MUNICIPAL CORPORATION, FAISALABAD Versus SAEED AHMAD KHAN

MUHAMMAD ASADULLAH, J. ‑‑This judgment will dispose of the present appeal as also the cross‑objections filed by the respondent.

2. Contract for collection of octroi on behalf of the appellant, for the period from 1‑8‑1980 to 31‑7‑1981 was auctioned in favour of the respondent on 28‑6‑1980 after publishing notices regarding terms and conditions in various newspapers. The respondent was the highest bidder for a sum of Rs.6,92,00,000. According to the terms for the auction a sum of Rs.5,76,000 had to be deposited by each bidder before taking part in the auction. The said amount was deposited accordingly by the respondent vide Bank Draft dated 28‑6‑1980. According to another term the successful bidder had to pay 1% of the total auction money after the fall of hammer in his favour. Although the successful bidder could, while making the said deposit of 1% substract the sum of Rs.5,76,000 paid as earnest money yet the respondent issued a cheque for Rs.6,92,000 being 1% of the total amount of Rs.6,92,00,000. The cheque was accepted by the auction committee and was sent to the bank for encashment. The bank found an overwriting on the date of issue of the cheque inasmuch as in the figure 1980, the digits 80 had been overwritten on 79. They, therefore, returned the cheque on 29‑6‑1980 for obtaining full signatures of the respondent on the said overwriting. However, before the cheque was sent back for this purpose the Mayor of the appellant Corporation forfeited the earnest money amounting to Rs.5,76,000 deposited by the respondent before taking part in the auction. Consequently, the auction in favour of the respondent was also cancelled. Subsequently the contract was awarded to another person on a much lesser amount. The respondent filed the present suit for recovery of Rs.5,76,000 the earnest money plus Rs.80,516 as interest, totalling Rs.6,56,516. He alleged that the contract was illegally breached and cancelled by the appellant and his earnest money amounting to Rs.5,76,000 was illegally forfeited. The suit was contested by the appellant on the main ground that as the cheque issued by the respondent was returned back uncashed it was the respondent who had breached the contract and his contract was validly cancelled and the earnest money was rightly forfeited. They took certain legal objections as well. The learned trial Court framed the following issues:

(1) Whether the order of defendant dated 28‑6‑1980 forfeiting Rs.5,76,000 of the plaintiff is illegal and void and he is entitled to recover this amount from the former alongwith interest, if so, what will be the rate of interest and the date of its imposition? O.P.P.

(2) Whether the cheque carrying Rs.6,92,000 issued by the plaintiff to the defendant was returned to the former without encashment?

O. P. P.

(3) Whether the suit is premature for want of notice under section 171 of the Punjab Local Government Ordinance, 1979? O.P.D.

(4) Whether the defendant is entitled to recover special costs from the plaintiff, if so to what extent? O.P.D.

(5) Relief.

The learned Civil Judge, 1st Class, Faisalabad, decreed the suit of the respondent to the extent of Rs. 5,76,000 only vide his judgment dated 30‑10‑1983. No interest was allowed to the respondent. The appellant has filed this appeal to challenge the said judgment and decree. The respondent has filed cross‑objections claiming the said interest. We have perused the record and have heard the arguments.

