The Cost of Litigation Act 2017

[AS PASSED BY THE NATIONAL ASSEMBLY]

BILL further to amend the Code of Civil Procedure, 1908 and the Code of ' Criminal Procedure, 1898 It is hereby enacted as follows:-

1 Short title, application and commencement,-
(1) This Act may be called the Costs of Litigation Act, 2017,
(2) It shall apply to the Islamabad Capital Territory.

2. Amendment of Act v of 1908.- In the code of civil Procedure, 1908 (Act V of 1908),-
(I) for section 35, the following shall be substituted, namely:- A WHEREAS it is expedient further to amend the Code of Civil Procedure, 1908 (Act V of 1908) and the Code of Criminal Procedure, 1898 (V of 1898), for the purposes hereinafter appearing; (3) It shall come into force on such date as the Federal Government may, by notiflcation in the official Gazette, specify and shall apply to such courts in the Islamabad Capital Territory as the Federal Government may, by notification in the official Gazette, determine in this behalf and different dates may be specified in respect of different courts.
PART-I CIVIL PROCEEDINGS "35. Costs.- (1) Subject to such conditions and limitations as may be prescribed, and to the provisions of any law for the tirne being in force,-
(i) a party to any proceedings shall, before the announcement of final order, judgment or decree, file in the prescribed Form, details of actual costs of litigation, including but not limited to court fee, s:amp fee, fee paid to counsel and all other ancillary or incidental expenses thereto;
(ii) the Court shall award the actual costs of litigation under clause
(i) to the successful party with markup not exceeding the prescribed limit per annum, as notified by the State Bank of Pakistan, at the time of passing the order, judgment or decree;
(iii) the costs other than those mentioned in clause (i) shall be in the discretion of the Court; and (iv) the Court shall have full power to determine out of what property such costs are to be paid and recovered and to give all necessary directions for the purposes aforesaid.
(2) The fact that the Court has no jurisdiction in respect of the proceedinqs shall be no bar to the exercise of such powers under - this section.";
(II) for section 35-A, the following shall be substituted, namely:- "35A. Adjournment costs.-If, on the date fixed for hearing in any proceedings, a party to the proceedings or any other person, despite service of notice, fails to appear or comply with any order of the Court or mandatory provision of the Code or any other law for the time being in force, seeks an adjournment for such purpose, the Court shall, for sufficient cause and reasons to be recorded, grant such adjournment on the condition that such party or person shall pay to the other party, costs of adjournment which shall not be less than five thousand Rupees per adjournment or such higher amount as may be prescribed from time to time: Provided that if the Court is satisfied that the adjournment being sought ls on account of unavoidable reasons beyond the control of the party concerned, which reasons shall be recorded by the Court, the Court may grant adjournment without imposing adjournment costs: Provided further that if the court finds that there is a tendency of seeking repeated adjournments by any party on such grounds/ the court may not grant adjournment without lmposing the adjournment costs as the court may deem fit."; and
(III) after section 35A, substituted as aforesaid, the following new sections shall be inserted, namely:- "35B. Special costs.-
(1) if in any proceedings, the Court finds that any averment made by any party is false or vexatious to the knowledge of such party, the Court shall award special costs to the opposite party against whom such averment has been made.
(2) The amount of any special costs awarded under sub-section (1) shall be taken into account in any subsequent suit for damages or compensation in respect of such claim or defence. 35C. General provisions as to costs.- The Government shall not be liable to costs under sections 35, 35A and 358. Explanation.- In sections 35, 35A and 35B, the expression "proceedlngs" lncludes suit, appeal, review, revision, execution or any other proceedings and any matter incidental thereto.".

PART.II CRIMINAL PROCEEDINGS
3. Amendment of Act v of 1898.-In the Code of Criminal Procedure, 1898 (Act V of 1898),- -3-
(I) the existing section 200 shall be renumbered as sub-section (1) thereof and,- (i) in sub.section (1), renumbered as aforesaid, proviso. after clause (aa), the following new (b) shall be inserted. namely:- in the clause (U) (n1) "(b) \r'/here a complainant is a Court or a public servant, the Court or a public servant, as the case may be, shall not be liable to adjournment costs under sub-section (2)i'; and (ii) after sub-section (1"), amended as aforesaid, the following new sub-section shall be added, namety:- "(2) Subject to provisions of section 344, il on the date fixed for hearing in any proceedings, a party to a case or any other person, despite service of notice. fails to appear cr comply with any order of the Court or mandatory provision of the Code or any other law fl)r the time being in force, seeks an adjournment f,lr such purpose. the Court may, for sufficient cause and reasons to be recorded, grant such edjournment on the condition that such party or F,erson shall pay to the other party, adjournment costs which shall not be less than ten thousand rupees per adjournment or such higher amount e s may be prescribed from time to time."; ln section 250, in sub-section (2), for the words "twenty five thousand" th_e words "one hundred thousand" shall be substituted."; and in sectiori 344, in sub-section (1), after the expression "terms" tile commas and words ", including adjournment costs," shall be inserted.". -
4- STATEMENT OF OBJECTS AND REASONS The tendency of filing false and vexatious cases and taking baseless grounds for defense is unfortunately on the increase. This tendency leads to numerous evils, lncluding heavy expenditure incurred by the affected parties, causing them financial loss and mental torture, apart from wasting precious time of the courts. It is, therefore, necessary to empower courts to impose costs to discourage false and frivolous litigation and unnecessary adjournments. It is proposed to make amendments in the Code of Civll Procedure, 1908 for thls purpose. Amendments are also being proposed in the Code of Criminal Procedure, 1898 to provide for impositlon of adjournment costs in criminal cases. The Bill is designed to achieve the aforesald object.
MINISTER-IN-CHARGE -5-

Party cannot improve its case beyond pleadings

PLJ 2018 Lahore 1042

Present: Ch. Muhammad Masood Jahangir, J.

Mst. SURRAYA BIBI--Petitioner

versus

IMTIAZ AHMAD etc.--Respondents

C.R. No. 2715 of 2014, decided 25.4.2018.

Civil Procedure Code, 1908 (V of 1908)--

----S. 115--Revisional jurisdiction--Specific Relief Act, (I of 1877)--Suit for declaration possession and cancellation of sale deed--Decreed--Appeal--Case was remanded--Suit was dismissed--Appeal Dismissed--Concurrent findings--Ingredients of transaction--Challenge to--It is sine qua non for a vendee to establish; firstly, that transaction was struck with a titleholder or a person having authority to create right; secondly it was settled against consideration, and thirdly such sale was accompanied by delivery of possession--Concurrent findings of Courts below cannot be disturbed by this Court while exercising revisional jurisdiction provided under Section 115 of Code, 1908 is not tenable as both judgments and decrees having been found to be result of misreading and non-reading of evidence as well as non-adherence to law applicable in this regard are not sustainable in eye of law--It is correct that normally this Court does not interfere with concurrent findings of fact recorded by two Courts below, but when there is gross misreading and non-reading of evidence and patent violation of law is floating on surface of such concurrent findings, this Court cannot shut its eyes and is always under obligation to rectify error by interference in such like illegal findings.      [Pp. 1045& 1050] A & F

2004 SCMR 1001 & 2006 SCMR 1238, ref.

Onus to Prove--

----Mere execution and registration of sale deed by itself do not furnish proof of aforenoted ingredients of transaction and whenever such document as well as transaction cited therein is questioned or denied, onus lies on beneficiary to prove both of these.                                                        [P. 1045] B

Pleadings--

----It is settled law that a party has to first assert facts and pleas in pleadings and then it can prove same through evidence--A party is not allowed under law to improve its case beyond what was originally setup in pleadings.       [Pp. 1045 & 1046] C

Qanun-e-Shahdat Order, 1984--

----Arts. 17 and 79--Document--Financial obligation--Attestation of sale deed by identifier--Marginal witness--Violation of mandatory requirement--It was made imperative that a required number of persons must attest any such document being its marginal witnesses and as per requirements of latter provision, such a document can only be used as evidence when two attesting witnesses, at least, have been called for purpose of proving its contents, execution and construction, but nothing short of it can even be imagined for proving same--It is well established by now that any signatory of a document involving financial obligation cannot be treated as its marginal witness, until he has signed it in such capacity--Construing requirement of Articles ibid as being procedural rather than substantive and equating testimony of an identifier with that of attesting witness would not only defeat philosophy of said provision, but it would also be violative of its intent and purpose, which was specifically introduced while re-enacting law on evidence--Attestation of sale deed by identifier, who had an independent role in series of facts and registration of instrument was highly unusual--Such omission was not only significant but was also destructive to case of plaintiffs hence for violation of mandatory requirement of provision under discussion sale deed was inadmissible and was wrongly relied upon by Courts below--C.R. was accepted.  [Pp. 1048 & 1049] D & E

1997 SCMR 459, ref.

Mr. Ghulam Farid Sanotra, Advocate for Petitioner.

