ABDUL GHANI Versus MUHAMMAD ARJUMAND MALIK

MUHAMMAD MAZHAR ALI, J .‑‑This letters patent appeal is directed against the judgment of a learned single Judge of this Court, dated 2‑9‑1968 passed in Suit No. 166 of 1965 whereby he has dismissed the suit as being barred by limitation.

2. The facts giving rise to this appeal are these. The appellants filed a suit on 10‑7‑1965 in the erstwhile High Court of West Pakistan, Karachi Bench, for declaration that they were the owners of the property described in Schedule 'A' and 'B' to the plaint, for cancellation of the deed of assignment, dated 15th August, 1960 and for permanent injunction restraining the defendants, their servants and agents from using occupying or dealing with the aforesaid property in any manner whatsoever.

3. The appellants' case as set up in the plaint was that the appellant No.l is the father of the appellant No. 2 and the respondents Nos. 1, 2 and 3 are sons of respondent No. 4. It was on or about 5‑6‑1956 that the appellant No.2 alongwith his mother Mst. Fatima Bai wife of the appellant No.l jointly purchased a running concern known and styled as 'Clifton Aerated Water' which was housed at 21 Napier Barracks, Karachi. The concern was purchased from one Mohammad Usman Dharamsi for a consideration of Rs.35,500. On the day following the purchase of the said concern i.e. 6‑6‑1956, the appellant No.2 entered into a partnership agreement with his mother Mst. Fatima Bai for carrying out the business of manufacturing of aerated water and such other business as may be mutually agreed upon. The said partnership business was agreed to be carried on at 'Shams Cottage' Opposite Karachi Airport, Star Gate, Malir Road, Karachi, under the firm name of 'Clifton Aerated Water Factory'. On 2‑4‑1957 the appellant No. 1 purchased the said immovable property known as 'Shams Cottage' and together with another dwelling house situated on Plot No. 164‑1, Deh Safooran, Tapo Soongal, Taluka Karachi, admeasuring acre vide sale‑deed, dated 24‑4‑1957. The 'Clifton Aerated Water' together with its machines and plants and other paraphernalia was then shifted to Deh Safooran. The appellant No. 2 and his mother Mat. Fatima Bai thereafter invested huge sums towards improvement and expansion of the above said concern. However, it was on 14‑3‑1959 that the appellant No.2 and Mst. Fatima Bai entered into partnership with one Sarfraz Khan and Hakimuddin who claimed to be experts in the aerated water industry. A partnership deed dated 19th October, 1959 was executed between the appellant No. 1. Mst. Fatima Bai on the one part and M/s. Sarfraz Khan son of Ahmed Khan and Hakimuddin son of Munawar Ali Qadri, on the other part. It was then averred in the plaint that Sarfraz Khan and Hakimuddin in collusion and conspiracy with the respondent No. 4 Meraj Amin Malik who happened to be the General‑Manager of National Commercial Bank Karachi, obtained a loan of Rs.10,000 in the name of 'Clifton Aerated Water Company' from the abovenamed bank without the knowledge and consent of the appellant No.2 and Mst. Fatima Bai. The said two partners of the second part, namely, Sarfraz Khan and Hakimuddin allegedly acted against the interest of the partnership business and consequently the firm was dissolved in terms of the Deed of Dissolution, dated 13‑8‑1960.