3. The conditions of sale as advertised in three newspapers by the appellant are on file as Ext.P.2 Ext. P.3 and Ext.P.4. The last sentence of the said conditions states that the detailed terms and conditions can be perused in the office of the appellant. However, two of the relevant conditions viz. Nos. (i) and (iii) which are somewhat relevant are contained in sub‑para (1) of para 5 of the memorandum of appeal. The deposit of earnest money amounting to Rs.5,76,000 according to the said conditions was to be made in the shape of a bank draft and it was accordingly made before the auction commenced. Neither the conditions contained in Ext. P.2 to Ext. P.4 nor condition No. iii contained in memorandum of appeal provided for specific mode of payment of 1% of the auction price. The said conditions do not state that the said 1% had to be deposited there and then and in cash. Therefore, the respondent was legally entitled to pay the said amount through a cheque. Leaving aside the question of this entitlement the aspect that the appellant and in particular .the auction committee accepted the payment through cheque is very important. The cheque Ext. PW.l/A was issued by the respondent there and then on 28‑6‑1980. This cheque was accepted as payment by the auction committee, i.e., by the appellant. They sent the said cheque for encashment perhaps on the same date. However, it was returned uncashed on 29‑6‑1980 with the observation that the overwriting of "80" may be got signed in full from the respondent. It is an admitted fact and so is stated by Muhammad Abdullah, Office Superintendent of the appellant, as D.W.1 The bank stamp on the said cheque shows that it was duly dealt with for clearing on 29‑6‑1980 which means that it was officially received by them on the said date and it was returned to the appellant on the same date i.e. 29‑6‑1980. Before the refusal of the bank to encash the cheque and before its receipt back by the appellant the auction in favour of the respondent was cancelled and the amount of Rs.5,76,000 was forfeited through an order of the Mayor made on 28‑6‑1980 itself. This was done on the report of Octroi Superintendent DW.2 who had stated that after the auction the respondent had left saying that he will pay 1$ of the amount through cheque and that by the time of the making of the report he (the respondent) had not turned up, and therefore, the order for forfeiture of earnest money amounting to Rs.5,76,00 may be made. This report is on file as Ext. P.W.2/A. The Mayor made the order of forfeiture thereon which is Ext. P.W.2/2. Abdul Rauf PW.2 was a member of the auction committee and he did not sign the order of forfeiture Ext.PW.2/2 alongwith the Mayor. This order besides its legal aspect speaks of two things, one that the cheque was handed over at least at the time when the order of forfeiture was being made and the other that the order of forfeiture was made without sending the cheque to the bank for encashment and without waiting for its encashment or return officially. The overwriting of "80" is a small defect and keeping the same in view the bank did not completely dishonour the cheque. The objection slip with which the same was returned quite clearly says that the "alteration on date requires drawer's signatures in full". No other objection to the encashment was made and Sh. Abdul Qayyum, PW.1, the Controller of Branches of Muslim Commercial Bank has stated that there was no other hitch for the encashment of the cheque and that if the alteration would have been signed the cheque would have been cashed. In these circumstances the appellant should have called upon the respondent to sign the said alteration and if he refused or even hesitated in doing so if he had delayed the matter there could be some ground for the appellant to cancel the auction and to take steps for the forfeiture of the earnest money. It is pertinent to point out that Abdullah, PW.1, Octroi Superintendent, had stated that the respondent was never asked to sign the said alteration. As already said, officially the cheque was received by the bank on 29‑6‑1980 for clearance but cancellation of auction was made on 28‑6‑1980 without waiting for clearance or encashment. This means that the cancellation was made without looking into the objection raised by the bank or to be raised by the bank in respect of its encashment. It may be pointed out that no notice whatsoever was given to the respondent by the appellant before making an order for cancellation of the auction or forfeiture of the earnest money. This was a very big penalty being imposed on the respondent and under the principles of natural justice a notice to him was necessary. There was no haste in proceeding with the matter of cancellation and forfeiture because the contract of auction had to take effect more than a month afterwards from 1‑8‑1980 This minor defect could be rectified long before the said commencement the respondent according to the said condition No. (iii) was at liberty to deposit 1$ of the auction price after deducting the earnest money of Rs.5,76,000 and in this way the respondent could make a deposit of only Rs.1,16,000. So, is contained in the report of DW.1 at Ext. PW.2/A. However, the respondent was so anxious to get the contract and to abide by the terms and conditions thereof that he issued a cheque for Rs.6,92,000 and did not deduct the earnest money amounting to Rs.5,76,000 This would mean that the respondent was not only willing to perform his part of the contract but also actually performed the same by issuing a cheque of an amount which was in excess by Rs.5,76,000. If such a person was asked to sign the alteration he would not have refused, he would not have hesitated and he would not have delayed the signing thereof. As such the actions of the appellant in cancelling the auction and in forfeiting the earnest money were not only hasty but also illegal and void. It will be useful to add that the Mayor himself was not competent to cancel the auction or to forfieture the earnest money. He did so even without the consent and signatures of all the members of auction committee. Abdul A Rauf PW.2 who was a member of auction committee has stated that he did not sign the order Ext. PW.2/2. Therefore, the order of cancellation and forfeiture was even otherwise illegal. The finding of the learned trial Court on issue No.l, therefore, is quite correct and is confirmed.

4. The respondent had also claimed interest on the amount of Rs.5,76,000. As pointed out above there was an overwriting on the cheque issued by him. Although the defect was small and was curable but still it remains a defect and in view of the same the respondent is not entitled to any interest. The prayer for interest has, therefore, been rightly refused by the learned trial Court. The findings on other issues are not challenged before us. The appeal is dismissed. The parties shall bear their own costs.

H.B.T./M‑540/L Appeal dismissed.