Stereo. H C J D A 38.

Judgment Sheet
IN THE LAHORE HIGH COURT, LAHORE
JUDICIAL DEPARTMENT

C.R. No.76121 of 2022

Muhammad Ali Housing Scheme, etc.

Versus

Kamran Latif, etc.

JUDGMENT

Date of Hearing 30.05.2023

For the petitioners Mr. Imran Ali, Advocate
For Respondents. Malik Liaqat Ali Raj, Advocate.

Raheel Kamran J:- The petitioners have assailed the

judgment and decree dated 17.10.2022 passed by the learned
Additional District Judge, Faisalabad whereby suit filed by
respondent No.1 was decreed while allowing his appeal.
2. Brief facts of the case are that respondent No.1/plaintiff
instituted a suit for confirmation of possession through specific
performance of agreement to sell alleging therein that the
petitioners developed a housing scheme with the name and style
of Muhammad Ali Housing Scheme, situated at Chak
No.222/RB, Faisalabad and respondent No.1 purchased plot
No.134/C, measuring 6-Marlas 1-Sarsai, 2-Sqft from him
against the consideration of Rs.2,447,407/- in presence of the
witnesses, out of which an amount of Rs.489,481/- was paid as
earnest money and possession was delivered and it was settled
that remaining payment would be made through installments. It
was further averred in the plaint that the petitioners got
sanctioned the site plan and with their permission respondent
No.1 raised construction over the plot. It was also stated in the
plaint that respondent No.1/plaintiff paid all installments as per
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schedule making payment of an amount of Rs.1,957,916/- out of

the total consideration and was ready to pay the remaining sale
consideration of an amount of Rs.489,491/-, however, the
petitioners did not make any development in the society as per
their promise rather they sent a notice dated 21.06.2018 to
respondent No.1/plaintiff to make payment of extra land. The
petitioners-defendants contested the said suit by filing written
statement while controverting the stance of respondent No.1-
plaintiff. It was inter alia averred in the written statement that
respondent No.1-plaintiff committed default in the payment of
7th and 8th installments for an amount of Rs.489,491/- and was
liable to late payment charges under clause 15 of the
agreement/allotment letter amounting to Rs.126,962/- as on
14.09.2018. Prayer was made therein for dismissal of the suit.
Out of divergent pleadings of the parties, as many as five issues
were framed. The respondent-plaintiff deposited remaining
installments/consideration in the trial Court vide order dated
26.08.2019. After recording evidence of the parties and hearing
their counsels, the suit was dismissed by the trial Court vide
judgment and decree dated 08.12.2021. Feeling aggrieved,
respondent No.1 preferred appeal there-against and the same
was accepted by the Appellate Court while decreeing his suit
vide impugned judgment and decree dated 17.10.2022 to the
following effect: -
“12. ……….The plaintiff has categorically stated in his
plaint that he has purchased suit property (detail fully been
given in the head note of the plaint) from the defendant against
consideration of Rs.24,47,407/- and he has already paid
Rs.19,57,916/- to the defendants while submitting their
statements leveled an allegation against the plaintiff/appellant
that the plaintiff/appellant has made default regarding
payment of remaining installments of the consideration
amount; due to that reason, the defendants are entitled to
receive late payment surcharge from the plaintiff/appellant. In
these circumstances, execution of an agreement to sell in
shape of allotment latter Exh.P1 has frankly been admitted by
the defendants through their written statement; whereas, the
appellant/plaintiff while showing his good intention has
already deposited remaining installments/consideration
amount in the learned trial court vide its order dated
26.08.2019. Now question arises as to whether the defendants
are entitled to receive late payment surcharge from the
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plaintiff/appellant, the Hon’ble Lahore High Court, Lahore

through its esteemed judgment PLD 2015 CLD 1439 has
answered this question and held that as such kind of late
payment surcharge is un-Islamic and illegal. This court has
further gone through contents of agreement to sell/allotment
latter dated 27.07.2015 Exh.P1 and it has observed that time
was not essence of the contract rather it has provided penal
clause of late payment surcharge which is otherwise is illegal
and un-Islamic. When possession of the suit property has
already been handed over to the plaintiff and he has raised
constructions upon the said suit property; the
appellant/plaintiff is entitled to discretionary relief of specific
performance as he has already paid entire consideration
amount to the defendants and in the learned trial court vide its
order dated 26.08.2019. In these circumstances, this court is
of considered view that the plaintiff has successfully proved
this issue; hence, this issue is decided in favour of the
plaintiff.”

