ZAKARIA A. BAWAN Versus CITY DPUTY COLLECTOR

By an agreement in writing dated 25‑9‑1969 Investment Corporation of Pakistan, the defendant No. 2 herein, hereinafter referred to as the I. C. P. agreed to sell and the plaintiff agreed to purchase 30,000 ordinary shares of Rs. 10.011 each of R. R. Jute' Mills Ltd., a company having its registered office at Dacca, East Pakistan, now Bangladesh, at the price of Rs. 10.75 per share. The Jute Mills together with all assets of the said company are situate in Bangla Desh. The agreement recites that the I. C. P. was likely to sell out the said shares but as the plaintiff vendee was desirous of purchasing the same on 31st October 1971, the I. C. P. at the request of the plaintiff agreed to retain these shares for that period and on expiry of that period to sell it to the plaintiff vendee. The agreement provided that until 31st October 1911, the plaintiff will pay to I. C. P. on the 31st day of October in each year an amount equivalent to 12 % of the total nominal amount of the said shares as Agreed Minimum Dividend if the I. C. P. had not already received any dividend in that year in respect of the said shares. If on‑ the other hand the I. C. P. had recieved from the company dividend in excess of the Agreed Minimum Dividend of 12 % the excess was to be adjusted against the Agreed Sale Price of the said shares. In the event of the failure of the plaintiff to pay the full amount of the Agreed Minimum Dividend on the date prescribed the plaintiff became liable to pay to the I. C. P. interest at 3 % above bank interest with a minimum of 9 % per annum from each day of default. Clause 6 of the agreement provided that on 31st of October 1971, the plaintiff shall deposit with the I. C. P. the Agreed Sale Price of the said shares alongwith the Agreed Minimum Dividend for the second year and transfer deed duly stamped in respect of the said shares and on its receipt the I. C. P. shall cause the transfer deed to be executed on its behalf and deliver to the plaintiff alongwith certificates of the said shares. The responsibility for getting the transfer deed registered was that of the plaintiff. The amount due and payable by the plaintiff to I. C. P. towards Agreed Minimum Dividend and/or Agreed Sale Price was guaranteed by M/s. R. R. Textile Mills Ltd.

The I. C. P. by their letters dated 16‑8‑1971 Exh. 6, 23‑7‑1971 Exh. 7, and 30‑10‑1971 Exh. 8, demanded a total sum of Rs. 24,675.00 towards the Agreed Minimum Dividend due as on 31‑10‑1970 and the interest payable thereon. By its letter dated 4th March 1972, Exh. 9, the plaintiff was called upon to pay in addition to the aforesaid sum of Rs. 24,675.00. Agreed Minimum Dividend of Rs. 37,500 00 due and payable by the plaintiff as on 31‑10‑1911 and also the Agreed Sale price of 30,000 shares of R. R. Jute Mills Ltd. at Rs. 10.75 per share amounting to Rs. 3 22.500.00. The I. C. P also claimed interest at 9 Y, per annum, both on the Agreed Minimum Dividend and the Agreed Sale Price. In reply dated 13th March 1972, Exh. 20, made on behalf of the plaintiff time was sought as the plaintiff was out of country. Ultimately, the plaintiff took up the position that the agreement bad become frustrated by reason of the events in East Pakistan during the year 1971 and in the alternative, the terms of the agreement became and were impossible of performance. This was followed by a legal notice from the 1. C. P. to the plaintiff dated 16‑9‑1972, Exh. 21, in which final request was made to the plaintiff to make the payment of a total sum of Rs. 4,15,559.47 within 15 days failing which It w" stated that the I. C. P. shall be left with no alternative but "to dispose of your, 30, 000 shares in R. R. Jute Mills Ltd., in the open market and realize their dues, and in case the proceeds from the sale of the shares were insufficient they will forward the case to the District Collector for recovery of the arrears of land revenue for the balance amount outstanding." The plaintiff in his reply, Exh. 22, sought copy of the agreement as his copy was kept at Dacca and was not available to him and the contention was repeated that the agreement had become frustrated. There is further correspondence between the parties to the same effect and as the plaintiff failed to make good the demand to the I. C. P., the latter moved the Collector for recovery of its dues as arrears of land revenue. The City Deputy Collector vide his notice dated 17‑8‑1973 under section 81 of the Land Revenue Act, 1967 called upon the plaintiff to pay a sum of Rs. 4,2 7,740.00 due and payable to I. C. P. as arrears. The plaintiff was further called upon to pay a sum of Rs. 8,474.80 as collection charges and notice fee of Rs. 1 in the name of the City Deputy Collector, Karachi. It is in respect of this notice that the plaintiff in this suit seeks a declaration as being without lawful authority and of no legal effect a d a permanent and a temporary injunction restraining the City Deputy Collector and the I. C. P. from claiming the sums mentioned in the impugned notice of the City Deputy Collector as arrears of land revenue or otherwise and restraining the defendants from taking compulsory proceedings or any other proceedings against the plaintiff as threatened in the impugned notice.

