Hakeem Muhammad Irfan Kashif etc. vs Hassan Ali etc.

Stereo. H C J D A-38.

JUDGMENT SHEET

IN THE LAHORE HIGH COURT, MULTAN BENCH,

MULTAN

JUDICIAL DEPARTMENT

R.F.A. No.203 of 2022 Hakeem Muhammad Irfan Kashif & others Versus

Hassan Ali & others

JUDGMENT

Date of hearing:15.09.2026.

Appellants by: M/s. Sh. Muhammad Rafique Goreja and Umme Salma Sheikh, Advocates.

Respondents by: M/s. Haji Muhammad Tariq Aziz Khokhar and Muhammad Amin Khan Sial, Advocates.

MUHAMMAD SAJID MEHMOOD SETHI, J.-

Through the instant Regular First Appeal, the appellants/plaintiffs have assailed judgment and decree dated 24.02.2022, passed by learned Civil Judge, Khanewal, whereby their plaint was rejected under Order VII Rule 11 C.P.C. on the ground that the agreement dated 22.01.2018 was, in substance, a partnership agreement and the suit was barred by Section 69 of the Partnership Act, 1932.

2.Briefly, the appellants/plaintiffs instituted a suit seeking, inter alia, specific performance of agreement dated 22.01.2018, rendition/settlement of accounts, partition and separate possession, perpetual and mandatory injunctions and damages. It was pleaded that the parties were co-owners of land measuring about 17 acres and had agreed to jointly develop the same under the scheme known as “Sabir City Town”. Under the agreement, specified shares were allocated amongst the co-owners; 40% of the land was to be sold for generating funds for development expenses, whereas the remaining 60% was to be distributed amongst the co-owners according to their respective shares.

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Respondent No.1 was entrusted with management of the development, receipt of sale proceeds and rendering of accounts. The appellants alleged that respondent No.1 failed to perform the obligations undertaken under the agreement, did not render accounts and denied the appellants their lawful rights. The respondents contested the suit and, inter alia, pleaded that the appellants had failed to contribute towards development expenses and had no enforceable claim. The prayer for rejection of the plaint under Order VII Rule 11 C.P.C. was also made on the premise that the arrangement between the parties was, in substance, a partnership and, being unregistered, the suit was hit by Section 69 of the Partnership Act, 1932. The learned Trial Court accepted the said objection and rejected the plaint without framing issues or recording evidence, resulting in the instant appeal.

3.Learned counsel for the appellants contends that the learned Trial Court fell into a serious error in treating the agreement dated 22.01.2018 as a partnership agreement, although neither the plaint nor the defence proceeded on the basis of existence of any partnership firm. He argues that the parties were co-owners of the property and the agreement merely regulated its development, sale and distribution amongst the co-owners. He submits that Section 69 of the Partnership Act has no application to a suit instituted by co-owners asserting their contractual and proprietary rights, particularly when the plaint contains independent claims for accounts, partition, injunction and damages. He further contends that the disputed questions regarding the nature of the agreement, development expenses, sale proceeds, accounts and respective rights of the parties could not have been adjudicated under Order VII Rule 11

C.P.C.

4.Learned counsel for the respondents, on the other hand, supports the impugned judgment and submits that the substance of the agreement demonstrates that the parties had entered into a

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business arrangement for development and sale of plots and, therefore, the learned Trial Court rightly treated it as a partnership arrangement. He maintains that the appellants themselves admitted their failure to contribute development expenses and, consequently, no enforceable right accrued in their favour.

5.Arguments heard. Record perused.

6.The principal question requiring determination is whether, on the basis of the pleadings available before it, the learned Trial Court was justified in rejecting the entire plaint under Order VII Rule 11, C.P.C., by holding that the agreement dated 22.01.2018 was, in substance, a partnership agreement and that the suit was consequently barred by Section 69 of the Partnership Act, 1932. The answer must necessarily be found within the well-defined parameters of Order VII Rule 11, C.P.C. The jurisdiction conferred by the said provision is undoubtedly important and enables the Court to terminate, at the threshold, a suit which is clearly incompetent or barred by law. However, such jurisdiction is exceptional in character and cannot be converted into a substitute for a regular trial where the alleged statutory bar depends upon disputed facts, the interpretation of a disputed instrument, the legal relationship between the parties or the capacity in which a party has instituted the suit.