Sh. Sakhawat Ali, Advocate for Respondents.

Date of hearing: 25.4.2018

Judgment

The brief facts for resolving the dispute arising out of the Revision Petition in hand were that Mst. Surraya Bibi, present petitioner, was exclusive owner of land measuring 14 Kanals 17 Marlas. Hidayat Ullah, father of the respondents, was her real brother. The property of petitioner lady was transferred to the respondents, sons of her brother vide sale deed No. 807 dated 25.06.2003 (Exh.P1) and the former within next three months brought a suit for declaration, possession and cancellation of Exh.P1 contending therein that actually the property had been leased out to father of the respondents, who in its garb manevoured a sale deed in favour of his sons, which being result of fraud, misrepresentation and without consideration was liable to cancellation. The suit was contested on behalf of respondents/defendants through written statement, but surprisingly without giving any details with regard to time, date, month, year, venue and names of witnesses to disclose that when, where and before whom transaction of sale reflected in impugned sale deed was effected, however, it was only pleaded that subject land was purchashed for value of Rs. 100,000/-, which was paid before the respectables. Facing with the contest, issues were settled, evidence of the parties was collected and as a result of its appreciation, initially the suit was decreed vide judgment dated 16.11.2006, but it could not hold the field as the learned District Court on 12.06.2007 remanded the suit to his subordinate after resettling the issues with slight modification and afforded opportunity to the parties to lead further evidence. Pursuant thereto, one of the beneficiaries, Respondent No. 1 (DW1), Hidayat Ullah and Zafar Ullah the signatories of the sale deed being DW2 and 3 respectively as well as Aftab Ahmed (DW5), the Registering Officer were again examined, whereas the earlier statements of DW1 and 2, recorded prior to remand order were also kept intact. Anyhow, second time, not only learned Trial Court dismissed the suit vide judgment and decree dated 04.06.2012, but appeal of the petitioner before the learned Appellate Court also failed through judgment and decree dated 15.04.2014, hence Petition in hand.

2.  Mr. Ghulam Farid Sanotra, Advocate, learned counsel for petitioner/plaintiff has submitted that impugned sale deed being a document of financial liability was required to be attested at least by two marginal witnesses, whereas it was only witnessed by Hidayat Ullah, the father of the respondents and Zafar Ullah put his thumb impressions on it being identifier of the vendor, who could not be equated with a marginal witness; that the alleged vendor was illiterate, folk lady and sale deed on her behalf had been executed/sanctioned without any independent advice with her; that no convincing and reliable evidence was examined on behalf of beneficiaries to prove alleged transaction, whereas available evidence being full of contradictions was neither believable nor persuasive and that the impugned judgments being tainted with misreading and non-reading of evidence were liable to be set aside. In contra, Sh. Sakhawat Ali, Advocate, learned counsel for respondents refuted the arguments of his counterpart while accentuating that although sale deed being a registered instrument was clothed with strong presumption of correctness, which was not required to be formally proved, yet each and every signatory of the sale deed (Exh.P1) was examined to prove its construction as well as transaction reflected therein and that on the basis of minor contradictions or infirmities the statements of DWs could not be discarded, whereas substances and gist of their depositions fully proved the case of respondents. He further argued with great concern that concurrent finding of fact rendered by two Courts below could not be disturbed while invoking jurisdiction available to this Court under Section 115 of the Code, 1908.

3.  Heard and record perused.

4.  In order to enforce a sale, it is sine qua non for a vendee to establish; firstly, that transaction was struck with a titleholder or a person having authority to create right; secondly it was settled against consideration, and thirdly such sale was accompanied by delivery of possession. Mere execution and registration of sale deed by itself do not furnish proof of aforenoted ingredients of the transaction and whenever such document as well as transaction cited therein is questioned or denied, onus lies on the beneficiary to prove both of these.

At the cost of repetition written statement of the contesting respondents was silent with regard to essential details of transaction and it is settled law that a party has to first assert facts and pleas in the pleadings and then it can prove the same through evidence. A party is not allowed under the law to improve its case beyond what was originally setup in the pleadings.

Anyhow, as per available record the lady herself while appearing being PW1, explicitly worded in her statement-in-chief that Hidayat Ullah was her real brother to whom the property was leased out, but with him neither any sale transaction was settled nor any consideration was received and that she never executed the sale deed, whereas Hidayat Ullah procured her thumb impression on some papers to accomplish lease deed. The petitioner examined Zafar Iqbal (PW2), her son, who seconded her mother to that extent and also denied to have received any amount from the respondents. The moment PWs denied the transaction and execution of sale deed, onus was shifted to the persons claiming benefit of disposition of the land and to discharge it, Imtiaz Respondent No. 1, one of the beneficiaries being DW1, for the first time, exposed the details of transaction while stating therein that on 25.06.2003 the transaction was settled against Rs. 100,000/-, which was paid, then they came to Narowal where stamp paper was purchased, scribed and registered as per desire of his aunt. In response to a specific question, DW1 categorically nominated that Riaz Cheema, family member of the vendor and son of the latter were present during entire proceedings, but surprisingly none of them witnessed the sale deed despite their availability nor any of them was summoned by the respondents to affirm that some independent advice was with her to have understood the import and magnitude of the transaction for which instrument was executed. Regardless of it, the beneficiary (DW1) failed to point out particular persons, who being witnesses thumb marked the sale deed. The perusal of impugned instrument left no doubt that Zafar Ullah, one of its signatories, did not sign it being its marginal witness, rather he being identifier of the vendor, thumb marked it in such capacity. He as DW3 did not depose that after execution of the sale deed by the Deed Writer it was signed/thumb marked before him, rather he indeed stated in his statement-in-chief that the document was thumb marked after accomplishment of its registration by the Sub-Registrar. This witness completely failed to pinpoint that the lady was known to him or that she was identified by him before the concerned officer. He was the sole independent witness, who even failed to identify his thumb impression over the sale deed with the pretext to have lost eyesight, however, his deposition in cross-examination to the following effect:

"ہمیں بھٹی کا تب سب رجسٹرار کے دفتر لے کر گیا تھا۔ درست ہے کہ بھٹی نے سب رجسٹراروں کے کلرکوں کو کہا اور انہوں نے تمام کاروائی کی۔"

has left an impression that Sub-Registrar did nothing on his part to attest the sale deed. Then comes the statement of Hidayat Ullah (DW2), the signatory of Exh.D1 being its marginal witness. He being father of the beneficiaries was the most interested person, whose statement could not be given due weight, however he also did not state that sale deed after its execution was read over to the vendor or that the parties along with him as well as DW3 put their signatures/thumb marks before the Deed Writer, rather he was also of the view that they did so before the Attesting Officer. The Deed Writer, Muhammad Azam (DW4) in his cross-examination stated that Riaz Cheema, a relative of the lady/vendor was also available at the time of execution of sale deed, but due to non-availability of his CNIC, he was not added as marginal witness of the sale deed. Although Registering Officer (DW5) was examined too, but he did not utter a single word that petitioner had appeared before him for the execution of sale deed or that she made a statement before him, rather he simply stated that sale deed (Exh.D1) was registered by him. Some of the glimpses of his cross-examination given below would be relevant to expose his irresponsible attitude towards discharge of his official duty:-

"Ex:D1 پر میرے دستخط ہیں باقی تحریر میری نہ ہے۔ از خود کہا کہ روٹین کے مطابق ہم نشانی طور Initial کرتے ہیں۔ گواہان کو ظاہر ہے میں ذاتی طور پر نہ جانتا ہوں ۔۔۔۔ یہ نوٹ میں نے اپنے ہاتھ نہ لکھا ہے کہ رجسٹری بائع کو پڑھ کر سنائی گئی اور اس نے درست تسلیم کیا۔"

5.  There is no denying of the fact that a document involving financial obligation has to be executed, constructed and proved as per mode provided under Articles 17 and 79 of the Qanun-e- Shahadat Order, 1984. What are requisites can be understood by reading said provisions, which are reproduced hereunder:--

17.  Competence and number of witness.--

(1) The competence of a person to testify, and the number of witnesses required in any case shall be determined in accordance with the injunctions of Islam as laid down in the Holy Quran and Sunnah.

