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Official Citation: 2024 CLC 268
Court / Jurisdiction: Sindh High Court
Year of Decision: 2025
Decision Date: 2025-02-11
Parties: M/s. Lucky Tex (Pvt.) Limited vs M/s. Cresox (Pvt.) Limited
Ruling Summary: This decision was rendered by the Sindh High Court on 2025-02-11, officially reported as 2024 CLC 268. In this matter between M/s. Lucky Tex (Pvt.) Limited and M/s. Cresox (Pvt.) Limited, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as 2024 CLC 268
Court Name: Sindh High Court Judge(s): Muhammad Abdur Rahman Title: M/s. Lucky Tex (Pvt.) Limited vs M/s. Cresox (Pvt.) Limited Case No.: Suit No. 290 of 2018, Judl. Misc. No. 32 of 2022, Judl. Misc. No.33 of 2022 Date of Judgment:2025-02-11 Reported As: 2025 SHC 268, 2025 CLD 561 Result: Suit Dismissed
Judgment
ORDER MOHAMMAD ABDUR RAHMAN, J. Through this common order I will be deciding: Code of Civil Procedure, 1908, against a compromise decree dated 14 February 2022 passed by this Court in Suit No. B-21 of 2017; (ii) Judicial Miscellaneous Application No. 33 of 2022 that has been maintained under Sub-Section (2) of Section 12 of the Code of Civil Procedure, 1908 against a compromise decree dated 14 February 2022 passed by this Court in Suit No. B-34 of 2017; and (iii) the maintainability of Suit No. 290 of 2018. A. Facts 2. Cresox (Private) Limited (hereinafter referred to "Cresox") availed various financial facilities from Habib Bank Limited (hereinafter referred to as "HBL"), Faisal Bank Limited (hereinafter referred to as "FBL") and Pak Oman Investment Bank Limited (hereinafter referred to as Pak Oman") and on which financial facilities it has defaulted. As security for such financial facilities an immovable property bearing Plot No. A/40 SITE, Survey No.21, Sheet No.35P/1-35/13 admeasuring 5.039 acres (hereinafter referred to as the "Mortgaged Property") had been mortgaged by Cresox with HBL, FBL and Pak Oman. 3. It has been informed that the following litigation has been filed as against Cresox: (i) Suit No. B-02 of 2014 was presented on 3 January 2014 by Pak Oman before this Court in its Banking Jurisdiction under the provisions of the Financial Institution (Recovery of Finances) Ordinance, 2001 (hereinafter referred to as the Ordinance, 2001) for recovery of Rs. 162,344,199/- and which was decreed on 26 July 2017 for the sum of Rs. 162,344,199/- with cost of funds from 1
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December 2013 till the date of realisation of the entire decretal amount. A Judgment dated 18 September 2017 and Decree dated 18 September 2017 was passed by this Court in favour of Pak Oman in Suit No. B-02 of 2014.; (ii) Suit No. B-21 of 2017 was presented on 28 July 2017 by HBL before this Court in its Banking Jurisdiction under the Ordinance, 2001 inter alia for recovery of Rs. 332,133,097.16 and summons of service was published in the Daily Jung and the Daily Dawn on 14 August 2017. The Suit was decreed on 14 February 2022, on a comprise application, for the sum of Rs. 332,133,097.16 with cost of funds from the respective dates of default till the date of realization of the entire decretal amount; (iii) Suit No. B-34 of 2017 was presented on 20 November 2017 by FBL before this Court in its Banking Jurisdiction under the Ordinance, 2001 inter alia for recovery of Rs. 295,976,789 and summons of service was published in the Daily Jung and the Daily Dawn on 25 November 2017. The Suit was decreed on 14 February 2022, on a comprise application, for the sum of Rs. 295,976,789 with cost of funds from the respective dates of default till the date of realization of the entire decretal amount; (iv) Suit No. 816 of 2017 was instituted before Banking Court No. IV at Karachi as against Cresox and others in July 2017 for the recovery of US$ 554,402.82/- and GBP 38,654.51/- and in which, on a compromise application, a decree was passed for US$ 554,402.82/- and GBP 38,654.51/- with cost of funds from the respective dates of default till the date of realization of the entire Decretal amount. 