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Suit No. 612 of 1955, decided on 12th December 1963.
[as amended by Registration (Amendment) Ordinance (XLV of 1962)], Ss. 49 & 17‑Document requiring compulsory registration but not registered‑Admissible in evidence‑Registration (Amendment) Ordinance (XLV of 1962), S.13.
‑Suit between Corporation and third person dealing with it‑Contract or act on behalf of Corporation by its officer ultra vires only when such act or contract be beyond powers expressly or impliedly conferred on Corporation‑Contract or act ultra vires not for want of power in Corporation itself but for lack of power in its Officer to perform such duty or because of non‑compliance with certain formalities required by law to be observed‑May be valid as to third person‑Person dealing with Corporation‑Bound only to read Act and registered documents concerning such Corporation‑Not bound to make inquiry into regularity of internal proceedings ; "the indoor management".
Palmer's Company Law pp. 32‑33; 7 A C 869; American Jurisprudence Vol. 13 pp. 784‑5; Barnett v. South London Tramways Company (180) 18 Q B D 815 and London Association of Ship owners & Co. v. London and India Docks Joint Co. 67 L T 238 ref.
, S. 53‑A‑Does not create any right for making a claim‑Affords merely defence against transferor attempting to enforce right other than one provided in contract in respect of property of which transferee stands in posses sion.
‑Document purporting to be lease in terms of years but not duly stamped and registered‑Creates tenancy‑at‑will.
Ramchandra Agarwala and another v. Syameswari Dasya A I R 1925 Cal. 1171 ref.
, S. 13‑Ordinance whether applicable to yearly tenancies (Obiter).
Tanzilur Rehman for Plaintiffs.
S. M. Shafi for Defendants.
Dates of hearing : 31st October, 1st, 6th, 7th, 8th, 12th, 13th, 14th and 15th November 1963.
Two cross suits bearing Nos. 612 and 1246 of 1955 will be decided by this judgment. The first mentioned suit was instituted on the 7th of July 1955 by Altaf Hussain who died in August 1959, and his legal representatives were brought on record. They will be hereinafter referred to as "the plaintiff". The suit of the plaintiff is that the Pakistan Employees' Co‑operative Housing Society Limited (P. E. C. H. S.), hereinafter referred to as "the Society", had agreed to give on lease a plot of land, measuring about 13,000 square yards situated in Block No. 2 of the Society, to him for establishing a nursery on it. He took possession of it and developed it but the Society was contemplating to cancel the allotment and to resume the possession of land. With this object it was threatening to disconnect the water supply to the plot ; therefore, he has asked for permanent injunctions to restrain the Society from dispossessing him and from interfering with the water supply. The Society instituted the other suit on the 2nd of December 1955, against Altaf Hussain for taking possession of the plot of land and for the recovery of Rs. 5,000 up to the date of the suit and at the rate of Rs. 541 per month thereafter as damages for wrongful use and occupation. The allegations of the Society in its plaint and the written statement are that Mr. Imam, who was its Honorary Secretary at the relevant time, gave a writing to the plaintiff in respect of the alleged lease but he had no authority to do so. It was without consideration, inadmis sible in evidence for want of registration, collusive and fraudulent. The particulars of the fraud are as set out in paragraph 6 of the written statement and the plaintiff's possession is described as that of a trespasser. Counsel for the parties framed 15 issues in the suit of the plaintiff and 12 issues in the suit of the Society. An order was made on 18‑8‑1956 that the two suits should be tried together.
2. They were fixed for final disposal on the 31st of October 1963, on which date I reviewed the facts of both cases and framed the following 5 consolidated issues with the consent of counsel for the parties :
(1) Whether the Plot was allotted, or agreed to be leased out or leased out to Altar Hussain by or on behalf of the
P. E. C. H. Society
(2) If Issue No. 1 is decided in favour of Altaf Hussain, then whether the allotment of the agreement to lease out or the lease is‑
(a) legally valid
(b) invalid owing to fraud as alleged in paragraph 6 of the written statement of the P. E. C. H. Society
(3) If Issue No. 2 is decided in favour of the P. E. C. H. Society, then whether the Society is entitled to the damages and mesne profits claimed by it
(4) What Is the effect of non‑payment of water charges on the prayer of injunction with respect to the supply of water
(5) Whether the Secretary of the P. E. C. H. Society had ostensible authority and the Managing Committee acquiesced in the exercise of it ; If so, what is its effect
3. Two witnesses have been examined on behalf of the plaintiff. They are Aftab Hussain son of Altaf Hussain, P.W.1 and Muhammad Mustafa Khan, P. W. 2. The Society has pro duced one witness: He is Muhammad Ahsahul Haq Khairi, D. W. 1. Ninety‑four documents in all have been exhibited in the two suits.