4. At this juncture the respondent No. 4 induced the appellant No. 2 to take a further loan of Rs.10,000 in order to pay off the liabilities of the dissolved firm and to overcome the chaos created by the retiring partners. As a matter of fact the respondent No.4 thereby wanted to create further encumbrances and liabilities. Later on, the respondent No. 4 alongwith one Mr. Ali Hassan Mangi, who was the Chairman of both National Commercial Bank Limited and the Urban Cooperative Industrial Bank Ltd., came to the appellants on 10‑6‑1960 and fraudulently induced the appellant No. 2 and Mst. Fatima Bai to dissolve their partnership and to form a private limited company. The appellants and Mst. Fatima Bai being under the undue influence of respondent No. 4 on account of his having advanced the above said bank loans and the presence of the Chairman of the aforesaid banks were further placed under undue influence of the respondent No.4. Moreover, the respondent No.4 also promised that the appellant No.l, being the head of the family, would be appointed as a Chairman of the proposed company and he would be paid remuneration of Rs.1,000 per month out of the profits of the company. These false representations led the appellant No.2 and Mst. Fatima Bai to dissolve their partnership through Deed of Dissolution made on 13‑8‑1966. In order to make way for formation of a Private Limited Company by the name of 'Multiple Industries (Pak.) Limited' (hereinafter referred to as 'the Company').

5. In pursuance of the aforesaid objects, defendants Nos. 1 to 4, thereafter, through misrepresentation, fraud and undue influence, got a Deed of Assignment, dated 15th August, 1960 executed in favour of the Company. This was done by taking advantage of the fact that Rs.20,000 were outstanding against the appellant No.l and all sorts of false promises had been made to the effect that the appellants were to gain by this arrangement whereas all the time the real intention was to deprive them of their property. In any event, the Deed of Assignment was without consideration. It is also void as it pertains to immovable property which cannot be assigned or transferred except by a registered deed. Besides, the contents of the said Deed of Assignment were neither read over nor explained to the appellants and no consent was knowingly given for the transfer of this property.

6. That in the Company the appellant No.l was allotted shares worth Rs.5,000 and the appellant No.2 shares worth Rs.45,000. The respondents No.l, 2 and 3 were respectively allotted shares worth Rs.30,000, Rs.20,000 and Rs.20,000. The above shares were allotted after estimating the partnership at Rs.70,000 and a further sum of Rs.20,000 was debited against the appellants. The accounts of the company were never shown to the appellants.

7. The respondents No. 1 to 3 got various documents written in English signed by the appellant No.l for the alleged purpose of widening the business without disclosing the meaning and nature of the documents. The appellants deny that these writing fraudulently obtained from them are in any way binding on them more particularly because the appellants do not know English and undue advantage was taken of this fact.

8. The respondents No. 1 to 3 in collusion and conspiracy with respondent No.4 informed the appellants that in the Memorandum and Articles of Association of the Company provision had been made to make the appellant No.l Chairman and the appellant No.2 the Resident Director and full protection was provided for the appellants. The appellants, however, came to know that these here all false promises and that the fact the Memorandum and Articles of Association were so designed as to make the Managing Director an absolute Director to do what he liked and oust whom lie liked.

9. That the respondent No.4 paid a sum of Rs.27,000 in small sums from time to time allegedly by way of tentative remunerations and emoluments going in the office of Chairman of the Company, but that these payments were shown technically as loans by National Commercial Bank which were to be adjusted against the share of profits of the plaintiff No.l out of the profits of the Company.

10. That the Managerial affairs of the Company remained entirely in the hands of the respondent No.l hence the appellants cid not know the real happenings. The respondent No.1 never called and meeting nor published or produced any statement of business or profits whatsoever and kept putting off the appellants or false promises in that regard. The appellants had not been given any share in profits, except an allowance of Rs.100 per month to the appellant No. 2 as Resident Director.

