Case law on additional amount in specific performance .

The High Court cancelled the orders of the lower courts primarily due to several legal and factual findings that were deemed erroneous or unjustified. Here are the key reasons why the High Court overturned the lower courts' orders:

1. **Unjustified Imposition of Additional Payment**: The High Court found that the lower courts had incorrectly imposed an additional payment (Rs. 6,769,350) on the petitioner. They reasoned that both parties were responsible for the non-performance of the agreement to sell the plot, and therefore, it was unjust to solely penalize the petitioner with additional financial burden. The High Court emphasized that the concept of imposing compensation (additional payment) should be based on clear evidence of default and the resulting loss suffered by the non-defaulting party.

2. **Misreading of Evidence**: The High Court pointed out that the lower courts had misinterpreted or overlooked crucial evidence presented in the case. For instance, they highlighted that pay-orders for a significant amount had been arranged by the petitioner before the initial performance date, and certain circumstances beyond the petitioner's control, such as an injunctive order, had affected the timeline for performance.

3. **Failure to Prove Default**: It was observed that respondent No. 3, who was the seller or their representative, had not adequately proven that the petitioner had defaulted on the agreement. The High Court noted discrepancies in the lower courts' findings regarding the petitioner's alleged default and the consequential justification for imposing additional financial obligations.

4. **Incorrect Application of Contract Terms**: The High Court also identified flaws in the lower courts' application of the contract terms, particularly concerning the forfeiture of earnest money and the conditions under which such actions could be justified. They clarified that the lower courts' interpretation did not align with the actual terms stipulated in the agreement.

5. **Absence of Legal Reasoning**: Lastly, the High Court found that the lower courts' decisions lacked proper legal reasoning and failed to provide adequate justification for their conclusions. This deficiency in reasoning undermined the validity of the orders passed by the lower courts.

In summary, the High Court's decision to cancel the orders of the lower courts was based on the rectification of legal errors, misinterpretation of evidence, and the improper application of contract terms that led to an unjustified imposition of financial penalties on the petitioner.

Judgement

Stereo. HCJDA 38.

Judgment Sheet

IN THE LAHORE HIGH COURT, 

LAHORE.

JUDICIAL DEPARTMENT

….

Civil Revision No. 23551/2023.

Raja Muhammad Khubaib.

Versus

Addl. District Judge, Lahore & others.

JUDGMENT

Date of hearing:

05.06.2024.

Petitioner through:

Ms. Sabahat Rizvi, Advocate.

Respondent No.2 through:

Mr. Maqsood Ahmad Ghuman, 

Advocate

Respondent No.3 through:

Mr. Ishfaq Amir, Advocate.

Respondent No.4 – [had no adverse interest to the petitioner] 

ASIM HAFEEZ, J.

This and connected Civil Revision No.38993/2023 are 

directed against consolidated judgment & decree dated 21.02.2023, whereby 

appellate court dismissed appeals preferred by the petitioner and respondent No.3,

against judgment & decree dated 30.07.2022 of the court of first instance, which 

decreed petitioner’s suit for specific performance of agreement to sell of 

30.11.2020 [time for performance was extended twice with mutual concurrence], 

and directed petitioner to pay additional amount of Rs.6,769,350/-, over and 

above the consideration amount agreed under the agreement. Petitioner is 

aggrieved of the imposition of payment of additional amount. Respondent No.3 

objects to the decree of specific performance on the premise that agreement stood 

rescinded upon failure of the petitioner to arrange balance consideration of 

ivil Revision No. 23551/20

23.

Civil Revision No. 38993/20223.

2

Rs.24,500,000/- by the end of second extended period, which was 28.02.2021. 

For quick and complete understanding, operative part of the judgment of the trial 

court is reproduced hereunder,

“This civil suit is hereby decreed subject to payment of 

Rs.67,69350/0 in addition to the remaining consideration 

Rs.245,00,000/- by the plaintiff to the defendant No.1 within 30 days 

of this order. In case of this failure to pay the said amounts within 30 

days, suit of the plaintiff shall be deemed dismissed and in said case 

the defendant No.1 would be bound to return the earnest money 

Rs.65,00,000/- to the plaintiff within next days 30 days. There is no 

order as to cost.”

2.

Factual narration provided in the opening paragraphs of judgment of the 

appellate court is sufficient for understanding underlying facts, still some material 

facts, potentially touching the subject matter controversy, need amplification. 

Factum of Agreement to sell dated 30.11.2020, execution thereof and conditions 

embodied therein constitute admitted facts. First cut-off date was 02.01.2021, 

which was extended till 30.01.2021 and finally to 28.02.2021. There is no dispute 

that date for performance was extended due to injunctive order against property in 

question. Earnest money of Rs.6,500,000/- was paid and balance consideration 

payable was 24,500,000/-. Petitioner had arranged for pay-orders for balance 

consideration before 02.01.2021. Parties agree to disagree on two issues. 

