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Petitioner: Messrs CAPITAL FARMS, ISLAMABAD VS Respondent: NATIONAL DEVELOPMENT FINANCE JUDGMENT
Court Name: Lahore High Court Judge(s): Ch. Mushtaq Ahmad Khan, Raja Abdul Aziz Bhatti Title:Messrs CAPITAL FARMS, ISLAMABAD vs NATIONAL DEVELOPMENT FINANCE
JUDGMENT
Reported As: PLD 1996 Lahore 99 Result: Appeal dismissed Judgment JUDGMENT ' CH. MUSHTAQ AHMAD KHAH, J.--Messrs K. Agricole (Pvt.) Ltd., Shahrah-e-Kashmir, Islamabad, the respondent No,2, entered into an agreement with National Development Finance Corporation, the respondent for financing the purchase of Raw Materials, Finished Goods, Stores, Spares, Plant and Machinery and other assets etc. On mark-up basis on 9-31986, under the terms whereof respondent No,1 purchased for respondent certain assets at the purchase price of Rs,2,250,000 (Rupees two million two hundred fifty thousand only), which were repurchased by respondent No,2 for the marked-up price of Rs,5,221,400 (Rupees five million two hundred twenty one thousand and four hundred only). The marked-up price was payable by respondent No,2 to respondent No,1 in ten six monthly equal instalments amounting to Rs,522,140 each, within the period commencing 17- 1988 up to 1-1-1993. By way of security and repayment of the aforementioned financial facility, respondent No,2 executed the following documents through its Managing Director, the respondent No,3:-- (1) Promissory Note for Rs,5,221,400. (2) Letter of hypothecation, dated 24th July, 1986. (3) Deed of floating charge, dated 24th July, 1986. ' The last deed was presented to the Deputy Registrar, Joint Stock Companies, Islamabad under the provisions of section 127 of the Companies Ordinance, 1984, who registered the same in accordance with the above said provisions. Respondent No,3, further executed by way of security an irrevocable general power of attorney in for of respondent No,1 and an equitable mortgage of
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his Property bearing Plot No,C-1/A measuring 9.78 acres, Scheme No,II, Poultry and Vegetable Farm, Chak Shahzad, Islamabad in favour of respondent No,1, particulars where are as under:-- "DESCRIPTION OF TITLE DEEDS AND EQUITABLE MORTGAGE HANDED OVER AND EXECUTED BY THE DEFENDANT NO.2. (i) Description of the Title Deeds: (a) Agreement to lease of Immovable Property, dated 20th November, . 1984 executed between Capital Development Authority, Islamabad and Mr. Khushnood All registered on 25-11-1984 as No,4529 in Book No,1, Volume No,58 and a duplicate copy pasted in the Additional Book No,1, Volume No,219 on pages from 1 to 7 at the office of the Sub-Registrar, Islamabad. (b) No-objection certificate dated 19-6-1986 from Capital Development Authority, Islamabad. (c) Allotment Letter No, CDA/DEM(PVC-15)C-1/A/84/4982, dated 19-11-1984 issued by Additional Director, Environment, Capital Development Authority, Islamabad. (ii) Description of Equitable Mortgage: ' All that piece and parcel of plot of land bearing No,C-1/A measuring 9.78 acres or thereabout situated in P&V Scheme No, II, Islamabad. ' Thereafter, respondent No,2 availed of all the aforementioned financial facilities of the amount of Rs,2.25 million but failed to liquidate the liability in terms of the agreement referred to above and did not pay a single instalment. Resultantly, after service of legal notices, dated 25-9-1989 and 19- 4-1990, a suit was filed by respondent No,1 for recovery of Rs,3,694,639.30 as on 30-6-1991 with liquidated damages at 29% annum to the date of its full and final payment or realization with costs, against respondents Nos.2 to 6, out of whom respondent No,2 is the company, whereas the others are its Directors, in the Lahore High Court, Rawalpindi Bench, Rawalpindi under the Banking Companies (Recovery of Loans) Ordinance, 1979. The respondents Nos.2 to 6 were initially summoned in the ordinary course, registered post acknowledgement due and also by publication in the Daily Nawa-i-Waqt and the Nation, Lahore for 22-2-1992. They were served but did not appear, hence, were proceeded against ex parte. A preliminary decree was passed in favour of respondent No, 1 as prayed for. Subsequently, an application under Order XXXIV, Rule 5, C.P.C. Was filed by respondent No,1 for passing of final decree, which application was also not contested by the respondents in spite of service, therefore, vide judgment and decree dated 23-10-1993, a final decree was passed in favour of respondent No,1 by the learned Special Court Banking, Rawalpindi. 