rejected the plaint. In the said order, it was held that since respondent No,1 had withdrawn the earlier suit without permission for filing a fresh one, the new suit was barred by law in terms of Order XXIII, Rule 1, C.P.C. The record is silent as to whether the said order and decree dated 05.01.2017 was assailed any further. THE THIRD SUIT: 14.On 13.02.2016, respondents Nos,1 and 2 filed a suit for declaration, cancellation of agreement and permanent injunction against the appellant before the Court of Civil Judge, Islamabad. In the said suit, respondents Nos,1 and 2 prayed for a declaration to the effect that they are entitled to forfeit the amount paid by the appellant as earnest money under the agreement dated 17.06.2015. Respondents Nos,1 and 2 also prayed for a decree for cancellation of the said agreement and a decree for permanent injunction restraining the appellant from using the said agreement to sell in any manner. Vide order dated 09.06.2016, the said suit was dismissed as withdrawn after the learned counsel for respondents Nos,1 and 2 recorded her statement to the effect that a compromise had been effected between the parties. There is no document on the record reflecting the terms and conditions of the compromise between the parties to the said suit. THE FOURTH SUIT: 15.On 31.01.2017, the appellant filed a suit for specific performance of the agreements dated 04.06.2015 and 17.06.2015 against the respondents. Respondents Nos,1 and 2 put in appearance before the learned civil Court and on 20.03.2017 recorded their statements to the effect that they had purchased the suit plot, vide agreement dated 04.06.2015, from respondent No,3; that under the terms of the said agreement, respondents Nos,1 and 2 could sell the suit plot to a third party; that respondents Nos,1 and 2 sold the suit plot to the appellant, vide agreement dated 17.06.2015; and that respondents Nos,1 and 2 would have no objection if the suit instituted by the appellant was decreed. 16.On 04.05.2017, respondent No,3 filed an application under section 11 read with Order VII, Rule 11, C.P.C. praying for the rejection of the plaint. The plea taken by respondent No,3 in the said application was that the suit instituted by the appellant was barred under the principle of res judicata since the subject matter of the said suit was directly and substantially the same as the suit titled "Muhammad Waqar Azeem v. Raja Muhammad Khalil and others" which had been decided, vide judgment and decree dated 05.01.2017. The appellant contested the said application by filing a written reply. 17.Vide impugned order and decree dated 13.09.2017, the learned civil Court allowed the said application and rejected the plaint. The learned civil Court appears to have appreciated the fact that the appellant was not a party to the previous suit for specific performance instituted by
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respondent No,l. However, the learned civil Court held that since the appellant was claiming specific performance of one of the agreements through respondent No,1 who was a party to the previous suit, the suit for specific performance instituted by the appellant was barred under the principle of res judicata. The said order and decree dated 13.09.2017 has been impugned by the appellant in the instant regular first appeal. 18.The vital question that needs to be determined is whether the suit for specific performance instituted by the appellant on 31.01.2017 could be held to be barred by the principle of res judicata, even though the appellant was not a party to the previous two suits for specific performance (instituted by respondent No,1 on 01.09.2015 and 29.12.2015), and even though the specific performance of the agreement dated 17.06.2015 was not sought by respondent No,1 in the previous two suits. THE PRINCIPLE OF RES JUDICATA: 19. The rule of res judicata enacted in section 11, C.P.C. is based on the principle that a decision once rendered by a competent Court on a matter in issue A between the parties after a full inquiry should not be agitated over and again. For the purposes of clarity, section 11, C.P.C. is reproduced herein below:- "11. Res judicata.-- No Court shall try suit or issue in which the matter directly and substantially in issue has been directly and substantially in issue in a former suit between the same parties, or between parties under whom they or any of them claim, litigating under the same title, in a Court competent to try such subsequent suit or the suit in which such issue has been subsequently raised, and has been heard and finally decided by such Court." (Emphasis added) 20. The principle of res judicata is based on public policy and necessity to ensure an end to litigation. In the case of Province of Punjab v. Malik Ibrahim and Sons (2000 SCMR 1172), it has been held that in order to attract the principles of res judicata, the following conditions must be complied with:- "(1) The matter directly and substantially in issue in the subsequent suit or issue must be the same matter which was directly and substantially in issue either actually or constructively in the former suit. (2) The former suit must have been a suit between the same parties or between parties under whom they or any one of them claim. (3) The parties as aforesaid must have litigated under the same title in the former suit. (4) The Court which decided the former suit must have been a Court competent to try the subsequent suit in which such issue is subsequently raised. (5) The matter directly and substantially in issue in the subsequent suit must have been heard and finally decided by the Court in the first suit." 21. Now, in the earlier two suits for specific performance, respondent No,1 (i,e, the plaintiff therein) had sought the specific performance of agreement dated 04.06.2015 against respondent No,3. In the suit instituted by the appellant, specific performance of agreement dated 04.06.2015 as well as agreement dated 17.06.2015 has been sought. In the case of Mustafa Kamal v. Daud Khan (2009 SCMR 221), it has been held that when the subject-matter of the previously instituted suit was not the same as the fresh suit and the parties were also not the same, the principle of res judicata was not applicable. 22. The plaintiff in the earlier suits was respondent No,1, whereas the plaintiff in the subsequent suit was the appellant. The appellant was not even a party to the earlier suits instituted by respondent No,1. Therefore, it is my view that the test laid down in the case of Province of Punjab v. Malik Ibrahim and Sons (supra) for the applicability of the principle of res judicata is not satisfied in the case at hand.
