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Petitioner: KAMRAN and another VS Respondent: ZONAL MANAGER and another
Court Name: Sindh High Court Judge(s): Sajjad Ali Shah, Aziz-ur-Rehman Title: KAMRAN and another vs ZONAL MANAGER and another Case No.: 1st Appeal No,25 of 2011 Date of Judgment:2013-09-12 Reported As: 2014 CLD 304 Result: Appeal allowed
Judgment ORDER ' AZIZ-UR-RAHMAN, J.---Through this First Appeal under section 22 of Financial Institutions (Recovery of Finances) Ordinance, 2001 [hereinafter abbreviated as F.1.0., 2001], the appellants have impugned order dated 28-3-2011 passed by Banking Court-I, Hyderabad [Annexure 'C' to the MoA], whereby the application under section 15(6) of Financial Institutions (Recovery of Finances) Ordinance, 2001 read with section 151, C.P.C. Filed by Mst. Zarina Bibi widow of Fazaluddin/Auction Purchaser was disposed of with direction to the appellants to vacate the auction property i,e, Flat No,L-18, Block/L, Siddique Plaza Unit No,8 Latifabad, Hyderabad [hereinafter referred to as Subject Flat] and hand over vacant possession thereof to the Auction Purchaser [respondent No,2] within thirty (30) days. The prayer sought by the appellants is to the effect that the impugned order dated 28-3-2011[Annexure 'C' to the MoA] be set aside as the same is un-sustainable in law. 2. Precisely, the relevant facts leading to the above prayer are as under:-- 3. That one Mir Muhammad Ali son of Mir Mureed Ali as a customer availed loan facility from House Building Finance Corporation [hereinafter abbreviated as HBFC] and against such facility granted to and availed, Mir Muhammad Ali mortgaged Flat No, L-18, Block-"L" on 4th floor, measuring 620-00 sq. Ft. Sub-plot No,L-2, Siddique Plaza Unit No,8 Latifabad, Hyderabad in favour of respondent No,1 [HBFC]. 4. Per version of HBFC [respondent No,1], Mir Muhammad Ali, notwithstanding of availing of loan facility failed and/or neglected to liquidate the outstanding dues of HBFC. On account of 'such default', respondent No,1 proceeded to recover the outstanding dues amounting to Rs,1,36,979 [Rupees one Lac Thirty Six Thousand Nine Hundred Seventy Nine only] byway of auction of the 'Subject Flat' without intervention of the Court in terms of section 15 of F.I.O., 2001.
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5. Auction notices, according to respondent No,1 [HBFC] were published in daily "EXPRESS" of 17-10- 2009 and daily "DAWN" of 19-10-2009 [of two different dates] and in consequence thereof the 'Subject Flat' was auctioned on 16-11-2009 [i,e, auction date] in favour of respondent No,2 [Mst. Zarina Bibi] in the sum of Rs,1,40,000 [Rupees One Lac Forty Thousand only]. Upon acceptance of the bid submitted by respondent No,2, sale deed of 30th March, 2010 in favour of the highest bidder/respondent No,2. [Mst. Zarina Bibi] was also executed. 6. Record shows that on 17-3-2010, of course, against the spirit of subsection (10) of section 15 of F.I.O. 2001, respondent No,1 instead of filing 'PROPER ACCOUNTS' in terms of section 15(10) of F.I.O. 2001, chosen to file an application under section 15(10) of F.I.O. 2001 [No,3 of 2010] before Banking Court No,I, Hyderabad. On the back side of aforesaid application, Registrar of Banking Court No,I, Hyderabad has/had put a note, which reads as follows:- "Submitted. 17-3-2010. ' Mr. Abdul Rasheed Shaikh, Advocate on behalf of the H.B.F.C, Zonal Office, Civic Center, Hyderabad/Applicant has filed an application under section 15(10) of the Financial Institutions (Recovery of Finances) Ordinance, 2001, which showing proper accounts of the sale proceeds of the mortgaged property bearing Flat No,L-18, Block-L, Siddique Plaza Unit No,8 Latifabad Hyderabad, which has been sold out in public auction as under:- I.Public auction held by the applicant on 16-11-2009 II.The highest bid given by Mst. Zarina Bibi wife of Fazaluddin 140,000 III.The bid amount accepted and confirmed by the settlement committee H.B.F.C.L., Karachi on13-2-2010 IV.H.B.F.C.L. Hyderabad A/C in the name of Mir Muhammad Ali son of Mureed Ali.No.20401368- U ' The application is within time (30) days and within the jurisdiction of this Court. Orders are solicited. Sd/- Registrar Banking Court No,1, Hyderabad. 7. Order passed thereon reads as under:-- ORDER. ' Admit. Register the application. Sd/ -Duty Judge, Banking Court No,1, Hyderabad. 