2. On the basis of the aforementioned final decree, respondent No,1 filed execution petition before the learned Special Judge Banking, Rawalpindi, whereupon the mortgaged property, referred to above, was attached and was published to be auctioned on 13-7-1995, on which date an objection petition was filed before the learned Executing Court by Messrs- Capital Farms Islamabad, who is the appellant before this Court under the provisions of Order XXI, rules 97 and 99 read with section 151, C.P.C. In this application the stance taken by the objector is that the plot, which has been attached and is going to be sold in pursuance of the decree passed in favour of respondent No,1, was allotted to Syed thushnood All Rizvi, respondent No,3 on 15-11-1984, which has been agreed to be sold by him, vide agreement to sell dated 27-10-1988, for total consideration of Rs35,00,000, out of which the objector has already paid Rs,20,00,000, and as the plot has not so far been transferred by the C.DA. In absence of respondent No,2, who had left for Canada, the appellant has filed a suit for specific performance of the contract, which is pending adjudication in the Court of Syed Ikhlaque Hussain Shah, Civil Judge, Islamabad and that it is only. Today that the objector has come to know that the suit plot is going to be auctioned under a decree passed by the Court and upon further inquiry it has transpired that the said plot was mortgaged with the National Development Finance Corporation and its dues were not cleared by the concerned persons, therefore, as the objector is a bona fide purchaser for value and is in possession of the suit plot in his own independent right, the same may be excluded from the list of the property to be auctioned,
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otherwise the applicant shall suffer irreparable loss, hence, he may be protected against the malpractices of the third party. This application was ordered to be fixed for hearing on 16-7-1995, on which date notice was issued to respondent No,1 for 19-7-1995, however, on the said date the applicant did not appear and the application was dismissed in default. One Raza Hussain has also appeared on behalf of the applicant before the Court Auctioneer as well on 13-7-1995 and had stated that an application has been filed before the Executing Court, which has been fixed for 16-7- 1995. The auction proceedings under the above circumstances were not held on 13-7-1995 and ultimately on 19-7-1995, the plot was put to auction, on which date besides Javed Mawaz Khan respondent No,9 and others, Mahmood Alam, who is the husband of Mst. Aisha Alam and also a partner of Messrs Capital Farms, Islamabad and another partner of the firm who is the real brother of Mst. Aisha Alam, through whom the present appeal has been filed, participated in the auction. The respondent No,9 being the highest bidder purchased the plot in question for an amount of Rs,62,00,000, in whose favour, the auction has been confirmed and the sale certificate has also been issued to him, vide order dated 22-8-1995. The execution proceedings have also been filed vide the same order. It may be mentioned here that the objection petition referred to earlier was filed through husband of Mst. Aisha Alam, who is a partner of the appellant Firm. The judgment- debtors have neither challenged the preliminary or final decree nor have challenged the auction proceedings, hence, the same have become final qua the decree-holder, the judgment-debtors and the appellant who claims interest in the property through the judgment-debtors. 