4. It seems that during the pendency of the litigation with HBL and FBL and one week after the passing of the Judgement and Decree each dated 18 September 2017 in Suit No. B-02 of 2014, Lucky Tex Pakistan (Private) Limited (hereinafter referred to as "Lucky Tex") entered into an Agreement dated 25 September 2017 with Cresox and which obligations were settled in the following terms: .....This AGREEMENT between M/S Cresox Private Limited ("CSL"), through its representative Mr. Tariq Shafi & Lucky Tex Pakistan Private Limited ("LTEX"). through its representative Mr. Ahmed Tabba, being mutually agreed upon for the sale of CSL's Land, Buildings, & Machineries to LTEX as defined by the Terms & Conditions here hereunder, 1. Plot No. A-40 Manghopir Road SITE. having land totaling approximately 5.039 Acres and the buildings located on the same plot totaling a covered area of approx. 144,400 square feet, in addition to the Power Generators, Waste Heat Recovery System, Chillers, Boilers, Effluent Treatment Plant and their installations, fixtures, fittings, cables and all their related parts and Infrastructure shall be sold by CSL to LTEX for a total consideration of PKR 900,000,000/-(PKR Ninety Crores) 2- The Sale Price of PKR 900,000,000/-is inclusive of any and all payments to be first paid to the Consortium of Banks/ Financial Institutions ("CoB") for the release of CSL's Pledged Assets from any encumbrances and charges, allowing for complete clearance/ release and No Objection Certificates to transfer the Land, Buildings, and Machineries to LTEX by CSL. Following the release of all charges & encumbrances on CS's Assets by the CoB, the balance amount of the Sale Price, if any, shall be transferred to CSL, Furthermore, any amount greater and/or less than PKR 900,000,000/- for the CoB settlement shall be to the account of CSL/Tariq Shafi and/or his nominees. 3. Annexure "A", which forms an integral part of this Agreement, being a list of Machineries and their related parts to be sold by Mr. Tariq Shafi and/or his nominees to a local and/or foreign buyer of his choice/ discretion and at a price/rate decided by Mr. Tariq Shafi and/or his nominees. The sale of the items included in Annexure "A" shall be routed thru LTEX and the net proceeds (net of L/C charges) of the same shall be at the disposal of Mr. Tariq and/or his nominees. The proceeds from the sale of the items included in Annexure "A" upto PKR 300,000,000/-shall be Mr. Tariq Shafi's and/or his nominees' share solely, and any proceeds exceeding PKR 300,000,000/- shall be LTEX's share. The sale proceeds of items in Annexure "A" are independent of the Sale Price of PKR 900,000,000/-detailed in Points 1 & 2 above.
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4. In order to achieve mutually beneficial terms for all parties concerned, Mr. Tariq Shafi and/or his nominees and Mr. Ahmed Tabba and/or his nominees will conduct negotiations with the CoB jointly. The final terms agreed with the CoB will be the purview of the CoB, CS, and LTEX and shall be shown as the official agreement between the concerned parties. 5. Appropriate notices and other regulatory and compliance related issues regarding the Terms of this Agreement shall be fully covered to safeguard the interest of all concerned parties. 6. The timeline for the sale/removal of items in Annexure "A" shall be mutually agreed by Mr. Tariq Shafi and Mr. Ahmed Tabba and/or their nominees after the successful conclusion of Points 1 & 2 of this Agreement. 7. Bridge Financing upto a maximum of PKR 10,000,000/ - Is to be provided by LTEX to CSL/Mr. Tariq and/or his nominees for miscellaneous expenditures, bills etc. Under the terms of this Bridge Financing, LTEX will directly pay upto PKR 10,000,000/- upon the written request of CSL/Mr. Tariq Shafi and/or their nominees. Furthermore, a provision for an additional PKR 10,000,000/-in Bridge Financing shall be provided by LTEX to CSL/Mr. Tariq and/or his nominees on a "if & when needed" basis. Adjustment of this Bridge Financing shall be done from the Sale Proceeds of the items in Annexure "A"." 