4. Mr. Muhammad Shafi counsel for the Society was of the view that the first issue was the most important because unless the alleged agreement of lease is proved, there would be no need to decide the other issues. His contention was that the writing purported to create a lease for 30 years but was not registered ; therefore neither the document could be proved nor oral evidence led to establish its contents. Here he was mistaken on two grounds. Firstly, section 49 of the Registration Act (No. XV of 1908) has been amended by Ordinance No. 45 of 1962. By this amendment clause (c) of section 49 of the Act has been omitted A with the result that a document which is compulsorily registerable under section 17 of the Act but is not registered does not create, declare, assign, limit or extinguish the right, title or interest in the property to which it relates but is admissible in evidence. Secondly, the plaintiff's allegation is that the possession of the Plot was delivered to him in part performance of the agreement ; therefore, section 53‑A of the Transfer of Property Act (IV of 1882) comes to his rescue. The objection of inadmissibility was raised by Mr. Muhammad Shafi during the evidence of P. W. 1 when the writing was to be exhibited but was over‑ruled by my order of the 31st of October 1963. The document which is a letter of the 16th of Jul) 1953, is Exh. 41, Mr. Tanzeel‑ur‑Rehman counsel for the plaintiff, explained additionally that he did not rely on Exh. 41, because Exhs. 40 and 72 taken together served his purpose fully. The contents of Exh. 40 are virtually as of Exh. 41 with the difference that Exh. 40 purports to be an offer which was made a few days earlier than Exh. 41 by the Secretary on behalf of the Society and was accepted by the plaintiff vide Exh.72 dated 13th of July 1953. This offer and acceptance, according to the plaintiff's counsel, were followed by Exh. 41 as a formality and the agreement was then partly performed by the delivery of the possession of that piece of land to the plaintiff.
5. The above discussion is not conclusive against the objec tion of Mr. Muhammad Shaft because he has further argued that the possession was not given by the Society but that the plaintiff had himself taken it unauthorisedly. Additionally, according to learned counsel, section 53‑A of the Transfer of Property Act does not help the plaintiff because he has not performed and is not willing to perform his part of the contract. Section 53‑A is as follows
53‑A. Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty.
and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract,
and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that the contract,
though required to be registered, has not been registered, or, where there is an instrument of the transfer, that the transfer has not been completed in the manner prescribed therefore by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the trans feree and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract:
Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof."
6. Aftab Hussain P.W.1, and Muhammad Mustafa Khan P. W. 2 have stated that the possession was delivered by the Society to the plaintiff in pursuance of the agreement soon after the date of the agreement., Muhammad Mustafa Khan, who was the Executive Officer of the Society from 1952 to 1957, has states that he had directed his subordinate staff to deliver the possession of the plot to the plaintiff. Those directions were issued b3 him because Exh. 41 was presented to him by the plaintiff with request that arrangement for giving possession might be made Muhammad Ahsanul Haq Khairi D, W. 1, who is the present Honorary Secretary of the Society, was not able to deny that the possession is with the plaintiff from July 1953, because the Society has claimed water charges vide Exh. 66 from the 16th of July 1953. Emphasis was, therefore, laid on behalf of the Society that the proper procedure for giving possession was not followed and a conclusion was attempted to be drawn from it that the plaintiff had taken the possession himself without authority. Muhammad Ahsanul Haq Khairi D.W.1, had, however, to admit that no procedure was prescribed for delivering possession, nor is there any Bye‑law of the Society in this respect. The objection as to the mode of taking and giving possession is, therefore, without substance.
7. The second contention of Mr. Muhammad Shafi that the plaintiff has not performed and is not willing to perform his part of the contract was supported by him by referring to the unpaid claim of the Society for water charges and the rent of the plot. Counsel for the plaintiff has explained on the other hand that the plot was free of rent for the first two years; therefore, no rent was due to the Society when the plaintiff instituted his suit. Similarly, according to Aftab Hussain P. W. 1, water charges were not demanded by the Society up to August 1962. Altaf Hussain was requested by the Society for the first time in May 1958 vide the letter Exh. 10‑
"to attend at the Society to discuss and thrash out‑an arrangement on the question of water charges and payment of the charges for the past as well as for the future."