(2) Unless otherwise provided in any law relating to the enforcement of Hudood or any other special law,

(a)      in matters pertaining to financial or future obligations, if reduced to writing, the instrument shall be attested by two men or one man and two women, so that one may remind the other, if necessary and evidence shall be led accordingly; and

(b)      in all other matters, the Court may accept, or act on, the testimony of one man or one woman or such other evidence as the circumstances of the case may warrant.

79.  If a document is required by law to be attested, it shall not be used as evidence until two attesting witnesses at least have been called for the purpose of proving its execution, if there be two attesting witnesses alive, and subject to the process of the Court and capable of giving evidence:

Provided that it shall not be necessary to call an attesting witness in proof of the executant of any document, not being a will, which has been registered in accordance with the provisions of the Registration Act, 1908 (XVI of 1908), unless its execution by the person by whom it purports to have been executed is specifically denied.

As per former provision, it was made imperative that a required number of persons must attest any such document being its marginal witnesses and as per requirements of the latter provision, such a document can only be used as evidence when two attesting witnesses, at least, have been called for the purpose of proving its contents, execution and construction, but nothing short of it can even be imagined for proving the same. As observed supra, the document under challenge was thumb marked only by Hidayat Ullah (DW2) being its marginal witness, whereas Zafar Ullah (DW3) put his thumb mark as an identifier, hence the document was not constructed as per requirement of Article 17 ibid, as such was not admissible in evidence. The emphasis of Mr. Sakhawat Ali, learned counsel for the respondents that DW3 proved the transaction as well as execution of sale deed and merely for the elision on the part of Deed Writer, that he was written as identifier could not be made basis for not treating him as marginal witness, was misconceived. It was not a case where judicial discretion of the Court could be invoked to treat identifier being attesting witness. It is well established by now that any signatory of a document involving financial obligation cannot be treated as its marginal witness, until he has signed it in such capacity. Construing the requirement of Articles ibid as being procedural rather than substantive and equating the testimony of an identifier with that of attesting witness would not only defeat philosophy of the said provision, but it would also be violative of its intent and purpose, which was specifically introduced while re-enacting the law on evidence. The attestation of sale deed by the identifier, who had an independent role in the series of facts and registration of the instrument was highly unusual. Such omission was not only significant but was also destructive to the case of the plaintiffs hence for violation of mandatory requirement of the provision under discussion sale deed was inadmissible and was wrongly relied upon by the Courts below.

6.  The other glaring backdrop of the case was that the sale deed under litigation in hand was executed on behalf of an illiterate lady and as per judgments of the apex Court rendered in cases reported as Taleh Bibi and others vs. Mst. Maqsooda Bibi and another (1997 SCMR 459), Mian Allah Ditta through LRs vs. Mst. Sakina Bibi and others (2013 SCMR 868), Ghulam Farid and another vs. Sher Rehman through LRs. (2016 SCMR 862) and Phul Peer Shah vs. Hafeez Fatima (2016 SCMR 1225), the legal protection is to be extended to her, which is available to a pardanashin woman and in such situation, it was sine qua non for the beneficiaries to have proved that not only independent advice was available with her, but she had settled the bargain with conscious mind of transferring the property in dispute to the respondents. The Deed Writer (DW4), Identifier (DW3) and the Attesting Witness (DW2) admitted in their testimonies that either son or a relative of the lady/vendor was available, but non-signing of the document on their part raised serious question about its genuineness. The disputed transaction on behalf of lady was effected in favour of siblings of her brother. The latter was in a position to exert his pressure or had got a relation of great confidence to wield influence upon her and in such situation that was to be seen with doubt and care. The submission of Mr. Sakhawat, learned counsel that each of the DWs specifically deposed in his statement that the Scribe as well as the Registering Officer confirmed from the lady with regard to receipt of sale amount, who thereafter scribed and registered the sale deed, hence there was no further requirement for making the document and transaction understandable to her was not well founded. It was the defence of the lady that the property was never sold out, rather it was leased out, as such it was imperative upon the beneficiaries to have proved that the consideration, if any paid, was for the sale.

7.  The argument of learned counsel for the respondents that thumb mark upon Exh.D1 having already been admitted by the petitioner/plaintiff, the respondents were no more required to prove its valid construction, was not plausible. Admittedly the lady pleaded and deposed that her brother procured her thumb impression for the execution of lease deed, so in such situation, her admission would not ipso facto prove the sale deed as well as transaction reflected therein to raise presumption of it being a genuine document having legal value. The other emphasis of learned counsel that sale deed was a duly registered document and it being a public document attained presumption of correctness, as such Courts below were perfect to rely upon it, was not persuasive. As per reference to Article 85 (e) of the Order ibid, whenever the execution or validity of a purportedly registered document is denied, such registered document loses sanctity of being presumed to be correct, but its lawful veracity will depend upon quantum and quality of evidence to be produced to prove its lawful execution. Reliance can be placed upon judgments reported as Abdul Ghafoor and others vs. Mukhtar Ahmad Khan and others (2006 SCMR 1144) and Abdul Majeed and 6 others vs. Muhammad Subhan and 2 others (1999 SCMR 1245). In the latter case, the apex Court concluded in the following words:--

It is axiomatic principle of law that a registered deed by itself, without proof of the execution and the genuineness of the transaction covered by it, would not confer any right. Similarly, a mutation although acted upon in Revenue Record, would not by its own force be sufficient to prove the genuineness of the transaction of which it purports unless the genuineness of the transaction is proved. There is no cavil with the proposition that these documents being part of public record are admissible in evidence but they by their own force would not prove the genuineness of document.

Additionally, under Section 60 of the Registration Act, 1908, only a restricted presumption is attached that registration proceedings were regularly and honestly carried out by the attesting officer, but the said presumption attached to its certificate is always rebuttable.

8.  The argument of learned counsel for the respondents that the concurrent findings of the Courts below cannot be disturbed by this Court while exercising revisional jurisdiction provided under Section 115 of Code, 1908 is not tenable as both the judgments and decrees having been found to be the result of misreading and non- reading of evidence as well as non-adherence to the law applicable in this regard are not sustainable in the eye of law. It is correct that normally this Court does not interfere with the concurrent findings of the fact recorded by two Courts below, but when there is gross misreading and non-reading of evidence and patent violation of the law is floating on the surface of such concurrent findings, this Court cannot shut its eyes and is always under obligation to rectify the error by interference in such like illegal findings. Reliance can be placed upon the judgments reported as Ghulam Muhammad and 3 others vs. Ghulam Ali (2004 SCMR 1001) and Mushtari Khan vs. Jehangir Khan (2006 SCMR 1238).

9.  Corollary of the appreciation of evidence and legal aspects discussed hereinabove is that this Civil Revision is accepted, impugned judgments and decrees are hereby set aside and suit of the petitioner/ plaintiff is decreed. No order as to costs.

(M.M.R.)         C.R. accepted

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Vendee has to prove Title, Consideration and Delivery of Possession

PLJ 2018 Lahore 1042

Present: Ch. Muhammad Masood Jahangir, J.

Mst. SURRAYA BIBI--Petitioner

versus

IMTIAZ AHMAD etc.--Respondents

C.R. No. 2715 of 2014, decided 25.4.2018.