3. Learned counsel for the petitioner contends that the

petitioner was entitled to late payment surcharge in terms of
clause-15 of the agreement/allotment letter issued to respondent
No.1 which has been disregarded by the Appellate Court while
erroneously relying on judgment of this Court in the case of
“Muhammad Farooq Azam v. Bank Al-Falah Limited and
others” (2015 CLD 1439). According to him, the said judgment
is distinguishable on facts inasmuch as the same related to
banking transaction whereas in the instant case late payment
charges were payable under Section 74 of the Contract Act,
1872. He finally contends that even otherwise the suit of
respondent No.1 could not be decreed in view of the provisions
of Section 24(b) of the Specific Relief Act, 1877 as respondent
failed to fulfil his part of performance as per agreement to
sell/allotment letter which was an admitted fact.
4. Conversely, learned counsel for respondent No.1
contends that the respondent in this case had paid an amount of
Rs.1,957,916/- to the petitioners out of the sale consideration
and remaining amount of Rs.489,491/- was paid pursuant to the
order passed by the trial Court. He further contends that dispute
in this case is essentially regarding late payment charges for
which the petitioners issued notice dated 15.11.2017 while
claiming payable amount to be Rs.51,553/- in terms of clause 15
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of the agreement/allotment letter. He maintains that possession

of the suit property had already been delivered to respondent
No.1, therefore, the contract stood substantially performed on
his part. He finally contends that clause 15 of the
agreement/allotment letter was not enforceable against the
respondent/plaintiff as such but subject to determination by the
trial Court of reasonable compensation not exceeding the
amount so specified therein in terms of Section 74 of the
Contract Act, 1872 which exercise was never carried out by the
courts below.
5. Heard. Available record perused with assistance of the
parties.
6. There is legal presumption in view of explanation to
section 12 of the Specific Relief Act, 1877 that the breach of
contract to transfer an immovable property cannot be adequately
relieved by compensation in money. The burden to dislodge the
above legal presumption is on the one who avers contrary to it.
No doubt the jurisdiction to decree specific performance is
discretionary, however, the exercise of such discretion is not
arbitrary but reasonable and is guided by the judicial principles.
In the suit for specific performance, if plaintiff makes any
express averment in the pleadings of his readiness and
willingness to perform his part of the contract and deposits the
balance sale price as per direction of the Court then it would not
be deemed to be his incapability of performing his part of the
contract as envisaged under section 24(b) of the Specific Relief
Act, 1877 rendering the contract non-enforceable, the suit
cannot be dismissed. Reliance in this regard is placed on the
case of Muhammad Asif Awan vs. Dawood Khan and others
(2021 SCMR 1270). This Court finds the reasons recorded by
the Appellate Court in paragraph No.12 of the impugned
judgment, reproduced herein above, to be unexceptionable in so
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far as the decree for specific performance cannot be refused to

the respondent-plaintiff in the facts and circumstances of the
instant case. The only question, however, is whether respondent
No.1 is bound to pay the late payment charges on account of his
failure to pay the installments on agreed dates? In this regard,
the trial Court framed issue No.3, which is reproduced
hereunder: -

“3. Whether the defendants are entitled to

receive late payment charges? OPD”

The trial Court, vide its judgment dated 08.12.2021, decided the
said issue in favour of the petitioners whereas the Appellate
Court, vide impugned judgment, decided it against them while
finding clause 15 of the agreement/allotment letter regarding
surcharge against the injunctions of Islam.
7. It is noteworthy that clause (2) of Article 175 of the
Constitution of the Islamic Republic of Pakistan, 1973 (“the
Constitution”) provides that no Court shall have any jurisdiction
save as is or may be conferred on it by the Constitution or by or
under any law. The jurisdiction to declare any law or provision
of law repugnant to the injunctions of Islam, as laid in the Holy
Quran and the Sunnah of the Holy Prophet, is vested in the
Federal Shariat Court under Article 203D of the Constitution
whereas Article 203G of the Constitution imposes a bar upon
any other Court or Tribunal including the Supreme Court, except
for appeal before the Shariat Appellate Bench of the Supreme
Court under Article 203F, to entertain proceedings or to exercise
any power or jurisdiction in respect of any matter within the
power or jurisdiction of the Shariat Court. The Appellate Court
clearly lacked jurisdiction to declare any provision of the
agreement/allotment letter to be repugnant to the injunctions of
Islam. Validity and enforceability of any such provision is to be
adjudicated on the touchstone of section 74 of the Contract Act,
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1872. For that reason, the Appellate Court has erroneously