5. On account of Cresox not performing on its obligations, Lucky Tex on 10 February 2018 maintained Suit No. 290 of 2018 seeking Specific Performance on the Agreement dated 25 September 2017 and an Injunction and in which suit ex-partre ad-interim orders were passed on 12 February 2018 in the following terms: "......2. This is a suit for specific performance of the agreement dated 25.09.2017 executed between the plaintiff and defendant for plot No. A-40, Manghopir Road along with the building, fixtures and fittings in the total sale consideration of PKR. 900,000,000/- which is inclusive of all payments to be first paid to the consortium of banks/financial institutions for the release of pledged assets from any encumbrances and charges allowing for complete clearance/release and no objection certificate to transfer the land, buildings and machineries to the plaintiff. In paragraph No.7 it is further stated that bridge financing up to maximum of PKR 10,000,000/-was to be provided by the plaintiff to the defendant for miscellaneous expenditures. Learned counsel submits that up to Rs. 76,00,000/- has been paid and in this regard a summary of payment is available at page No. 79. Learned counsel submits that since the bank loans are also involved in this case without payment of which further steps for the transfer of property could not be initiated, therefore, he offers to furnish solvent bank guarantee equivalent to the amount of the deal to show their seriousness. He argued that the plaintiff came to know that the defendant is planning to sell out this property to some other person, therefore, he requests that till next date, defendant may be restrained not to create any third party interest. Issue notice to the defendant. However, subject to furnishing bank guarantee in the sum of Rs.900,000,000/- (PKR Ninety Crore only) to the satisfaction of Nazir of this court within seven days, the defendant shall not create any third party interest in the property. Adjourned to 23.02.2018." The ex-parte interim order passed on 12 February 2018 was confirmed on 22 October 2018 in the following terms: ".....14.In view of above facts and circumstances, of this case, it appears that the Plaintiff has made out a prima facie case; whereas, the Plaintiff has shown its willingness to perform the Agreement in question and for such purposes has already furnished a Bank Guarantee with the Nazir of this Court as directed while passing the interim order. Moreover, the balance of convenience also lies in favour of the Plaintiff and if the injunctive relief is not granted, the Plaintiff shall suffer irreparable harm and loss, which cannot be quantified as in that case third party interest(s) would be created by the Defendant. Accordingly, the injunction application bearing CMA No.2072/2018 is allowed
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and Ad-interim order passed on 12.02.2018 is hereby confirmed on the same terms and conditions." HCA No. 402 of 2018 was maintained by Cresox as against the order dated 22 October 2018 and which was dismissed on 15 January 2020. Apparently, an appeal was preferred as against the order passed in HCA No. 402 of 2018 before the Supreme Court of Pakistan and which was dismissed by the Supreme Court of Pakistan for non- prosecution.[1] 6. It seems that after the passing of the interim order in Suit No. 290 of 2018, Execution No. 21 of 2020 was presented before this Court by Pak Oman seeking execution of the Judgement and Decree each dated 18 September 2017 that had been passed in Suit No. B-02 of 2014 and which remains pending. Thereafter Cresox entered into a compromise agreement with HBL and on which agreement a compromise decree dated 14 February 2022 was passed by this Court in Suit No. B-21 of 2017 and another compromise agreement was entered into by Cresox with FBL and on which compromise agreement a compromise decree also dated 14 February 2022 was passed by this Court in Suit No. B-34 of 2017. Execution Application No. 14 of 2022 and Execution Application No. 15 of 2022 maintained by HBL and FBL respectively, each seeking execution of the compromise decrees dated 14 February 2022 passed in Suit No. B-21 of 2017 and Suit No. B-34 of 2017, also remain pending before this Court. 7. On account of the Compromise Decrees each dated 14 February 2022 passed by this Court in Suit No. B-21 of 2017 and Suit No. B-34 of 2017, Lucky Tex maintains J.M. No. 32 of 2022 and J.M. No. 33 of 2022 each under Sub-Section (2) of Section 12 of the Code of Civil Procedure, 1908 seeking to set aside each of the Compromise Decrees, primarily on the ground that they were entered into by Cresox in violation of the order dated 22 October 2018 passed in Suit No. 290 of 2018. 