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Regular First Appeal No. 11 of 1980, decided on 23rd November, 1986.

‑‑‑S. 73‑‑Suit for recovery of loss suffered on breach of contract‑ Municipal Corporation leasing out Sullage Farm to appellants through auction but they failed to pay auction amount within time‑‑Lease in favour of appellants cancelled by Municipal Corporation and reauctioned to a third party at lower amount‑‑Municipal Corporation claiming that they were entitled to recover loss sustained by them due to difference of auction amount actually offered by appellants and auction amount offered by third party‑‑Appellants contending that no contract was signed between parties, that auction was not confirmed by Controlling Authority i.e. Commissioner and that possession of leased land was not delivered to them‑‑Evidence on record showing that one of appellants was already in possession of Sullage Farm and both of them were jointly leased out both were as such considered to be in possession thereof; that they paid a part of auction money and auction was confirmed by Controlling Authority i.e. Commissioner, a contract had, therfore, reached between parties and there was nothing wrong or illegal in procedure‑‑Held, both appellants were jointly and severally liable for loss suffered by Municipal Corporation on account of reduction of lease of disputed land‑‑Appeal against order of trial Court decreeing suit of respondent Corporation dismissed in circumstances.

Rashid Ahmad Chughtai for Appellant.

Nemo for Respondents.

Date of hearing: 23rd November, 1986.

.‑‑In brief the facts of this appeal are stated as follows:‑

Municipal Corporation (earlier Municipal Committee), Faisalabad owned a sullage farm in Chak No. 124/G. B. in an area of 169 Acres 1 Kanal 14 Marlas. It was auctioned for cultivation for a period of two years commencing from 7th July 1970 through open auction. Muhammad Iqbal and Shahbaz Khan were given this farm on lease, being the highest bidders for Rs.5,50,000 per year on 26th June, 1970. Both the defendants signed the bid sheet EXh.P.l on that date. They paid Rs.5,000 and then through an application dated 1st July, 1970 Exh.P.2 requested the Municipal Corporation that the sum of Rs.25,000 deposited by them as security be also adjusted towards payment on their behalf. Another sum of Rs.1,37,500 was also paid by them towards lease money. In this way, a balance of Rs.9,62.500 remained due from them. The defendants were put in possession of the said land in accordance with the terms and conditions of the auction. In fact, Muhammad Iqbal, one of the bidders, was already in possession of the said land when he alongwith Shahbaz Khan defendant jointly made the highest bid in the auction. The auction in favour of the two defendants was placed before the general house of the Corporation vide agenda Exh.P.5. The lease was sanctioned for two years vide resolution No.310 dated 8th July, 1970 Exh. P.6 subject to sanction by the controlling authority. In compliance with this resolution, the Commissioner Sargodha Division, Sargodha vide letter Exh. P.7, was requested to accord necessary sanction which was conveyed by the Commissioner vide letter Exh.P.8 dated 25th July, 1970.

The defendants did not pay the lease money in accordance with the terms and conditions of the auction. They were, therefore, sent a notice Exh. P.9 on 3rd August, 1970 asking them to pay the said amount. The notices were received by Muhammad Iqbal vide acknowledgement receipt Exh.P.10. In spite of this notice, the defendants failed to pay the lease money. The matter was referred to the Commissioner Sargodha Division, who, vide letter Exh.P.14 dated 14th September, 1970 allowed another opportunity to the defendants to deposit the balance amount. It was observed in this letter that if they failed to do so, the sullage farm may be reauctioned and the loss, if any, be recovered from them. Notice Exh.P.15 dated 15th September, 1970 was accordingly sent to both the defendants requiring them to pay the due amount within seven days. This notice was received by Muhmmad Iqbal defendant No. 1 vide acknowledgement receipt Exh.P.16 and by Shabaz Khan defendant No.2 vide acknowledgement receipt Exh. P.17 or 17th September, 1970. Both the defendants failed to deposit the balance amount of lease money as a result of which their lease was cancelled. They were accordingly informed of the same vide notice Exh. P.18, dated 24th September, 1970. After cancellation of this lease, the Municipal Committee took back possession of the farm land vide Patwari's Roznamcha Waqiati report Exh.P.20, dated 25th September, 1970.

