2011 S C M R 1917
[Supreme Court of Pakistan]
Present: Nasir-ul-Mulk and Jawwad S. Khawaja, JJ
ASIF RAZA MIR—Petitioner/Appellant
MUHAMMAD KHURSHID KHAN—Respondent
Civil Petition No. 1385 of 2010 and Civil Appeal No. 557 of 2010, decided on 27th July, 2011.
(Against the consolidated judgment dated 22-6-2010 passed by the Lahore High Court, Rawalpindi Bench in R.S.A. No. 12 of 2008 and C.R. No. 416 of 2008).
(a) Interpretation of documents—
—-Contents, substance and context of a document would determine its nature, but not its title, label or heading alone.
Messrs Khanzada Muhammad Abdul Haq Khattaq and Co. v. WAPDA through Chairman and another 1991 SCMR 1436 at 1439 and House Building Finance Corporation v. Shahinshah Humayun Cooperative House Building Society and others 1992 SCMR 19 at 27-28 rel.
(b) Specific Relief Act (I of 1877)—
—-S. 12—No agreement to sell between parties—Effect—No question of specifically enforcing same would arise.
(c) Transfer of Property Act (IV of 1882)—
—-S. 54—Agreement to sell, construction of—Scope—Agreement could be construed as a mortgage, charge or security for a loan, if such intention was spelt out from its contents or from its attending circumstances.
Chitty on Contracts, Vol. 1 at 632 (London, Sweet and Maxwell, 28th ed., 1999) rel.
Zulfiqar Khalid Maluka, Advocate Supreme Court for Petitioner/Appellant (in both cases).
Syed Asghar H. Sabzwari, Senior Advocate Supreme Court and Ch. Akhtar Ali, Advocate-on-Record for Respondent (in both cases).
Date of hearing: 27th July, 2011.
JAWWAD S. KHAWAJA, J.—These two appeals, one arising out of C.P. No. 1385 of 2010 and the other being an appeal as of right, have been decided by means of the following short order dated 27-7-2011:–
“For reasons to be recorded later, Civil Appeal No. 557 of 2010 is allowed and Civil Petition No. 1385 of 2010 is converted into appeal and partially allowed. Consequently the impugned judgment of the High Court is set aside, whereas the judgment and decree of the appellate Court dated 4-8-2008 is restored, subject to the modification that the interest at the normal bank rate awarded by the appellate Court to the respondent/decree holder on the decretal amount of Rs.18,50,000 shall be adjusted against fair rent to be determined by the executing Court for the period during which Shop No.1, Sector G-6 Markaz, Islamabad remained in occupation of the respondent decree holder.
2. We also direct that possession of the shop in dispute be delivered to the appellant-defendant as soon as he makes payment of the decretal amount of Rs.18,50,000 or deposits the said amount in the executing Court. The shop in question shall, however, remain attached to secure payment of any amount which may be determined by the learned executing Court after the adjustment of fair rent against the interest awarded to the respondent-plaintiff.”
2. Before expressing the reasons for the above short order, the facts of this case may be briefly stated. The appellant Mr. Asif Raza Mir is the owner of Shop No. 1 (corner) Sector G-6 Markaz, Islamabad (the ‘disputed property’). According to the averments in the plaint, on 17-12-1991 the appellant entered into an agreement to sell the disputed property to the respondent-plaintiff, Mr. Muhammad Khurshid Khan, for a total consideration of Rs. 15,00,000. Out of this sum, Rs. 12,00,000 were stated to have been paid to the appellant in advance by the respondent-plaintiff. The remaining amount was to be paid to the appellant by 16-3-1992. On receiving this payment, the purported agreement to sell obliged the appellant to transfer the property to the respondent-plaintiff. The agreement further envisaged certain penalties for both the respondent-plaintiff and the appellant if they failed to meet their obligations under the contract. The respondent-plaintiff claimed that, in accordance with the terms of the agreement, he made the remaining payment of Rs.3,00,000 to the appellant as witnessed by the agreement (Exh.P2) dated 18-3-1992. The appellant allegedly refused to transfer the disputed property to him. Aggrieved by the appellant’s conduct, he sought to, amongst other things, specifically enforce the contract before the courts below. In view of its relevance, the prayer made in the plaint is reproduced as under:–
“It is therefore respectfully prayed that the following decrees may be awarded in favour of the plaintiff No.1:
(a) Decree for declaration that plaintiff is the General Attorney regarding shop No.1 measuring 16 x 45 carner [sic] out of the plot situated in Sector G-6 Markaz Islamabad on the basis of General Power of Attorney registered at No.5974 dated 17-12-1991 and its duplicate copy pasted in Book No.4, volume No.151 pages 118 to 118 and the same cannot be cancelled and the cancellation if any is illegal unlawful ineffective on the rights of the plaintiff.