But he replied vide Exh. 20 that he was lying ill in Jinnah Central Hospital and requested that the proposal be communicated to him in writing. The Society then demanded water charges for the first time vide Exh. 66 dated the 19th of August 1962, and the amount mentioned in the bill was Rs. 25,259 without stating the rate and the quantity of water supplied. This amount could not be paid without necessary details and Aftab Hussain has alleged that it is wrong. Muhammad Ahsanul Haq Khairi D. W. 1, was cross examined on this subject. He has stated that
The Society has no storage tanks but water is supplied directly from the K. D. A. mains. What I mean really is not that the consumption of water has been calculated but the expenditure incurred by the Society on buying water from the K. D. A. has been taken into consideration. The Managing Committee of the Society had decided to install meters to measure the water supply to every consumer but the general body of the Society overruled it, therefore, meters were not installed. The total area of the Society is about 1,200 acres. The total expenditure of the Society for procuring the water is about Rs. 60,000 to Rs. 65,000 a month. We have not pro duced those accounts in Court. I do not know why they have not been produced.
Aftab Hussain, P. W. 1, has alleged that‑
"the Society allowed the water charges to accummulate so .that my father and I would be in difficulty about paying them off. "
The Society has claimed damages for use and occupation from the plaintiff in its suit but has omitted to claim the water charges because, according to the suggestion of counsel for the plaintiff, i1 did not intend to waste its money on the imaginary claim that has been made in the bill, nor to reduce it for fear of exposing its errors. Mr. Muhammad Shafi contended in reply that there might be a real or imaginary excuse for not paying or tendering the water charges, but the plaintiff has not even offered to, pay the rent when he submitted his written statement in 1958 and the amended written statement in 1961. Aftab Hussain, P. W. 1, has, however, stated, without contradiction from the opposite side, that his father tried to pay the rent and visited the office of the Society personally but the payment was not accepted. I think that the Society cannot be blamed for it because the lease became a subject of dispute among its members as early as in 1954 ; but then the plaintiff too cannot be blaimed for the non‑payment.
8. My conclusion of the above discussion is that an agree ment for lease was made, but its validity and nature are to be examined separately. Issue No. 1 is decided in favour of the plaintiff with this reservation.
9. Its validity has been questioned on the grounds of illegality and fraud. They are embodied in Issue No. 2, 1 propose to examine the objection of illegality first. The objec tion has been supported by Mr. Muhammad Shafi by setting forth the following considerations
(1) The Plot was earmarked for the amenities of the Society in general and could not be leased ‑for a commercial purpose like a nursery.
(2) The agreement is without consideration.
(3) The agreement was neither made in the form prescribed for making allotments, nor in the manner prescribed for contracts.
(4) The Managing Committee did not sanction it by passing a resolution.
(5) The Secretary was not authorised to enter into such agreements, nor could he be authorised to do so.
10. The first two considerations can be disposed of simply by pointing out that the Managing Committee had passed a resolution on the 10th of July 1951, vide Exh. 15, declaring that a nursery was an amenity and that there are provisions in Exhs. 40 and 41 fixing rent and making it incumbent on the lessee that he would supply plants to the Society at a concession of 20 per cent. These two considerations are, therefore, not in the way of the plaintiff.
11. The other three considerations can be dealt with together, They are meant to indirectly attack the vires of the transaction from two angles which are (i) the proper procedure and formali ties and (ii) the limits of authority of the Secretary. The procedural defects are also meant to fall within the second objection because the Society being a creature of law cannot ordinarily depart in its acts from the procedural provisions of its code.
12. In order to test the vires of the transaction it is necessary to note the relevant provisions of the Code of the Society. The Society is a co‑operative body of persons registered under the Bombay Co‑operative Societies Act, 1925. Its entire Code, according to its present Honorary Secretary, Muhammad Ehsanul Haq Khairi, D. W. 1, consists of the bye‑laws, Exh. 80. The relevant bye‑laws are as follows
Objects
"2. The objects of the Society shall be to carry on the trade of buildings, and of acquiring, buying, selling, hiring, letting and developing land in accordance with Co‑operative principles and to establish and carry on social, recreative and educational work in connection with its tenants and the Society shall have full power to do all things it deems necessary or expedient for the accomplishment of all objects specified in its bye‑laws, including the powers to purchase, hold, sell, exchange mortgage, rent, lease, sub‑lease, surrender accept surrenders of and deal with lands of any tenure and to sell by instalments and subject to any terms or conditions and to make and guarantee advances to Members for building or purchasing property and to erect, pull down, repair, alter or otherwise deal with any building thereon.
Membership
"7. All persons who have signed the application for registra tion are original members. Other members shall be elected by the Committee provided that all members shall be employees of Pakistan Government. Two adverse votes are sufficient to exclude an applicant. Every person shall pay Rs. 5 on applying for admission. In cases where the application is refused the entrance fee shall be returned.
