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Petitioner: Dr. Mrs. TALAT KHAN and anothers VS Respondent: Mrs. SARAH SHAFQAT and 6 others
Court Name: Supreme Court of Pakistan Judge(s): Muhammad Arif, Mamoon Kazi, Saeeduzzaman Siddiqui Title: Dr. Mrs. TALAT KHAN and anothers vs Mrs. SARAH SHAFQAT and 6 others Case No.: Civil Appeal No.900 of 1998 C.A. No.3 of 1994 Date of Judgment:1999-08-25 Reported As: 2000 SCMR 184 Result: Appeal allowed
JUDGMENT
JUDGMENT ' SAIDUZZAMAN SIDDIQUI, J.---The above appeal with the leave of this Court is filed against the judgment dated 7-5-1995, in H.C.A. No.3 of 1994, whereby the Hon'ble Division Bench of the High Court of Sindh remanded the case tb the learned Judge in Chambers with the direction that the reference of the Official Assignee forwarding the bid offered by the appellants to purchase the properties of Karachi Cardiac and General Hospital (Pvt.) Limited (hereinafter to be- referred as 'the Hospital') be heard and disposed of after giving opportunity of hearing to all the interested parties. ' The relevant facts of the case are that the Hospital was incorporated as a Private Limited Company under Companies Ordinance, 1984 (hereinafter to be called 'the Companies Ordinance') in the year 1984. The object of the Company was to establish and run the hospital through finances to be equally contributed by three groups of doctors led by Dr. Surgeon Suleman Ahmed Khan, Dr. Surgeon S.A Hamid and Dr. Syed Hamid Shafqat, respectively. In addition to the finances which were to be provided by the above mentioned three groups of doctors, it was also agreed that further funds could be raised through borrowings from Industrial Development Bank of Pakistan (hereinafter to be referred as 'the Bank'). It appears that in order to secure loan from the Bank, besides mortgaging the assets of the hospital, personal properties belonging to Mrs. Sarah Shafqat, Mrs. Rashida Hameed and Adnan Ahmed Khan were mortgaged with the Bank. It further appears that the loan obtained by the hospital could not be repaid with the result that on 19-11- 1990, the Bank filed an application (J.M. No. 8/90) under section 39 of the Industrial Development Bank of Pakistan ordinance, 1961 (hereinafter to be referred as the Ordinance') for recovery of a sum of Rs.2,61,36,464. In the abovementioned J.M. Filed by the Bank besides the hospital Mrs. Sarah
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Shafqat, Mrs, Rashida Hameed and Adnan Ahmed Khan; the three guarantors, were also impleaded as party besides Dr. Surgeon Suleman Ahmed Khan and the legal heirs of late Surgeon S.A. Hameed, who died in the meantime. On 23-1-1991 a learned Single Judge issued ad interim attachment order in J.M. No. 84 of 1990 in respect of properties offered as security for the loan. The Court simultaneously directed the Official Assignee to engage the services of a Chartered Accountant to determine the exact amount of liabilities against the hospital. The official assignee accordingly, engaged the services of a Chartered Accountant and in the light of the report of a Chartered Accountant submitted his report to the Court showing the liability of the Hospital as on 15-11-1992 amounting to Rs.2,12,03,886. None of the parties disputed the liability so determined and accordingly, no objections were filed by any of the respondents against interim attachment issued by the learned Single Judge which was made absolute on 29-10-1992. As a result of the order of learned .Single Judge making the attachment absolute, the properties belonging to the hospital as well as that of the guarantors; except the property belonging to Dr. Syed Hamid Shafqat, were ordered to be sold by the Official Assignee. As the order making the attachment absolute was not challenged by any of the parties, the properties belonging to the hospital were advertised for sale through open auction by the Official Assignee on 26-4-1993 showing the reserve price of the properties as Rs.2,50,00,000. It is an admitted position that in response to the auction notice, no bid was received by the Official Assignee. Accordingly, under the direction of the Court, a second advertisement was issued by the Official Assisgnee on 11-8-1993 inviting offer for sale of the properties of the hospital showing the reserve price of the properties as Rs.30,00,000. In response of the second auction notice, only one offer of Rs.2,27,00,000 was received from one Dr. Mrs. Talat Khan along with pay order Rs.22,70,000. This offer was submitted by the Official Assignee through his report dated 30-8-193 to the Court for approval. It appears that after expiry of the period fixed in the auction notice for submitting the bid for the properties of the hospital, Messrs Mehran Motors also submitted their, bid for Rs.2,32,00,000. Alongwith pay,, order of