Petitioner alleged that he was ready and willing to perform his obligations, but 

respondent No.3 was not in Pakistan till July 2021. Conversely, respondent No.3 

took stand that pay-orders arranged were cancelled before 28.02.2021 and 

petitioner had no funds to pay, which situation attracted default clause and 

agreement, wherein agreeably time was of the essence in terms of clause 3, stood 

cancelled and earnest money was liable to be forfeited. Suit was instituted on 

20.05.2021.

Civil Revision No. 23551/20

23.

Civil Revision No. 38993/20223.

3

3.

Arguments heard; record perused, and Court concluded as follows.

4.

Controversy touches down upon two questions. Whether imposition of 

compensation through additional payment is justified and secondly, whether 

agreement stood cancelled upon alleged default and was time essence of the 

contract – in the context of second issue the burden lies on the respondent No.3 to 

prove factum of default of the petitioner and establish that timely performance 

was central to the enforceability of the contract. 

5.

First thing first. Whether imposition of compensatory amount – additional 

payment – was justified. Upon perusal of the judgments of the courts, which 

concurrently decided in favour of additional payment, it is found that findings 

with respect to additional payment were erroneous. Concept of compensating, in 

monetary terms, is essentially a tool to recompense the party that suffered loss,

injury or disadvantage. Loss caused; injury occasioned; disadvantage suffered, in 

contractual arrangements, would, correspondingly, be the cause and effect of 

default committed or failure attributable to one of the parties to the contract. 

Hence, before subjecting defaulting party to the obligation of compensating the 

non-defaulting party, it is imperative to substantiate 

‘

factum of default’

. It is 

axiomatic that trial court reached conclusion that ‘Now the plaintiff and defendant 

No.1 are equally responsible for non-performance of the suit agreement to sell on 

28.02.2021’ [observed in paragraph 11 of its judgment]. If that was the position 

how could petitioner be penalized by subjecting it to payment of additional 

payment when failure was attributed to both the parties. Appellate court failed to 

identify and reject blatant discrepancy in the judgment, and instead endorsed the 

illegality. This peculiar mistake is fatal to the sustainability of the judgments. It 

appears that Courts misread the evidence and overlooked effect thereof. Evidently, 

Civil Revision No. 23551/20

23.

Civil Revision No. 38993/20223.

4

Rs.6,500,000/- was paid as earnest money. Pay-orders for balance consideration 

of Rs.24,500,000/- were arranged before the first performance date – [this fact 

was admitted by respondent No.3, who appeared as DW-1]. Time was mutually 

extended in wake of an injunctive order, which injunctive order remained intact 

till 09.02.2021. Final performance date was 28.02.2021. It is not disputed that 

pay-orders for Rs.5,400,000/- and Rs.800,000/- were cancelled before 28.02.2021 

and other two payment orders, for substantial amount, became ineffective after 

the filing of the suit on 20.05.2021. Notably, under the orders of the Court 

balance amount of Rs.24,500,000/- was deposited before 06.07.2021. In these 

circumstances, how lack of willingness could be attributed to the petitioner – no 

reasoning was found in the judgments. There is another aspect of the matter. 

Respondent No.3 appeared as DW-1, who admitted that he went to U.S in 

January 2021, after the agreement, and came back in the last week of July 2021. 

And who further admitted that he was not in Pakistan at the time of the extension 

of time-period for performance on 30.01.2021 and 28.02.2021. One of the 

conditions of the agreement was physical presence of the respondent No.3 before 

DHA, Lahore, at the time of transfer of the plot – [condition 4 of the agreement].

In these circumstances, whether finding of default on the part of petitioner is 

legally sustainable. I lay hands on decision in the case of “Muhammad Siddique v. 

Muhammad Akram” (2000 SCMR 533), where Hon’ble Supreme Court had 

awarded compensation, over and above the agreed consideration but in the 

context of different facts – wherein suit, though within limitation, was instituted 

after nine years of the agreement therein. In said circumstances, compensation 

was awarded. 

Civil Revision No. 23551/20

23.

Civil Revision No. 38993/20223.

5

6.

In view of the aforesaid, I find the findings recorded and direction of 

payment of additional amount of Rs.6,769,350/- unjustified, unlawful and devoid 

of reasoning.

7.

Now I take up second issue, regarding significance of the performance 

within stipulated time. No doubt that timelines for performance were provided in 

the agreement and same were extended on two occasions. Without commenting 

on the circumstances leading to extension of time, the relevant question is 

whether petitioner had defaulted after 28.02.2021 and whether any intent of 

timely performance of agreement was demonstrated on the part of the respondent 

No.3. There is no hard and fast rule to determine whether time is the essence of 

the agreement, no doubt performance timelines in the agreement had significant 

bearing on the question of timely performance and effect of failure, but mere 

elapse of cut-off date, proprio vigore would not non-suit the buyer but such 

determination is dependent upon facts and circumstances encountered in each 

case. Respondent No.3 admitted absence from Pakistan during material times, 

who remained in U.S from January 2021 till last week of July 2021. Written 

statement is silent regarding issuing any notice of default on the part of the 

petitioner. No notice of cancellation was issued, let alone alleged. Respondent 

No.3 was the only witness appeared. No document was brought on record to show 

that any authority was extended to any person to undertake process of transfer of 

plot, in the absence of respondent No.3. Learned counsel for respondent No.3 

cited following decisions to support argument of significance of time in the 

context of effect of non-performance, “MUHAMMAD ASLAM and others. Vs. 