General Power of Committee
"53. The management of the business of the Society shall be vested in the Committee who in addition to the powers and authorities by the rules and these bye‑laws or otherwise expressly conferred upon them may exercise all such powers and do all such acts and things as may be exercised or done by the Society, and are not hereby or by statute expressly directed or required to be done by the Society in General Meeting, but subject nevertheless to the provisions of the Act the Rules, the bye‑laws and to any regulations from time to time made by the Society in General Meeting provided that no regulation so made shall invalidate any prior act of the Committee which would have been valid if such regulation had not been made.
Details of Power
"54. Without prejudice to and not so as to limit or restrict the general powers conferred by the last preceding bye‑law and the other powers conferred by the rules and these bye‑laws it is hereby expressly declared that the Committee shall have the following powers that is to say, power‑
Contracts
(h) to enter into all contracts for the Society and settle the terms thereof ;
Incidental Acts
(p) to do all such acts and things as are incidental to or which the committee may think conducive to the attainment of the objects of the Society or any of them.
Delegation of Power
"58. The Committee may delegate any of the powers hereby given to it to one or more subcommittees of its own members who shall in the functions entrusted to them conform in all respects to the instructions and regulations given them by the Committee and the meeting and proceedings of such sub‑committee consisting of two or more members shall be governed by the provisions herein contained for regulating the meeting and proceedings of the Committee so far as the same are applicable thereto and are not superseded by any regulations made by the Committee under this bye‑law. The Managing Committee may nominate non‑members also to a Sub‑Committee or Sub‑Committee may co‑opt a non‑member. Such non members shall have no vote.
Secretary
"60. The Committee shall appoint a Secretary with the duties following
Correspondence
(5) He shall carry on the correspondence of the Society.
Control of Committee
(6) He shall in all things act in the discharge of his duties under the direction and control of the Committee.
Execution of Documents
"62. All documents or receipts signed on behalf of the Society shall be signed by the Secretary and one member of the Committee."
13. The facts to which the above provisions are to be applied are that the Society decided vide its resolution Exh. 67 to establish two nurseries and published a Public notice vide Exhs. 83 and 84 in two issues of the daily DAWN, dated the 24th and 25th of January 1950, to invite applications to the Secretary for leasing "two plots of land (measuring) about 3 acres each situated in Blocks 2 and 6 for establishing nurseries therein." The applications
were considered by the Committee and the Plot of land situated near the Khayyam Cinema was given on lease to one Mr. Jahangir Vohra where he has established the Green Nursery. The resolu tion of the Committee is Exh. 73 and the lease deed dated 24‑5‑1951 is Exh. 69. It is an unregistered letter and purports to create a lease for 5 years. The first year is free of rent, the rent for the second and third years is Rs. 200 per month and the rent for the fourth and fifth years is Rs. 300 per month. The area of the land is 2 acres. The lessee is required to sell plants to the Society at a concession of 10 per cent. No plot was at that time given on lease for the second nursery and there is no explana tion of the omission. Mr. Tanzeel‑ur‑Rehman has suggested that nobody was prepared at that time to establish a second nursery. After more than two and a half years of the public notice Altaf Hussain applied to the Secretary vide his letter Exh. 71 dated 10‑9‑1952 for taking a plot of land on lease for 30 years. Now the Secretary was Mr. Imam. He had been appointed with special powers vide the Committee's resolution which is item 12 in Exh. 16. Its relevant part is as follows :
"Lastly the Chairman proposed that the Honorary Secretary should, in addition to the duties mentioned in Rule 60, be entrusted with the responsibility for supervision of all develop ment works and management of the affairs of the Society under the general control and guidance of the Managing Committee. The proposal was approved."
The words "in addition to the duties mentioned in Rule (or bye laws) 60" should be noted. The Secretary offered a plot to the plaintiff vide Exh. 39. He stated that the Society had agreed to lease it to him. Altaf Hussain did not reply to it. The Secretary, therefore, made another offer stating again that the Society had agreed to it vide Exh. 40 which was accepted by Altaf Hussain vide his letter Exh. 72 dated 13‑7‑1953. The relevant terms are as follows
Area : 1,300 square yards, in Block No. 2..
rent
(i) First two years ... No rent
(ii) 3rd to 5th years ... Rent at the
rate of Rs. 150
per acre per
annum.
(iii) 6th to 10th years Rs. 180 per
acre per annum.
(iv) 11th to 30th years Rs. 200 per
acre per
annum.
Water :
(b) 1 " size pipe lines would be provided by the Society upto the Nursery and water would be supplied on a no profit no loss basis.
Concession
(d) You shall allow a rebate of 20%. on your scheduled prices for plants and trees required by the Society for its public ameni ties such as road side trees and plants for public parks gardens etc."