3. Messrs Capital Farms has filed this time-barred regular first appeal to challenge the judgment and decree passed in the suit wider the provisions of section 12 of the Banking Companies (Recovery of Loans) Ordinance, 1979. Along with memo of appeal, application under section 12(6) of the Ordinance, 1979 seeking condonation of delay has also been filed. Grounds given in the application in support of condonation of delay are that the appellant being not a party to the suit acquired knowledge of the decree on 13-7-1995, when the plot was going to be put to auction, immediately whereupon, an application was filed before the executing Court and after getting certified copy of the judgment and decree, the appeal has been field on 9-8-1995, which is within time with effect from the date of knowledge, therefore, the delay in filing of the appeal is condonable in the interest of justice and the appeal is liable to be heard on merits. 4. Mr. Mansoor Ahmad, Advocate assisted by Mr. Waqar-ul-Haq Sheikh, Advocate has appeared on behalf of the appellant, whereas Sh. Iftikhar Ahmad, Advocate has entered appearance on behalf of respondent No,1, Mr. S.M. Kamal, Assistant Director, C.D.A. Has appeared on behalf of respondent No,7, none has entered appearance on behalf of respondents Nos.2 to 6, who have been proceeded against ex parte, M/s. Raja Muhammad Anwar, IQ. Muhammad Farooq and Raja Shafqat Abbasi, Advocates have appeared on behalf of respondent No,9. Respondent No,8 is the Court which has passed the decree and is not represented and even otherwise is not a necessary party to these proceedings, hence, shall be deemed to have been deleted as a respondent in the appeal. 5. In support of this appeal, learned counsel for the appellant has raised the following contentions:- - (i) That the appellant has entered into an agreement for sale with respondent No,3 without notice of the mortgage of the plot in question in favour of respondent No,1, under which agreement the possession , was delivered to him, therefore, the appellant being a bona fide interest-holder without notice for consideration is entitled to retain the possession of the plot under section 53-A of Transfer of Property Act, hence, the proceedings, which were initiated during the pendency of the suit for specific performance filed by him and which have culminated in the passing of a decree and sale of the plot in question are illegal and inoperative qua his rights, therefore, the appellant has a locus standi to challenge the impugned decree, which is, not binding upon him. In support of
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this contention, reliance has been placed on the cases of H.M. Saya & Co., Karachi v. Wazir All Industries Ltd, Karachi and another PLD 1959 SC 65; Arsalla Khan v. Bashir Ahmad Blour and 3 others PLD 1976 SC 581 and Sh. Fazal-ur-Rehman and another v. Chief Settlement and Rehabilitation Commissioner, Punjab and others 1991 SCMR 423. ' That the relationship between respondents Nos.1 and 2 was that of a financer and the customer, therefore, the only forum which could have adjudicated the dispute and passed a decree therein is the Tribunal created under the Banking Tribunals Ordinance, 1984, Ordinance LVIII of 1984, which forum has exclusive jurisdiction as is clear from the joint reading of sections 2(c), 2(e), 4, 5 and 8(c) thereof, the Special Court constituted under the Banking Companies (Recovery of Loans) Ordinance, 1979 did not possess jurisdiction in the case in hand as the said Court is competent to adjudicate the dispute relatable to loans on interest basis and not finances advanced under the finance agreement which are two distinct relationships/agreements, therefore, the impugned decree is patently void and inoperative against the rights of the appellant, hence, is liable to be set aside. In this behalf reliance has been placed by the learned counsel on the case of Messrs Grain Systems (Pvt.) Ltd. And 10 others v. Agricultural Development Bank 1993 SCMR 1996. ' That the appeal is not barred by time as the same has been tiled within 30 days with effect from the date of knowledge of passing of the decree and even if it is assumed to be barred by time, the appellant being not a party thereto had acquired knowledge thereof on 13-7-1995, obtained certified copies thereof and filed the same on 9-8-1995, hence, it is a fit case for condonation of delay, particularly when the decree is void and bar of limitation does not operate against the appellant to challenge the decree