IN THE SUPREME COURT OF PAKISTAN

(Appellate Jurisdiction)

PRESENT:
MR. JUSTICE UMAR ATA BANDIAL, HACJ
MR. JUSTICE MUNIB AKHTAR
MR. JUSTICE MUHAMMAD ALI MAZHAR

CIVIL APPEAL NO. 1005 OF 2019

(Against the Order of Lahore High
Court, Lahore dated 20.10.2017
passed in R.S.A. 167 of 2009)

Gulzar Ahmad, etc.

… Appellants

Versus

Muhammad Aslam, etc.

… Respondents

For the Appellants : Ch. Afrasiab Khan, ASC

For the Respondent : Sh. Tariq Mehmod, ASC

LRs. No.(1-2)
LRs. of Respondent : Ex-Parte.
No. 3.

Date of Hearing : 20.08.2021

JUDGMENT

MUHAMMAD ALI MAZHAR, J:- This Civil Appeal has been

brought to challenge the judgment dated 20.10.2017 passed by
Lahore High Court in RSA No.167/2009 whereby the appeal was
dismissed and the judgment passed by Additional District Judge
Gojra on 12.12.2009 in C.A.No.78-13/2007 was maintained.

2. The short-lived facts of the case are as under:-

The Respondent No.1 and 2 filed a suit for Specific

Performance against the appellants and Respondent No.3 on
the premise that respondent No.3 (Mst. Kalsoom Begum)
entered into an agreement to sale with the plaintiffs
(Muhammad Aslam & Ali Akbar) in respect of land
measuring 26 kanals 14 marlas situated at Chack No.
298/JB, Gojra in total sale consideration of Rs.474000/-
and received Rs.50,000/- earnest money pursuant to
CA.No.1005 of 2019 -:2:-

agreement to sell dated 27.06.2000. The cut-off date for the

transfer of property was 5.10.2002 but the defendant No.1
(Kalsoom Begum) before expiry of stipulated timeline,
transferred the aforesaid land in favour of appellants
(defendants No.2 to 4 in the suit) on 12.8.2002 vide
mutation entry in the record of rights against the sale
consideration of Rs.6,50,000/-. On filing suit for specific
performance, the trial court settled the issues, recorded
evidence and dismissed the suit, however in view of
stipulation in the agreement, the plaintiffs were found
entitled to the refund of earnest money of Rs.50,000/- and
Rs.100,000/- as penalty from defendant No.1. The plaintiffs
filed C.A.No.78-13/2007 and learned appellate court after
considering the pros and cons, set aside the impugned
judgment and decreed the suit as prayed subject to deposit
of balance sale consideration of Rs.4,24,000/- within thirty
days. This appellate order was challenged by the present
appellants through RSA in the Lahore High Court, Lahore
which was dismissed. During pendency of appeal, the
respondent No.1 and 3 expired and vide Amended Memo,
the legal heirs of respondent No.1 and respondent No.3 were
brought on record.

3. On 2nd April, 2019, leave to appeal was granted in the following

terms:-

“The learned counsel for the petitioners states that the suit for
specific performance filed by respondents No.1 and 2 was
dismissed by the learned trial Court, whereas, the appellate
court reversed the finding and decreed the suit, which was
maintained through the impugned judgment dated
20.10.2017 of the learned High Court. According to the
learned counsel, the petitioners are bona fide purchasers
without notice and transfer was effected in their favour
through mutation No.2176 dated 21.08.2002 on payment of
the entire consideration and possession was handed over. He
further stated that the plea of the petitioners that they are
bona fide purchasers without notice was not displaced and
merely on assumption and conjecture the finding was
reversed. It is further stated that in terms of the agreement
relied upon by the plaintiffs/respondents the agreement was
to be performed on or before the cut-off date failing which the
agreement would be rescinded and vendor will be within his
right to transfer the property which he exercised in
accordance with section 21 of the Specific Relief Act. The
points noted above do call for examination, therefore, leave to
appeal is granted.

4. The learned counsel for the appellants articulated that the

impugned judgment is based on misreading of evidence. Both the
courts below failed to consider that the appellants are transferees
for value who paid money in good faith and without notice of the
original agreement to sell hence they are entitled to the benefit of
Section 27 of the Specific Relief Act. The plaintiffs in suit failed to
prove the knowledge of earlier agreement by the subsequent
CA.No.1005 of 2019 -:3:-

vendees. He further avowed that in view of the condition jot down

in the agreement, the trial court rightly dismissed the suit and
directed the defendant No.1 to refund the earnest money with
penalty to the plaintiffs.