The accepted terms were repeated by the Secretary, in his letter dated 16‑7‑1953, Exh. 41 together with the remark that the Society had agreed to them. Altaf Hussain soon obtained posses sion of the plot as well as a water connection to it and then established a nursery on it. Mr. Imam was a powerful Officer at this time as the resolution which is item 6 in Exh. 25 dated the 30th of April 1953, indicates. Its relevant part is as follows :
"(a) The Chairman pointed out that the Hony : Secretary had the permission of the Managing Committee to make individual allotments of plots in Block No. 6, but'‑he had also made Commitments to certain persons who are not eligible to be the members of the Society such as H. E. The Governor -General, the Late Prime Minister, Mr. Fazlur Rahman, Hon'ble Dr. A. M. Malik and Hon'ble Maulvi Tamizuddin Khan. Allotments made to such persons were approved.
(b) The Managing Committee also approved of the allotment of residential plots made up to 30‑4‑1953."
(The italics are mine).
The approval of the allotments to ineligible persons and the blanket or general approval of all allotments made up to 30‑4‑1953 are to be noted. The present Secretary has stated as D. W. 1 that those allotments were 600 In all. Moreover, no list of the 600 allottees is attached to the resolution, nor is there any refer ence in the resolution to such a list, nor has the society produced such a list. In these circumstances it is immaterial as to what procedure was followed by Mr. Imam for making the allotments but an attempt has been made to exclude the plot in dispute from the blanket approval by pointing out that the resolution spoke of residential plots of Block No. VI only. Counsel for the plaintiff, therefore, cross examined the present Secretary as follows
"Q : I put it to you that the Resolution which is at item VI of Exh. 25 approving the allotments made by the Secretary in Blocks VI, III and II in it included the plot which is in question in these proceedings
A : It is correct that the allotments which were made up to the 30th of April 1953, related to the three blocks, but the plot in dispute here was not included in that Resolution.
It is correct that the Secretary was making allotments not only to the Members but also to those who were not eligible to become members. Those allotments were also approved as is indicated by item VI of Exh. 25."
Counsel also cross‑examined the present Secretary with regard to the difference in the procedure of making allotments of the residential plots and other plots as follows
Q : Were there any special forms of sub‑licenses and sub leases for the purposes of commercial amenity plots
A : There are forms approved by the Government which are a part of our lease for purposes of sub‑leases and sub‑licenses in respect of commercial plots, but there are no separate forms as far as the amenity plots are concerned. But for the Green Nursery a form was prescribed by the Managing Committee. No general form was prescribed for nurseries."
While Mr. Imam was exercising vast powers and was acting almost as the Society itself, opposition to him was growing among the members. His powers were curtailed by a resolution which is item No. 2 in Exh. 17 as follows :
Resignation of the Hon. Secretary and appointment of his successor
The resignation tendered by the Hony. Secretary was considered by the Managing Committee alongside their resolu tion dated 1‑6‑1952 by which Mr. Imam was appointed Hony. Secretary. The Managing Committee while appreciating the services rendered by the Hony. Secretary to the Society considered that it was neither legal nor advisable to invest him or any functionary of the Society with absolute powers . The Managing Committee, therefore, authorised the Chairman to inform the Hony. Secretary that he might reconsider his resignation subject to the following :
The Hony. Secretary without the previous approval of the Managing Committee (a) shall not make allotments of plots or grant extension of the existing areas of in favour of the allottees.
(b) shall not enrol new members,
(c) shall not change the lay‑out plan sanctioned by the Government,
(d) shall not interfere with the execution of the development schemes approved by the Managing Committee,
(e) shall not pass any order orally or in writing in contraven tion of the rules, bye‑laws or decisions of the Managing Committee,
(f) shall exercise financial powers only as hereafter defined by the Managing Committee,
(g) shall not enter into any agreement or contract unless so authorised under the rules or bye‑laws, and
(h) shall generally be subject to the guidance of the Chairman."
He lost the election and ceased to be the Secretary, according to the counsel for the parties, from the 14th of November 1953. An open letter Exh. 11‑A, dated 10‑2‑1954, containing complaints with regard to the affairs of the Society was addressed by a large number of the members and employees of the Society to the Chairman, the members of the committee and the Society. One of the complaints was as follows :
Father of a member of the Managing Committee is known to have acquired the lease of 13,000 sq. yards of land n Block No. 2 without being required to pay anything in return for the lease. This gentleman, Altaf Hussain, by name is not a Government servant. It is alleged that even trucks and employees of the Society are being used for the development of this private project.