11. That on or about 29‑3‑1963 the respondent No.4, came to the appellants, apparently much agitated, and told them that the respondent No.l had invested all business, profits in the expansion of the Company without adjusting the principal payments made to the appellant No. 1, which, 'according to him were to be immediately adjusted as a team of State Bank Auditors had started audit of National Commercial Bank Ltd. and that unless the deficit caused by raking payments to the appellant No. l was made good, the position of respondent No.4 would become untenable and that respondent No.l was out of station. The respondent No.l, any how, prevailed upon the appellants, and in the result the appellant No.2 agreed to pledge his shares with a sister bank, namely, the Industrial Urban Cooperative Bank. The appellants were also pursuaded by respondent No.4 to sign some blank papers which were allegedly meant to be used for the bank purposes, but they did not know their contents as they were not conversant with English. The respondent No. .4, took the appellants in his car to the Industrial Urban Cooperative Bank where the shares of appellant No. 2 were pledged. Thereafter, a cheque of Rs.27,000 was given to the appellants after obtaining their signatures. The cheque was, however, kept by the respondent No.4 in his own custody. Thereafter the respondent No. 4 stopped the periodical payments of stipends to the appellant No.l on the plea that for the time being he should draw amounts from his account in the Industrial Urban Cooperative Bank. In this way‑ the respordents Nos, 1 to 3 succeeded in their conspiracy to entangle the appellants in a very tight noose and in collusion with the authorities of the Industrial Urban Cooperative Bank they manipulated the affairs in such a way that the shares of the appellant No. 2 were ultimately ordered to be auctioned.

12. That oh or about 17‑5‑1964 the appellant No.l received a notice from the Arbitrator appointed by Deputy Registrar for Cooperative Societies. He took it to the respondents Nos. 1 to 4 who assured him that it was just a formality and no action would be taken against him. The appellant No.l was convinced by these assurances. He, however, after sometime received another notice, dated 3‑6‑1964 from. the Arbitrator. He again approached the respondents and was again advised by them to disregard the notice and that soon money frog: the share profit of the appellants, and the monthly allowance would be paid and the matter would be settled. On 23‑2‑1965 when the appellants saw the advertisement in the Morning News that, the shares of the appellants were to be auctioned by the Industrial Urban Cooperative Bank, they suddenly realises the crushing nature of the fraud that had been practiced upon them. When they took the advertisement to the respondent and showed it to them they adopted an attitude 'as if they were looking upon the appellant for the first tire; and refused to discuss the problem raised by them at all'. Thereafter the appellant No.2, who has a Resident Director of the Company, went to the factory but he was not allowed to enter by the Chowkidar who warned him that if he would force his entry in the factory, he world be thrown out. Upon these happenings the appellants realised the magnitude of the well‑planned scheme chalked unit by the respondents to deprive them of their property. The documents thus, executed by the appellants were not binding on them and which were even in law inapplicable of causing transfer of property. The Deed of Assignment having been executed under undue influence and the appellants having been made victims of fraud, the said Deed was quite unenforcible for the above‑noted reasons and, inter alia, for want of consideration and non‑registration ‑ of the documents.

13. On these facts the appellants filed a suit (Suit No. 166 of 1965) against the respondents in the then High Court of West Pakistan, Karachi Bench, on 10‑7‑1965 for cancellation of the Deed of Assignment, dated 15‑8‑1960 and declaration that they were the owners of the property described in Schedule ' A' and ' B' to the plaint and also for issuance of a permanent injunction restraining the respondents, their servants and agents from using, keeping or in any way dealing with the aforesaid property in any manner whatsoever. The cause of action was shown to have arisen at Karachi on or about 29‑3‑1965 when the appellants for the first time realised the full signification of the fraud played on them, and it became necessary to ask for cancellation of the Deed of Assignment and for permanent injunction. The respondents Nos. 1 to 3 filed a joint written statement denying the various allegations made in the plaint. They also inter alia, pleaded that the suit besides being misconceived and not maintainable, was time‑barred. The respondent No. 4 also filed a separate written statement to the same effect. He also claimed that the suit was under valued and under stamped and that the suit was also hit by the principle of part performance of contract as contained in section 53‑A of the Transfer of Property Act.

14. It was on 23‑5‑1966 that a learned single Judge of erstwhile High Court of West Pakistan passed the following order:‑----

"That this application under Order VII, Rule 11 has been made on various grounds. It appears to me after hearing learned counsel that the question of limitation is of some importance in this matter, specially as reliance is placed on A I R 1345 PC 5 in the context of the ground that the suit is barred by limitation. I would, therefore, frame the following preliminary issue for determination:‑

'Is the suit of the plaintiff barred by time', and set it down for regular hearing on this issue. Date in office, after vacation. "

Subsequently on 8‑10‑1966 another order was passed by the learned single Judge, the operative part whereof reads as under:‑

" ....In the circumstances I feel that the examination of some evidence will be necessary and it will also be further necessary for the plaintiff to be examined in consequence of the framing of this issue." .