Rs.5,00,000. The Court, however, did not accept the offer made by Dr. Mrs. Talat Khan as it was not found adequate. The offer made by Messrs Mehran Motors was also rejected as it was not made within the period prescribed for making the bid in the auction notice. The Official Assignee was, accordingly, directed to cause a fresh advertisement for sale of the properties of hospital with reserve price of Rs.2,75,00,000.00. In response to this third auction notice, dated 3-11-1993 Dr. Mrs. Talat Khan and Mrs. Birjees made an offer of Rs.2,32,25,000. To the Official Assignee to purchase the properties belonging to the hospital. The Official Assignee through his reference dated 20-11-1993 forwarded the above offer of appellants to the Court. It is the case of appellants that the copies of the reference of Official Assignee, dated 20-11-1993, were supplied to all the parties. It also appears that an attempt was made to obtain urgent order in Chambers on the reference of the Official Assignee on 23-11-1993 but the learned Judge declined to grant the application for urgent hearing. Thereafter, the reference of the Official Assignee in the normal course came up for hearing before the learned Judge in Chambers on 14-12-1993 in presence of the counsel of the Bank, counsel of auction- purchaser, Advocate of the hospital and the Official Assignee. The learned Judge accepted the bid of Rs.2,32,25,000 and directed the appellants to deposit balance amount with the Official Assignee within 15 days. It is not disputed that the balance of the bid money was deposited by the appellants as directed by the Court whereupon possession of the property was handed over to the appellants on 22-1-1994. The fee claimed by the Official Assignee on the sale of the property was also sanctioned by the learned Judge in Chambers by order, dated 11-1-1994. Mrs. Sarah Shafqat, who was one of the respondents in J.M. No.8 of 1984 filed H.C.A. No. 3 of 1993 against the order of learned Judge in Chambers, dated 14-12-1993 accepting the bid offered by Dr. Talat Khan and Mrs. Birjees Khan for Rs.2,32,25,000. Before the learned Division Bench, respondent No.1 (who was appellant before the Division Bench) contended that the order-accepting bid of Dr. Talat Khan and Mrs.
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Birjees Khan was without notice to her. It was also contended before the learned Division Bench that respondent No.1 had filed J.M. 19 of 1992 under section 290 of the Companies Ordinance in April, 1992 which was ordered to be heard along with J.M. 84 of 1990 by the learned Company Judge on 15-9-1993. It was contended before the learned Division Bench that in view of the order passed on 15-9-1993, which was by consent of both the parties, the order passed by the learned Single Judge in J.M. 84 of 1990 confirming sale of properties, was not a valid order. The appeal was resisted on behalf of the appellants on the ground that J.M. 19 of 1992 filed by respondent No.1 had no nexus with J.M. 84 of 1990 and in any case no prejudice was caused by confirming the sale of the properties of the hospital which had taken place in pursuance of the order passed by The learned Single Judge making the interim attachment absolute under the provisions of the Ordinance. It was also contended before the learned Division Bench that the hospital having been put to auction twice and no bid having been received, the confirmation of sale in favour of auction-purchaser/appellants as a result of 3rd notice of auction sale did not suffer from any infirmity in the circumstances of the case. The learped Division Bench, however, did not agree with the contention of appellants and reached the conclusion that the reference of the Official Assignee in J.M. No. 8 of 1990 could not be heard separately from J.M 19 of 1992, as both the cases were ordered to be heard together. Accordingly, the H.C.A. Filed by respondent No.1, was allowed and the order passed by the learned Single Judge confirming the sale in favour of appellants was set aside and the case was remanded to the learned Single Judge with the direction that the reference made by the Official Assignee for acceptance of the bid offered by the appellants be heard alongwith J.M. 19 of 1992 after notice to all the interested parties. Leave was granted against the judgment of learned Division Bench, dated 7-5-1995 to consider, legality of the order passed by the learned Division Bench including the question of maintainability of H.C.A. Filed by respondent No.1 before the learned Division Bench of High Court of Sindh. ' We have heard Mr. Syed Sharifuddin Pirzada, the learned Senior Advocate Supreme Court for the appellants, Mr. Abdul Hafeez Pirzada, the learned Senior Advocate Supreme Court for respondent No.1 while Mr. Afsar Abidi, Advocate Supreme Court, appeared for