That member of the Committee was Aftab Hussain, son of Altaf Hussain, who was elected as such on the 1st of November 1953. The Committee appointed an inquiry committee which submitted its report, Exh. 11, with a dissenting note Exh. 11‑B. The majority recommended that the second nursery was unneces sary and that the first nursery should also be taken over on the expiry of its lease. The Committee decided, as follows vide its resolution Exh. 11‑D dated 16‑11‑1954
"The Managing Committee does not recognize the action by the Hony. Secretary by making allotment of 13,000 sq. yards and the Managing Committee decided that this land should be resumed by the Society immediately. The land in possession of the Green Nursery should also be resumed by the Society on the expiry of its lease. Any facilities provided by the Society to the first should be withdrawn."
Altaf Hussain gave a legal notice to the Registrar of Co‑operative Societies vide Ex. 13 and the Society called upon him to vacate the premises vide its notice Exh. 86 dated the 4th of July, 1955. Altaf Hussain, therefore, filed Suit No. 612/1955 and the Society filed the Cross Suit No. 1246/1955.
14. Several controversies of minor nature were raised by counsel for the parties but the fact remains that Mr. Imam was granted more powers than a Secretary could exercise in terms of Bye‑law No. 60 and acted without any restraint, but his actions had a tacit approval of the Committee which had left all the affairs of the Society to him. The Committee could delegate any authority it liked under Bye‑law No. 58 to a sub‑committee of two or more members, but that provision does not justify the conferment of the vast powers on the Secretary vide Exh. 16. There was no prescribed procedure for giving leases or sub‑leases to non‑members excepting for Bye‑laws Nos. 54 (b) and 62 but this procedure was not followed in the case of the Green Nursery See Exhs. 68, 73 and 69‑nor in the case of Altaf Nursery.
15. Mr. Tanzilur Rehman has, therefore, contended that Exh. 41 which was written in disregard of Bye‑laws No. 54 (b) and 62 may not be perfect document but Exhs. 40 and 72 constitute the offer and acceptance of the terms of lease which are protected under section 53‑A of the Transfer of Property Act, because the plaintiff was given the possession of the plot and had developed it into a nursery. The offer and acceptance, might be ultra vires of the powers of Mr. Imam but were not ultra vires of the powers of the Committee and the Society. The Secretary had the authority under Bye‑law No. 60 (5) to correspond on behalf of the Society and he had written, vide Exh. 40, that the Society had offered the terms. Altaf Hussain, who was not a member of the Society, could rely on the presumption of valid "indoor Management", and was not required to inquire as to whether, how and when the Society had offered the terms. Counsel has referred to the observations of Palmer made in his Company Law at pp. 32‑33 and has relied on 7 A C 869. Palmer's observations are as follows
This rule is that or special, or by a deed of settlement or of Parliament memorandum and articles registered in some public office, persons dealing with the company are bound to read the Act and registered documents, and to see that the proposed dealing is not inconsistent therewith ; but they are not bound to do more ; they need not inquire into the regularity of the internal proceedings‑what Lord Hatherley called the Indoor Manage ment'.
They are entitled to assume that all is being done regularly. So a Managing Director, who draws a bill on behalf of a company without any authority, binds the company.
Further
This rule is based on the principle of convenience, for business could not be carried on if a person dealing with the apparent agents of a company was compelled to call for evidence that all internal regulations had been duly observed. Thus where the articles give power to borrow with the sanction of a General Meeting, a lender who relies on this power need not inquire whether such sanction has in fact been obtained. He may assume that it has, and if he is acting bona fide, he will, even though the sanction has not been obtained, stand in as good a position as if it had been obtained.
In the judgment cited by counsel it was found that the directors of the limited liability company were not validly appointed, that no resolution was passed to authorise the bank to make payment as was conveyed to it by a letter of the Secretary of the company and that in fact no meeting of directors was ever held, but the bank acted on the faith of the letter believing it to be correct. It was held that the bank lawfully made payments of the cheques which were signed according to the letter and that the liquidator of the company could not recover that money from the bank.
16. I may add that the bye‑laws of the Society have a specials sanctity only for and in respect of the Society which cannot violate them without exposing its acts to the criticism of being ultra vire because its powers and the mode of exercising them are controlled by the bye‑laws ; but in that respect too all ultra vires acts of corporate body do not stand on the same footing. When a corporation does an act which is beyond its powers or competency then it is ultra vires in the fundamental or primary sense of the expression. As a general rule such an act is invalid. But when an act is ultra vires of the powers of an officer or of its prescribed formalities then different considerations apply, as to the powers subsequent because ratification of it by the corporation or previous assent of the corporation to it may be deducible from the circum stances and as to the formalities the corporation may become estopped from questioning such an act by accepting benefits from it, or thereby causing an outsider to in good faith do or omit t do an act to his detriment which he would not have omitted o done otherwise. The distinction between the primary and secondary meanings of the expression has been explained in Vol. 13 of the American Jurisprudence at pp. 784‑5 as follows :
An act or contract of a corporation is properly said to be ultra vires when it is beyond the powers expressly or impliedly conferred upon the Corporation . . . . .. In a less funda mental and proper sense, corporate acts are also said to be ultra vires when the corporation is not authorised to perform such acts because of a disregard of certain formalities, which the law demands, because of any improper use of enumerated powers, or because of a lack of power in such regard in its officers or agents.