in question. Reliance in this behalf has been placed on the cases of Syed Mahmud Alam v. Syed Mehdi Hussain and 2 others PLD 1970 Lahore 6; Hussain Bakhsh and others v. Settlement Commissioner and another PLD 1969 Lah. 1039; Syed Nazir Hassan v. Settlement Commissioner, Lyallpur PLD 1974 Lah. 434; Nawabzada Muhammad Umar Khan (represented by his Legal Heirs ) and 4 others v. Pakistan through Secretary, Cabinet Division and 2 others PLD 1982 Pesh. 1; Province of Balochistan v. Messrs Tribal Friends Company, Loralai PLD 1986 Quetta 321 and Mst. Rehmat Bibi and others v. Punnu Khan and others 1986 SCMR 962. (iv) That the remedy of filing objections was not available to the appellant under the provisions of section 47/151 read with Order XXI, rules 98 and 99 of C.P.C. As the said provisions authorise the Executing Court to render a fading on the question of execution and discharge of a decree and that the said Court has no jurisdiction to go behind the decree, and hence, declare it as void, therefore, the objection petition filed by the appellant even if dismissed for want of prosecution will not take away his right to file the appeal against the decree in consequences whereof his rights are also effected. Reliance has been placed on the cases of Muhammad Sharif v. Jalal-ud-Din 1971 SCMR 594; Sardar Abdul Majid Khan Lashari v. The Asio-African Co. Ltd. 1972 SCMR 236; S. Anwar All Shah v. S. Niaz All Shah PLD 1978 Lah. 1078. (v) That the plot in question did not legally an mortgaged with respondent No,1 as the plot did not belong to the Company and no registered deed of mortgage was executed in favour of respondent No,1 by the Company. Consequently, no decree could have been passed in relation to the plot in dispute. Reliance to this behalf has been placed on the case of Messrs Eagle Star Insurance Co. Ltd. v. Messrs Usman Sons Ltd. And others PLD 1969 Kar. 123. (vi) That the appellant being a bona fide agreement holder, in possession of the plot in question and being a suiter before the Civil Court in a pending suit for specific performance of the contract, his rights cannot be effected by the decree passed in favour of respondent No,1 on the basis of a so-called mortgage by deposit of title deeds firstly for the reasons that the suit by respondent No,1 was filed during the pendency of the appellant's suit and secondly for the reasons that under
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section 53-A of the Transfer of Property Act, the appellant is entitled to retain possession of the plot even if the equity of redemption has been sold and purchased by respondent No,9. Reliance in this behalf has been placed on the case of Karachi Catholic Cooperative Housing Society Ltd. V. Mirza Jawad Baig PLD 1994 Kar. 194. 5-A. As against the above arguments, Messrs Kh. Muhammad Farooq, Raja Muhammad Anwar and Raja Shafqat Khan Abbasi, Advocates, learned counsel for respondent No, 9 have raised the following contentions:-- (i) That the only remedy available to the appellant if any, was to file an application under section 47 read with Order XXI, Rules 98 and 99, C.P.C., which remedy he did avail of by filing of objection petition, but did not pursue the same, which has been dismissed for want of prosecution, therefore, he is not entitled to file an appeal to obtain the same relief which he sought from the Court of competent jurisdiction and his motive was dismissed for want of prosecution. Reliance has been placed on the cases of Islamic Republic of Pakistan v. Muhammad Saeed PLD 1961 SC 192; Brig. (Retd.) Muhammad Aslam Khan v. The Azad Government of the State of Jammu and Kashmir 1983 CLC 1204; Muhammad Lal v. Abdul Quddus PLD 1975 Quetta 29; Muhammad Lal Patni v. Sr. Kali Nath AIR 1962 SC 199 and Abdul Malek 1Vliah v. Moslemuddin (Mokleshuddin) Sheikh PLD 1970 Dacca 743. ' That the appellant has no right or interest in the suit property which is the subject-matter of the suit. The plot in dispute was mortgaged by the judgment-debtors in favour of the decree-holder on 9-3-1986, whereas the alleged agreement, even execution whereof has been denied by the executants, before the Civil Court, was executed on 27-10-1988, therefore, valid first charge having been