relied upon the judgment of this Court in the case of Muhammad
Farooq Azam v. Bank Al-Falah Limited and others (2015 CLD
1439) to declare clause 15 of the agreement/allotment letter to
be un-Islamic and unenforceable. Additionally, the afore-
mentioned judgment was rendered in a banking case, which
manifestly has no relevance in the instant case.
8. Section 74 of the Contract Act, 1872 deals with a contract
which provides the amount of compensation in the form of
penalty or liquidated damages in case of breach. It postulates
that in such cases, the party complaining of the breach, whether
or not actual damage or loss is proved to have been caused
thereby to receive from the party who has broken the contract,
reasonable compensation not exceeding the amount so named or
as the case may be the penalty stipulated for the breach. In the
case of Province of West Pakistan v. Mistri Patel and Co. (PLD
1969 Supreme Court 80), it has been held by the Supreme
Court:
“The award of compensation by the Court under section
74 of the Contract Act, will depend upon its finding as to
what in the facts and circumstances of the case is
reasonable compensation subject to the limit of the amount
mentioned in the contract.”

It has been further held by the Supreme Court of Pakistan in the

case of Khanzada Muhammad Abdul Haq Khan Khatak and Co.
vs. WAPDA (1991 SCMR 1436):
“Where an amount is mentioned in the contract as penalty
payable on breach of contract, the parties are entitled to
recover actual damages not exceeding the amount mentioned
in the contract but in case of liquidated damages, a party is
entitled to recover the same from the opposite party in case
of breach of contract. However, where the Court considers
that the amount mentioned in the contract as liquidated
damages is oppressive, or highly penal in nature the Court
may refrain to grant such amount and itself determine the
amount which is reasonable in the circumstances of a
particular case.” (Emphasis supplied by this Court)
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9. Clause 15 of the agreement/allotment letter stipulates late

payment charges of Rs.1000/- per day for default in the payment
of installment due on 10th of each month, otherwise the plot was
not to be transferred. The aforementioned clause manifestly
postulates compensation of late payment charges of Rs.1000/-
per day at a uniform rate regardless of the differences in the total
amount of default in each case. Undisputedly, there was delay in
the payment of 7th and 8th installments on part of respondent
No.1 despite delivery of possession of the plot in question to
him. The petitioners are entitled to reasonable late payment
charges for the period of default in the payment of afore-
mentioned installments. This Court, however, finds the amount
of compensation specified in clause 15 ibid, to be oppressive and
highly penal in the facts and circumstances of instant case which
cannot be allowed to the petitioners inasmuch as undisputedly
respondent No.1 had paid well in time the first six installments
and the delay was in relation to remaining two installments of
Rs.489,491/- constituting 25% of the sale consideration for
which late payment charges at the rate of Rs.1000/- per day (i.e.
Rs.365,000/- per annum) are manifestly extortionate. No other
reasonable amount of compensation has been claimed in the
written statement and established by the petitioners in the instant
case. Since there was no determination by the courts below of
reasonable compensation, this Court deems it appropriate to
hold the petitioners entitled to compensation in total of
Rs.150,000/- for delay in the payment of last two installments
which were deposited in the trial Court by respondent No.1 vide
order dated 26.08.2019. The above figure of compensation is an
approximation arrived at taking into account the State Bank of
Pakistan’s interest rates at the relevant time.
10. For the foregoing reasons, the titled civil revision is
disposed of while maintaining the impugned judgment and
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decree of specific performance passed by the Appellate Court in

favour of respondent No.1 and against the petitioners subject to
payment of compensation of late payment charges by respondent
No.1 to the petitioners as mentioned above. There shall be no
order as to costs.

(RAHEEL KAMRAN)
JUDGE

Approved for reporting.

Judge

*Asim Shahzad*