3. Shortly stated the defence of the I. C. P. is that the demand made by them in their letter dated 4‑3 1972 are dues within the meaning of section 31 of the I. C. P. Ordinance, 1966 and, therefore, recoverable as arrears of land revenue. In support of its contention that these are "dues" the case of the I. C. P. is that there was a sale of the shares in question as distinct from an agreement to sell as on the date of the agreement dated 21‑5‑1969 or in the alternative on 31‑10‑1971 on which date the plaintiff became a debtor to the I. C. P. both for the ascertained and fixed, Agreed Minimum Dividend and the Agreed Price and interest thereon and, therefore, recoverable from the plaintiff as arrears of land revenue by reason of the I. C. P. Ordinance, 1966, the Land Revenue Act, 1890 and the West Pakistan Land Revenue Act, 1967 and the rules made thereunder.

4. It is next contended on behalf of I. C. P. that 'the jurisdiction of this Court is barred under section 31 of the I. C. P. Ordinance read with section 4 of the Revenue Recovery Act, 1890 and the West Pakistan Land Revenue Act, 1967 and that the injunction cannot be granted against acts lawfully done.

5. Consent issues adopted by the Court in this case read as follows :‑

(1) Can the claim of the defendant No. 2 be recovered as arrears of land revenue ?

(2) Has the defendant No. 2's claim been fixed, determined as estab lished ?

(3) Whether the Agreement dated 21‑5‑1969 was an agreement to sell or a sale ?

(4) Whether the said agreement became an executed contract? If so, from which date and to what effect ?

(5) Was the said Agreement frustrated and became impossible of performance‑?

(6) Has the property/title in the shares, which are subject matter of the suit, been transferred to the plaintiff ? if so from what date ?

(7) Is the defendant‑No. 2's claim for interest on the alleged sale price of the shares warranted by clause 4(b) of the Agreement as contended by the defendant No. 2 ?

(8) Did the parties contemplate on or about 21‑5‑1969 that there would be rebellion in East Pakistan. followed by the invasion of East Pakistan, followed by emergence of Bangla Desh ?

(9) Were the events that occurred in 1971, particularly . from April to December 1971, in East Pakistan of fundamental nature ?

(10) Has this Hon'ble Court jurisdiction to entertain the present suit ?

(11) Is the suit barred under section 4 of the Revenue Recovery Act, 1890 and the West Pakistan Land Revenue Act; 1967 ?"

6. Issues Nos. I and 2.‑Theie issues being related may be answered together. Mr. Haider Mota, the learned counsel for the plaintiff contended that in order to enable I. C. P. to recover the amount claimed as arrears of land revenue the indispensable a pre‑requisite was that the amount claimed must be "dues", and to lie "dues" they must be determined and established in accordance with law.

7. It was next argued that in the absence of the provisions in the 1. C. P. Ordinance providing for determination or establishment of its dues, only such amounts would be recoverable as land revenue by the I. C. P. as are admitted or in respect of which the I. C. P. has obtained a decree from a ,competent Court of law. The learned counsel invited my attention to several decisions of this Court and the first is reported as Government of West Pakistan v. Abdul Majid and another (P L D 1963 Kar. 653). In this case the Sind Foodgrains Nationalization Board attempted to recover a certain sum from the plaintiff as being due to them under the provisions of section 6 of the Foodgrains Nationalization Board Act, 1951 which reads as follows

"Notwithstanding anything contained in any law for the time being in force, the Government may recover the dues of the Board from the Agents as arrears of land revenue as provided by the Sind Land Revenue Code, 1879."

