Before Muhammad Sharif and M. R. Kayani, JJ.
Rai Bahadur JHODHA MAL KUTHIALA – Defendant – Appellant
versus
THE ASSOCIATED HOTELS OF INDIA, LTD – Plaintiffs – Respondents

Appeal No. 31 of 1949, decided on 24th November 1949, from the decree of Senior Sub-Judge, Lahore, dated the 14th March 1949.

(a) Specific Relief Act (I of 1877) S. 25 (b) – Agreement of sale – Development Scheme including property agreed to be sold – Publication of notice under section 36 Punjab Ton Improvement Act 1922, effect of – Vendor’s free from reasonable doubt – Purchaser whether can rescind contract – Contract Act (IX of 1872) section 20 – Mistake as to a matter of fact essential of agreement – Transfer of Property Act (IV of 1882) section 55(1) (a) – Duty of seller.

On 2nd October, 1946 J agreed to sell to M property situated at Lahore for rs. 52,75,000/- and received Rs. 5,00,000 as earnest money. The sale was to be completed before 2nd December 1946. On 19th November 1946, parties agreed to extend the date of completion and registration of the sale deed to 20th January 1947, M agreeing to increase the price by Rs. 25,000. Meanwhile, on 7th December 1946, the Lahore Improvement trust Framed a Development scheme under sections 24, 28 (2) of the Punjab Town Improvement Act 1922 for the acquisition of a certain area of land including the property agreed to be sold. On the 13th January 1947, J sent a telegram to M demanding money for stamp and registration expenses and calling upon him to fix a date for registration. M refused to have the sale completed, as the notice issued by the Improvement Trust was “a serious defect in title”. He also asked for the return of the earnest money. On J’s refusal M brought a suit for the recovery of the earnest money together with interest at 6 percent per annum from the 6th January 1947 till realization:

Held (1) that the publication of the notice under section 36 of the Punjab Town Improvement Act by itself did not cause any defect in title or property justifying the rescission of the contract of sale.

(2) That there was as no doubt a threat of the acquisition of the property by the Government which might or might not have materialized but the mere communication of the Government’s intention that the property might be required for a public purpose did not create any burden or impose any liability.

(3) That the purchaser could not on his own initiation rescind the contract, and as it was done illegally, he was liable to forfeit the amount of the deposit money.

(1927) 2. Ch. 379; (1941) 1 ch. 503 relied on.
(1942) 1 ch. 349; 50 Cal. 615; (1945) I K B. 148; 63 Cal. 124 distinguished.
1926 All. 469; 59 Bom. 83;1940 Sind 58 referred to.

Per Kayani, J. – Since the defendant can enforce specific performance of the contract, he is entitled to retain the earnest money. [p. 58].
There is no warrant for the view, and indeed there cannot be, that where an Improvement Trust or other authority notifies its intention to acquire any land, the title of the owner of that land thereafter becomes doubtful. That title, in fact, is recognized until the very day of the acquisition and it is for that reason that the owner receives compensation. [p. 57].

Section 25 (b) of the specific Relief Act becomes operative only when circumstances are disclosed which cast some measure of doubt on the title of the seller. [p. 57].

One fundamental distinction between section 20 of the Contract Act and section 55 of the Transfer of Property Act consists in whether both parties to the contract or the seller alone has knowledge of a defect in the property sold, for while in the former case the ignorance of the parties is not dishonest, in the latter the element of fraud necessarily intervenes, and it is for that reason that section 55 of the Transfer of Property Act expressly declare the conduct of the seller to be fraudulent when he fails to disclose to the buyer a material defect in the property. [p.53].

(b) Interpretation of statutes – Doubtful words and phrases – Parallel English cases, how far can be relied on.

Per Kayani, J. while it is of great advantage to cite parallel English cases for the interpretation of doubtful words and phrases it does not appear safe to adopt those interpretations in all cases, without being clear that the language of the statute in the two countries is virtually identical, lest in the adoption we should find our meaning divorced from our own context. [p. 53].

(c) English Law – Principles, how far can be relied on.

Per Kayani, J. It is unsafe to adduce principles of English law without trying to discover whether there correspondents to those principles anything in our own law which may be said to constitute a recognition of those principles in all details. [p. 54].