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Petitioner: IRFAN NAWAB VS Respondent: SONERI BANK LIMITED
Court Name: Sindh High Court Judge(s): Munib Akhtar Title: IRFAN NAWAB vs SONERI BANK LIMITED Case No.:Suit No,B-77 and C.M.A. No,10220 of 2011 C.M.A. No,10220 of 2011 M.A. No,10220
of 2011 Date of Judgment:2012-05-22 Reported As: 2012 CLD 1976 Result: Order accordingly Judgment ORDER ' MUNIB AKHTAR, J.---The present application, which is for interim injunctive relief arises in the following circumstances. The plaintiff, who does business as a sole proprietor had a banking relationship with the defendant for a number of years and from time to time availed various facilities. As presently relevant, the plaintiff mortgaged two properties belonging to him with the bank. The first property is located in the Faran Co-operative Housing Society (hereinafter referred to as the "Faran Society Property"). The mortgage in respect of this property was created both by a mortgage deed and by the deposit of title deeds, and an appropriate memorandum of deposit of title deeds was drawn up. The second property is located in Jinnah Co-operative Housing Society (hereinafter referred to as the "Jinnah Society Property"). The mortgage on this property was created only by way of deposit of title deeds. Both properties are of course situated in Karachi. The plaintiff's case is that he has in fact paid off the amounts that were due and payable to the defendant and the present suit has been filed for a settlement of accounts and more importantly for present purposes for redemption of the mortgaged properties. 2. The suit has been filed under the Financial Institutions (Recovery of Finances) Ordinance, 2001 ("2001 Ordinance"). The immediate grievance of the plaintiff, which led to the filing of the present application (on 11-10-2011) is a public notice that was published in the press by the defendant on 8- 10-2011. By means of this public notice, the defendant, purporting to exercise statutory powers that allowed it to sell mortgaged properties without the intervention of the Court, sought to dispose of both the properties by way of auction. The plaintiff claims that the properties cannot be so disposed off and seeks interim injunctive relief.
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3. The public notice issued by the defendant referred to two statutory provisions enabling it to sell off the mortgaged properties, being section 15 of the 2001 Ordinance and section 69 of the Transfer of Property Act, 1882 ("T.P. Act"). In order to properly appreciate the rival submissions of learned counsel, it will be appropriate to first take up section 15, which insofar as is presently relevant provides as follows:-- "15. Sale of mortgaged property.---( 1) In this section, unless there is anything repugnant in the subject or context-- (a) "mortgage" means the transfer of an interest in specific immovable property for the purpose of securing the payment of the mortgage money or the performance of an obligation which may give rise to a pecuniary liability; (b) "mortgage money" means any finance or other amounts relating to a finance, penalties, damages, charges or pecuniary liabilities, payment of which is secured for the time being by the document by which the mortgage is effected or evidenced, including any mortgage deed or memorandum of deposit of title deeds; and "mortgaged property" means immovable property mortgaged to a financial institution. (2) In case of default in payment by a customer, the financial institution may send a notice on the mortgagor demanding payment of the mortgage money outstanding within fourteen days from service of the notice, and failing payment of the amount within due date, it shall send a second notice of demand for payment of the amount within fourteen day's. In case the customer on the due date given in the second notice sent, continues to default in payment, financial institution shall serve a final notice on the mortgager demanding the payment of the mortgage money outstanding within thirty days from service of the final notice on the customer. (4) Where a mortgagor fails to pay the amount as demanded within the period prescribed under subsection (2), and after the due date given in the final notice has expired, the financial institution may, without the intervention of any Court, sell the mortgaged property or any part thereof by public auction and appropriate the proceeds thereof towards total or partial satisfaction of the outstanding mortgage money: Provided that before exercise of its powers under this subsection, the financial institution shall cause to be published a notice in one reputable English daily newspaper with wide circulation and one Urdu daily newspaper in the Province in which the mortgaged property is situated, specifying particulars of the mortgaged property, including name and address of the mortgagor, details of the mortgaged property, amount of outstanding mortgage money, and indicating the intention of the financial institution to sell the mortgaged property. The financial institution shall also send such notices to all persons who, to the knowledge of the financial institution, have an interest in the mortgaged property as mortgagees. (11) All disputes relating to the sale of the mortgaged property under this section including disputes amongst mortgagees in respect of distribution of the sale proceeds, shall be decided by the Banking Court. (12) Neither the Banking Court nor the High Court shall grant an injunction restraining the sale or proposed sale of mortgaged property unless- (a) it is satisfied that no mortgage in respect of the immovable property has been created; or (b) all moneys secured by mortgage of the mortgaged property have been paid; or (c) the mortgagor or objector deposits in the Banking Court in cash the outstanding mortgage money. (13) The rights and remedies provided under this section are in addition to, and not in lieu of, any other rights or remedies a financial institution may have under this Ordinance. (14) The provisions contained in this section shall have effect notwithstanding anything contained in this Ordinance."