(b) A decree for specific performance of the agreement dated 17-12-1991 and 18-3-1992.
(c) If the sale agreements dated 17-12-1991 and 18-3-1992 are not enforceable then in alternative decree for recovery of Rs.15 lacs may be passed in favour of the plaintiff and against the defendant with costs”.
3. The appellant-defendant, however, in his written statement denied that he had agreed to sell the disputed property. According to him, the respondent-plaintiff had lent Rs.500,000 to him, at an interest rate of Rs.25,000 per month. To provide a legal cover to this otherwise unlawful transaction, the appellant-defendant contends that the respondent-plaintiff entered into an agreement with him purporting to create a partnership which guaranteed a fixed monthly return of Rs.25,000 to the latter. The understanding between the parties, according to the appellant-defendant, was to only provide a security for the said loan and not to alienate the disputed property. The appellant-defendant further contends the aforesaid agreement to sell has actually been superseded by a new agreement dated 16-6-1992, which truly captured the intention of the parties and their real relationship inter se.
4. Based of the pleadings, six issues were framed by the trial Court. Issues Nos. 3, 4 and 5, in respect of which onus of proof was placed on the respondent-plaintiff, are central to determining the controversy before us. These have been reproduced below for ease of reference:–
“(3) Whether there exists any valid sale agreement with regard to the suit property between the parties? OPP
(4) Whether the alleged agreement to sell is illegal, based on fraud, void and ineffective qua the plaintiff? OPP
(5) If issues Nos. 3 and 4 are proved in favour of plaintiff, then whether the plaintiff has performed his part of agreement and as such, is entitled to the decree for declaration, specific performance and in the alternative for recovery of Rs.15,00,000 from the defendant? OPP”
5. The suit was decreed by the learned trial Court on 30-10-2001 and as a consequence specific performance of the agreement was granted to the respondent-plaintiff. The appellant-defendant, Asif Raza Mir, challenged the aforesaid decree. His appeal was partially allowed vide judgment dated 4-8-2008. The declaration and specific performance sought by the respondent-plaintiff was declined and instead a money decree was passed for Rs.18,50,000 in favour of the respondent-plaintiff “along with the interest in line with the practice in vogue in Bank [sic] from the date when the amount was paid to the appellant-defendant”.
6. Both parties were aggrieved of the aforesaid appellate judgment. Therefore, the respondent-plaintiff filed a second appeal (R.S.A. No.12 of 2008) while the petitioner-defendant filed a revision petition (C.R. No.416 of 2008) in the High Court. The High Court set aside the appellate judgment and decree and restored the decree of the learned trial court in favour of the respondent-plaintiff. It is in these circumstances that these two appeals have come before us.
7. Having considered the evidence and the judgments of the learned Additional District Judge and the High Court in this case, we find the case of the respondent-plaintiff, to the extent of declaration and specific performance, to be without merit. There was no agreement to sell the disputed property and resultantly no relationship of buyer and seller existed between the parties which would bind the appellant-defendant to convey the disputed property. The various agreements between the parties were only meant to secure the amount which was advanced by the respondent to the appellant by way of loan. The respondent has been less than forthright in his plaint about the genesis and true nature of his transactional relationship with the appellant. This will be apparent from the documentary evidence next discussed.