8. That while considering these issues I had on 19 September 2023, framed the following issue in Suit No. 290 of 2018: "....Whether the Sale Agreement dated 15.09.2017 was maintainable considering S. 23 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, and other relevant laws, given that the Subject Property possessed a charge prior to the Sale Agreement? B. Contentions on behalf of the Applicants in J.M. No. 32 of 2022 and J.M No. 33 of 2022 9. Mr. Hanif Faisal Alam entered appearance on behalf of the Applicants in J.M. No. 32 of 2022 and J.M. No. 33 of 2022 and contended that despite the Order dated 22 October 2018 passed in Suit No. 290 of 2018 and the Order dated 15 January 2020 passed in HCA No. 402 of 2018 confirming that order, both of which were in the knowledge of Cresox, FBL and HBL they continued to enter into a Compromise Agreement and on which basis the Compromise Decrees dated 14 February 2022 were passed in Suit No. B-21 of 2017 and Suit No. B-34 of 2017. 10. Mr. Hanif Faisal Alam has referred the court to Paragraph 6 of the Counter Affidavit that had been filed by HBL to J.M. No. 32 of 2022 and to Paragraph 6 of the Counter Affidavit that had been filed by FBL to J.M. No. 33 of 2022 in which they both confirmed receipt of letters dated 27 February 2020 that were issued to each of them informing them about the orders passed in Suit No. 290 of 2018 and HCA No. 402 of 2018 and contended that despite having knowledge about the injunctive orders, Cresox, FBL and HBL continued to violate the order by executing the compromise agreement and presenting each application before this Court and on which applications a compromise decree has been passed. 11. Maintaining that the orders passed in Suit No. 290 of 2018 and HCA No. 402 of 2018 were deliberately suppressed from this court when passing the Compromise Decree dated 14 February 2022 in Suit No. B-21 of 2017 and the Compromise Decree dated 14 February 2022 passed in Suit No.B-34 of 201, Mr. Hanif Faisal Alam relied on a decision of the Supreme Court reported as Mst. Nasira Khatoon and another vs. Mst. Aisha Bai and 12 others[2] to advance the proposition that
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the concealment of material facts would constitute fraud and render an application under Sub- Section (2) of Section 12 of the Code of Civil Procedure, 1908 as being maintainable. 12. He contended that there had no suppression of any fact on the part of Lucky Tex in as much as both the learned Single Judge in Suit No. 290 of 2018 and the Division Bench in HCA No. 402 of 2018 were each aware of the pendency of the proceedings instituted by HBL, FBL and Pak Oman and had passed orders notwithstanding the pendency of those proceedings. In this regard reference was made to the decision of the Supreme Court of Pakistan reported as University of Health Sciences and others vs. Mumtaz Ahmad and another[3]in which it was held that a decision of Division Bench of a High Court would be binding on single judge of a High Court, and on which basis he stressed that this Court was bound to give effect to the decision passed by a Division Bench of this Court in HCA No. 402 of 2018 and allow both J.M. No 32 of 2022 and JM No. 33 of 2022 as the Compromise Decrees dated 14 February 2022 creating rights over the Mortgaged Property in favour of HBL and FBL had clearly been passed in violation of the order dated 15 January 2020 passed in HCA No. 402 of 2018. Reference in particular was made to the order dated 13 April 2022 passed in Execution Application No. 14 of 2022 and whereby the Court had permitted the sale of the Mortgaged Property and which had been passed pursuant to the Decree passed in Suit No. B- 21 of 2017. He therefore maintained that unless the Compromise Decrees dated 14 February 2022 passed in Suit No. B-21 of 2017 and Suit No. B-34 of 2017 were not set aside, the orders passed in Suit No. 290 of 2018 and HCA No. 402 of 2018 would each be rendered redundant. 