Civil Procedure Code, 1908 (V of 1908)--

----S. 115--Revisional jurisdiction--Specific Relief Act, (I of 1877)--Suit for declaration possession and cancellation of sale deed--Decreed--Appeal--Case was remanded--Suit was dismissed--Appeal Dismissed--Concurrent findings--Ingredients of transaction--Challenge to--It is sine qua non for a vendee to establish; firstly, that transaction was struck with a titleholder or a person having authority to create right; secondly it was settled against consideration, and thirdly such sale was accompanied by delivery of possession--Concurrent findings of Courts below cannot be disturbed by this Court while exercising revisional jurisdiction provided under Section 115 of Code, 1908 is not tenable as both judgments and decrees having been found to be result of misreading and non-reading of evidence as well as non-adherence to law applicable in this regard are not sustainable in eye of law--It is correct that normally this Court does not interfere with concurrent findings of fact recorded by two Courts below, but when there is gross misreading and non-reading of evidence and patent violation of law is floating on surface of such concurrent findings, this Court cannot shut its eyes and is always under obligation to rectify error by interference in such like illegal findings.      [Pp. 1045& 1050] A & F

2004 SCMR 1001 & 2006 SCMR 1238, ref.

Onus to Prove--

----Mere execution and registration of sale deed by itself do not furnish proof of aforenoted ingredients of transaction and whenever such document as well as transaction cited therein is questioned or denied, onus lies on beneficiary to prove both of these.                                                        [P. 1045] B

Pleadings--

----It is settled law that a party has to first assert facts and pleas in pleadings and then it can prove same through evidence--A party is not allowed under law to improve its case beyond what was originally setup in pleadings.       [Pp. 1045 & 1046] C

Qanun-e-Shahdat Order, 1984--

----Arts. 17 and 79--Document--Financial obligation--Attestation of sale deed by identifier--Marginal witness--Violation of mandatory requirement--It was made imperative that a required number of persons must attest any such document being its marginal witnesses and as per requirements of latter provision, such a document can only be used as evidence when two attesting witnesses, at least, have been called for purpose of proving its contents, execution and construction, but nothing short of it can even be imagined for proving same--It is well established by now that any signatory of a document involving financial obligation cannot be treated as its marginal witness, until he has signed it in such capacity--Construing requirement of Articles ibid as being procedural rather than substantive and equating testimony of an identifier with that of attesting witness would not only defeat philosophy of said provision, but it would also be violative of its intent and purpose, which was specifically introduced while re-enacting law on evidence--Attestation of sale deed by identifier, who had an independent role in series of facts and registration of instrument was highly unusual--Such omission was not only significant but was also destructive to case of plaintiffs hence for violation of mandatory requirement of provision under discussion sale deed was inadmissible and was wrongly relied upon by Courts below--C.R. was accepted.  [Pp. 1048 & 1049] D & E

1997 SCMR 459, ref.

Mr. Ghulam Farid Sanotra, Advocate for Petitioner.

Sh. Sakhawat Ali, Advocate for Respondents.

Date of hearing: 25.4.2018

Judgment

The brief facts for resolving the dispute arising out of the Revision Petition in hand were that Mst. Surraya Bibi, present petitioner, was exclusive owner of land measuring 14 Kanals 17 Marlas. Hidayat Ullah, father of the respondents, was her real brother. The property of petitioner lady was transferred to the respondents, sons of her brother vide sale deed No. 807 dated 25.06.2003 (Exh.P1) and the former within next three months brought a suit for declaration, possession and cancellation of Exh.P1 contending therein that actually the property had been leased out to father of the respondents, who in its garb manevoured a sale deed in favour of his sons, which being result of fraud, misrepresentation and without consideration was liable to cancellation. The suit was contested on behalf of respondents/defendants through written statement, but surprisingly without giving any details with regard to time, date, month, year, venue and names of witnesses to disclose that when, where and before whom transaction of sale reflected in impugned sale deed was effected, however, it was only pleaded that subject land was purchashed for value of Rs. 100,000/-, which was paid before the respectables. Facing with the contest, issues were settled, evidence of the parties was collected and as a result of its appreciation, initially the suit was decreed vide judgment dated 16.11.2006, but it could not hold the field as the learned District Court on 12.06.2007 remanded the suit to his subordinate after resettling the issues with slight modification and afforded opportunity to the parties to lead further evidence. Pursuant thereto, one of the beneficiaries, Respondent No. 1 (DW1), Hidayat Ullah and Zafar Ullah the signatories of the sale deed being DW2 and 3 respectively as well as Aftab Ahmed (DW5), the Registering Officer were again examined, whereas the earlier statements of DW1 and 2, recorded prior to remand order were also kept intact. Anyhow, second time, not only learned Trial Court dismissed the suit vide judgment and decree dated 04.06.2012, but appeal of the petitioner before the learned Appellate Court also failed through judgment and decree dated 15.04.2014, hence Petition in hand.

2.  Mr. Ghulam Farid Sanotra, Advocate, learned counsel for petitioner/plaintiff has submitted that impugned sale deed being a document of financial liability was required to be attested at least by two marginal witnesses, whereas it was only witnessed by Hidayat Ullah, the father of the respondents and Zafar Ullah put his thumb impressions on it being identifier of the vendor, who could not be equated with a marginal witness; that the alleged vendor was illiterate, folk lady and sale deed on her behalf had been executed/sanctioned without any independent advice with her; that no convincing and reliable evidence was examined on behalf of beneficiaries to prove alleged transaction, whereas available evidence being full of contradictions was neither believable nor persuasive and that the impugned judgments being tainted with misreading and non-reading of evidence were liable to be set aside. In contra, Sh. Sakhawat Ali, Advocate, learned counsel for respondents refuted the arguments of his counterpart while accentuating that although sale deed being a registered instrument was clothed with strong presumption of correctness, which was not required to be formally proved, yet each and every signatory of the sale deed (Exh.P1) was examined to prove its construction as well as transaction reflected therein and that on the basis of minor contradictions or infirmities the statements of DWs could not be discarded, whereas substances and gist of their depositions fully proved the case of respondents. He further argued with great concern that concurrent finding of fact rendered by two Courts below could not be disturbed while invoking jurisdiction available to this Court under Section 115 of the Code, 1908.

3.  Heard and record perused.

4.  In order to enforce a sale, it is sine qua non for a vendee to establish; firstly, that transaction was struck with a titleholder or a person having authority to create right; secondly it was settled against consideration, and thirdly such sale was accompanied by delivery of possession. Mere execution and registration of sale deed by itself do not furnish proof of aforenoted ingredients of the transaction and whenever such document as well as transaction cited therein is questioned or denied, onus lies on the beneficiary to prove both of these.

At the cost of repetition written statement of the contesting respondents was silent with regard to essential details of transaction and it is settled law that a party has to first assert facts and pleas in the pleadings and then it can prove the same through evidence. A party is not allowed under the law to improve its case beyond what was originally setup in the pleadings.

Anyhow, as per available record the lady herself while appearing being PW1, explicitly worded in her statement-in-chief that Hidayat Ullah was her real brother to whom the property was leased out, but with him neither any sale transaction was settled nor any consideration was received and that she never executed the sale deed, whereas Hidayat Ullah procured her thumb impression on some papers to accomplish lease deed. The petitioner examined Zafar Iqbal (PW2), her son, who seconded her mother to that extent and also denied to have received any amount from the respondents. The moment PWs denied the transaction and execution of sale deed, onus was shifted to the persons claiming benefit of disposition of the land and to discharge it, Imtiaz Respondent No. 1, one of the beneficiaries being DW1, for the first time, exposed the details of transaction while stating therein that on 25.06.2003 the transaction was settled against Rs. 100,000/-, which was paid, then they came to Narowal where stamp paper was purchased, scribed and registered as per desire of his aunt. In response to a specific question, DW1 categorically nominated that Riaz Cheema, family member of the vendor and son of the latter were present during entire proceedings, but surprisingly none of them witnessed the sale deed despite their availability nor any of them was summoned by the respondents to affirm that some independent advice was with her to have understood the import and magnitude of the transaction for which instrument was executed. Regardless of it, the beneficiary (DW1) failed to point out particular persons, who being witnesses thumb marked the sale deed. The perusal of impugned instrument left no doubt that Zafar Ullah, one of its signatories, did not sign it being its marginal witness, rather he being identifier of the vendor, thumb marked it in such capacity. He as DW3 did not depose that after execution of the sale deed by the Deed Writer it was signed/thumb marked before him, rather he indeed stated in his statement-in-chief that the document was thumb marked after accomplishment of its registration by the Sub-Registrar. This witness completely failed to pinpoint that the lady was known to him or that she was identified by him before the concerned officer. He was the sole independent witness, who even failed to identify his thumb impression over the sale deed with the pretext to have lost eyesight, however, his deposition in cross-examination to the following effect:

"ہمیں بھٹی کا تب سب رجسٹرار کے دفتر لے کر گیا تھا۔ درست ہے کہ بھٹی نے سب رجسٹراروں کے کلرکوں کو کہا اور انہوں نے تمام کاروائی کی۔"

has left an impression that Sub-Registrar did nothing on his part to attest the sale deed. Then comes the statement of Hidayat Ullah (DW2), the signatory of Exh.D1 being its marginal witness. He being father of the beneficiaries was the most interested person, whose statement could not be given due weight, however he also did not state that sale deed after its execution was read over to the vendor or that the parties along with him as well as DW3 put their signatures/thumb marks before the Deed Writer, rather he was also of the view that they did so before the Attesting Officer. The Deed Writer, Muhammad Azam (DW4) in his cross-examination stated that Riaz Cheema, a relative of the lady/vendor was also available at the time of execution of sale deed, but due to non-availability of his CNIC, he was not added as marginal witness of the sale deed. Although Registering Officer (DW5) was examined too, but he did not utter a single word that petitioner had appeared before him for the execution of sale deed or that she made a statement before him, rather he simply stated that sale deed (Exh.D1) was registered by him. Some of the glimpses of his cross-examination given below would be relevant to expose his irresponsible attitude towards discharge of his official duty:-

"Ex:D1 پر میرے دستخط ہیں باقی تحریر میری نہ ہے۔ از خود کہا کہ روٹین کے مطابق ہم نشانی طور Initial کرتے ہیں۔ گواہان کو ظاہر ہے میں ذاتی طور پر نہ جانتا ہوں ۔۔۔۔ یہ نوٹ میں نے اپنے ہاتھ نہ لکھا ہے کہ رجسٹری بائع کو پڑھ کر سنائی گئی اور اس نے درست تسلیم کیا۔"

5.  There is no denying of the fact that a document involving financial obligation has to be executed, constructed and proved as per mode provided under Articles 17 and 79 of the Qanun-e- Shahadat Order, 1984. What are requisites can be understood by reading said provisions, which are reproduced hereunder:--

17.  Competence and number of witness.--

(1) The competence of a person to testify, and the number of witnesses required in any case shall be determined in accordance with the injunctions of Islam as laid down in the Holy Quran and Sunnah.

(2) Unless otherwise provided in any law relating to the enforcement of Hudood or any other special law,

(a)      in matters pertaining to financial or future obligations, if reduced to writing, the instrument shall be attested by two men or one man and two women, so that one may remind the other, if necessary and evidence shall be led accordingly; and

(b)      in all other matters, the Court may accept, or act on, the testimony of one man or one woman or such other evidence as the circumstances of the case may warrant.

79.  If a document is required by law to be attested, it shall not be used as evidence until two attesting witnesses at least have been called for the purpose of proving its execution, if there be two attesting witnesses alive, and subject to the process of the Court and capable of giving evidence:

Provided that it shall not be necessary to call an attesting witness in proof of the executant of any document, not being a will, which has been registered in accordance with the provisions of the Registration Act, 1908 (XVI of 1908), unless its execution by the person by whom it purports to have been executed is specifically denied.

As per former provision, it was made imperative that a required number of persons must attest any such document being its marginal witnesses and as per requirements of the latter provision, such a document can only be used as evidence when two attesting witnesses, at least, have been called for the purpose of proving its contents, execution and construction, but nothing short of it can even be imagined for proving the same. As observed supra, the document under challenge was thumb marked only by Hidayat Ullah (DW2) being its marginal witness, whereas Zafar Ullah (DW3) put his thumb mark as an identifier, hence the document was not constructed as per requirement of Article 17 ibid, as such was not admissible in evidence. The emphasis of Mr. Sakhawat Ali, learned counsel for the respondents that DW3 proved the transaction as well as execution of sale deed and merely for the elision on the part of Deed Writer, that he was written as identifier could not be made basis for not treating him as marginal witness, was misconceived. It was not a case where judicial discretion of the Court could be invoked to treat identifier being attesting witness. It is well established by now that any signatory of a document involving financial obligation cannot be treated as its marginal witness, until he has signed it in such capacity. Construing the requirement of Articles ibid as being procedural rather than substantive and equating the testimony of an identifier with that of attesting witness would not only defeat philosophy of the said provision, but it would also be violative of its intent and purpose, which was specifically introduced while re-enacting the law on evidence. The attestation of sale deed by the identifier, who had an independent role in the series of facts and registration of the instrument was highly unusual. Such omission was not only significant but was also destructive to the case of the plaintiffs hence for violation of mandatory requirement of the provision under discussion sale deed was inadmissible and was wrongly relied upon by the Courts below.

6.  The other glaring backdrop of the case was that the sale deed under litigation in hand was executed on behalf of an illiterate lady and as per judgments of the apex Court rendered in cases reported as Taleh Bibi and others vs. Mst. Maqsooda Bibi and another (1997 SCMR 459), Mian Allah Ditta through LRs vs. Mst. Sakina Bibi and others (2013 SCMR 868), Ghulam Farid and another vs. Sher Rehman through LRs. (2016 SCMR 862) and Phul Peer Shah vs. Hafeez Fatima (2016 SCMR 1225), the legal protection is to be extended to her, which is available to a pardanashin woman and in such situation, it was sine qua non for the beneficiaries to have proved that not only independent advice was available with her, but she had settled the bargain with conscious mind of transferring the property in dispute to the respondents. The Deed Writer (DW4), Identifier (DW3) and the Attesting Witness (DW2) admitted in their testimonies that either son or a relative of the lady/vendor was available, but non-signing of the document on their part raised serious question about its genuineness. The disputed transaction on behalf of lady was effected in favour of siblings of her brother. The latter was in a position to exert his pressure or had got a relation of great confidence to wield influence upon her and in such situation that was to be seen with doubt and care. The submission of Mr. Sakhawat, learned counsel that each of the DWs specifically deposed in his statement that the Scribe as well as the Registering Officer confirmed from the lady with regard to receipt of sale amount, who thereafter scribed and registered the sale deed, hence there was no further requirement for making the document and transaction understandable to her was not well founded. It was the defence of the lady that the property was never sold out, rather it was leased out, as such it was imperative upon the beneficiaries to have proved that the consideration, if any paid, was for the sale.

7.  The argument of learned counsel for the respondents that thumb mark upon Exh.D1 having already been admitted by the petitioner/plaintiff, the respondents were no more required to prove its valid construction, was not plausible. Admittedly the lady pleaded and deposed that her brother procured her thumb impression for the execution of lease deed, so in such situation, her admission would not ipso facto prove the sale deed as well as transaction reflected therein to raise presumption of it being a genuine document having legal value. The other emphasis of learned counsel that sale deed was a duly registered document and it being a public document attained presumption of correctness, as such Courts below were perfect to rely upon it, was not persuasive. As per reference to Article 85 (e) of the Order ibid, whenever the execution or validity of a purportedly registered document is denied, such registered document loses sanctity of being presumed to be correct, but its lawful veracity will depend upon quantum and quality of evidence to be produced to prove its lawful execution. Reliance can be placed upon judgments reported as Abdul Ghafoor and others vs. Mukhtar Ahmad Khan and others (2006 SCMR 1144) and Abdul Majeed and 6 others vs. Muhammad Subhan and 2 others (1999 SCMR 1245). In the latter case, the apex Court concluded in the following words:--

It is axiomatic principle of law that a registered deed by itself, without proof of the execution and the genuineness of the transaction covered by it, would not confer any right. Similarly, a mutation although acted upon in Revenue Record, would not by its own force be sufficient to prove the genuineness of the transaction of which it purports unless the genuineness of the transaction is proved. There is no cavil with the proposition that these documents being part of public record are admissible in evidence but they by their own force would not prove the genuineness of document.

Additionally, under Section 60 of the Registration Act, 1908, only a restricted presumption is attached that registration proceedings were regularly and honestly carried out by the attesting officer, but the said presumption attached to its certificate is always rebuttable.