This recovery was successfully challenged by the plaintiff in a suit. In the appeal, which was dismissed, the Division Bench relying on an unreported judg ment in Suit No. 169 of 1953 held that condition precedent to the application of section 6 of the Foodgrains Nationalisation Board Act, 1951 which dealt with recovery of the dues of the Board from its agents as arrears of land Revenue, was that there should be existing dues which are determined and established. The Board had, in this case, relied upon a statement of amount which showed that a specified sum was recoverable from the plaintiff but this amount was disputed and denied by the plaintiff: The Court repelled the contention on behalf of the Board that in these circumstances the state ment of account amounted to a certificate as envisaged by section 149'of the Land Revenue Code or section 46 of the Income‑tax Act: The Court further came to the conclusion that inasmuch as the Foodgrains, Nationaliza tion Board Act, 1951 omitted to provide for the determination of its dues,. unlike the provision in section 149 Land Revenue Code and section 46(2) of the Income‑tax Act, there was a lacuna in the law and, therefore, the Board could not recover as arrears of land revenue its dues from its agents and in the absence of a provision in the said Act for determination of its dues from an agent, the claim of the Board against the agent would at best be a claim against the agent and not dues payable by the agent. .

8. The next case relied upon is Province of West Pakistan v. Muhammad Ayub Khuhro (P L D 1967 Kar. 673). In this case a certain sum of money, being arrears of rent of a house in occupation of the defendant, was sought to be recovered as arrears of land revenue under the West Pakistan Government Dues- Recovery Ordinance, 1962 as "ascertained dues payable to the Government and on behalf of the Government." It was contended that any claim or demand notified under section 3 of the said Ordinance, reproduced hereunder immediately . became due and recoverable by the Government from the defendant like arrears of land revenue :‑

"3 (i) Government may, by notification declare that any dues or class of dues recoverable by Government shall be recoverable from the: defaulters as if such dues were arrears of land revenue.

(2) On the publication of a notification under subsection (1) any such dues shall be recoverable under the Revenue Recoveries Act, 1890 (Act I of 1890) as arrears of land revenue."

8‑A. The learned Judge referred to the unreported decisions of this Court in Suit No. 169 of 1953 and the Letters Patent Appeal from that judgment wherein the question for decision was whether an amount claimed by the Sind Foodgrains Nationalization Board could, by virtue of section 6 of the Foodgrains Nationalisation Act, 1951 be treated as an amount due and recoverable as land revenue. The Court reaffirmed the view that that aforesaid provision provided for the manner of the recovery of dues only and so long as the claim made by the Board was not converted into established dues, the section was not meant to be utilized. The Court further reaffirmed the view that the Board could not adjudicate upon their own claims more so, as the law did not provide for determination of its dues for otherwise the party with an adverse interest would be the judge to decide the disputes between the parties a situation should be avoided. For the determination of the word "dues" the learned Judges relied on the definition., in Wharton's Law Lexicon as "that which law or justice requires to be paid or done" and concluded that there was vast difference between the meaning of the words claim and dues and before a claim can ripen into `dues' a determination has to be reached in accordance with law of Justice. The other decision to which the learned counsel Mr. Mansoor Ahmed Khan invited my attention is the case of State Bank of Pakistan v Karachi Development Authority (P L D 1967 Kar. 216) wherein the Karachi Development Authority sought to recover certain amount under section 147‑A of the Karachi: Development Authority Order, 1957 which provided that all sums due to the Authority shall be recoverable as land revenue. The Court held that this provision only provided a method of recovery and that the section presumed. that the amount sought to be recovered by that method had been founds to be due and, therefore, Karachi Development Authority had first to get its claim duly adjudicated so that it assumes the form of dues.