8. It appears, that on 9-10-2010, before the Banking Court No,I, Hyderabad an application under section 15(6) of F.I.O., 2001 for eviction of the appellants' from the 'Subject Flat' [knowingly in occupation of the appellants] was filed by respondent No,2. On the said date [i,e, 9-10-2010], notice was ordered to the opponents/appellants and HBFC/ respondent No,1 herein. 9. In reply to the aforesaid application, the appellants filed their objections wherein not only the maintainability of the application, but also the so-called proceeding of auction held on 16-11-2009 was questioned/challenged. Further it was categorically stated that the appellants' possession of the 'Subject Flat' is lawful as the same having been purchased by their mother [Mst. Zakia Sultana wife of Allandad Khan] from its' owner [Mir. Muhammad Ali son of Mir Mureed Ali] through duly signed sale agreement of 24-9-1997, after payment of Rs,1,10,000 [Rupees One Lac Ten Thousand only]. Per sale agreement, after payment of HBFC's loan, the mortgagor was bound to execute registered sale deed in favour of the purchaser. Per averments, the appellants are in lawful possession of the 'Subject Flat' since 24-9-1997. No notice as required, in terms of proviso to subsection (3) of section 15 of F.I.O. 2001 has been issued to and/or served upon the appellants. Otherwise, HBFC's dues would have been paid by the appellants as agreed through duly executed sale agreement dated 24-9-1997.
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10. The aforesaid application when came up before the Court on 28-3-2011 the same was dismissed through the impugned order herein [Annexure 'C' to the Molt]. Hence the instant Ist. Appeal was filed. 11. ' On 1-6-2011, when the above Ist. Appeal No,D-25 of 2011 came up before the Court for order/katcha peshi, the following order was passed:-- (1)"2&3. It is inter alia, contended by the learned counsel for the appellants that they are in possession of the flat in question, which was purchased by their mother through an agreement to sell dated 24-9-1997. Since the mortgagor failed to pay the outstanding loan amount of Rs,1,36,979, the H.B.F.C. Exercised its Power under section 15(4) of Financial Institutions (Recovery of Finances) Ordinance, 2001 and auctioned the mortgaged property without intervention of the Court for a meager amount of Rs,1,40,000 against its prevailing price of more than Rs,10,00,000 and the Banking Court acted mechanically while accepting the account and did not properly exercised its power under section 15(10) of Ordinance, 2001 by overlooking such a glaring connivance. It further rejected the objections of the petitioners and directed them to hand over the possession to the auction purchaser within thirty days. ' The learned counsel for the appellants argued that before passing the impugned order, the learned banking Court had failed to consider that before auctioning the property the Bank had not complied with necessary requirements as envisaged under section 15 of the aforesaid ordinance. He further argued that the flat in question is having worth more than Rs,10,00,000, but in order to secure the meager outstanding amount of loan, the flat has been sold out just in Rs,1,40,000 with the mala fide intention of respondent No, 1. ' Issue notice to the respondents. In the meanwhile, the impugned order is suspended till next date subject to deposit of Rs,2,50,000 by the appellants with the Additional Registrar of this Court within three days." 12. On 20-8-2013 when again the above Ist Appeal came up before the Court, we have heard the learned counsel for the parties and with their able assistance scanned the available record before us minutely. 13. Mr. Muhammad Ishtiaque Khan, learned counsel for the appellants vehemently contended that 'no notice' was served upon the appellants in terms of proviso to subsection (3) of section 15 of F.I.O. 2001. Per learned counsel, the mortgaged property [i,e, Flat No,L-18, Block/L, Siddique Plaza Unit No,8 Latifabad, Hyderabad measuring 620-00 sq. Feet] was put to auction without fulfilling the requisite legal formalities. Learned counsel further urged that the sale agreement dated 24-9-1997 is 'coupled with possession' of the appellants. Appellants thus having 'vested right' over and regarding the 'Subject Flat' since 1997. Holding possession of the 'Subject Flat' by the appellants', of course, is lawful. Selling/Auction of the 'Subject Flat' contrary to appellants' vested rights in collusive and/or fraudulent manner at thrown away price [i,e, in sum of Rs,1,40,0001 