7.The settled test is that, for purposes of Order VII Rule 11, C.P.C., the plaint has to be read meaningfully and as a whole. The Court is ordinarily required to examine the averments contained in the plaint, together with documents which form part thereof or such admitted material as may lawfully be considered at that stage. The pleaded facts are to be assumed to be correct for the purpose of determining whether they disclose a cause of action or whether the suit is, from the statements in the plaint itself, barred by law. The Court is not required, at that stage, to determine whether the plaintiff will ultimately succeed in proving the pleaded facts. The distinction between absence of a

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cause of action and failure to prove a cause of action is fundamental. The former may attract Order VII Rule 11, whereas the latter is ordinarily a matter for adjudication after framing of issues and recording of evidence. The Hon’ble Supreme Court in Mst. Rehmat Begum v. Mehfooz Ahmed and others (PLD 2024 Supreme Court 1108) has reiterated that, where the controversy involves mixed questions of law and fact, the proper course is to permit the suit to proceed and determine the disputed questions either through appropriate preliminary issues or upon regular trial. Likewise, Ahmed Ali Talpur v. Sub- Registrar Latifabad, Hyderabad and others (PLD 2025 Supreme Court 302) reaffirms that a plaint cannot be rejected on the basis of disputed matters which require adjudication through the ordinary judicial process.

8.Tested on the above touchstone, the plaint in the present case cannot be said to disclose, on its face, a statutory bar under Section 69 of the Partnership Act. The appellants pleaded that they were co-owners of the suit property; that the co-owners entered into an agreement for development of their jointly owned land; that specified shares were allocated amongst them; that respondent No.1 was entrusted with development and management; and that the sale proceeds and development activity were to be accounted for and distributed in accordance with the agreed arrangement. Significantly, the plaint does not unequivocally proceed on the basis that the appellants instituted the suit as partners of a partnership firm. Nor does it, on its plain reading, assert that the rights claimed are necessarily rights arising from a partnership contract enforceable only in the capacity of partners. Rather, the appellants assert contractual and proprietary rights arising out of an arrangement concerning jointly owned immovable property. Whether such arrangement, when examined in the light of its complete terms and the surrounding circumstances, legally constitutes a partnership is itself a matter requiring determination.

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9.The mere fact that the arrangement contemplated development of land, sale of a portion thereof and distribution of the resulting plots or proceeds does not, by itself, conclusively establish the existence of a partnership. Its legal character has to be gathered from the substance and terms of the agreement, the rights and obligations created thereby, the relationship intended between the parties and, where disputed, the surrounding circumstances and conduct. In Mst. Rehmat Begum’s case supra, while dealing with an agreement arising in the context of an existing partnership, the Hon’ble Supreme Court declined to determine its legal effect summarily where the character and consequences of the agreement themselves required adjudication. The principle applies with greater force where, as here, the parties dispute the very nature of the arrangement. The learned Trial Court, without framing an issue or recording evidence, effectively resolved this foundational controversy in favour of the respondents, thereby travelling beyond the permissible scope of Order VII Rule 11, C.P.C.

10.The same consideration governs the invocation of Section 69 of the Partnership Act, 1932. The statutory disability cannot be attracted merely because the transaction has been described by the defendants as a partnership arrangement. Before such disability can be invoked, it is necessary to determine the legal relationship between the parties, the capacity in which the plaintiffs have instituted the suit, the nature and source of the rights asserted, and whether the particular claim falls within the statutory prohibition contained in Section 69. In Javed Masood Khan v. Zahid Hussain and others (2001 CLC 676), the question of Section 69 was examined with reference to the capacity in which the plaintiffs sued and the nature of the right sought to be enforced, demonstrating that the statutory bar cannot be mechanically applied merely because partnership is referred to in the pleadings. Likewise, Messrs Countrymen through Partners and others v. Province of Sindh through

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Secretary and 11 others (2015 YLR 2306) underscores that the statutory disability under Section 69 must be tested against the conditions and nature of the particular suit and right asserted, rather than extended merely on account of the existence or reference to a partnership-related arrangement. In the present case, therefore, the applicability of Section 69 could not be assumed before determining the true legal character of the agreement and the nature of the rights asserted by the appellants.