9. On the basis of the aforesaid decisions Mr. Haider Mota stated that there was not only no determination or establishment of the I. C. P's claim against the plaintiff but as in Foodgrains Nationalisation Board Act, 1951 and the Karachi Development Authority Order no provision in the I. C. P. Ordinance for its determination or establishment and, therefore, only such amounts can be recovered by the I. C. P. as the arrears of land revenue as are admitted or in respect of which the I. C. P. has obtained a decree from a competent Court of law. The aforementioned decisions of this Court clearly support the learned counsel and unless, therefore, I come to the conclusion that the denial of the I. C. P's claim by the plaintiff was patently false I do not think that the I. C. P. could recover the amount in dispute as arrears of land revenue. The defences which have been raised in support of its denial of the claim made by tile I. C. P. are, prima facie, substantial. It is contended that the agreement in question as it purports to be is an agreement to sell and not sale; that the property in the goods, namely, the shares did not and could not pass to the plaintiff in view of the provisions contained in section 34(3) of the Companies Act; that this Court will take judicial notice of the event in East Pakistan in the unfortunate year 1971, which events it is alleged neither were nor could have been within the contemplation of the parties; that the 1. C. P. cannot even sue for price much less seek to remove it as dues under its Ordinance; that the purpose contemplated by the agreement was not mere delivery to the plaintiff of the paper scripts but script which effectively represented the stock in a Corporation. These contentions were, with matched ability, sought to be repelled by Mr. Mansoor Ahmad Khan the learned advocate for the 1. C. P. In these circumstances I will state not more than this that the defences raised by the plaintiff will, as and when the occasion arises. require serious consideration.

10. Mr. Mansoor Ahmed Khan the learned counsel for the I. C. P, sought to argue that the aforesaid decisions of this Court are open to question for two reasons. He firstly contended that this Court wrongly relied on a decision of the Supreme Court in the case of Abdul Latif v. Government of West Pakistan (PLD 1962 SC 384) and that the aforesaid decisions are not good law in view of the decision of the Supreme Court in the case of Mahboob Alam v. Province of Punjab and others (1973 SCMR 415). In the Karachi cases following observations of the Supreme Court in 1962 case were relied upon :‑

"A right construction of the Act can only be attained if its whole scope and object, together with an analysis of its wording and the circum stances in which it is enacted are taken into consideration. From art examination of the Land Revenue Act, it is apparent that it provides first a procedure for determination of land revenue and then comes the machinery for realization of such revenue. It is, therefore, manifest that before the operation of the machinery section for realisation of the arrears, the authority concerned must decide whether there is an arrear due or not."

In the above case certain sum of money was sought to be recovered from a treasury contractor, a public accountant as arrears of land revenue under section 4 of the Public Accountants' Default Act, 1850 without serving any show‑cause notice on him. It may be noted that it was not the case of the contractor that the law in question did not entrust to the authority, the Head Office to which the contractor belonged, the function of determining the liability and the Court had, therefore, no occasion to go into the question whether or not there was any such lacuna as was found in Foodgrains Nationalisation Board Act, 1951 and the Karachi Development Authority Order in the Karachi cases. This may be for the reason that the Act itself provided that the person at the Head Office to which a public accountant belonged may proceed against any such public accountant for any loss or defalcation in his account as if the amount thereof were arrears of land revenue due to the Government. Neither in the Karachi cases referred to above nor in the present case any such right has been given to the I. C. P. as was given to Head of office under Public Accountants' Default Act.

Even otherwise the relationship between the claimant and the defaulter, being analogous to employer and employee and where the employee is entrusted with public funds there was no occasion to examine any such alleged lacuna in the law. It would, therefore, not be correct to state that this case even by implication decides that it is unnecessary or there need not be in the authority claiming the amount, the power to determine the amount claimed or that such power is implied in such authority. The case proceeded on the bass that such authority was available with the Head of office but before its determination the public accountant to be affected by it should be heard. The observations of the Supreme Court referred to above were relied upon by the High Court only to show that the Land Revenue Act provided procedure, both for determination of land revenue and machinery for its realization.