Pursuance to the above orders of the Court both the appellants examined themselves in support of their case and were cross‑examined; whereas the respondent No.4 examined one Ashiq Hussian Kureshi,, an Assistant from the Office of Registrar Joint Stock Companies, Karachi, who in turn was cross‑examined by the learned counsel for the appellants. After hearing the arguments of the parties on the above‑noted preliminary issue the learned single Judge passed the impugned judgment on 2‑9‑1968 thereby holding that the suit was clearly barred by limitation and, consequently, dismissing it with costs, the learned single Judge further observed in the impugned judgment as under:‑

"27. Before parting with this judgment it may be mentioned that for the consideration of the issue of limitation the question of the frame of suit was also considered, as that question, apart from being a question of law, was inextricably linked with the determination of that issue."

16. We have heard Mr. Salahuddin, learned counsel for the appellants. He made the following submissions:

(i) That the learned single Judge was not legally competent to go into the question of frame of the suit while deciding the sole preliminary issue on the point of limitation;

(ii) That while holding that the relief of declaration in respect of properties mentioned in Schedule 'A' and 'B' without their being a prayer for possession of those properties, the learned single Judge failed to appreciate that it was not so pleaded by the respondents and hence the decision on the point was outside the pleadings of the parties;

(iii) That the learned single Judge erred in overlooking the fact that in a case based on fraud, the entire transaction was to be looked at and a few discrepancies in the statements of the appellants in their deposition were not sufficient to destroy the facts stated in paras. 3 to 19 of the plaint;

(iv) That the learned single Judge failed to appreciate that the period of limitation started from 23‑3‑1965 when the appellants saw an advertisement in newspaper 'Morning News' that their shares were to be auctioned by the Industrial Urban Cooperative Bank not any time earlier than that as is elaborately mentioned in paras. 3 to 19;

(v) That the learned single Judge further failed to appreciate that section 18 of the Limitation Act was manifestly applicable to the facts of the case and that Article 91 of the Limitation Act was irrelevant to the facts of the case. The case was, the counsel so contended, covered by Article 120 of the Limitation Act and hence the suit was well within time;

(vi) The counsel submitted that the learned single Judge erred in holding that section 39 of the Specific Relief Act was applicable to this case; whereas it was a case plainly falling under section 42 of the Specific Relief Act. The suit for declaration was thus properly maintained inasmuch as the title in the property did not pass to the purchaser. The counsel, therefore, prayed that the case may be remanded for decision on merits.

17. The solitary issue involved in this appeal, as stated above, is as to whether the suit was barred by limitation. The appellants' case is that section 18 of the Limitation Act, 1908 (hereinafter referred to as 'the Act' is applicable to the facts of this case and since the appellants came to know of the fraud committed upon them by the respondents for the first time on 23‑5‑1965 when the appellants saw an advertisement in newspaper (Morning News) that their shares were to be auctioned by the Industrial Urban Cooperative Bank on 29‑3‑1985. The case of the respondents, on the other hand, before the learned single Judge was that Article 91 of the Act is applicable to the instant case. The learned single Judge after recording the evidence of the appellants and hearing the counsel for the parties has held that Article 91 of the Act was applicable to the suit and hence it was already barred by limitation. Before proceeding further to consider the above‑noted contentions raised by the learned counsel for the appellants it would, I think, be proper if section 18 and, Article 91 of the Act are reproduced hereunder:‑

Section 18 reads:‑

"18. Effect of fraud.‑‑ Where any person having a right to institute a suit or make an application has, by means of fraud, been kept from the knowledge of such right or of the title on which it is founded, or where any document necessary to establish such right has been fraudulently concealed from him, the time limited for instituting a suit or making an application‑‑

(a) against the person guilty of the fraud or accessor thereto, or

(b) against any person claiming through him otherwise then in good faith and for a valuable consideration, shall be computed from the time when the fraud first became known to the person injuriously affected thereby, or, in the case of the concealed document, when the first had the means of producing it or compelling its production."