by HBFC in favour of the respondent No,2 besides unlawful is void. Per learned counsel, in Auction Notices' no 'RESERVE PRICE' has been mentioned which otherwise, is a legal requirement of law. The entire 'auction proceedings' so initiated/held, per learned counsel, are fictitious and fraudulent thus have no sanctity in the eyes of law. The auction of the 'Subject Flat' in favour of respondent No,2, per learned counsel, besides illegal, unlawful is liable to be declared as null and void. 14. In support of his contentions, learned counsel for the appellants has placed his reliance on the following cases:-- (i) NIZAMUDDIN AND COMPANY v. THE BANK OF KHYBER (2003 CLD 914). (ii) NOOR BADSHAH v. HOUSE BUILDING FINANCE CORPORATION (PLD 2006 Lahore 771). 15. Conversely, Mr. Abdul Rasheed Shaikh, learned counsel for respondent No,1 [HBFC] forcefully argued that after requisite notices to the mortgagor, sale/auction of the 'Subject Flat/mortgaged property', indeed, has been conducted properly in terms of section 15(4) of F.I.O.
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2001. Per contention of the learned counsel for respondent No,1 [HBFC], the 'mortgaged property' has been auctioned/sold in accordance with the provision of F.I.O., 2001 as well. Per learned counsel, since the respondent No,2 was the highest bidder, therefore, her bid was accepted. Thereafter, sale deed, per contention, was executed in favour of respondent No,2. Possession of the appellants' over and regarding the 'Subject Flat', according to the learned counsel, is illegal and unlawful. The Appeal so filed by the appellants' is liable to be dismissed. 16. Mr. Riazuddin Qureshi, learned counsel for respondent No, 2 argued that the impugned order dated 28-3-2011 [Annexure 'C' to the MoA] is valid and has passed properly. Respondent No,2, after completing all the requisite formalities has purchased the 'Subject Flat'. Per stand of the Auction Purchaser, the appellants are illegally and unlawfully holding possession of 'Subject Flat'. Respondent No,2, under circumstances, per learned counsel, was constrained to file an application under section 15(6) of F.I.O. 2001 for vacating the 'Subject Flat' by the appellants. Learned counsel for the respondent No,2 further urged that merely on the basis of sale agreement coupled with appellants' possession, appellants' cannot claim vested rights over 'Subject Flat' [i,e, Flat No, L-18, Block-"L" on 4th floor, measuring 620-00 sq. Ft. Sub-plot No,L-2, Siddique Plaza Unit No,8 Latifabad, Hyderabad]. Learned counsel for the respondents in support of their contentions placed reliance on the case of FARRUKH ABBAS v. A.D.P.B. (2006 CLD 970). 17. While exercising the right of rebuttal, learned counsel for the appellants 'without prejudice' to his contentions raised, offered to respondent No,2 double payment [i,e, Rs,2,50,000] plus all expenses incurred however, the same offer was not accepted. The learned counsel for the appellants further submitted that appellants are ready and willing to pay all the outstanding dues of HBFC [respondent No,1] plus other charges, if any. 18. Regarding this submission, learned counsel focused our attention towards' order dated 1-6-2011 passed in the instant Appeal, in compliance whereof, Rs,2,50,000 [Rupees Two Lacs Fifty Thousand only] was deposited in Court by the appellants' long ago [i,e, on 3-6-2011]. Per learned counsel for the appellants, the auction of the 'Subject Flat' is illegal, unlawful inter alia, no notice was issued to/received by the appellants' in terms of proviso to subsection (3) of section 15 of F.I.O. 2001. 19. The auction of the 'Subject Flat' by the respondent No,1, per learned counsel, besides being collusive, fraudulent is unlawful. The violation of mandatory provisions viz-a-viz has rendered the auction void and of no legal effect. The value of the 'Subject Flat' is not less than Rs,10,00,000 [Rupees Ten Lacs only] however, to secure the meager outstanding loan amount of Rs,1,36,979 [Rupees One Lac Thirty Six Thousand Nine Hundred Seventy Nine only] it was sold out at thrown away price of Rs,1,40,000 [Rupees One Lac Forty Thousand] only. 20. Heard learned counsel for the parties. 21. Before proceeding further, we deem it appropriate to reproduce herein the relevant provisions of section 15 of F.I.O. 2001, which reads 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 (c) "mortgaged property" means immovable property mortgaged to a financial institution.