11. The facts in the case of Mahboob Alam v. Province of Punjab as has been observed by Muhammad Gul. J., sere radically different from the case reported in P L D 1967 Kar. 673. The Court had no occasion to consider the definition of the word "dues" and proceeded on the basis that the only defence to the claim made by the department under the West Pakistan Government Dues Recovery Ordinance was that the petitioner held receipts showing Payment of the amount claimed from him and in spite of several opportunities given to him he‑ failed to produce‑,,these receipts. It would also appear from the judgment that the only contention raised was that the petitioner had not been given a show cause before his liability for the sum outstanding against him was determined, in support of which contention reliance was Placed on the aforesaid case of Abdul Latif v. Government of West Pakistan (PLD 1962 SC 384) but repelled on the ground that the contention was factually incorrect.

12 Mr. Haider Mota next contended that assuming that the I. C. P. under its Ordinance had the power to determine its alleged claim against the plaintiff and that it had so determined it such determination would be open to question on the ground that it was made without any notice to the plaintiff and without hearing him. That the petitioner was not heard in person before the demand was made against him by the 1. C. P. is not denied: At best what can be said on behalf of the I. C. P. is that before sending the papers to the City Deputy Collector for recovery of its dues the plaintiff had certainly been notified the I. C. P's claim and its intention to recover it as arrears of land revenue. But as was pointed out by Mr. Mota the determination bad proceeded these notices, and prior to it, no notice in the nature of a show cause was given to the plaintiff On the basis of principles laid down in Abdul Latif's case it follows that the impugned notice fails also on the ground that the plaintiff was not heard before the I. C. P. determined its claim against the plaintiff, assuming that the I. C. P, had the power to do so.

13. The impugned notice of the City Deputy Collector was also challenged on she ground that the amount claimed therein is even on the showing of the I. C. P to excess of the plaintiff's liability under agreement dated 21‑5‑1909. The amount claimed in the notice is Rs. 4,23,740.00 which is inclusive of the sum of Rs. 50,793.00 clamed by the 1. C. P. as interest at 9% on the Agreed Sale Price. In the Written Statement this interest was sought to be justified by reference to clause 4(b) of the agreement though that clause provides for interest on the Minimum Agreed Dividend only. Mr. Mansnor Ahmed Khan then relied on section I of the Interest Act. 1839 but this section only empowers the Court to allow interest. The impugned notice further seeks to recover an additional sum of Rs. 8,474.80 as 2 % collection charges in justification of which section 115‑A of the Land Revenue Act, 1967 was pressed into service. This section does not provide for recovery of any such charges from the claimant but on the other hand provides that the recovery charges shall be deducted from the amount claimed.

14. Mr. Mansoor Ahmed Khan contended that the amount sought to be recovered as‑arrears of land revenue is an amount admitted by the plaintiff: This is quite clearly incorrect. The first demand made by I. C. P. for the Agreed Price was on 4‑3‑ 1972 Exh. 9 in a reply to which Exh. 10, the plaintiff took up the position that the agreement bad frustrated. No doubt in his deposition the witness examined on behalf of the plaintiff stated that (he‑plaintiff would have paid the Agreed Minimum Dividend and the Agreed Price if the events in East Pakistan had not taken place, but this is again not an admission of liability as argued by Mr. Mansoor Ahmed Khan. Moreover, there is substance in the contention of Mr. Mota that the plaintiff's denial of liability is based on law, namely, frustration of the agreement and any admission contrary to law will not estop the plaintiff from denying from his liability.

15. My conclusion, therefore, is that under section 31 of the I. C. P. Ordinance only dues can be recovered as arrears of land revenue and since the dues are those which are determined and established only such amounts would be recoverable as land revenue as are admitted or established by a competent Court of law, and the present demand of the I. C. P. being neitber,1 the issue No. 1 is answered in favour of the plaintiff.