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4. Mr. Zeeshan Abdullah, learned counsel for the plaintiff, submitted that section 15(2) required the financial institutions to give three successive notices to the mortgagor in the manner as therein provided. He accepted that in the present case the first of these notices, dated 29-6-2011, was received by the plaintiff and a reply, dated 5-7-2011, was made thereto denying that any amount was payable by the plaintiff and also raising and taking various objections as stated therein. However, it was categorically denied that the second and third notices were received by the plaintiff. It may be noted that according to the defendant these notices were issued on or about 16- 7-2011 and 1-8-2011 respectively. Thus, the plaintiffs case is that the requirements of section 15(2) not having been fulfilled and being mandatory in nature, the defendant could not exercise the statutory power of sale under the section. 5. With regard to subsection (2), learned counsel also drew attention to the fact that with regard to the first two notices, the word "sent" had been used, whereas with regard to the third notice the word "served" had been used. Learned counsel submitted that this was deliberate and indicated that the final notice had to be communicated to the customer with, and by, a degree of formality that was greater than the manner in which the first two notices could be communicated. His case was that the method to be adopted to communicate the third notice had to be akin to the method adopted by a court for service of notice or summons. Since this had admittedly not been done, learned counsel contended on this basis also that the requirements of subsection (2) had not been complied with. 6. The foregoing points were of course applicable to both the mortgaged properties. The next point taken by learned counsel related only to the Jinnah Society Property. Learned counsel referred to section 15(1), which defines certain terms for purposes of the section. In particular he relied on the definition of "mortgage money" given in clause (b) of the said subsection. While not denying the creation of a mortgage on the Jinnah Society Property by way of deposit of title deeds, learned counsel submitted that no memorandum of deposit of title deeds had been drawn up nor was there any document by which the mortgage on the Jinnah Society Property was effected or evidenced. His submission was that the specific (and rather restricted) definition of "mortgage money" limited' it to a mortgage that had been effected or evidenced by a specific document. Since a financial institution could sell off a mortgaged property pursuant to section 15 only to recover "mortgage money" as therein defined, learned counsel contended that the Jinnah Society Property could not therefore be sold pursuant to this section. 7. Learned counsel also referred to section 15(12), which places a bar on the jurisdiction of a banking court and also the High Court to grant an injunction restraining the sale or proposed sale of mortgaged property unless any one of the three situations as stated therein is in existence. Learned counsel submitted firstly that since mandatory requirements of subsection (2) had not been complied with and that in any case the Jinnah Society Property could not be sold for the reasons just stated, subsection (12) did not apply at all to the present case. He further submitted that even if this subsection did apply, then the facts and circumstances were such that clause (b) thereof was applicable. This was so because it was the plaintiffs case that the finances secured by the mortgages had already been paid off (and in fact the plaintiff claimed that he had made excess payments). Learned counsel submitted that in order for clause (b) to become applicable, all that was required was a bare statement to this effect being made in the plaint although he contended that the plaintiffs case was fully supported by the record, and relevant documents and material. 8. Insofar as section 69 of the T.P. Act was concerned, learned counsel submitted that that provision could not be relied upon by the defendant by reason of section 4 of the 2001 Ordinance and hence the defendant did not have and could not exercise any statutory power of sale in terms
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thereof. He submitted on the foregoing basis that the plaintiff had more than sufficient cause and grounds to be entitled to interim injunction relief and prayed accordingly. 9. Mr. Ijaz Ahmed, learned counsel for the defendant strongly opposed the grant of any relief. He submitted that, insofar as section 15 was concerned, All three notices as required under subsection (2) had been served on the plaintiff. The defendant had placed on record the courier receipts for the first and third notices. Relying on these receipts, learned counsel for the plaintiff had argued that while the name of the consignee in the receipt for the first notice was correctly given (as that of the plaintiff) and his address had also been correctly noted, in the receipt for the third notice, while the name of the plaintiff appeared as the consignee, the address indicated was not correct. Learned counsel had submitted on this basis that the defendant's own documents showed that the second and third notices had not been received by the plaintiff. On the other hand, learned counsel for the defendant referred to these very receipts to contend to the contrary. He drew attention to the signature of the person shown as having received the notices and submitted that the signatures on both receipts were identical. Thus, since receipt of the first notice was admitted, and the third notice had been received by the same person, its receipt could not be denied, and this was so notwithstanding any clerical error in the address of the consignee (i,e, the plaintiff). Thus, learned counsel contended, receipt of the first and third notices stood established from the record. He candidly stated that the courier receipt for the second notice had been misplaced but submitted that a presumption of regularity attached to the acts of the defendant and there could not be any reasonable basis on which it could be seriously disputed that while the bank had sent the first and third notices, which were duly received, the same position did not obtain in relation to the second notice. 