5. Quite the opposite, the learned counsel for the respondent No.2
and legal heirs of respondent No.1 contended that neither the
condition of refunding the earnest money in the event of default
along with certain amount of penalty creates any impediment or
obstruction against the vendee to file suit for specific performance
nor it precludes the court not to decree the suit. He further argued
despite sufficient evidence concerning the execution of agreement
with time frame, the defendant No.1 with mala fide intention as
well as to fetch more money violated the agreement without any
default committed by plaintiffs.

6. Heard the arguments. The trial court settled the issues and
parties were also allowed to lead evidence. It is clearly reflected
from the evidence that the execution of agreement between
respondent No.1 and respondent No.3 was an admitted document.
In order to prove its authenticity and genuineness, the witnesses
were also produced and they firmly testified and corroborated its
execution. The respondent No.3 agreed to sell out the property in
the sum of Rs.4,74,000/-and also received Rs.50,000/- as an
earnest money. The land was to be transferred in favour of the
vendee on 5.10.2002, but before cessation of cut-off date, she
transferred the property thru mutation entry No.2176 in favor of
appellants on 12.8.2002. The appellants pleaded to have
purchased the property in the sum of Rs.6,50,000/- as a bona fide
purchaser for the value without notice of previous agreement. It is
unequivocally reflected from the judgment of the trial court that
agreement to sell was considered a valid piece of evidence but
much emphasis was also made on penalty clause which was to be
triggered in case of violation.

7. Compliant with Section 100 CPC, the second appeal only lies in
the High Court on the grounds that the decision is being contrary
to law; failure to determine some material issue of law, and
substantial error or defect in the procedure provided by the Code
CA.No.1005 of 2019 -:4:-

or law for the time being in force which may possibly have
emanated an error or slip-up in the determination or decisiveness
of the case on merits. Meaning thereby, it does not lie to question
the findings on facts. In the case of Madan Gopal vs. Maran
Bepari (PLD 1969 SC 617), this court held that if the finding of
fact reached by the first appellate court is at variance with that of
trial court, such a finding by the lower appellate court will be
immune from interference in second appeal only if it is found to be
substantiated by evidence on the record and is supported by
logical reasoning, duly taking note of the reasons adduced by the
first court which have been disfavored in the contrary finding. It
was further held that interference would be justified if the
decision of the lower courts is found to be contrary to law or
some usage having the force of law has failed to determine
some material issue of law. Whereas in another case reported
as Amjad Ikram vs. Mst. Asiya Kausar (2015 SCMR 1), the court
held that in case of inconsistency between the trial court and the
appellate court, the findings of the latter must be given preference
in the absence of any cogent reason to the contrary as has been
held by this court in the judgments reported, as Madan Gopal and
4 others v. Maran Bepari and 3 others (PLD 1969 SC 617) &
Muhammad Nawaz through LRs. v. Haji Muhammad Baran
Khan through LRs. and others (2013 SCMR 1300).

8. The demeanor of the defendant No.1 divulges that in order to

fetch more money, she sold out the property before the cut-off
date. Neither appellants produced any agreement to sell nor proved
any due diligence before acquiring property through mutation
entry. The vendor’s conduct demonstrates that just to deprive the
first vendee to buy out the property in the agreed sale
consideration mentioned in the agreement, she transferred the
property surreptitiously before cut-off date on the basis of
mutation entry in receipt of better price. Nothing attributed against
the first vendee (plaintiffs) that they violated the terms and
conditions of the sale agreement or the date mentioned in the
agreement was elapsed due to their default or conduct. This court
CA.No.1005 of 2019 -:5:-

in the case of Ghulam Rasool vs. Muhammad Hussain (PLD

2011 SC 119) held as under:-

“The rule of discretion in the specific enforcement cases should

not be arbitrarily applied rather it should be invoked to promote
fairness and equity. The respondents-plaintiffs have established
on record to have entered into an agreement for the purchase of
the suit land and the payment of Rs.5,000 as earnest money to
the vendor. It is not established, if they were delinquent or failed
to perform any of their obligation under the sale agreement and
thus are disentitled to the equitable relief; only for the reason that
the appellants had made full payment to the vendor but when
they have not established to be the bona fide purchasers, the
discretionary relief should not be withheld from the plaintiffs,
otherwise it would tantamount to giving undue premium to the
subsequent vendee, who though has purchased the property with
the notice of the prior agreement to sell and is found disentitled
by the courts to the protection under section 27(b) of the Specific
Relief Act, which is the only provision in law to safeguard his
rights, yet he be given guerdon and rewarded and the plaintiffs
who otherwise have proved their case and are not at fault in any
manner whatsoever must be non-suited. This shall be sheer
arbitrariness, which is sworn foe of discretion”.