16. Issues Nos. 3, 4, S. 6, 8 and 9.‑The learned counsel for the plaintiff contended that these issues have been raised not with a view to seek their determination in these proceedings but to demonstrate that the claim of the 1. C. P. could not be said to be dues in terms found by me while deciding issues Nos. I and 2. It would in fact appear to be so on a perusal of reliefs claimed in the present suit. Mr. Mansoor Ahmed Khan the learned counsel for the I. C. P. stated that these issues must be determined by this Court for they have been specifically raised in the patties pleadings, I am however inclined to think that the scone of a suit is as wide as the reliefs claimed notwithstanding the fact that plaint may contain numerous allegations of fact or contentions of law. The Court will determine only such allegations to the pleadings of the parties which are necessary in relation to the relief claimed. In the present suit the plaintiff challenges the notice issued by the City Deputy Collector dated 17‑8‑1973 as without lawful authority and without legal effect and an injunction restraining the defendants from claiming the sums mentioned in this notice as arrears of land revenue or otherwise. Some argument was addressed on the connotation of the words "or otherwise" which according to Mr. Mansoor Ahmed Khan enlarged the scope of the suit but it would appear to me that these words "or otherwise" have to be read in conjunction with the relief for declaration. These words cannot and will not prevent the I. C. P. to institute a suit for recovery of the amount claimed as was quite clearly conceded by Mr. Mota. I am further of the view that these issues would certainly have become subject of determina tion if the I. C. P. had counter‑claimed, which is not the case here. As I have stated earlier the plaintiff had to raise various contentions relating to the agreement and his liability to pay the amount claimed by the I. C. P. to show that his denial was not only honest but prima facie, reasonable. The counsel for the parties have addressed to me very painstaking arguments but for reasons aforesaid, it is unnecessary for me to answer them. It will suffice to say that according to Mr. Mansoor Ahmed Khan, the agreement Exh. 5/1 should be read with the agreement Exh. 15, the Re‑payment and Performance Guarantee and so read became an executed and not executory agreement as on the date of its execution; that the property in the goods, the shares, passed in favour of the plaintiff in any event on 31st October 1971, or in alternatively it will be deemed to have passed onto the plaintiff on this day by reason of his failure to deposit the sale consideration and the‑ duly stamped transfer deed for the signature of the I. C. P. ; that by virtue of section 55(2) of the Sale of Goods Act, the I. C. P. was entitled to price irrespective of the fact that the property in the goods had not passed in favour of the plaintiff; that the plaintiff is estopped from denying that the property had passed in him; that the foreign occupation of East Pakistan did not take place until 17th December 1971 and the agreement in fact continued to be capable of specific performance even thereafter for the agreement had not only been made at Karachi but bad also to be performed at Karachi. For obvious reasons it would not be fair to comment upon these defences in this suit. It will suffice to say that the contentions raised by the learned counsel for the parties are substantial and without their determination in appropriate proceedings, the I. C. P's. claim cannot be said to be dues.

17. Issue No. 7.‑This issue has already been answered by me while dealing with issues Nos. 1 and 2. .

18. Issues Nos. 10 and 11.‑In support of his contention that this Court has no jurisdiction to entertain the present suit, Mr. Mansoor Ahmed Khan relied on section 4 of the Revenue Recovery Act, 1890 and section 172 of the West Pakistan Land Revenue Act, 1967. Section 4 of the Revenue Recovery Act, 1890 has, however, no application for two reasons. This section provides that when proceedings are taken for recovery of public demand by enforcement of process in other districts then those in which they become payable, the remedy available to the person denying his liability is to pay under protest the amount demanded and institute a suit in a civil Court for the repayment of the amount so paid. Moreover, the person from whom the recovery is sought to be made must he a person from whom the amount claimed is due and, therefore, if the amount is not due there would be no occasion to have recourse to the said Act. Coming to section 172 of the West Pakistan Land Revenue Act it bars the jurisdiction of civil Court in respect of any claim connected with or arising out of the collection by Government or the enforcement by Government of any process for the recovery of land revenue or any sum recoverable as arrears of land ‑revenue. In order, however, to succeed on this plea, it had to be established that the sum sought to he recovered by I. C. P. from plaintiff was on recoverable as an arrears of land revenue, and since my finding on issues Nos. 1 and 2 ii to the contrary the section will have no application to the facts of the present case. These issues are therefore, decided against the I. C. P.

19. The result is that the suit is decreed as prayed for.

K. B. A.

Suit decreed.