13. Relying on a decision of the Supreme Court of Pakistan reported as Subedar Sardar Khan through Legal Heirs and others vs. Muhammad Idress through General Attorney and another[4] he said that while determining J.M. No 32 of 2022 and J.M. No. 33 of 2022 it was incumbent on this Court to restrict itself to the contents of the Application and not to consider the merits of the Suit. Reliance in this regard was also placed on a decision of a Learned Single Judge of the Islamabad High Court reported as Rubina Amjad vs. Javaid Shafique Siddiqui and others[5] to forward the same contention. 14. He concluded on the merits of J.M. No. 32 of 2022 and J.M. No. 33 of 2022 by contending that even if the Court concluded that Suit No. 290 of 2018 was not maintainable, even in that scenario the Compromise Decrees dated 14 February 2022 passed in Suit No. B-21 of 2017 and Suit No.B-34 of 2017 each must still be set aside, as Suit No. 290 of 2018 and J.M. No. 32 of 2022 and J.M. No. 33 of 2022 must be considered independently of the proceedings in Suit No. 290 of 2018. 15. Regarding the application of Section 23 of the Ordinance 2001, Mr. Hanif Faisal Alam referred to the wordings of the Sub-Section (1) of Section 23 of the Ordinance 2001 and contended that "after publication of summons, no customer shall without prior permission of Banking Court 'transfer, alienate, encumber, remove or part with possession of any property furnished to the financial institution as mortgage...', and any such transfer, alienation, encumbrance, or other disposition shall be void and of no legal effect." Maintaining that there was a clear difference as between an Agreement to transfer and a transfer he relied on a judgement passed by the Supreme Court of Pakistan reported as Muhammad Iqbal and others vs. Nasrullah[6] wherein it had been held that Agreement to Sell did not create any title or claim over an immovable property and contended that therefore Sub-Section (1) of Section 23 of the Ordinance, 2001 did not prevent a mortgagor from entering into an Agreement of Sale in respect of Mortgaged Property and hence the Agreement of Sale that has been entered into as between Cresox and Lucky Tex for the purchase of the Mortgaged Property did not violate that provision. Placing further reliance on the decision reported as Zamiruddin Ahmad vs. Havas Khan,[7] he maintained that in the event that there was any ambiguity with regards to the scope of the word 'encumbrance' as used in Sub-Section (1) of Section 23 of the Ordinance, 2001 then the Court should consider the meanings of other words connected with the word encumbrance in that section so as to apply the reference in the context
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in which it was being made and emphasised that the word 'encumbrance' should therefore be read as being restricted by the word of 'transfer' and hence not include an Agreement of Sale. He also placed reliance on Section 54 of the Transfer of Property Act, 1882 to maintain that a contract or an Agreement for Sale did not create any 'interest' or 'charge' in the Mortgaged Property and therefore on a literal interpretation did not come with the purview of Sub-Section (1) of Section 23 of the Ordinance, 2001 and could not be considered to be void. In this regard he relied on a decision of the Lahore High Court, Lahore reported as Sheikh Jameel Ahmad vs. Raja Khalid Hussain[8] in which it was held that by entering into an Agreement of Sale the Plaintiff had not violated the provisions of Sub-Section (2) of Section 23 of the Ordinance, 2001. He also relied on a decision reported as Habib Metropolitan Bank Limited vs. Messrs Dagra Textiles (Pvt.) Limited and 3 others[9] wherein it was held that the provisions of Sub-Section (1) of Section 23 of the Ordinance, 2011 would only be operative where the immovable property being transferred was subject to a mortgage and not otherwise. 