9. Though the relief of specific performance of an agreement is

discretionary but the discretion cannot be exercised arbitrarily or
unreasonably. Section 12 of the Specific Relief Act inter alia
expounds specific performance of contract when their exist no
standard for ascertaining the actual damage caused by non-
performance of the act agreed to be done; when the act agreed to
be done is such that pecuniary compensation for its non-
performance would not afford adequate relief and when it is
probable that pecuniary compensation cannot be got for the non-
performance of the act agreed to be done. Attached explanation
also provides that unless and until the contrary is proved, the
court shall presume that the breach of contract to transfer
immoveable property cannot be adequately relieved by
compensation in money and that the breach of the contract to
transfer moveable property can be thus relieved. The party
approaching the court has to show that he was ready and willing
to perform its part of the contract and the other side was avoiding
or had refused to perform his part of contract. Where the terms
and condition of the agreement are expressed in clear terms, an
inference can be drawn that the parties after due diligence with
proper application of mind entered into a valid, lawful and a
concluded contract. According to Section 19 the Specific Relief Act,
CA.No.1005 of 2019 -:6:-

person suing for specific performance of contract may also ask for
compensation for its breach either in addition to or in substitution
for such performance. If court decides that specific performance
ought not to be granted, it may grant compensation and in case,
the court decides that specific performance ought to be granted
but not sufficient to satisfy the justice of the case then court may
also grant compensation.

10. In the present controversy, the niceties of Section 20 are also

very crucial which elucidate that a contract otherwise proper to be
specifically enforced, may be thus enforced, though a sum be
named in it as the amount to be paid in the case of its breach and
the party in default willing to pay the same. In this backdrop a
party to a contract for the sale of immovable property should not
be allowed to evade specific performance merely because the
agreement provides the penalty to be paid on default. In the same
context, this court rendered the judgment in the case of Syed Arif
Shah vs. Abdul Hakeem Qureshi (PLD 1991 SC 905) and held as
under:-

“…. there is legal presumption in view of Explanation to

section 12 that the breach of a contract to transfer an
immovable property cannot be adequately relieved by
compensation in money. This initial presumption is not
dislodged by the factum that under the sale agreement, a sum
is named as the amount of liquidated damages in case the
contract is not performed. The burden to dislodge the above
legal presumption is on the person who avers contrary to it. It
was further held that the jurisdiction to decree specific
performance is discretionary and the Court is not bound to
grant such relief merely because it is lawful. However, the
discretion of the Court is not arbitrary but sound and
reasonable and is to be guided by judicial principles which are
amenable to correction by a Court of appeal”.

Halsbury’s Laws of England, Second Edition, Volume XXXI,

Part-II “Limits of the Jurisdiction”, Paragraph 373 also
enlightened the raison d'être of penalty clause as under:-

“373 Where the contract contains a stipulation that in the event

of non-performance a certain sum of money shall be paid, that
fact is not in itself decisive in considering whether or not specific
performance should be granted. Nor does the distinction between
penalty and liquidated damages (q) affect the answer to this
question (r). The answer is to be found by considering the
CA.No.1005 of 2019 -:7:-

intention of the parties, that is, whether the party bound to

performance has an alternative choice given to him by the
contract, to perform or to pay the agreed sum, or whether he is
bound to do a certain thing with a penal sum or sum by way of
liquidated damages attached as security (s). In the latter case the
Court, notwithstanding the penal clause, enforces performance if
the contract be such that without the penal clause it would have
been proper for specific performance.”

(q) For an explanation of this distinction, see titles Bonds,

Vol.III., p.110; Damages, Vol.X., pp.141 et seq., see also
titles Building Contracts, Engineers and Architects, Vol.III.,
PP.279 et seq., 292, 293; Master and Servants, Vol. XXII.,
pp.161, 162; Shipping and Navigation, Vol. XXX., p.361
(Charter-party). (r) London City) v. Pugh (1927), 4 Bro. Parl.
Cas.395; 17 Digest 404, 2134; Webb v. Clark (1782), I
Fonblanque, Treatise of Equity, 154; 2 Digest 19, 112;
French v. Macale (1842), 2 Dr. & War. 269; 42 Digest 446,
180 i, Coles vs. Sims (1854), 5 De. G.M. C.1; 17 Digest 402,
2116; Carden v. Butler (1832), Hayes & Jo.112; Bird v.
Lake (1863), I Hem. & M.111; 17 Digest 365, 1757; Bray v.
Fogarty (1870), 4 I.R.Eg.544; 17 Digest 149, p. (s) French v.
Macale, Supra; Coles v. Sims, Supra; Roper v.
Bartholomew, Butler v. Bartholomew (1823), 12 Price, 797,
821; 17 Digest 402, 2114; and see titles Deeds and Other
Instruments, Vol.X., pp.325-327; Equity, Vol.XIII., pp.189,
190.