8.  The argument of learned counsel for the respondents that the concurrent findings of the Courts below cannot be disturbed by this Court while exercising revisional jurisdiction provided under Section 115 of Code, 1908 is not tenable as both the judgments and decrees having been found to be the result of misreading and non- reading of evidence as well as non-adherence to the law applicable in this regard are not sustainable in the eye of law. It is correct that normally this Court does not interfere with the concurrent findings of the fact recorded by two Courts below, but when there is gross misreading and non-reading of evidence and patent violation of the law is floating on the surface of such concurrent findings, this Court cannot shut its eyes and is always under obligation to rectify the error by interference in such like illegal findings. Reliance can be placed upon the judgments reported as Ghulam Muhammad and 3 others vs. Ghulam Ali (2004 SCMR 1001) and Mushtari Khan vs. Jehangir Khan (2006 SCMR 1238).

9.  Corollary of the appreciation of evidence and legal aspects discussed hereinabove is that this Civil Revision is accepted, impugned judgments and decrees are hereby set aside and suit of the petitioner/ plaintiff is decreed. No order as to costs.

(M.M.R.)         C.R. accepted

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Rules cannot travel beyond the mandate of primary enactment

PLJ 2018 Lahore 1051

Present: Shahid Karim, J.

M/s. IMRAN ALI LUBRICANTS--Petitioner

versus

FEDERATION OF PAKISTAN and others--Respondents

W.P. No. 39468 of 2016, decided on 2.4.2018.

Sales Tax Rules, 2006--

----R. 12(d)(1)--Sales Tax Act, (Act 1990), S. 21(2)--Constitution of Pakistan, 1973, Arts. 199, 10-A & 18--Blacklisting and suspension of registration of registered person--Sales tax registration--Uniform Policy--Right of hearing--Due Process--Suspension of registration without notice--Rules cannot travel beyond mandate of primary enactment--Validity--Rule 12 is irrational and unreasonable on basis of further ground that once a suspension order has been passed ex-parte, Commissioner concerned is not required to review that order till proceedings of blacklisting are concluded nor has a registered person been conferred a right to have that order reviewed pending those proceedings--It established essential relationship between constitutional right to be heard and right to be heard by a counsel--Although suspension of registration can be argued to constitute impermissible punishment before trial, but this in itself does not violate substantive due process--However it does offend procedural due process in that it must still be implemented in a fair manner--And a suspension without notice is certainly a clog on petitioner’s right to be treated fairly and with reasonableness.              [Pp. 1060 & 1061] A, B & C

Constitution of Pakistan, 1973--

----Arts. 10-A & 18--Right of registered person--Lawful profession--Due process--Fair trial--We must bear in mind difference that right of hearing being part of “fair trial” and “due process” having acquired a constitutional status has made--An ordinary right of hearing could be taken away by an express statutory provision--But now, right cannot be excluded by ordinary legislation (except in cases in which right of hearing is not treated as an absolute right)--In this case, overwhelming view is that right of hearing is part of due process of law and thus an absolute right at least in cases which impact a person to his utter detriment by affecting his right of property, life, livelihood or liberty--Language of Rule 12(b)(i) starkly brings forth criminal nature of charge against a registered person--Doubtless, registered person is being charged with a criminal offence and clear intent is to proceed against him as such--Even before stage of blacklisting arrives, satisfaction of Commissioner while considering suspension, relates to seriously egregious allegations such as fake invoices, evasion of tax and commission of fraud--All of these are charges of a criminal nature and thus registered person is, a fortiori, entitled to protection of Article 10-A and to a fair trial and due process--Indubitably therefore, he is also entitled to a right of hearing at both stages of determination--Also Article 18 of Constitution confers right on a person to enter upon any lawful profession or occupation and to conduct any lawful trade or business and this is only subject to such qualifications as may be prescribed by law--However, conferring of power on Commissioner under Rule 12 is a clear impairment of right under Article 18 conferred on all citizens as clearly, registered person against whom a suspension order has been passed is barred from conducting all kind of business for a period of ninety days at least. [P. 1062] D, E & F

Principles of Natural Justice--

----Proceedings whether Judicial or Administrative--If proceedings might result in consequences affecting person or property or other right of parties concerned--Therefore, where a person is empowered to take decisions after factual investigation into facts which would result in consequences affecting person, property or other right of any other person, then Courts have inclined generally to imply that power so given is coupled with a duty to act in accordance with principles of natural justice and fairness--Undoubtedly power of suspension of registration without prior notice is unlawful and impinges upon rights of petitioners to be treated in accordance with law and to be afforded due process of law--Rule 12 to extent that it provides for suspension of registration of a registered person without prior notice is held to be ultra vires Constitution as well as main enactment and is struck down--As a consequence thereof Commissioner concerned can only proceed to suspend registration of a registered person with prior notice and upon affording an opportunity of hearing--Petitions were allowed. [P. 1062] G

PLD 1965 SC 90, ref.

M/s. Khubaib Ahmad and Mohsin Virk, Advocates for Petitioners.

Mr. Sarfraz Ahmad Cheema, Advocate and Mr. Tahir Mehmood Ahmad Khokhar, DAG for Respondents.

Date of hearing: 8.3.2018.

Judgment

This petition challenges the constitutionality of Rule 12 of the Sales Tax Rules, 2006 (Rules, 2006). Rule 12 has been enacted in pursuance of the provisions of Section 21(2) of the Sales Tax Act, 1990 (Act, 1990). The first challenge is on the basis of the rule vouched by the respectable authority that rules cannot travel beyond the mandate of the primary enactment. The second limb of the challenge is that Rule 12 offends the provisions of Articles 10-A and 18 of the Constitution of Islamic Republic of Pakistan, 1973 (the Constitution) and impinges upon the right of the petitioners to be treated in accordance with law and by due process of law as well as affects the right of the petitioners to conduct trade and business as enshrined in Article 18 of the Constitution.

2.  This judgment shall also decide connected petition W.P No. 22691 of 2017 which involves a common question of law and fact and challenges the same show-cause notice.

3.  Rule 12 of the Rules, 2006 is at the heart of the controversy raised in these petitions and it would be appropriate to reproduce the said rule in extenso:

“12. Blacklisting and suspension of registration.--Where the Commissioner or Board has reasons to believe that the registered person is to be suspended or blacklisted, in order to ensure that the LTUs and RTOs follow a uniform policy for suspension and blacklisting of sales tax registered persons under Section 21(2) of the Act and for subsequent proceedings in such cases, the following procedure shall be followed, namely:--

(a) SUSPENSION

(i)  Where a Commissioner, having jurisdiction, is satisfied that a registered person has issued fake invoices, evaded tax or committed tax fraud, registration of such person may be suspended by the Commissioner through the system, without prior notice, pending further inquiry. The basis for such satisfaction may inter alia include the following, namely:–

          (A)  non-availability of the registered person at the given address;

          (B)  refusal to allow access to business premises or refusal to furnish records to an authorized Inland Revenue Officer;

          (C)  abnormal tax profile, such as taking excessive input tax adjustments, continuous carry-forwards, or sudden increase in turnover;

          (D)  making substantial purchases from or making supplies to other blacklisted or suspended person;

          (E)  non-filing of sales tax returns;

          (F)  on recommendation of a commissioner of any other jurisdiction;

          (G) any other reason to be specified by the Commissioner;

(ii)  the suspension of registration shall take place through a written order of the Commissioner concerned, giving reasons for suspension. This order shall be endorsed to the registered person concerned, all other LTUs/RTOs, the FBR’s computer system, the STARR computer system and the Customs Wing computer system for information and necessary action as per law;

(iii)  a registered person who does not file sales tax return for six consecutive months shall be caused to be suspended through the system without any notice;

(iv)  in cases, where the buyers and suppliers of any such person, whose registration is being suspended, belongs to another LTU/ RTO, and these buyers / suppliers are also required to be suspended, the Commissioner shall intimate the Chief Commissioner of the concerned LTU/RTO in whose jurisdiction such buyers/suppliers fall, in writing explaining the complete facts of the case and the reasons on the basis of which these buyers/suppliers are to be suspended, to initiate proceedings for suspension/blacklisting of the buyers/suppliers;