11.It is equally significant that the learned Trial Court placed reliance upon the assertion that the appellants had not paid the development expenses and were merely ready to pay the same. Such assertion, even if raised by the respondents, could not be treated as conclusively established at the stage of Order VII Rule 11, C.P.C. Whether contribution towards development expenses constituted a condition precedent, a reciprocal obligation, or an obligation the alleged non-performance of which affected the appellants’ ultimate entitlement depends upon the terms of the agreement and the evidence concerning its performance. The distinction between absence of a cause of action and inability to prove a pleaded claim at trial was emphasized in Mohammad Anwar Ramay and 2 others v. National Bank of Pakistan through President/Chief Executive and another (2021 CLC 981). Similarly, Chanar Gul and 4 others v. Province of Sindh through Secretary, Sindh Secretariat and 3 others (2017 YLR Note 434) holds that a disputed factual foundation cannot ordinarily be converted into a ground for rejection of the plaint merely because the defendant disputes the plaintiff’s version. The learned Trial Court, therefore, could not use the respondents’ disputed assertion regarding development expenses as a basis for non-suiting the appellants at the threshold.

12.The nature of the reliefs claimed also assumes significance. The appellants sought, inter alia, specific performance of the agreement, rendition/settlement of accounts, partition and separate possession, perpetual and mandatory

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injunctions and damages. The plaint contains specific averments regarding the appellants’ asserted co-ownership, the agreement, development of the land, receipt and utilization of sale proceeds, alleged failure to render accounts, and denial of their asserted shares and rights. These averments, if ultimately established, furnish a basis for adjudication of the reliefs claimed. The question at this stage was not whether the appellants would ultimately succeed, but whether the plaint disclosed a legally cognizable cause of action. As held in Mohammad Anwar Ramay’s case supra, the Court at the stage of Order VII Rule 11 is not required to determine whether the plaintiff will ultimately be able to prove the case, where such determination depends upon issues and evidence. The sweeping conclusion that the appellants had disclosed neither a cause of action nor locus standi, therefore, was not warranted merely from the plaint.

13.The presence of multiple reliefs furnishes an additional reason why the entire plaint could not have been rejected in the manner adopted by the learned Trial Court. It is settled that there is no concept of piecemeal rejection of a plaint under Order VII Rule 11, C.P.C. In Mohammad Anwar Ramay’s case supra, it was held that where multiple reliefs are claimed, the plaint cannot be rejected merely because one of the prayers may not be maintainable; and the same principle has subsequently been reiterated by the Hon’ble Supreme Court in Ahmed Ali Talpur’s case supra. Thus, even if any particular relief were ultimately found to be unavailable or subject to a statutory restriction, such question would not, without more, justify rejection of the entire plaint where other reliefs disclose an independent basis for adjudication. The learned Trial Court, however, treated the entire suit as barred by assigning one particular legal characterization to the agreement, without separately examining the rights and reliefs asserted by the appellants.

14.The learned Trial Court further appears to have used inconsistent descriptions of the agreement, at places referring to

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it as an “agreement to sell” and elsewhere treating it as a “partnership agreement”. Neither nomenclature is determinative. The legal effect of the document has to be gathered from its substance, terms and operative provisions, read in the context of the pleadings and the relationship asserted by the parties. The very fact that competing characterizations of the agreement emerge from the record demonstrates that its legal nature was not an admitted or self-evident matter. In Mst. Rehmat Begum’s case supra, the Hon’ble Supreme Court cautioned against determining the legal effect of an agreement summarily where its character and consequences were matters requiring adjudication. The learned Trial Court, therefore, ought not to have treated its own characterization of the document as a concluded fact for purposes of Order VII Rule 11, C.P.C.