Article 91 reads as under:‑

"91. To cancel or set ???????????????????????????????????????????????????? Three years when the facts entitling aside an instrument not ????????????????????????????????????? the plaintiff to have the instrument otherwise provided for. ???????????????????????????????????? cancelled or set aside become known

??????????? to him."

18. A bare reading of section 18 makes it absolutely clear that in order to bring their case within the preview of this section the appellants had to establish that they were, consequent to the fraud perpetuated upon them, kept from the knowledge of having a right to institute suit or where any documents necessary to establish such right have been fraudulently concealed from them. If it is found that the respondents were guilty of fraud then the time limit for instituting the suit shall be computed from the time when the fraud first became known to the person injuriously affected thereby, namely, the appellants in the instant case. The appellant's contention is that the cause of action for the suit out of which this appeal has arisen accrued to the appellants when they "for the first time realised the suit significance of the fraud played on them". See para. 23 of the plaint). Section 18 of the Act does not, firstly, speak of the realization of the` full significance of the fraud. Secondly, it may be noted here that in pare 10 of the plaint it is specifically pleaded that the respondents No.l to 4 through misrepresentation, fraud and undue influence got a Deed of Assignment dated 15‑8‑1960 executed in favour of the Company. Here I may pause a little to point out that the so called Deed of Assignment dated 15‑8‑1960 (Annexure G' to the plaint) is in fact an Agreement of Assignment. This agreement of Assignment has been executed only by appellant No.l whereas in this very paragraph 10 it is averred that it was done by taking advantage of the fact that Rs.20,000 were outstanding against the appellant No.l. Further averments made in this para, to the effect that this document (Deed of Assignment dated 15‑8‑1960) is void as it pertains to immovable property which cannot be assigned or transferred except by a Registered Deed are thus based on self‑assumed fact of the Agreement of Assignment being taken as Deed of Assignment. Now with regard to the floating of the Company it was mentioned in para. 12 of the plaint that the respondents No. l to 3 floated it whereas the appellant No.l in his deposition before the learned single Judge clearly stated that "a private company was formed with his son as the Resident Director, the factory was mutually valued at Rs.70, 000" . The Memorandum and Articles of Association of the Company are signed by both the appellants. The shares allocated to the Directors as per Memorandum and Articles of Association of the Company are also shown in para 11 of the plaint by the appellants themselves. The allegation of undue influence and fraud allegedly exerted and perpetuated by the respondent No.4 in concert with Ali Hasan Manghi, the Chairman of the National Commercial Bank Ltd; on account of the Clifton Aerated Water Company, the partnership concern, in-debited to the National Commercial Bank Limited, could not be believed more particularly in view of the fact that the appellants belonged to a business community and were actually engaged in business for the last many years. It is the common feature of a business concern to obtain a loan either from the private parties or banks as and when it is so considered necessary for the purposes of doing the business. The mere fact of taking the loan of Rs.10,000 from the above‑named bank could not lead to the irresistible conclusion as has been sought to be pleaded by the appellants, that it was with ulterior motive as pleaded in the plaint. The learned single Judge, I do not feel hesitant to say so with respect, has rightly observed:‑

After all both the plaintiffs belonged to business community, made their living from business and it must be presumed that they had sufficient experience of commercial dealings".

The plea of so‑called undue influence has, in my opinion, been for valid and cogent reasons repelled by the learned single Judge and I do not find any good reasons to take a different view in this behalf.