(v)  no input tax adjustment/refund shall be admissible to the registered person during the currency of suspension. Similarly, no input tax adjustment/refund shall be allowed to any other registered persons on the strength of invoices issued by such suspended person (whether issued prior to or after such suspension), during the currency of suspension;

(vi)  the Commissioner shall, within seven days of issuance of order of suspension, issue a show-cause notice (through registered post or courier service) to the registered person to afford an opportunity of hearing with fifteen days of the issuance of such notice clearly indicating that he will be blacklisted, in case–

          (A)  there is no response to the notice;

          (B)  he has not provided the required record;

          (C) he has not allowed access to his business record or premises; and

          (D)  any other reason specified by the Commissioner;

(vii) in case show-cause notice is not issued within seven days of the order of suspension, the order of suspension shall become void ab-initio;

(viii)  in case of non-availability of the suspended person at the given address, the notice may be affixed on the main notice Board of the LTU/RTO;

(ix)  on receipt of the reply to the notice and after giving an opportunity of hearing to the registered person, if the Commissioner is satisfied, he may order for revoking of suspension of the registered person;

(b) BLACKLISTING

(i)  in case, after giving an opportunity of hearing, the offence is confirmed, the Commissioner shall issue an appealable self-speaking order for blacklisting of the registered person, and shall proceed to take legal and penal action under the relevant provisions of the Act;

(ii)  the order of blacklisting shall contain the reasons for blacklisting, the time period for which any refund or input tax claimed by such person or by any other registered person on the strength of invoices issued by him from the date of his registration shall be inadmissible, any recovery to be paid or penalties to be imposed;

(iii)  the order of blacklisting shall be issued within ninety days of the issuance of the notice of hearing. In case, the order of blacklisting is not issued within this time period the suspension of registered person shall become void ab-initio;

(iv)  copies of the order shall be endorsed to the registered person concerned, all other LTUs/RTOs, the FBR/PRAL computer system, the STARR computer system and the Customs Wing computer system. Each LTU/RTO shall circulate all such lists to their refund sections, audit Sections and other concerned staff to ensure that the order is implemented in letter and spirit by all concerned;

(v)  all LTUs / RTOs shall further circulate the copies of the order along with a computer system-generated list of invoices issued by the blacklisted persons as referred to in the preceding clause, to all officers of Inland Revenue having jurisdiction over the registered persons who have claimed credit of input tax or refund on the strength of the invoices issued by the said blacklisted persons; and

(vi)  the officer of Inland Revenue receiving the aforesaid list under clause (v) shall issue show-cause notice under Section 11 and sub-section (3) of Section 21 of the Act to a registered person for rejecting the input tax or refund claimed against the invoices so circulated and further proceed to decide the matter as per law through a self-speaking appealable order and after affording a reasonable opportunity of being heard to such person, in the manner as provided in the said sub-section (3).”

4.  As can be seen from the rule, reproduced above, that it relates to blacklisting and suspension of registration of a registered person. It lays down the procedure to be followed as a uniform policy for the purpose of suspension and blacklisting of sales tax registration under Section 21(2) of the Act, 1990 and for subsequent proceedings in such cases. The structure of Rule 12 is such that the proceedings of blacklisting follow an order of suspension by the Commissioner having jurisdiction in the matter. As a prefatory, it can be seen that the Commissioner has the power to suspend the registration of a registered person without prior notice and pending further inquiry. This can only be done by the Commissioner if he is satisfied that a registered person has issued fake invoices, evaded tax or committed tax fraud. The precise challenge of the petitioners is to the enumeration in Rule 12 which empowers the Commissioner to suspend the registration of a registered person without prior notice. This power to suspend without prior notice, according to the petitioners, is ultra vires the Constitution and also resides in the Commissioner concerned an unfettered and unbridled power.

5.  The learned counsel for the respondents led by Mr. Sarfraz Ahmad Cheema, Advocate, on the other hand, defended the said rule on the ground that the petitioners and other registered persons who are proceeded against by suspension of their registration are afforded an opportunity of hearing by service of show-cause notice on them within seven days of the suspension of the registration and a right of hearing is conferred on such persons which takes care of their constitutional and other statutory rights.

6.  At first blush, the power of the Commissioner to suspend the registration of a registered person without prior notice is an unstructured power and clearly seems expropriatory in nature. Although, Rule 12 envisages that the Commissioner prior to exercising the power has to be satisfied that the registered person has issued fake invoices, evaded tax or committed tax fraud, it does not enumerate a notice to be given to the registered person and for an opportunity of hearing to be provided. The concept of being satisfied on the part of a Commissioner clearly entails an inquiry to be undertaken as the Commissioner cannot, without recourse to scrutiny of the relevant record and making an inquiry be satisfied that a registered person has either issued fake invoices or has committed tax fraud. These are serious allegations and raise a presumption that there has to be necessarily cogent and material evidence before the Commissioner to come to a satisfaction that a drastic measure such as suspension of registration is called for. Therefore, it is clear that the Commissioner is obliged to make some sort of inquiry before proceeding to form an opinion to suspend the registration. It cannot therefore be said that the Commissioner does not have ample time to engage the registered person in that inquiry and in some of the instances, the Commissioner in order to be satisfied will require certain documents to be furnished by the registered person himself and, therefore, it can safely be said that the engagement of the registered person in the entire procedure would be inevitable in most of the cases. For example, Rule 12(a) spells out the basis for such satisfaction and which will include inter alia the refusal by the registered person to allow access to business premises or to furnish record. Some of the other factors which have been mentioned in the said rule would also lend credence to the view that the Commissioner will have to have material evidence before him in order to be satisfied and thus to proceed to suspend the registration of a registered person. It is incredulous and iniquitous, therefore, on the part of the rule making authority to have provided for the suspension of the registration without prior notice to the registered person.

7.  Although Mr. Sarfraz Cheema, Advocate argued that the registered person will have sufficient opportunity to rebut the allegations in response to a show-cause notice to be served within seven days, the service of notice and subsequent proceedings are nothing but the continuation of the proceedings that have been set in motion by an ex-parte suspension order. It goes without saying that a suspension order entails serious and debilitating consequences for the registered persons. Some of them have been listed in the Rule 12 itself. For example, no input tax adjustment/refund shall be admissible to the registered person during the currency of suspension. Similarly, no input tax adjustment/refund shall be allowed to any other registered persons on the strength of invoices issued by such suspended person. However, the Commissioner is under a duty to issue a show-cause notice within seven days of the issuance of order of suspension and that notice will mention that the registered person will be blacklisted in case he does not respond to the notice on any of the grounds mentioned in Rule 12(vi). If the proceedings are initiated by the Commissioner within seven days of the order of suspension, then the proceedings may continue for a period of ninety days and for which time the suspension order shall remain in force.

8.  This begs the question: what if at the end of the ninety days either the proceedings are not concluded and the suspension order becomes void ab initio or that the proceedings end in favour of the registered person. In both these cases, the petitioners shall have by then suffered an irreparable loss and injury which cannot be compensated and for which the registered person does not seem to have a remedy. He will not be able to file proceedings for the restitution of the losses occasioned to him on account of an order which had no basis in law or which may have been issued mala fide or under a misapprehension of fact. Therefore, plainly although a registered person has ostensibly been afforded due process of law, yet the initial order of suspension of his registration without notice has rendered illusory the due process which is subsequently sought to be afforded to that registered person.

9.  Section 21(2) of the Act, 1990 which requires a procedure to be prescribed by the Board is to the following effect:--

“21(2) Notwithstanding anything contained in this Act, in cases where the Commissioner is satisfied that a registered person is found to have issued fake invoices or has otherwise committed tax fraud, he may blacklist such person or suspend his registration in accordance with such procedure as the Board may by notification in the official Gazette, prescribe.”

10.  Therefore, the procedure is required to be prescribed by the Board on the basis of the powers conferred by Section 21(2). However, it is vouched by respectable authority that the rules made and the procedure prescribed under the delegated powers conferred by the primary registration have to conform to the main enactment and cannot be in contravention thereof. The Board has been empowered to prescribe a procedure but the power conferred on the Board does not envisage a procedure which takes away the rights of a registered person or offends the principles of due process of law. What is being contemplated by Section 21(2) is that a Commissioner may have an ultimate power to either suspend a registration or blacklist a person but it cannot be culled out from Section 21(2) that an unbridled and unfettered power can be conferred on the Commissioner concerned to suspend a registration for a period of ninety days without notice and without affording an opportunity of hearing. Thus, in my opinion, Rule 12 to that extent travels beyond the mandate of the main enactment and cannot be sustained.