After cancellation of lease in favour of the two defendants and after taking possession of the farm land, it was put to reauction on 4th November, 1970. One Moti son of Fateh Din was the highest bidder for Rs.3,30,000 per year i.e. Rs.6,60,000 for two year's period. This offer was accepted by the controlling authority. The earlier auction in favour of the two defendants was for Rs.5,50,000 per year. In this way, it was claimed by the Municipal Committee that it had suffered a loss of Rs.3,02,500 which was a difference of the two auctions. The auction bid sheet in favour of Moti son of Fateh Din is Exh. P.23. This auction was held on 4th November, 1970 after public notice Exh. P.24.

2. The suit instituted by Municipal Committee on 13th March, 1973, was resisted by the two defendants. Muhammad Iqbal defendant No.l controverted the averments in the plaint. It was pleaded by him that the suit was bad for non‑joinder of necessary parties; that the plaintiff had no cause of action to file this suit because the auction was not confirmed by the Commissioner Sargodha Division; that the plaintiff is estopped from bringing this suit by his words and conduct; and that the area auctioned in their favour was short by 22 Acres. On merits, para I of the plaint was admitted. It was, however, added that 22 Acres out of the leased land was graveyard and Abadi and that the possession was not delivered to 5:m. It was pleaded that the Commissioner as controlling authority did not sanction the auction in his favour and as such, present suit was liable , to be dismissed.

Shahbaz Khan defendant No.2 in his written statement pleaded that the Municipal Committee had made no distinction in the respective case of the defendants who had fallen apart only a few days after sanction of auction in their favour and the present suit has been brought on wrong facts. It was stated by him that after novation of the contract in favour of defendant No. 1, no liability could be fired on him. On merits, it was pleaded that out of 169 Acres the land measuring 22 Acres was in occupation of the trespassers and not fit for irrigation and that wrong area was declared before the auction. He admitted that the highest bid offered in auction by the defendants was accepted. He denied delivery of possession of the leased land to him. He further denied having deposited any security with the Municipal Committee. It was stated in the written statement by defendant No. 2 that Municipal Committee not only violated the terms of the lease but it actually cancelled the same ignoring defendant No.2 altogether. It was alleged that the arrangement by Municipal Committee was a calculated move 'to inflict a severe loss on him to give wrongful gain to defendant No.l. He claimed refuned of Rs.68,750 from the Municipal Committee which .he had earlier deposited after the auction. The learned Civil Judge, Faisalabad framed the following issues on the pleadings of the parties:‑--

(1) Whether the defendants are liable to pay the suit amount to the plaintiff

(2) Whether the plaintiff is estopped to file the present suit

(3) Whether defendant No.2 is not liable to pay the suit amount

(4) Whether the suit is bad for non‑joinder of necessary parties

(5) Relief .

Issue No.l was decided in favour of the plaintiff‑respondent No.l. It was held that according to para 2 of the pt‑tint, the plaintiff had already received Rs.1,67,500 from the defendants and as such, the recoverable loss comes to Rs.2,72,500 and not Rs.3,02,500 as claimed. Issues 2 and 4 were not pressed by the learned counsel for the defendants and were accordingly found against them. Issue No.3 was decided against defendant No.2 appellant. As a result of these findings, the suit of Municipal Committee was decreed with costs to the extent of Rs.2,72,500 against the defendants vide impugned judgment and decree dated 20th December, 1979. hence this appeal.

3. We have carefully gone through the oral as well as the entire documentary evidence placed on record by the parties with the assistance of learned counsel for the appellant.

It was not denied on behalf of the appellant that Shahbaz Khan defendant No.2 (appellant) and Muhammad Iqbal defendant No.l (respondent No.2) jointly offered the highest bid of Rs.5,50,000 per year in the open auction for lease of sullage farm from 7th July, 1970 to 6th June, 1972. The payment of Rs.1,67,500 towards part payment of lease money has also not been denied. It was contended firstly that no contract was signed between the parties and as such, the present suit was not maintainable; secondly, that the auction was not confirmed by the controlling authority and as such, no claim can be set up to enforce recovery of loss allegedly suffered by the Municipal Committee; and thirdly, that the possession of the leased land was not delivered to defendant No.2 after the auction and as such, he was not liable to pay for any loss alleged to have been suffered by the Municipal Committee on account of the resuction of the sullage farm. The precise argument of the learned counsel for the appellant was that in fact Muhammad Iqbal defendant No.l (respondent No.2) was in possession of the leased area before suction in favour of the two defendants. Shahbaz Khan defendant No.2 should have been given separate possession of the leased land which was not done and as such, he was not liable to make good the loss suffered by the plaintiff.