8. Chronologically, the first document executed between the parties is the agreement (Exh. D3) dated 14-10-1990. This agreement clearly stipulates that the appellant-defendant is being given a loan of Rs.5,00,000 by the respondent. Out of the total agreed amount, Rs.2,60,000 was advanced at the time of execution of the agreement while the balance was agreed to be disbursed a few days later; at which point a detailed agreement was agreed to be signed. Consequently, on 20-10-1990, a contract purporting to be a partnership deed (sharakat nama) (Exh.D2) was executed between the parties. Although this agreement was supposedly meant to create a partnership between the parties, it was in actual fact, as the petitioner rightly contended, a loan agreement dressed up as a partnership deed. This conclusion is evident from two circumstances. Firstly, Exh.D.2 is a sequel to the agreement Exh.D.3. The loan transaction noted in Exh.D.3 has simply been translated into the document Exh.D.2. More importantly, the terms of the Sharakat Nama (Exh.D.2) are consistent with a loan transaction rather than a partnership agreement. This is obvious from the fact that a fixed rate of return of Rs.25,000 P.M. was made payable by the appellant to the respondent as “profit”.
9. It has long been settled in our jurisprudence that the contents of a document determine its nature and not its title or the label appearing at its head. Learned counsel for respondent was unable to explain as to how Exh. D.2 could be considered a partnership deed when the obligation imposed on the appellant-defendant was expressed as an absolute liability and commitment regardless of the profit or loss of the business. The return to the partners on their investment can be positive as well as negative. There is no business conceivable in the commercial world which is not susceptible to a loss or a fluctuating amount by way of profit. The learned counsel for the respondent-plaintiff, nevertheless, contended that the purported agreement Exh. D.2, conceives a partnership. Any lingering doubt on this controversy is put to rest by the following words in this agreement, which conclusively determine that the said document was not a partnership but was an agreement to cover a usurious loan at the exorbitant rate of 60% per annum:–
This stipulation negates the very fundamentals of a partnership.
10. That the nature of the relationship between the parties was that of lender and borrower is further buttressed by the next agreement (Exh.D1) which the parties entered into on 16-6-1992. It has been recorded in Exh.D1 that the appellant-defendant has received a sum of Rs.15,00,000 prior to the execution of the document, and acknowledges receipt of a further sum of Rs.3,50,000 thus making a total amount of Rs.18,50,000. This recital is followed by the extremely unusual stipulation which establishes that the parties were borrower and lender inter se and not seller and buyer as alleged in the plaint. It has been recorded that if by 1-7-1992 i.e. 14 days after the execution of the agreement, the appellant fails to repay the sum of Rs.18,50,000, the respondent-plaintiff shall have the right to sell the disputed shop after advertising the sale in the press. What conclusively determines the relationship between the parties is the additional stipulation that if the sale fetches an amount in excess of Rs.18,50,000, the appellant-defendant shall be entitled to such excess and if the sale fetches a price of less than Rs.18,50,000, the respondent-plaintiff shall be entitled to recover the short-fall from the appellant. These stipulations are enough to demolish the plea of the respondent that the agreements mentioned in his plaint dated 17-12-1991 (Exh.P1) and 18-3-1992 (Exh.P2) created a simple and straightforward agreement to sell. It is perhaps for this reason that a material concealment was made from the Court by the respondent-plaintiff and the agreement Exh.D1 dated 16-6-1992 was not referred to in the plaint.
11. Taking into account the above circumstances, it is not difficult for us to decide that the respondent-plaintiff was not entitled to a decree for specific performance. It should be noted that such relief is discretionary and is not to be allowed to a party which does not approach the Court with clean hands, especially where the record demonstrates that such party has been guilty of material non-disclosure. In this context it would be convenient to examine section 22 of the Specific Relief Act. This statutory provision, in relevant part, stipulates as under:–
“22. Discretion as to decreeing specific performance. The jurisdiction to decree specific performance is discretionary, and the Court is not bound to grant such relief merely because it is lawful to do so; but the discretion of the Court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a Court of appeal.