16. Concluding on this issue Mr. Hanif Faisal Alam submitted that both the Learned Single Judge and well as the Learned Division Bench of this Court were each fully aware of the fact that the Mortgaged Property had been mortgaged but still were of the view that Lucky Tex had a prima facie case while granting the injunction application in Suit No. 290 of 2018. He maintained that the Respondents cannot be permitted from completely ignoring the orders of this Court and have obtained a consent decree in in Suit No. B-21 of 2017 and Suit No. B-34 of 2017 in sheer violation of this Courts orders. He pleaded that this Court should set aside the Consent Decrees passed in in Suit No. B-21 of 2017 and Suit No. B-34 of 2017 and award compensatory costs to the Applicant. C. Contentions on behalf Lucky Tex in Suit No. 290 of 2018 17. Mr. Ali Mehdi entered appearance on behalf of the Plaintiff in Suit No. 290 of 2018. Referring to the Agreement of Sale dated 25 September 2017, he maintained that a perusal of that agreement would clearly show that the Plaintiff had made full disclosure in the Agreement of Sale of the fact that the Mortgaged Property was in fact mortgaged with a "consortium of financial institutions" and insisted that performance on the Agreement of Sale was contingent to the liabilities of the financial institutions being settled, the Mortgaged Property being redeemed and whereafter the Mortgaged Property would be transferred into the name of the Lucky Tex. 18. Reiterating the contentions of Mr. Hanif Faisal Alam, Mr. Ali Mehdi maintained that a distinction was to be made as between an Agreement of Sale and a Conveyance in terms of the language used in Sub-Section (1) and (2) of Section 23 of the Ordinance, 2001 and the interpretation cast on Section 54 of the Transfer of Property Act, 1882 and whereby in the case of an Agreement of Sale no rights per se were in created in the immovable property. Reliance in this regard were placed on the same decisions as relied on by Mr. Hanif Faisal Alam and reported as Sheikh Jameel Ahmad vs. Raja Khalid Hussain[10] and Muhammad Iqbal and others vs. Nasrullah.[11] Distinguishing the judgments and orders of this Court reported as Habib Bank Limited vs. Daizy Knitwear (Pvt) Limited through Chief Executive and 3 others,[12] National Bank of Pakistan vs. Messrs Dharamdad and 2 others,[13] Rafiq Ahmed Sanauri through Attorney and 3 others vs. Union Bank Limited through Bank Manager and 5 others,[14] Citizens Investment Co. vs. Askari Leasing Ltd. and others.[15] Muhammad Hussain and another vs. Judge Banking Court No. 1 Multan and 3 others,[16] Askari Bank Ltd. vs A.H. International (Pvt.) Ltd and others,[17] Muhammad Mansha vs. Industrial Development Bank of Pakistan[18] Mr. Mehdi contended that in each of those matters conveyances and gift deeds i.e., instruments that actually conveyed title were set aside as being void under the provisions of either Sub-Section (1) or Sub-Section (2) of Section 23 of the Ordinance, 2001 but none of which involved an Agreement of Sale. Regarding a decision of a learned single judge of this Court reported as Azra Saeed vs. Raees Khan through General Attorney and 5 others[19] Mr. Mehdi contended that while the Court did set aside an
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Agreement of Sale under Sub-Section (2) of Section 23 of Ordinance, 2001, in that suit the Plaintiff had sought declaratory rights to an immovable property premised on an Agreement to Sell and which the Plaintiff contended overrode the rights of financial institution to foreclose on the same immovable property. The learned Single Judge of this court, while rejecting the Plaint held that no declaratory rights to an immovable property could be premised on an Agreement of Sale and additionally also held that the Suit would be barred under Sub-Section (2) of Section 23 of the Ordinance, 2001. Mr. Ali Mehdi distinguished this order on the basis that the Plaintiff in Suit No. 290 of 2018 was not seeking declaratory rights to the immovable property and was instead seeking specific performance and hence that order would not be applicable to the facts of these proceedings. 19. He concluded by contending that Suit No. 290 of 2018 was therefore clearly maintainable and was not barred under either Sub-Section (1) or Sub-Section (2) of Section 23 of the Ordinance, 2001. D. Contentions on behalf of Cresox 20. Mrs. Heer Memon entered appearance on behalf of Cresox. She contended that Suit No. 290 of 2018 was clearly not maintainable and was barred under the provisions of Sub-Section (1) and Sub-Section (2) of Section 23 of the Ordinance, 2001. 21. Referring to the distinction as made between an Agreement of Sale and a registered conveyance, whereby the former does not transfer any right or interest in…
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