We have carefully considered these contentions in the light of the pleadings and evidence on record of this case.

The sullage farm was leased by the Municipal Committee through an open auction on 26th June, 1970 for a period of two years vide Fard Neelam EXh.P.l signed by both the defendants who were the highest bidders for Rs.5,50,000 per year. This auction was put in the general house of the Municipal Committee who approved the same subject to sanction by the controlling authority vide resolution Exh.P.6 dated 8th July, 1970. The required sanction was conveyed to the Municipal Committee vide letter Exh.P.8 dated 25th July, 1970. In view of all these proceedings there was no necessity for any formal execution of agreement between the parties. The defendants initially paid Rs.5,000 as earnest money. They then jointly made an application Exh.P.3 on 1st July, 1970, requesting the Municipal Committee to adjust Rs.25,000 the security amount towards payment of the lease money. This was accepted by the plaintiff. There is an admission in this application that the possession of the leased land was already with them. It was argued by the learned counsel that the words:‑----

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were added by someone else in the Municipal Committee office and were not written in the application Exh.P.3 submitted by the two defendants. Firstly, the defendant No.2 Shahbaz Khan while appearing as his own witness said nothing about this fact in his statement during the trial. Secondly, even if defendant No.2 was not given possession by the Municipal Committee after the acceptance of their offer, then also it is the admitted position that Muhammad Iqbal defendant No.2 was already in possession of the leased land at the time of its auction. Shahbaz Khan defendant No.2 in his statement in Court on 11th October 1978, stated that both the defendants had secured the lease of the land in dispute jointly in equal share. He further admitted that they had paid Rs.1,37,500 to the Committee in equal share. He admitted that defendant No.l was already in possession of the leased land but he was not given possession by the Committee after the auction. It is, therefore, evident that the two defendants jointly obtained the land on lease from the Committee. Defendant No.l was in possession of the land. The lease having been taken jointly, the possession of defendant No.1 would be considered possession of defendant No.2 as well. Both were agents of each other. As Muhammad Iqbal defendant No.l was admittedly in possession of the disputed land, it will be considered that Shahbaz Khan defendant No.2 also came in immediate possession of the said land after the sanction of .the lease in their favour. The Municipal Committee was not required to take any further step to put defendant No.2 in possession of the leased land. The confirmation of the lease by auction was conveyed by the Commissioner vide letter Exh.P.7 dated 25th July, 1970. The argument on behalf of the appellant was that the said letter had been signed by Director, Basic Democracies and not by the Commissioner himself and as such, it could not be said that the sanction had been granted by the Commissioner. This argument is without any force. The letter clearly indicates that the sanction was accorded under Rule 4(1) read with clause (b) of the proviso thereto, of the West Pakistan Municipal Committees (Contract) Rules 1960. The sanction was granted by the Commissioner though conveyed by him through a letter signed on his behalf by the Director, Basic Democracies. There is nothing wrong or illegal in this procedure.

It was argued by the learned counsel that Shahbaz Khan defendant No.2 appellant had nothing to do with the lease and as such, the entire amount should have been decreed against Muhammad Iqbal defendant No.l (respondent No.2). This argument was based on the submission that the two defendants after sanction of the lease in their favour parted because Muhammad Iqbal defendant in collusion with the Municipal Committee got the first lease cancelled which was re-auctioned in favour of his close relative Moti son of Fateh Din. This argument is without any basis. Shahbaz defendant appeared in support of his case during the trial as his own witness. He did not produce any evidence besides his own statement. In his statement he did not say anything about the rupture of his relations with Muhammad Iqbal defendant No.l. There is no evidence that Moti, the subsequent lease‑holder was related to Muhammad Iqbal defendant No.l. If Shahbaz Khan defendant had any grievance or claim against Muhammad Iqbal defendant, he could have proceeded in a legal manner against him but so far as the plaintiff Municipal Committee is concerned, both the defendants are jointly and severally liable for the loss suffered by it on account of reauction of the lease of the disputed land. Both the defendants offered joint bid in the first auction. The total lease money paid to Municipal Committee was equally shared by them. This contention, therefore, is repelled.

4. In view of the above discussion we find no merits in this appeal which is accordingly dismissed leaving the parties to bear the costs of this appeal.

M.Y.H./598/L Appeal dismissed.

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