10. Insofar as the Jinnah Society Property was concerned, learned counsel for the defendant submitted that it was covered by section 15 and that the material on record clearly established that it came within the definition of "mortgage money" as contained in subsection (1)(b). In this regard learned counsel referred in particular to the final words of the definition, where word "including" has been used. Learned counsel submitted that the use of this word indicated that the requirements of the definition were fulfilled if there was any document that evidenced the creation of the mortgage, and the matter was not limited to that very document which directly affected or evidenced the mortgage. He submitted that there could be any number of different documents that evidenced the creation or existence of a mortgage and gave several examples in this regard. Thus, he submitted that in many cases the mortgagor gave a power of attorney to the mortgagee, which referred to the mortgage. Such a power of attorney therefore was a document that evidenced the mortgage within the meaning of the definition. In the case of a company, the mortgage had to be registered with the Registrar Joint Stock Companies as required by the Companies Ordinance 1984. Learned counsel submitted that the forms and documents filed in this regard also constituted documents evidencing the mortgage within the meaning of the definition Similarly, a company was required by the Companies Ordinance to itself maintain a register of charges including mortgages, and learned counsel submitted that this register could likewise be the requisite document. Another example that he gave was the audited accounts of a company. If those referred to the mortgage in question, learned counsel submitted that that was yet again a document that complied with the requirements of section 15(1)(b). Of course, in the present case the mortgagor is a sole proprietor. Learned counsel submitted that certain documents placed on the record, to which I will refer later, evidenced the creation and existence of the mortgage on the Jinnah Society Property and that therefore, the requirements of the definition clause were amply fulfilled. 11. Learned counsel also relied on section 15(12) to contend that in the present case the jurisdiction of the Court was barred and no injunction could issue to restrain the sale of the two mortgaged
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properties pursuant to the public notice issued by the defendant. Learned counsel strongly contested the claim that there was nothing due and payable by the plaintiff. He submitted that even on a prima facie basis the record amply demonstrated that there was a substantial liability of the plaintiff, which he had failed to discharge. Learned counsel further contended that even if there were any irregularity in complying with the requirements of subsection (2), that still did not take the matter out of the scope of subsection (12) and the remedy, if any, of the customer (i,e,, the plaintiff) in such circumstances lay entirely in damages and not by way of an injunction. 12. Learned counsel also submitted that section 69 of the T.P. Act was fully applicable and could be invoked by the defendant in the present case. He contended therefore that on any view of the matter the plaintiff had no basis for seeking to enjoin the sale of the mortgaged properties and that the present application merited dismissal. 13. I had allowed learned counsel to submit synopses along with the case-law that they wished to rely upon and each learned counsel submitted his synopsis making reference to certain cases, which I will consider as and to the extent necessary and appropriate. 14. I have heard learned counsel as above, examined the record with their assistance and considered the case-law relied upon. I first take up the matter of the Jinnah Society Property and the question as to whether it is covered by the definition of "mortgage money" as given in section 15(1)(b). The first point to note, and this has been correctly accepted by learned counsel for the plaintiff, is that there is no dispute with regard to the mortgage by way of deposit of title deeds that has been created on this property. The only question is whether the specific definition of "mortgage money" as given in subsection (1)(b) of section 15, and hence the section itself, is applicable, which would enable the defendant to sell the property without the intervention of the court. 15. When the definition is considered, the first point to note is that it uses the word "means". The use of this word in a definition has the effect that is too well known to require any elaboration. Although subsection (1) states that the definitions therein are to have effect "unless there is anything repugnant In the subject or context", in my view this saving provision does not apply to the present definition and it is therefore the meaning of "mortgage money" as given in clause (b) that must be applied. When clause (b) is considered, it is clear that there must be some document which can be related to the definition. Absent such document the definition will not apply, or in other words, there will be no "mortgage money' within the meaning of section 15. The crucial point, 'as presently relevant, is to note the use of the definite article "the" in relation to the document. It is not simply "a" (or "any") document that will suffice. The definition, in other words, particularizes and specifies the document. What is this document? It is the document that must refer both to the amount of the financing and also the mortgage, either by creating the mortgage itself or evidencing its creation. Why? Because the definition .Requires, by using the words "of which", that the payment of the financing is secured "for the time being" by this document. At the same time, it is the document "by which" the mortgage is effected or evidenced. It is only such a document, and none other, that can meet the requirements of the definition. I cannot therefore accept the submission made by learned counsel for the defendant that any document (such as the various examples given by him) Will do for purposes of the definition as long as it is relatable to the mortgage. The juxtaposition of the words "effected" and "evidenced" and also the use of the words "by which" in relation to the document clearly establish that the section requires the existence of that specific document which must have been created for the sole (or at the very least primary) purpose of either creating the mortgage itself or evidencing it. In other words, any collateral document which refers to the mortgage is insufficient for the A purposes of the definition, and this would include a document that may be necessary to be prepared, filed or maintained to meet any statutory requirement. Insofar as the last portion of the definition, where the word "including" is used on which such emphasis was laid by learned counsel, is concerned, in my view that does not materially alter this