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(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 days. 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. (3) When a financial, institution serves a notice of demand, all the powers of the mortgagor in regard to recovery of rents and profits from the final mortgaged property shall stand transferred to the financial institution until such notice is withdrawn and it shall be the duty of the mortgagor to pay all rents and profits from the mortgaged property to the financial institution: Provided that where the mortgaged property is in the possession of aryl tenant or occupier other than the mortgagor, it shall be the duty of such tenant or occupier, on receipt of notice in this behalf the financial institution, to pay the rent or lease money or other consideration agreed with the mortgagor to the financial institution. (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. (5) (6) Where the mortgagor or his agent or servant or any person put in possession by the mortgagor or on account of the mortgagor does not voluntarily give possession of the mortgaged property sought to be sold or sought to be purchased or purchased by the financial institution, a Banking Court on application of the financial institution or purchaser shall put financial institution or purchaser, as the case may be in possession of the mortgaged property in any manner deemed fit by it: ' Provided that the Banking Court may not order eviction of a person who is in occupation of the mortgaged property or any part thereof under a bona fide lease, except on expire of the period of the lease, or on payment of such compensation as may be agreed between the parties or as Mau be determined to be reasonable buy the Banking Court. Explanation.---(1) Where the lease is created after the date of the mortgage and it appears to the Banking Court that the lease was created so as to adversely affect the value of the mortgaged property or to prejudice the rights and remedies of the financial institution, it shall be presumed that the lease is not bona fide, unless proved otherwise. (7) (8) (9) Net sale proceeds of the mortgaged property, after deducting all expenses of sale or expenses incurred in any attempted sale, shall be distributed ratably amongst all mortgagees in
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accordance with their respective rights and priorities in the mortgaged property. Any surplus left, after paying in full all the dues of mortgagees, shall be paid to the mortgagor. (10) A financial institution which has sold mortgaged property in exercise of powers conferred herein shall file proper accounts of the sale proceeds in a Banking Court within thirtu daus of the sate. (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 but 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) (14) (Underlining is ours'] 22. Under proviso to subsection (3) of section 15 of F.I.O. 2001, it has been specifically provided that where the mortgaged property is in the possession of any tenant or occupier other than the mortgagor, it shall be the duty of such tenant or occupier, 'ON RECEIPT OF NOTICE' in this behalf from the financial institution, to pay the rent or lease money or other 'CONSIDERATION' agreed with the mortgagor' to the financial institution. Besides, under subsection (11) of section 15 of F.I.O. 2001, all disputes relating to the sale of the mortgaged property under sub-section (11) including disputes amongst mortgagees in respect of distribution of the sale proceeds, is to be decided by the Banking Court. 23. The learned Banking Court No,1, Hyderabad without applying judicial mind and seeing the reasonableness of sale price [i,e, Rs,1,40,000 only] proceeded in a mechanical manner. The Banking Courts, it is worth to note, upon filing of accounts in terms of subsection (10) of section 15 of F.I.O. 2001, inter alia, are duty bound to see and ensure that not only the accounts filed are 'PROPER ACCOUNTS' but also ascertained that sale made by Financial Institutions under powers conferred on them under section 15 of F.I.O. 2001 is most fair, transparent and above any suspicion. Otherwise, interest of all concerned/stake holders could not be deemed properly safeguarded. Regarding this aspect of the matter subsections (10) and (11) are relevant. Under subsection (10) of section 15 of Financial Institutions [Recovery of Finances] Ordinance, 2001, upon sale of the mortgaged property in the exercise of powers conferred upon the Financial Institutions in terms of section 15 of F.I.O. 2001 a Financial Institution is required to file 'PROPER ACCOUNTS' of sale proceed in Banking Court within thirty days of the sale. Under subsection (11) of section 15, ALL DISPUTES relating to the sale of the mortgaged property under section 15 of F.I.O. 2001 including disputes amongst mortgagees regarding sale distribution of sale proceeds are required to be decided by the Banking Court, after thoroughly attending all aspects of the matter having been agitated or not. In the event of failure one may lose confidence in Courts of law. 24. From record, it reflects that despite knowledge of appellants' possession/occupation, respondent No,1 [HBFC] failed and/or neglected to give any notice to the appellants as envisaged under Proviso to subsection (3) of section 15 of F.I.O., 2001. Otherwise, in the event of receipt of notice, the appellants lest to say would have paid the 'outstanding dues' in terms of sale agreement dated 24-9-1997. None compliance, inter alia, of the provisions of section 15 of F.I.O., 2001, ex-facie has rendered the auction proceedings illegal and unlawful.