Further at page 785:
It is also to be observed, by way of limitation of the doctrine of ultra vires, that an attempt conveyance by the officer of a corporation of its property without authority does not involve the doctrine of ultra vires, but of agents attempting to act on behalf of their principal without authority."
Further at pages 787 and 789
"In a suit between the corporation and strangers dealing with it, the question is whether the act is one which the corporation is not authorised to perform under any circumstances or one that it may perform for some purpose or under certain conditions. In the first case it is strictly ultra vires; and as a general rule there can be no recovery because the party dealing with the corporation is bound to know, from the law of its existence, that it has no power to perform it." "In the second case noted hereinbefore where the contract is one that corpora tion may perform under some circumstances or under certain conditions, the contract is not in its strict sense ultra vires, and the issue will turn upon whether the party dealing with it is aware of the intention to perform the act for some unauthorized purpose or whether the attendant circumstances justify its making and its performance. Where an act is ultra vires not for want of power in the corporation, but for want of po Ir in its agents or officers or because of the disregard of mere formalities which the law requires to be observed, or is an improper use of one of the enumerated powers, it may be valid as to third persons".
Moreover
. . . . . although the corporation has failed to comply with some formality or regulation which it should not have neglected, but which has in fact been omitted after both parties to the transaction have acted and proceeded as if all preliminary formalities and regulation had been complied with and rights have attached, the corporation itself cannot be heard to set up the informality.
In view of the above statement of law it is unnecessary to discuss and distinguish Barnett v. South London Tramways Company ((1887) 18 Q B D 815) and London Association of Ship owners & Co. v. London and India Docks Joint Company (67 L T 238), which were cited by Mr. Muhammad Shafi. In this case the Society was aware that the Secretary could in terms of bye‑law 60 carry on correspondence on behalf of the Society so as to bind it and the Committee had invested him with vast powers as well as sanctioned hundreds of his acts without criticism.
The conclusion is that the objections of counsel as to illegality do not prevail and part (a) of issue No. 2 is decided in favour of the plaintiff. As to part (b) namely fraud, its particulars, as set out in paragraph 6 of the written statement of the Society, are as follows :
"6. That the plaintiff Altaf Hussain deceased and Mr. Imam the then Secretary of the defendant‑Society were in collusion with each other and they played a fraud on the defendant‑Society with a view to harm its interest. The particulars of fraud are as follows
(i) That it is false statement that the plaintiff Altaf Hussain's case or matter was at any time placed and considered by the defendant‑Society.
(ii) That it is also a false statement that the defendant‑Society at any time reconsidered the plaintiff Altaf Hussain's case.
(iii) That the then Secretary wrote the alleged letters, referred to in the plaint to the plaintiff Altaf Hussain deceased and created evidence in his favour.
(iv) That the then Secretary did not follow the procedure which was followed in the case of letting out property to Green Nursery. In the case of Green Nursery an advertisement was made in the newspapers and tenders were invited. The Managing Committee of the defendant‑Society then decided as to whom the plot of land should be leased out for purposes of nursery.
(v) That the land in dispute under the approved plan is ear‑marked for the amenitities of the members of the Society and it could not be given for the use of a Nursery.
(vi) "I hat the terms of the two letters are not for the benefit of the defendant‑Society and the advantage under it is for the plaintiff Altaf Hussain deceased.
(vii) That the then Secretary, Mr. Imam, kept the whole matter as a secret. He did not consult the Chairman and the Managing Committee. The defendant‑Society has not gained any advantage out of the alleged contract".
Items Nos. (i), (ii), (iv), (v) and (vii) have been discussed above. As to item No. (iii) the present Secretary has stated that
"I do not know what is meant by the statement contained in paragraph 6 (iii) of the written statement that the Secretary wrote the alleged letters to create evidence in his favour. The alleged letters are Exhs. 39, 40 and 41 which appear to have been issued by the office of the Society".
In reply to item No. (vi), counsel for the plaintiff referred to the note of Mr. Madani in which he has set out the advantages of a nursery for the Society, and also pointed out that an amenity plot could not be meant to directly provide financial benefit to the Society. Part (b) of issue No. 2 is, therefore, also decided in favour of the plaintiff.