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position. The reason is that the documents referred to in the last portion, the mortgage deed and memorandum of deposit of title deeds are those very documents by which a mortgage is either effected or evidenced in the sense just explained. These words cannot in my view be used ejusdem generis as, it would seem, is being contended by learned counsel for the defendant. The last portion of the definition does not expand the scope of the preceding words, but serves only to clarify and. Explain them and, it would seem, was added only by way of abundant caution. 16. Learned counsel for the defendant relied on three documents in relation to the Jinnah Society Property to contend that the mortgage on this property was "evidenced" for purposes of the definition. The first document was a letter dated 11-2-2009 addressed to the defendant by the plaintiff, which referred to the Jinnah Society Property. This document in my view does not comply with the requirements of the definition since it is at best a collateral document that merely makes a general reference to the "documents" (which presumably means the title deeds) of the Jinnah Society Property that were submitted for "enhancement of facility". The second document was the offer letter dated 21-2-2009 sent by the plaintiff to the defendant. This document, which was accepted and executed by the plaintiff, referred to the equitable mortgage on the Jinnah Society Property, as indeed it did to the mortgage created on the Faran Society Property. Again, in my view this is at most a collateral document which does not have the intent and effect as required by the definition of "mortgage money". The third document relied upon was the murabaha agreement dated 21-3-2009 executed between the plaintiff and the defendant. This document, in its clause 11.1, referred to its schedule F which made reference to both properties. However, it is to be noted that this clause speaks of the customer (i,e, the plaintiff) executing all such instruments and documents (in the future) as necessary for creating and perfecting the securities on the two mortgaged properties and thus cannot, on the face of it, be the document that evidenced the mortgage having been created. In my view therefore, the Jinnah Society Property does not come within the scope of the definition of "mortgage-money" and it therefore follows that this property could not be sold by the defendant pursuant to section 15 of the 2001 Ordinance. 17. I now turn to consider the question whether the defendant met the requirements of subsection (2). There can be no doubt that these requirements are mandatory and must be complied with if at all the financial institution is to sell the mortgaged property without the intervention of the court. While the subsection does use the word "sent" for the first two notices and "served" for the third, the conclusion sought to be derived from such use by learned counsel for the plaintiff cannot be accepted. The distinction is in my view too fine to be drawn for the purposes for which subsection (2) has been enacted and the person (i,e,, a financial institution) by whom the notices are to be sent. In my view, the two words have been used interchangeably. Insofar as the notices themselves are concerned, it is of course accepted that the first notice was received. Looking at the close similarity in the signatures of the recipients of the first and third notices, as relied upon by learned counsel for the defendant, I conclude that the third notice was also received by the plaintiff since the recipients prima facie appear to be the same person. The only question therefore is whether the second notice was received or not. As noted above, learned counsel for the defendant candidly stated that the receipt for this notice had been misplaced. While the onus of establishing that the requirements of subsection (2) have been fulfilled certainly lies on the financial institution, which it must discharge should an objection be taken in this regard, keeping in mind the totality of the facts and circumstances of the case, I am of the view that prima facie the second notice was also sent to the plaintiff. I can see no reason why the defendant would go through the exercise of taking recourse to section 15 and skip issuing one of the required notices. It is to be noted that the second notice, as placed on record by the defendant, makes reference to the first notice while the third notice makes reference to the second notice. In my view, in the facts and circumstances of the present case a presumption may be drawn that all three notices were sent to and received by the
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plaintiff and reference in this regard may be made to illustration (f) of Article 129 of the Qanun-e- Shahadat Order 1984. 18. Insofar as section 15(12) is concerned, it is of course well established that any provision which seeks to oust the jurisdiction of a court is to be strictly and narrowly construed. In my view, if there has been any failure to comply with the mandatory requirements of any of the subsections of section 15, or a matter does not otherwise come within its B terms, the bar contained in subsection (12) cannot possibly apply. Therefore, insofar as the Jinnah Society Property is concerned, the bar contained in subsection (12) can have no application since that property does not come within the scope of the definition of "mortgage money". Learned counsel for the plaintiff placed reliance, as noted above, on clause (b) of…
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