IN THE SUPREME COURT OF PAKISTAN 
(APPELLATE JURISDICTION) 
 
 
PRESENT: 
MR. JUSTICE MUSHIR ALAM 
MR. JUSTICE FAISAL ARAB 
MR. JUSTICE MUNIB AKHTAR 
 
CIVIL APPEAL NO. 1178 OF 2008 
(On appeal against the judgment dated 03.11.2006 
passed by the High Court of Balochisan, Quetta in 
REA Nos. 26 & 27/1999) 
 
Haji Baz Muhammad Khan & Haji Dad Muhammad Khan 
… Appellants 
VERSUS 
Noor Ali and Shakil Ahmed 
… Respondents 
 
For the Appellants: 
Mr. Kamran Murtaza, Sr. ASC  
 
 
 
 
 
For the Respondent (1): Mr. Zulfiqar Khalid Maluka, ASC 
 
For the Respondent (2): Ex-parte 
 
 
 
Date of Hearing:  
24.05.2018 
 
JUDGMENT 
 
 
 
FAISAL ARAB, J.- The respondent No. 1 was tenant of 
respondent No. 2 in a shop bearing Municipal No. 4-24/14 
situated in Liaqat Bazar, Quetta. In the year 1992, the respondent 
No. 2 orally agreed to sell this shop to respondent No. 1 for a sale 
consideration of Rs.3,10,000/-. The terms of the oral agreement 
that have come in evidence were that respondent No. 1 paid a sum 
of 
Rs.50,000/- 
as 
advance 
and 
the 
balance 
amount 
of 
Rs.260,000/- was required to be paid within a period of three 
months. When respondent No. 1 failed to make payment within the 
stipulated time, the time to complete the transaction was enhanced 
by a period of 1/2 years. However, even within such extended 
period, respondent No. 1 did not fulfill his contractual obligation. 
Subsequently, a dispute arose between the parties who then 
Civil Appeal No. 1178/2008 
2
agreed to refer the matter to arbitrators for settlement. The 
arbitrators gave their award on 26.09.1995, in terms whereof 
respondent No. 1 was to vacate the shop under his tenancy and 
hand it over to respondent No. 2 by 26.10.1995 and in 
consideration thereof respondent No. 2 was to pay a sum of 
Rs.1,400,000/- to respondent No. 1. This decision rendered by the 
arbitrators was not challenged by any of the parties in any legal 
proceedings. As respondent No. 1 did not handover the possession 
of the shop, the respondent No. 2 thereby also did not pay him the 
amount determined by the arbitrators. Respondent No. 2 then sold 
the shop to the appellants, who filed eviction proceedings against 
respondent No. 1 after which respondent No. 1 on his part filed a 
suit for specific performance of the contract in 1996 on the basis of 
the oral agreement to sell arrived at in 1992. It is this suit, which 
is the subject matter of the present proceedings. The suit was 
decreed in favour of respondent No. 1 vide judgment dated 
02.04.1999. The appellants and respondent No. 2 filed their 
respective appeals in the Balochistan High Court but the same 
were dismissed vide the impugned judgment. Hence, this appeal 
with leave of the Court. 
 
2. 
 
The legal effect of the arbitrators’ decision, which 
remained unchallenged was that the respondent No. 1 gave up 
both his right to seek specific performance of the contract under 
the oral agreement as well as his tenancy rights on the condition of 
receiving Rs.1,400,000/- from respondent No. 2, the original owner 
of the shop in question. In such circumstances, the respondent 
No.1 could not have sought specific performance of the oral 
Civil Appeal No. 1178/2008 
3
agreement that stood novated on terms reflected in the arbitrators’ 
award signed and acknowledged by both the parties. Once a party 
novates a contract then enforcement of the earlier agreement 
cannot be sought in terms of Section 62 of the Contract Act unless 
it is expressly stipulated in the fresh agreement that his rights in 
the original agreement will not be prejudiced. Thus the oral 
agreement to sell came to an end and in consequence thereof the 
respondent No. 1 was only entitled to receive Rs.1,400,000/- and 
handover the possession of the shop to respondent No. 2. Thus the 
suit for specific performance was not maintainable. The key 
principle of such an effect is discussed in the case of Habib Ahmad 
Vs. Meezan Bank Ltd (2016 CLC 351) whereby it was held as 
under:- 
 
“Novation would mean and be construed when contract 
already in existence is extinguished and a new contract is 
created where-under new rights emerge in favour of the 
parties. Unless the rights under the old contract are explicitly 
relinquished, no new contract comes into force. The 
procrastination by a party to abide by terms of the contract, 
which in the present context appears to gain benefit out of it, 
would not mean novation of the contract; it comes about 
where parties to the contract mutually agree to substitute it 
with the new contract. Therefore if a party alleges novation of 
a contract, it has to establish these prerequisites. For 
reliance the case of Mrs. Mussarat Shaukat Ali v. Mrs. Safia 
Khatoon, etc. reported in NLR 1995 SCJ 19 is referred to.” 
 
3. 
 
We, therefore, vide our short order directed respondent 
No. 2 to deposit Rs.1,400,000/- in this Court within a period of 
sixty days which shall then be paid to respondent No. 1. We have 
already mentioned in our short order that there shall be no 
Civil Appeal No. 1178/2008 
4
extension in time for any reason whatsoever and failure to deposit 
the amount within this period shall result in dismissal of this 
appeal and the respondent No. 1 shall be entitled to retain the 
possession of the shop in his capacity as tenant of the appellants 
who are the successor-in-interest of respondent No. 2. Within 
fifteen days of such deposit, the respondent No. 1 was required to 
handover vacant peaceful possession of the property to the 
appellants. If the respondent No. 1 fails to do so, the appellants 
shall be at liberty to file an application before Executing Court, 
which shall issue writ of possession without notice and put the 
appellants in possession of the property. The respondent No. 1 
shall be entitled to receive the amount deposited in this Court after 
the possession of the property is handed over to the appellants.  
 
4. 
 
The above are the detailed reasons of our short order 
of even date vide which we allowed this appeal and set aside the 
impugned judgment.  
 
 
JUDGE 
 
JUDGE 
 
 
 
JUDGE 
Islamabad, the 
24th of May, 2018 
Approved For Reporting 
Khurram 