18. Issue No. 3 can be decided by quoting from the state ment of the present Secretary. He has stated as follows
"The claim of the Society for Rs. 5,000 as damages is correct. There are no details or break up of this amount on the basis of which it has been claimed. It is an estimated loss of the Society. There is no basis for the estimate. Mesne profits at the rate of Rs. 541 per month have been claimed from the date of the suit until recovery. I do not know the basis for fixing the amount of Rs. 541 per month as mesne profits. The plot in dispute was meant to be used for providing amenities to the Society. No definite proposal had been in contemplation. The chances were that it would have been used for constructing a mosque, a play ground or a park for the benefit of the members of the Society".
The plaintiff is, therefore, liable to pay only the amount due in terms of Exh. 40. The issue is decided against the Society.
19. Issue No. 4 does not require separate discussion as it has been discussed as a part of issue No. 1 in Paragraph 6 above. It is decided against the Society.
20. The fifth issue does not need a separate discussion in view of what has been said in Paragraphs 14 to 16 above. It is decided against the Society.
21. The above discussion is incomplete in two respects which are firstly that no reference has been made to the effect of section 53‑A of the Transfer of Property Act on the reliefs claimed in the two suits and secondly that nothing has been said in regard to the nature of the tenancy. Mr. Muhammad Shafi rightly pointed out that section 53‑A of the Transfer of Property Act does not create a right for making a claim but only affords a defence against the transferor if he attempts to enforce a right other than one that is provided in the contract, in respect of the property of which the transferee is in possession. On this basis, he contended that in case the defence based on that section was upheld by this Court, the suit of the Society might be dismissed, but the suit of the plaintiff cannot be decreed. This contention of counsel however, is not sound in the circumstances of this case because the non‑observance of the prescribed procedure and formalities as well as excessive exercise of authority by Mr. Imam have been discussed from the point of view of the vires of the transaction and the finding is that they do not vitiate the lease. The plaintiff is, therefore, a lessee for additional reasons to section 5..‑A of the Transfer of Property Act. As to the nature of the tenancy, his lease purports to be for 30 years in terms of Exhs. 40 and 72, but obviously it cannot be valid for that period in terms of sections 17 and 49 of the Registration Act. Mr. Muhammad Shafi had cited Ramchandra Agarwala and another v. Syameswari Dasya (A I R 1925 Cal. 1171) in support of his proposition that, if a tenant takes possession of a premises under a documen which purports to be a lease in terms of years but is not duly stamped and registered, then tenancy at will is created. The pro position was not disputed by Mr. Tanzeel‑ur‑Rehman, but counsel for the parties were not in agreement as to whether a tenant at will could be ejected after notice or without a notice. I invited their attention to the West Pakistan Urban Rent Restriction Ordinance VI of 1959, because subsection (1) of section 13 of that Ordinance protects the possession of a tenant against eviction, as follows :
"A tenant in possession of a building or rented accommoda tion shall not be evicted there from in execution of a decree passed before or after the commencement of this Ordinance or otherwise, and whether before or after the termination of the tenancy, except in accordance with the provisions of this section".
Mr. Muhammad Shafi's short reply to that bar was that the Ordinance is applicable to monthly tenancies and not to yearly tenancies. He pointed out that Exhs. 40 and 72 created an yearly tenancy because the rent was fixed year‑wise, and not month‑wise. It is unnecessary for me to go into these questions, because the Society has not brought its suit for the eviction of the plaintiff as a tenant, but to take the possession of the premises from him as a trespasser. As soon as the problem of evicting the plaintiff as a tenant arises we leave the scope of the Society's suit behind. I would have been prepared to examine the nature of the tenancy more closely as well as to scrutinize the argument that the Ordinance does not apply to yearly tenancies, if Mr. Muhammad Shafi was agreeable to take the stand that the plaintiff is a tenant, but his plea remained that there was no tenancy and that the possession of the plaintiff was unauthorized. In these circumstances 19 cannot attribute a plea to the Society which has not been taken by it by amending its pleadings. I may add that Mr. Tanzeel‑ur- Rehman calculated the rent in terms of Exhs. 40 and 72 and stated that that was the amount which was due from the plaintiff as rent ; but I have not decided issue No. 3 on that basis in substitution of the Society's claim for damages for use and occupation because I wish to leave the effect of non‑payment of rent completely open for the benefit of the Society.
22. The over‑all conclusion of all that has gone before is that the suit of the Society is dismissed and the suit of the plaintiff is decreed subject to the rights and liabilities of the parties as landlord and tenant, as well as the liability of the plaintiff to pay the agreed rent and proper water charges. As the plaintiff has been in occupation of the premises for the last 10 years without paying rent and water charges, I allow the parties to bear their own costs in both the suits.
K. B.A. Suit decreed.
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