11.  It will be noticed upon reading of Section 21 that the satisfaction of the Commissioner is relatable both to the suspension of registration as well as to blacklisting. In the Rule 12, however, the satisfaction of the Commissioner is only relevant for the purposes of suspension and the basis of the satisfaction has also been spelt out in Rule 12(a)(i). It is really a contradiction in terms to say that a Commissioner is satisfied that a person has issued fake invoices, evaded tax or committed fraud, yet a further inquiry is required to confirm the offence. The term “satisfaction” is a term of art and connotes that there is enough material to form a definite opinion. A Commissioner can only be satisfied if he has conducted a deep and invasive inquiry praying into the records of a person. The words “is satisfied that a registered person has issued fake invoices…” do not leave anything to imagination that a conclusive opinion has been formed and the show-cause notice is a mere eye-wash. The show-cause notice is merely for the purpose of enabling the person to upend the satisfaction already arrived at by the Commissioner. The rules have carved out a two-tier adjudicative process treating suspension of registration as an interim step while Section 21 does not lend itself to any such intention on the part of the legislature. Therefore it cannot be deemed that the Board can, by the rules, empower a Commissioner to suspend without notice and to blacklist, with notice. This is an unreasonable and confiscatory restraint on the right of a registered person and cannot be sustained. To reiterate, the effect of suspension is as unfair and financially burdensome as an order of blacklisting and it would be iniquitous to draw a distinction and to create a dichotomy.

12.  Rule 12 is irrational and unreasonable on the basis of the further ground that once a suspension order has been passed ex-parte, the Commissioner concerned is not required to review that order till the proceedings of blacklisting are concluded nor has a registered person been conferred a right to have that order reviewed pending those proceedings. Article 10-A of the Constitution provides:--

“10-A. For the determination of his civil rights and obligations or in any criminal charge against him a person shall be entitled to a fair trial and due process.”

13.  In Shabbir Ahmed v. Kiran Khursheed and 8 others (2012 CLC 1236), learned Single Judge of this Court had the occasion to dilate upon and elaborate the extent and sweep of Article 10-A in the following words:--

“The impugned auction also offends the newly incorporated fundamental right under Article 10-A of the Constitution, which mandates that civil rights and obligations of the petitioners can only be determined through fair trial and due process. Article 10-A, morphs Article 4 into a more robust fundamental right, covering both substantive and procedural due process. While substantive due process provides a check on legislation and ensures the protection of freedoms guaranteed to a person under the Constitution, procedural due process, which concerns me here, provides that “each person shall be accorded certain “process” if they are deprived of life, liberty or property….The question then focuses on the nature of the “process” that is “due.”… The government always has the obligation of providing a neutral decision maker one who is not inherently biased against the individual or who has personal interest in the outcome.¹⁴ Due process is now available to every person as a fundamental right and underscores procedural fairness and propriety in determining his civil or criminal rights. The procedure adopted in determining the rights of the parties must at every step pass the test of fairness and procedural propriety and at all times must honour the law and the settled legal principles.¹⁵ Article 10-A is not limited to a judicial trial in its strict sense but requires fairness from any forum which determines the rights of a person. In this case the haughty indifference of TMA to ignore the petitioners and their existing tenancy and to smugly proceed directly with auction of the lease hold right does not pass the test of fairness or due process under Article 10-A. In addition, Articles 18, 23 and 24 of the Constitution are also offended as right to do business and right to enjoy property have also been impaired.”

14.  Here we are concerned with the procedural due process. Its importance lies in this that it established the essential relationship between the constitutional right to be heard and the right to be heard by a counsel. In Walker v Sauvinet 92 US 90 (1875), Justice Pitney, writing for the Court, thought in well-settled that:

“a criminal prosecution in the Courts of a State, based upon a law not in itself repugnant to the Federal Constitution, and conducted according to the settled course of judicial proceedings as established by the law of the State, so long as it includes notice and hearing, or an opportunity to be heard, before a Court of competent jurisdiction, according to established modes of procedure, is “due process” in the constitutional sense.”

15.  Although suspension of registration can be argued to constitute impermissible punishment before trial, but this in itself does not violate substantive due process. However it does offend procedural due process in that it must still be implemented in a fair manner. And a suspension without notice is certainly a clog on the petitioner’s right to be treated fairly and with reasonableness. Lord Denning, a great English Judge and jurist, writing in his book “The Due Process of Law”, describes “Due Process of Law”, as follows:

“By “Due Process” I do not mean rules of procedure. They are far too dull. I mean much the same as Parliament meant when it first used the phrase. It was in 1352 in the statute of 28 Edw, III, Ch. 3:

‘That no man of what estate or condition that he be, shall be put out of land or tenement, nor taken, nor imprisoned, nor disinherited, nor put to death, without being brought in answer by Due Process of Law’.

I mean also much the same as Madison meant when he proposed an amendment to the Constitution of the United States. It was accepted in 1791 in the Fifth amendment: No person…shall be deprived of life, liberty, or property, without Due Process of law.

So, by “Due Process of Law” I mean the measures authorized by the law so as to keep the streams of justice pure: to see that trials and inquiries are fairly conducted; that arrests and searches are properly made, that lawful remedies are readily available, and that unnecessary delays are eliminated. It is in these matters that the common law has shown its undoubtful genius.”

16.  We must bear in mind the difference that the right of hearing being part of “fair trial” and “due process” having acquired a constitutional status has made. An ordinary right of hearing could be taken away by an express statutory provision. But now, the right cannot be excluded by ordinary legislation (except in cases in which the right of hearing is not treated as an absolute right). In this case, the overwhelming view is that right of hearing is part of due process of law and thus an absolute right at least in cases which impact a person to his utter detriment by affecting his right of property, life, livelihood or liberty. The language of Rule 12(b)(i) starkly brings forth the criminal nature of the charge against a registered person. It says that:

“i)  in case, after giving an opportunity of hearing, the offence is confirmed….”.

17.  Doubtless, the registered person is being charged with a criminal offence and the clear intent is to proceed against him as such. Even before the stage of blacklisting arrives, the satisfaction of the Commissioner while considering suspension, relates to seriously egregious allegations such as fake invoices, evasion of tax and commission of fraud. All of these are charges of a criminal nature and thus the registered person is, a fortiori, entitled to the protection of Article 10-A and to a fair trial and due process. Indubitably therefore, he is also entitled to a right of hearing at both stages of determination.

18.  Also Article 18 of the Constitution confers the right on a person to enter upon any lawful profession or occupation and to conduct any lawful trade or business and this is only subject to such qualifications as may be prescribed by law. However, the conferring of power on the Commissioner under Rule 12 is a clear impairment of the right under Article 18 conferred on all citizens as clearly, the registered person against whom a suspension order has been passed is barred from conducting all kind of business for a period of ninety days at least.

19.  Besides, it is an immutable principle that in all proceedings whether judicial or administrative, the principles of natural justice have to be observed if the proceedings might result in consequences affecting the person or property or other right of the parties concerned. Therefore, where a person is empowered to take decisions after factual investigation into the facts which would result in consequences affecting the person, property or other right of any other person, then the Courts have inclined generally to imply that the power so given is coupled with a duty to act in accordance with the principles of natural justice and fairness. [The University of Dacca through its Vice-Chancellor and the Registrar, University of Dacca v. Zakir Ahmed (PLD 1965 Supreme Court 90)].

20.  Undoubtedly the power of suspension of registration without prior notice is unlawful and impinges upon the rights of the petitioners to be treated in accordance with law and to be afforded due process of law.

21.  In view of the above, these petitions are allowed. The Rule 12 to the extent that it provides for suspension of registration of a registered person without prior notice is held to be ultra vires the Constitution as well as the main enactment and is struck down. As a consequence thereof, the Commissioner concerned can only proceed to suspend the registration of a registered person with prior notice and upon affording an opportunity of hearing.

(M.M.R.)         Petitions allowed

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