created on the plot in question in the year 1986, any agreement relatable thereto subsequently executed/will be subject to the satisfaction of the first charge, therefore, even if it is conceded for the sake of argument that there is a valid agreement to sell in favour of the appellant, the same being subsequent in date to the date of mortgage, no cause of grievance can be raised by the holder thereof against the satisfaction of the first charge which satisfaction has not been objected to by the judgment-debtors. Even otherwise the agreement for sale does not create any interest or right in the property till the time a sale-deed is executed in pursuance thereto either by the executant of his own or in execution/pursuant to a decree for specific performance of the contract passed by the Court and till then the agreement-holder does not acquire any actionable cause of action against a third party, who is not a privy to the agreement or contract, therefore, it is not a fit case wherein the appellant can be allowed to challenge the decree and that too after expiry of the period of limitation. ' That the appellant is not entitled to challenge that decree hence, permission cannot be granted to him to prosecute this appeal as the plot in dispute has already been purchased by respondent No,9 in execution proceedings for consideration without notice, the sale cannot be set aside even if decree is held to be void and is set aside, therefore, title in the property having passed to a third party in execution of lawful proceedings, the so-called agreement as well as proceedings before the Civil Court on the basis thereof automatically stand frustrated and fructified. The appellant as such is not entitled to prosecute this appeal against a decree which has become final between the parties, on the basis of a claim being raised through the judgment-debtors. Reliance has been placed on the cases of Zain-uIAbdin Khan v. Muhammad Asghar All Khan and others ILR 10 Allahabad 166 (PC); Chitambar Shrinivasbhat v. Krishnappa ILR 26 Bombay 543; Sundaram v. Mamsa Mavuthar and others AIR 1921 Madras 157; A.C. Subba Beddi and andther v. Vasireddi Jaya Jiayya and others AIR 1923 Madras 659; Nanhelal and another v. Umrao Singh AIR 1931 PC 33; Abdul Rahim v. Abdul Haq AIR 1936 Lahore 191; Ambujammal v. P.Thangavelu Chettiar and another AIR 1941 Madras 399; Chowdhari Abdul Subhan Sahib v. Kante Ramanna AIR 1945 Madras 161; Nur Ahmad and others v. B.Muhammad Ibrahim and another PLD 1953 Lahore 470; Lutfor Rahman v. Mst.
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Tahera Khatun and others PLD 1961 Dacca 303; Lalji Sah and others v. Sat Narain Bhagat and others AIR 1962 Patna 182; S. Chokalingam Asari v. N.S. Krishna Iyer and others AIR 1964 Madras 404; Haji Ghulam Rasul and others v. Chief Administrator of Auqaf, West Pakistan, Lahore PLD 1966 Lahore 978; Janak Raj v. Gurdial Singh and another AIR 1967 SC 608; Hudaybia Textile Mills Ltd. And others v. Allied Bank of Pakistan Ltd. And others PLD 1987 SC 512; Munawar v. Mst. Nooran and 4 others 1989 MLD 1535 and Jane Margrete William v. Abdul Hamid Mian 1994 CLC 1437. (iv) That the appellant after filing the objection petition did not prosecute the same and two partners thereof participated in the auction proceedings, hence, the appellant accepted the decree as valid. Having failed in his efforts to get the property in auction proceedings, therefore, having acquiesced the auction proceedings by participating therein, the jurisdiction of the Court cannot be allowed to be challenged and, hence, granted permission to file this appeal. Reliance is placed on the cases of Nidamarthu Balasurya Bheemaraju v. Changati Mrutyanjayudu AIR.1931 Madras 354; Mst. Mumtaz Begum v. Abdul Rashid 1988 CLC 2023 and Karim Bakhsh and 4 others v. Riaz Hns.Sain 1993 SCMR 1667. (v) That the decree is valid as the Special Court constituted under the Ordinance, 1979 has a concurrent jurisdiction to decide the suit in question as the word 'load used in section 2(d) of the Ordinance has been amended so as to include the finance agreement as well as is clear by the provisions of section 5(gg) added to the Ordinance by the Banking Companies and Financial Service (Amendment of Laws) Ordinance, 1984 (Ordinance LVII of 1984). Therefore, the argument of the learned counsel for the appellant on this score is misconceived. Reliance has been placed to the later part of the judgment in case of Messrs Grain Systems (Pvt.) Ltd. (supra), relied upon by the learned counsel for the appellant. (vi) That no case for condonation of delay has been made out inasmuch as it is not clear from the application as to how and when the knowledge of passing of the decree was acquired by the appellant nor is there any proof that the knowledge of the decree was acquired on the date on which the plot was to be put to auction. Even if the plot was put to auction publication for the auction was made much earlier to the date of auction and there is a presumption that as the auction proceedings were conducted after wide publicity in the press, the appellant must have acquired the knowledge of the decree, but he kept silent and did not challenge the same within thirty days in spite of the knowledge. Even looked from another angle, the appellant can at the most challenge the decree on the basis of the pleas available to the judgment-debtors within the time available to them to challenge a decree as he is claiming interest to challenge the decree through them, who had the knowledge of the decree, but did not proceed to challenge. Consequently, delay in filing the appeal cannot be condoned merely on the basis of a bald assertion that the knowledge of the decree was acquired by the appellant on 13-7-1995. Reliance has been placed on the cases of Messrs United Bank Limited v. Messrs All Oil Mills and 4 others 1992 MLD 1039 and Riasat All and 2 others v. Mahmood Ahmad 1993 CLC 120. ' We have considered the arguments addressed by the learned counsel for the parties, gone through, the record the statutory provisions and relevant case-law on the subject, a brief resume whereof is as under: ' In case of H.M. Saya & Co. (supra), it has been held that a stranger to the suit or proceedings can file an appeal with leave of the Court if he is adversely affected by the order passed in such a suit or proceedings. At pages 68 and 69 of the report, it has been held as under:- "There can be no dispute that the only party which was adversely affected by the order of ad interim on junction was respondent No,1. We are satisfied that Saya & Co., deliberately omitted to make them parties with the intention of avoiding a contest. They knew fully well that the reliefs sought were really directed against Wazir All Industries Limited and their bankers. A stranger to a suit or a proceeding is not prohibited by the Code of Civil Procedure from filing an appeal from an
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order passed therein. It is true that there is no express provision permitting such party to prefer an appeal against such an order. This omission, however, cannot be understood to amount to prohibition. The Court ought not to act on the principle that every procedure is to be taken as prohibited unless it is expressly provided for. To give such a meaning to the omission would result in grave injustice. The facts of this case are clear example in point. The Court should proceed on the principle that every procedure which furthers administration of justice is permissible even if there is no express provision permitting the same. Section 96 of the Civil Procedure Code deals with appeals from decrees and section 104 deals with appeals from orders. These provisions do not in terms say who is entitled to prefer an appeal. The Code, however, lays down that it is the decree or the order that has to be appealed against. If the decree or order appealed from adversely affects a person he should be permitted to challenge the same in appeal even if he was not made a party to the original suit or proceedings. ' The learned counsel for the appellants has, in support of his Contention, relied upon three decisions. ' In the case of J. Rustamji of Lahore v. Official Liquidator of the People's and Amiritsar Bank Ltd. And another AIR 1919 Lahore 180, an appeal filed under section 169 of the Companies Act by a creditor against an order…
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