In the case of Ranger v. Great Western Rail Co.

[Reported as 5 H.L. Cas. 72; 24 L.T.O. S. 22; 18 Jur. 795; 10
E.R.824], Lord Cranworth held as under:-

“There is no doubt that where the doing of any particular act is

secured by a penalty, a court of equity is in general anxious to treat
the penalty as being merely a mode of securing the due performance
of the act contracted to be done and not as a sum of money really
intended to be paid. On the other hand, it is certainly open to parties
who are entering into contracts to stipulate that, on failure to
perform what has been agreed to be done, a fixed sum shall be paid
by way of compensation. Whether a sum so fixed is to be considered
as merely in the nature of liquidated damages, is often a question of
great nicety and difficulty. I am not sure that benefits has, on the
whole, resulted from the struggles which courts, both of law and
equity have made to relieve contracting parties from payments which
they have bound themselves to make by way of penalty. Such a
course may have been very reasonable and useful where the damage
resulting from the violation of the contract is capable of being exactly
measured, but whenever the quantum of damage is in its nature
uncertain and the due performance of it has been secured, or
purports to have been secured, by a penalty, it might, perhaps, have
been safer and more convenient to have always understood the
parties as meaning what their language imports namely, that on
failure to perform the contract, the stipulated penalty should be
paid. But this has not always been the doctrine of the courts. The
distinction between a penalty and a sum fixed as the conventional
amount of damages is too well established to be now called in
question, however difficult it may be to say in any particular case
under which head the stipulation is to be classed. I shall presently
have occasion to state that the sums in this contract, made payable
under the name of penalties, are to be treated as liquidated
damages, and not as penalties to secure something unliquidated.”
CA.No.1005 of 2019 -:8:-

11. The constituent of a supplication as bona fide purchaser

against a valuable consideration without notice is coupled with a
strict proof. According to Article 117 of Qanun-e-Shahadat Order,
1984, a person desires any court to give judgment as to any legal
right or liability, burden lies on him to prove that those facts exist.
Whereas under Article 119 of QSO the burden of proof as to any
particular fact lies on that person who wishes the court to believe
in its existence, unless it is provided by any law that the proof of
that fact shall lie on any particular person. It is most relevant for
us to discuss the nomenclature and classification of Section 27 of
the Specific Relief Act which is hooked up and connected to the
relief of specific performance against parties and persons claiming
under them by subsequent title. Consistent with this section,
specific performance of a contract may be enforced against any
person claiming title subsequently to the contract, except a
transferee for value who has paid his money in good faith and
without notice of the original contract. Mere denial by the
subsequent vendee that he had no knowledge of the prior
agreement would not enough to discharge his burden of proof. It is
also to be proved by the subsequent vendee that he acted in good
faith and after due diligence entered into an agreement to sell. The
9th Edition of Black’s Law Dictionary (page 1355) defines
a “bona fide purchaser” as “one who buys something for value
without notice of another’s claim to the property and without actual
or constructive notice of any defects in or infirmities, claims or
equities against the seller’s title; one who has in good faith paid
valuable consideration for property without notice of prior adverse
claims”.

12. A subsequent vendee avowing bona fide intention cannot be

absolved from making some cursory investigation to the title of the
vendor which may include but not limited to invite public
objections through public notices in order to articulate that there
was no deception or fouled intention to move in the transaction
and he acted in good faith or with bona fide intention without
knowledge or notice of earlier sale agreement at the time of his
transaction. He proceeded as a man of ordinary prudence in
CA.No.1005 of 2019 -:9:-

making inquiries anticipated as purchaser before acquiring a

title of the property. In the case of Hafiz Tassaduq Hussain v.
Lal Khatoon (PLD 2011 SC 296), this court held as under:-

“5. Be that as it may, the subsequent vendee thus has to

discharge the initial onus as follows:--

(1) that he acquired the property for due consideration and

thus is a transferee for value, meaning thereby that his
purchase is for the price paid to the vendor and not otherwise.

(2) there was no dishonesty of purpose or tainted intention to

enter into the transaction which shall settle that he acted in
good faith or with bona fide;

(3) he had no knowledge or the notice of the original sale

agreement between the plaintiff and the vendor at the time of
his transaction with the later.