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25. Apart from the above, the terms and conditions of the 'AUCTION NOTICES' published in daily "EXPRESSS" and daily "DAWN" of dated 17-10-2009 and 19-10-2009 [ of two different dates] have also been violated. For ready and convenience purposes, the terms and conditions of public auction regarding 'Subject Flat' [i,e, Flat No,L-18, Block-"L" on 4th floor, measuring 620-00 sq. Ft. Sub-plot No,L-2, Siddique Plaza Unit No,8 Latifabad, Hyderabad] are reproduced herein below:-- (i) The assigned/mortgaged property will be sold on "as is where basis". (ii) The participants are required to deposit Rs,25,000 in cash or through pay order (refundable to successful bidder) with the Presiding Officer of the Auction Committee before auction. (iii) The highest bidder will be declared successful. However, the decision of the auction committee will be final. (iv) The House Building Finance Corporation has the right to accept or reject any bid without assigning any reason whatsoever or in the case of non-acceptance of bid to re-auction the property. (v) The successful bidder shall have to deposit 50% of the bid amount with the Presiding Officer of Auction Committee at the spot, otherwise the deposit amount of Rs,25,000 will be forfeited and property will be re-auctioned. (vi) The successful bidder shall deposit the remaining 50% of the bid amount within fifteen days otherwise, 50% advance payment shall be forfeited and property will be re-auctioned. (vii) The undersigned has the right to postpone the auction without any reason. (viii) The undersigned has the right to fix the reserve price. (ix) Without obligation on the part of HBFC may assist the purchaser in getting the property vacated in terms of section 15(6) of F.LO., 2001. (x) The successful bidder is required to pay income tax according to the prevailing rules. [(Underlining is ours]. 26. The auction date per Auction Notices floated in the newspapers was 16-11-2009. From the record it transpires that the auction, indeed, was held on 16-11-2009. However, payment of 50% [i,e, Rs,70,000] was never paid in accordance with settled terms and conditions of public auction. Rather seemingly the payment was made in the following manner:-- (a) Rs,25,000 was paid through pay order No,0539066 dated 10-11-2009. (b) Rs,45,000 was paid through pay order No,0539100 dated 19-11-2009.. [It may be noted that auction was held on 16-11-2009 and 50% bid amount per condition No, was required to be deposited on the spot with the Presiding Officer of the Auction Committee]. 27. The terms and conditions as stated reproduced hereinabove were not only violated but also ignored. 28. The above position is quite clear from the letter of respondent No, 1. Being relevant letter No,HBFCL/ZM/ZOH/ 2009/2997 dated 20-11-2009 addressed/sent by Zonal Manager, House Building Corporation Limited to auction purchaser [Mst. Zarina Bibi] reads as below:-- HOUSE BUILDING CORPORATION LIMITED ZONAL OFFICE, HYDERABAD. ' HBFCLIZM/Z0H/ 2009, 2997 Dated: 20-11-2009. ' Miss. Zarina Bibi wife of Fazaluddin House No, 43-C-2, Unit No,8, Latifabad, Hyderabad. ' Subject: Declaration as Provisional purchaser (20401368-uc). ' Dear Sir /Madam, ' Reference to your bid Rs,1,40,000 (Pak Rupees one lac forty thousand) in respect of Flat No,L-18 Siddique Plaza Unit No,8 Latifabad Hyderabad and payment of…
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