19. Likewise the plea of fraud committed upon them by the respondents No. 1 to 4 in making the appellants agreeable to the incorporation of the Company is equally unsustainable, firstly, for the same reasons as given hereinabove. Besides, the undertaking given to the appellants that the appellant No.l will be appointed as a Chairman of the Company and appellant No. 2 as the Resident Director were actually fulfilled and this fact has been clearly admitted by the appellants in their depositions before the Court. The plea of the appellants that they, signed the various documents without knowing their nature as they did not know English, in which these documents were written, stands belied by their own admissions made during cross‑examination. The learned single Judge has dealt with this aspect of the case quite satisfactorily and in a convincing manner in his impugned judgment and here also I do not find any plausible and convincing reason to disagree with him. I may, however, add that no doubt the documents are written in English but it is difficult to believe the version of the appellants that they signed them without knowing their real import and nature. Regarding the execution of Agreement of Assignment the appellant No.2 in his deposition has stated that 'on the next day my father (namely, appellant No.l) got it read over by somebody and learnt that this Deed included the term regarding the payment of Rs.1000 per month. This factory, according to the Deed, was to be assigned in the name of Multiple Industries Limited'. Both the appellants have then clearly‑ deposed about the constituents of the Company and in the respective shares of the Directors. The appellant No.2 has further admitted that he was one of the Directors of the Company, that until few months before the filing of the suit he had been working as Director of the Company and looking after the production side of the factory. He has also admitted that his father was the Chairman of the Board of Directors of the Company and that his election as Chairman was done at the meeting called before five days after the Deed of Assignment was executed. He has admitted the signatures of his father, the appellant No.l, on Ex. II as Chairman of the Company. The appellant No.l has further admitted that he used to get only Rs.100 per month from the Company and that he at times used to purchase materials for the Company. With regard to the value of the assets of the dissolved partnership concern of Clifton Aerated Water Company the appellant No.2 has clearly admitted that "it is correct that the defendants had accepted our quotation of Rs.70,000 as the price of the Company". He has also admitted to have pledged his shares of Multiple Industries Limited with Industrial Urban Cooperative Bank by way of a security against loan. Although then he tried to wriggle out of it by stating that "in fact these shares were pledged by the defendants without my knowledge" . Having admitted that it was correct that he had issued a cheque in favour of National Commercial Bank Ltd. for Rs.27000 so as to adjust his overdraft with the said bank, he stated that he failed to repay the said loan to the said bank who, as a result auctioned his shares and recovered the amount. In view of the above noted admissions there is no escape from the conclusion that the stand taken by the appellants in the plaint which is contrary to the above admissions is unbelievable. The plea of the appellants taken in the plaint to the effect that the various documents filed along the plaint were signed by them on account of undue influence, fraud and misrepresentation made by the respondents No.l to 4 cannot be believed as correct. The learned single Judge has elaborately dealt with this aspect of the case as well and I feel myself in complete agreement with his reasonings as given in paragraph 20 of the impugned judgment.

20. The objection raised by the learned counsel for the appellants to the effect that the learned single Judge was not legally competent to go into the question of frame of the suit while deciding the above‑noted preliminary issue on the point of limitation, it may be noted that the occasion to do so arose to the learned single Judge because of the argument advanced by the learned counsel for the appellants before the learned single Judge that apart from seeking the cancellation of the Deed of Assignment dated 15‑8‑1960, the appellants had also sought a declaration that they were the owners of properties mentioned in Schedule 'A' and 'B' of the plaint and therefore the suit was governed by Article 120 of the Limitation Act. At any rate if that contention of the learned counsel for the appellants is ignored then the finding recorded by the learned Single Judge would assume the characteristic of the academic discussion of the matter. But if it is urged on behalf of the appellants that the said plea was valid then no objection can be legitimately taken to the course adopted by the learned single Judge. Consequently, I do not find any substance in this grievance of the appellants.

21. Under the aforesaid facts and circumstances of the case and for the reasons recorded hereinabove I do not find any merit in this appeal and dismiss it accordingly with no orders as to costs.

S.Q./‑A‑177/K ??????????????????????????????????????????????????????????????????????????????????????????????????????????? Appeal dismissed.