From the above it is depicted that the section merely enacts

the English equitable rule which allows later legal title to
prevail over an equitable interest in case of bona fide
purchaser for value without notice (emphases supplied). And
this principle has to be kept in view by the Courts while
analyzing and' appreciating the evidence on the record for the
discharge of the requisite burden.

7. The second ingredient "good faith" is the term which reflects

the state of mind and according to section 3(20) of the General
Clauses Act, 1897 "a thing shall be deemed to be done in 'good
faith' where it is in fact done honestly, whether it is done
negligently or not". While interpreting this, it was held in
Nannu Mal v. Rani Chander (AIR 1931 All 277 (FB)) that good
faith as defined above is equivalent to honesty of dealing
and does not entail upon the purchaser the necessity of
searching the registry, even assuming that there were facts
indicative of negligence in investigating title, that by itself was
not predicative of a lack of bona fides. Therefore, the second
condition shall stand settled if the subsequent vendee has
acted as a man of ordinary prudence in making inquiries
expected from a purchaser who wants to acquire a good title
for the price/value he is paying. This may include the
checking of the Revenue Record or obtain the copies thereof to
verify about the title of the vendor or any third party in right,
interest or charge over the property or any endorsement in
such record about any pending litigation or an injunctive
order etc; this may be a good and adequate exercise of
investigative process, in case of rural/agriculture property.
And for the same purpose, regarding urban property, the
Excise and Taxation record may be examined coupled with
the verification and obtaining the original documents of title
from the vendor, if those are available. However, the
subsequent vendee is not obliged to run from the pillar to post
in conducting rowing and fishing inquiries, to ascertain if a
third party has any interest etc. in the property which
otherwise is visibly lacking. But if there exist some overt,
prominent and conspicuous indicators about the third party
CA.No.1005 of 2019 -:10:-

interest, which are so patently noticeable and manifest that

those could not and should not be missed and ignored by a
purchaser, such as the possession not with the vendor but
someone else, who if approached or its nature investigated
would lead to discover such interest, the purchaser is obliged
to probe about it, otherwise he may not be able to take resort
of the noted equitable rule.”

13. At this moment, we would also like to accentuate on Section 55

of the Transfer of Property Act which germane to the rights and
liabilities of buyer and seller. According to this section, the seller is
inter alia bound to answer to the best of his information all
relevant questions put to him by the buyer in respect to the
property or the title thereto but here the entire deal seems to be
collusive and the conduct shows that subsequent vendee enticed
the vendor with better offer and the vendor under the temptation
to realize better price, violated the previous agreement and transfer
the land through mutation in a hurried manner without waiting
the cut-off date mentioned in the previous agreement. The
subsequent buyer/appellants though pleaded the transfer on the
basis of mutation entry but in trial court they failed to put forward
any evidence of inviting any objections before deal either through
public notice/announcement or any other inquiry or verification
made by them as part of due diligence. On the other hand, the
evidence led in the trial court reveals that Muhammad Siddique
(PW-3) was in cultivating possession of the suit land. Gulzar
Ahmed (DW-1) admitted in his cross examination that when they
purchased the suit land it was being cultivated by Muhammad
Siddique (PW-3) and the land was adjacent to their poultry from.
The person Muhammad Siddique was also witness to the
agreement to sell. Nothing said for any verification if made. Where
a person claims to be a transferee for the value without notice of
the original contract the burden lies upon him to prove that he
fulfills that character. The question of good faith is always a
question of fact which depends upon the facts and circumstances
of each case. The utmost important ingredient of Section 27 (b) is
the lack of knowledge or the notice of the subsequent vendee about
the original contract. The initial onus is on the subsequent
vendee and once it is discharged, then burden will shift on the
plaintiff to prove that the subsequent vendee had the notice of
CA.No.1005 of 2019 -:11:-

his sale agreement; the subsequent transaction is without

passing of the due consideration; it is a colourable or a
fraudulent transaction with dishonesty by the vendor and the
subsequent vendee in order to cause prejudice his rights under
the sale agreement. The first appellate court conscientiously
considered the evidence where the appellants failed to prove their
plea as bona fide purchaser for value without notice and the high
court in second appeal has also gauged and evaluated the entire
evidence properly and rightly maintained the judgment of first
appellate court.

14. As a result of above discussion, we do not find any justification

to interfere in the impugned judgment. The civil appeal is
dismissed.

ACJ

JUDGE

JUDGE
Islamabad, the
20th August, 2021
Approved for reporting.