MUHAMMAD ANWAR.” (2023 SCMR 1371), “ASIM JAMSHAID. VS. 

SHAHZAD IQBAL MALIK and others.” (2023 CLC 1100), “MST. SAMINA 

 23551/20

23.

Civil Revision No. 38993/20223.

6

RIFFAT and others. Vs. ROHAIL ASGHAR and others.” (2021 SCMR 7), 

“MUHAMMAD JAMIL and others. Vs. MUHAMMAD ARIF.” (20021 SCMR 

1108), “MUHAMMAD YOUSAF. VS. ALLAH DITTA and others.” (2021 SCMR 

1241), “MUHAMMAD ABDUR REHMAN QURESHI. VS. SAGHEER AHMAD.”

(2017 SCMR 1696), “HAMOOD MEHMOOD. VS. MST. SHABANA ISHAQUE 

and others.” (2017 SCMR 2022), “MUHAMMAD SAFDAR KHAN and another. 

Vs. MUHAMMAD NADEEM ABBASI and another.” (2021 MLD 617), “MIRZA 

SHAFAAT ALI BAIG. VS. Wg.Cdr. (Rtd.) KHURSHID ANWAR and another.”

(2020 YLR 886) and “MUHAMMAD SIDDIQUE and 6 others. Vs. ABDUL AZIZ 

RATALVI and 7 others.” (2016 YLR 612). Decisions cited were rendered in 

wake of peculiar circumstances in each case, and no commonalty of facts and 

circumstances were found. In the instant case, both the courts dismissed the plea 

of cancellation of agreement, which findings show no error of law or irregularity

in the exercise of jurisdiction. Respondent No.3 failed to prove factum of default 

on the part of the petitioner and also failed to make out a case for cancellation of 

the agreement in the context of condition 3 of the agreement. Respondent 3’s 

counsel emphasized on the decision rendered in the case of MUHAMMAD 

ASLAM and others. Vs. MUHAMMAD ANWAR (supra) without appreciating the 

factum of admission of failure on the part of the buyer to arrange for remaining 

consideration on the date of performance. In the case at hand pay-orders of 

Rs.18,300,000/- were not cancelled at the time of final performance on 

28.02.2021 and on said date respondent No.3 was not available in Pakistan. 

Likewise, facts of cited case of “MST. SAMINA RIFFAT and others. Vs. ROHAIL 

ASGHAR and others. (supra) are distinguishable, wherein intention to purchase 

was conspicuously lacking, besides failure of the plaintiff to deposit the amount 

 Revision No. 23551/20

23.

Civil Revision No. 38993/20223.

7

despite direction by the Court – in instant case balance amount was deposited 

under the directions of the Court. 

8.

There is another flaw in the judgment of the trial court, and affirmed by the 

appellate court. Court observed that in case petitioner failed to pay balance 

consideration within 30 days, respondent No.3 would be bound to return earnest 

money. This is contrary to the terms of the agreement. Agreement provided that 

in case the buyer fails to pay the remaining amount – buyer is petitioner – earnest 

money shall be treated forfeited. Agreement says that in case the seller fails or 

refuses to arrange for the transfer, he shall be bound to return doubled amount of 

earnest money, this latter condition is not applicable since the buyer had opted for 

enforcement of the agreement by resorting to remedy for enforcement of 

agreement. Now what would happen if the petitioner failed to pay the balance 

consideration within 30 days, without further ado earnest money had to be 

forfeited. 

9.

In view of the above, Civil Revision No.38993/2023 is dismissed. And 

Civil Revision No.23551/2023 is allowed and judgments and decrees of the trial 

court and the appellate court, to the extent of allowing / decreeing additional 

amount of Rs.6,769,350/- against the petitioner and direction to return earnest 

money upon failure of the buyer to pay balance consideration are, hereby, setaside and declared of no legal effect. And suit of the petitioner is, hereby, decreed 

in following terms,

“Petitioner’s suit is decreed subject to payment of remaining 

consideration Rs.24,500,000/- to respondent No.3 within 30 days of 

signing of this order. And in case of petitioner’s failure to do the 

needful, that is to pay the balance consideration within 30 days, 

Civil Revision No. 38993/20223.

8

petitioner’s suit shall stand dismissed and consequently the paid 

earnest money of Rs.6,500,000/- shall stand forfeited, and 

respondent No.3 shall be entitled to retain forfeited earnest money 

of Rs.6,500,000/- and thereupon petitioner shall have no claim 

against the property in question. No order as to the costs.”

10. Office shall accordingly prepare the decree sheet.

 

 (Asim Hafeez)

Judge

Decision signed on June 21st 2024.

Approved for reporting.

JUDGE

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