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23. In the case at hand, the appellant was not the plaintiff or even a party in the earlier two suits, in which specific performance of agreement dated 17.06.2015 had not even been prayed for. Since the agreement dated 17.06.2015 was not the subject matter of the earlier suits, the suit filed by the appellant is not hit by the principle of res judicata. In the case of Hafiz Noor Muhammad v. Ghulam Rasul (1999 SCMR 705), the Hon'ble Supreme Court observed that in order to apply the bar of res judicata, the Court must first determine whether the issue was raised, determined and decided in the former proceedings between the parties. Since the agreement dated 17.06.2015 was not the subject matter of the earlier suits filed by respondent No,1 and since the appellant was not impleaded as a party in the said suits, the learned civil Court could not have applied the principle of res judicata to the relief of specific performance of agreement dated 17.06.2015 sought by the appellant. WHETHER FOR THE APPLICABILITY OF THE PRINCIPLE OF RES JUDICATA THE EARLIER PROCEEDINGS SHOULD HAVE BEEN DECIDED ON MERITS: 24.It may be recalled that in the earlier two suits, there had been no adjudication on merits. The first suit instituted by respondent No,1 was dismissed as withdrawn, whereas the plaint in the second suit instituted by respondent No,1 was rejected under Order VII, Rule 11, C.P.C. on the ground that the first suit was withdrawn without permission to file afresh. Hence, there was no adjudication on merits i,e, whether agreement dated 04.06.2015 was specifically enforceable against respondent No,3. It is well settled that res judicata does not apply where an earlier suit is not decided on merits. In order to apply the bar of res judicata, the Court must first determine whether the issue was raised, determined and decided in the former proceedings between the parties. Where there was no indication that the question involved had been conclusively determined in the earlier litigation, the invocation of the principle of res judicata was not justified. The matter on which plea of res judicata was founded should have been finally adjudicated and decided in previous proceedings in order to furnish a ground for such a plea to succeed. Even a matter which was in issue in the previous litigation but was left open and undecided, subsequent proceedings on the said matter were not barred on the principle of res judicata. The principle of res judicata cannot be pressed into service unless it is established that the matter in issue was earlier adjudicated on merits and conclusively decided. Reference in this regard may be made to the law laid down in the cases of Muhammad Akram v. Member Board of Revenue (2007 SCMR 289), Muhammad Saleem Ullah v. Additional District Judge, Gujranwala (PLD 2005 SC 511), Hafiz Noor Muhammad v. Ghulam Rasul (1999 SCMR 705), Mian Khan v. Aurangzeb and others (1989 SCMR 58) and Abdul Ghafoor v. Chief Settlement Commissioner (1985 SCMR 464). In the case of Mst. Kaniz Fatima v. Member (Revenue), Board of Revenue, Punjab Lahore (PLD 1973 Lahore 495), it has been held inter- alia as follows:- "The decision of the Court under Order VII, Rule 11 rejecting the plaint is not on merits, because the suit in such a case virtually does not come before the Court for disposal on merits but falls out for the reason that preliminary steps to present the suit before the Court properly and effectively were not taken by the plaintiff. The principle of res judicata cannot be pressed into service unless the matter had been heard and finally decided. In order to invoke the principle of res judicata it is necessary to show that there was a decision finally granting or withholding the relief sought." 25 Additionally, in the case of Irum Cheema v. Auqaf Department (1999 SCMR 2289), it was held that where no findings were recorded by Court on a particular aspect of the matter and the point was left open for a decision in fresh proceedings, principle of res judicata would not be applicable to such matters. Furthermore, in the cases of Province of Punjab v. Ghazanfar Ali Shah (2017 SCMR 172), Abdul Hamid v. Dilawar Hussain alias Bhalli (2007 SCMR 945) and Managing Director, Oil and Gas Development Company Ltd. v. Syed Najmul Hassan Naqvi (2005 SCMR 890), it has been held that rejection of plaint does not operate as res judicata against the plaintiff in a subsequent suit.
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The rationale behind this is that rejection of plaint was not an adjudication on merits and it was said to be a decree only by fiction, which was no bar to a fresh suit. 26. In the case at hand, it is an admitted position that there was no adjudication on merits when the suits for specific performance instituted by respondent No,1 were disposed of. Hence, the learned civil Court erred by rejecting the plaint in the appellant's suit on the ground of res judicata. WHETHER THE PRINCIPLE OF RES JUDICATA WILL APPLY WHERE THE FORMER SUIT IS DISMISSED AS WITHDRAWN: 27. It is well settled that where a plaintiff withdraws a suit unconditionally, then under Order XXIII, Rule 1(1), C.P.0 he would be precluded from instituting a fresh suit in respect of the same subject matter as in the earlier suit. However, where the earlier suit is dismissed as withdrawn which implied that there was no adjudication or determination of the dispute on merits, a subsequent suit would not be barred by res judicata. Since the first suit filed by respondent No,1 was dismissed as withdrawn and since the plaint in the second suit filed by respondent No,1 was rejected on the ground that the first suit was dismissed as withdrawn without permission to file afresh, it cannot be said that there had been adjudication or a decision on the merits of the case. The bar of res judicata is not applicable where the earlier proceedings are dismissed as withdrawn. Reference in this regard may be made to the following case law:-- (i) In the case of Gulistan Textile Mills Ltd. v. Soneri Bank Ltd. (PLD 2018 SC 322 = 2018 CLD 203), in the following terms:-- "Res judicata the Latin term for "a matter (already) judged" and entails the concept of claim preclusion; once a matter has…
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