The following are cases in which the Court may properly exercise a discretion not to decree specific performance:
1. where the circumstances under which the contract is made are such as to give the plaintiff an unfair advantage over the defendant, though there may be no fraud or misrepresentation on the plaintiff’s part”.
(underlining added for emphasis)
Bearing in mind the facts of the case and the discretionary nature of relief by way of specific performance, we are clear that the discretion of the Court cannot be exercised in favour of the respondent-plaintiff. Additionally, having concluded that there was no agreement to sell between the parties, it follows that there can be no question of specifically enforcing the same.
12. It is unfortunate that the learned Judge-in-Chambers in the High Court has not taken note of the circumstances discussed above. Had he done so he surely would have reached a different conclusion. The learned Judge instead digressed from the main controversy in the case and embarked upon the fruitless exercise of determining if there had been any novation of contract between the parties as a result of the agreement Exh.D1. We also note that the documents on record have not received the full attention of the learned Judge. For instance, he has been unduly swayed by the heading of Exh.D1. We have already observed that it is the substance, content and context of a document which determines the nature of such document and not the label or heading alone. The nature of the document so determined represents the true intention of the parties and it is this which the courts are obliged to give effect to, not the mere form of the document. The cases titled Messrs Khanzada Muhummad Abdul Haq Khattaq and Co. v. Wapda through Chairman and another (1991 SCMR 1436 at 1439); House Building Finance Corporation v. Shahinshah Humayun Cooperative House Building Society and others (1992 SCMR 19 at 27-28) can be seen in support of this conclusion. We also have precedent which holds that a document purporting to be an agreement to sell can be construed as a mortgage, charge or security for a loan if such intention is spelt out from its contents or from its attendant circumstances. Chitty on Contracts, an authoritative text on contract law, has this to say on the subject:–
“True nature of the agreement. Extrinsic evidence is admissible to prove the true nature of the agreement, or the legal relationship of the parties, even though this may vary or add to the written instrument. Thus a conveyance may be shown to be merely a mortgage, a sale and hire-purchase agreement to be an unregistered bill of sale, and a sale of property to be a loan on security” [Chitty on Contracts, Vol 1. at 632 (London, Sweet & Maxwell, 28th ed., 1999)].
13. We further note that the learned Judge-in-Chambers in the High Court did refer to the agreement Exh.D1 and observed that the sum of Rs.3,50,000 had been received by the appellant thereunder, thus making a total of Rs.18,50,000 received by him. The Court, however, did not notice that the respondent-plaintiff had not pleaded any claim based on Exh.D1 and in fact, in his prayer reproduced above had relied entirely on Exh.P1/A and P2. As a consequence, the respondent-plaintiff had prayed for a money decree for Rs.15,00,000 and not Rs.18,50,000. This circumstance coupled with the material facts discussed above indicate that the High Court could not fully attend to the case and possibly, may not have had adequate assistance to enable it to do so.
14. We now take up for consideration the plea advanced on behalf of the appellant in respect of the money decree dated 4-8-2008 passed by the learned Additional District Judge. The appellant did not challenge the said decree to the extent of Rs.18,50,000. His grievance, however, is that the respondent-plaintiff has been in possession of the disputed shop from 11-1-1993 to 16-12-1999 and then again from 25-9-2002 to date. According to the appellant, since the respondent has been enjoying the use and occupation of the disputed shop for this extended period covering almost 15 years, the award of interest at the bank rate on the decretal amount of Rs.18,50,000 is not justified. This contention is well founded. It is for this reason we have modified the decree dated 4-8-2008 passed by the learned Additional District Judge in appeal as per our short order.
15. The above are our reasons in support of the short order dated 27-7-2011.
S.A.K./A-47/SC Order accordingly.