15.The controversy emerging from the pleadings was, therefore, not confined to a pure question of law apparent on the face of the plaint. It involved disputed matters concerning the ownership and shares of the parties, the precise nature and legal effect of the agreement, the obligations relating to development expenses, the role of respondent No.1 in managing the scheme and receiving sale proceeds, the alleged sale and distribution of plots, rendition of accounts, and the appellants’ entitlement to partition and other consequential reliefs. Such matters required appropriate issues and an opportunity to the parties to produce evidence. The principle stated in Chanar Gul’s case supra is apposite: where the plaintiff’s status, title document or foundational factual claim is disputed, such dispute ordinarily requires determination through issues and evidence and cannot, merely because of the defence, be treated as a ground for rejection of the plaint. The present controversy stands on the same footing.

16.The jurisdiction under Order VII Rule 11, C.P.C. is undoubtedly intended to prevent continuation of a suit which, from the plaint itself, is barred by law or otherwise falls within

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one of the statutory grounds for rejection. It cannot, however, be employed as a substitute for a trial on disputed questions of fact or mixed questions of law and fact. As reiterated in Ahmed Ali Talpur’s case supra, where the alleged statutory bar is dependent upon disputed factual or legal matters, the appropriate course is to permit the suit to proceed through the ordinary adjudicatory process. The same approach was adopted in Mst. Rehmat Begum’s case supra, where the legal effect of a partnership-related agreement could not be conclusively determined at the threshold. The Court, at this stage, is not required to conduct a comparative assessment of the rival versions or determine the ultimate truth of disputed assertions. The material question is whether, accepting the pleaded case for purposes of the threshold inquiry, the plaint discloses a cause of action and whether a statutory bar is apparent from the plaint or otherwise established through admitted and undisputed material. In the present case, the alleged bar under Section 69 is inseparably connected with the disputed character of the agreement and the nature of the rights asserted, and therefore could not properly form the basis for summary rejection.

17.Tested on the above principles, the impugned judgment and decree cannot be sustained. The learned Trial Court prematurely treated the agreement dated 22.01.2018 as a partnership agreement, invoked Section 69 of the Partnership Act without first determining the foundational facts and legal relationship necessary for its application, relied upon disputed matters concerning performance of the agreement, and rejected the entire plaint without adequately examining the several reliefs independently claimed by the appellants. The authorities discussed above make it clear that such disputed matters cannot be conclusively determined under Order VII Rule 11, C.P.C. The finding that the plaint disclosed no cause of action or locus standi, therefore, does not follow merely from the averments

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contained therein or from the disputed defence set up by the respondents.

18.For what has been discussed above, the instant appeal is allowed. The impugned judgment and decree dated 24.02.2022, passed by the learned Civil Judge, Khanewal, whereby the plaint was rejected under Order VII Rule 11, C.P.C., are hereby set aside. The plaint is restored to its original number and position. The matter is remanded to the learned Trial Court for decision afresh in accordance with law, after completion of pleadings, framing of appropriate issues, recording of evidence and adjudication of the suit on merits. The learned Trial Court shall independently determine, in accordance with law, the true legal character of the agreement dated 22.01.2018, the capacity in which the appellants have asserted their rights, the applicability, if any, of Section 69 of the Partnership Act, 1932, and the entitlement of the appellants to each of the reliefs claimed. Nothing stated herein shall be construed as an expression of opinion on the ultimate merits of the suit, and the learned Trial Court shall decide the matter uninfluenced by any observation contained in this judgment. The parties shall appear before the learned Trial Court on 01.10.2026. No order as to costs.

(Sultan Tanvir Ahmad) (Muhammad Sajid Mehmood Sethi) Judge Judge

APPROVED FOR REPORTING

Judge Judge

*A.H.S.*