respondents Nos.6 and 7. Mr. Syed Sharifuddin Pirzada, in support of the appeal, has raised the following contentions:-- (i) That J.M. 84 of 1990 having been filed under a Special Law, section 39 whereof provided appeal only in respect of orders passed under clauses (7) and (9), no other order passed under section 39 was open to be challenged by way of appeal; (ii) that the sale of properties of the hospital having taken place in accordance with provisions of Code of Civil Procedure, the only remedy available to the respondents to challenge the sale was in accordance with Order 21, rule 90 of the Code of Civil Procedure and the respondents having failed to avail of that remedy in accordance with the law, the appeal filed before the learned Division Bench was not maintainable; (iii) that the order confirming sale of the properties being an order not falling within the ambit of clauses (7) and (9) of section 39 of the Ordinance, no appeal against such an order was competent before the learned Division Bench; (iv) that the hospital having been put to auction on 2 occasions and having failed to attract the bid, the offer made by the appellants in response to the 3rd advertisement was rightly accepted/ confirmed by the learned Judge in Chambers; (v) that the respondent No. 1 having notice of the reference made by the Official Assignee for acceptance of the bid of appellants, did not put in appearance before the learned Single Judge at the time of hearing of the reference and, therefore, she could not subsequently object to the confirmation of sale/ bid of the appellants for Rs.2,32,25,000; (vi) that in any case, the respondent No.1 till today, has failed to place before this Court or during hearing of the H.C.A. By the learned Division Bench any offer or bid higher than the bid offered by
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the appellants and as such there was no valid ground for remand of the case to the learned Single Judge for rehearing; (vii) that the subject-matter of J.M 84 of 1990 and 19 of 1992 being different, no prejudice was caused by taking up J.M. 84 of 1990 separately and disposing of the same by a separate order. ' In reply to the above submissions of the learned counsel for the appellants, Mr. A.H. Pirzada, the learned Advocate Supreme Court for respondent No. 1, has advanced the following contentions:- (i) That the order confirming the sale in favour of the appellants passed by the learned Judge in Chambers, dated 14-12-1993 was wholly without jurisdiction as the said order was passed without hearing respondent No.1, who was a necessary party in the case; (ii) that according to the cause-list of the High Court for 14-12-1993, the case was fixed on a motion, and therefore, it could not be disposed of without issuing notice to the parties. It is urged by the learned counsel that in the cause-list, the cases which were listed for motion, did not contain names of the Advocates appearing in the cases, and therefore, it cannot be argued that the counsel of respondent No. 1 had the notice of said reference fixed before the learned Judge in Chambers; (iii) that in view of the order passed by the Court on 15-9-1993 directing that J.M. 19 of 1992 will be taken up and heard alongwith J.M.. 84 of 1990, disposal of J.M. 84 of 1990 without hearing J.M. 9 of 1992 was not a proper disposal; (iv) that the learned Judge having rejected the bid of Rs.2,27,00,000 offered by appellant No.1 and also having refused to accept bid of Rs.2,32,00,000 offered by Messrs Mehran Motors as inadequate, acceptance of bid of the appellants for Rs.2,32,25,000. Was not a proper exercise of discretion by the Court specially when the reserve price of the hospital was fixed as Rs.3,50,00,000. And the properties were being sold below the reserve price; (v) that the order passed by the learned Single Judge confirming the sale was appealable under Ordinance XV of 1980 as well as under Law Reforms Ordinance 1972, and as such the appeal filed by respondent No. I was fully competent; (vi) that the learned Judge in Chambers while confirming the sale in favor of the appellants failed to address the question of adequacy of the price offered by the appellants and as such the exercise of discretion to accept bid which was admittedly below the reserve price, was not a proper exercise of discretion; (vii) that the provisions of Order 21, Rule 90 of the Code of Civil Procedure were not attracted in the present case as it was not a sale by auction which was accepted by the Official Assignee. It was only a bid which was received by the Official Assignee and forwarded to the learned Judge in Chambers for passing appropriate order. In any case, the respondents having filed application under Order 21, Rule 90 (ibid), before the H.C.A. Bench and the case having been remanded to the learned Judge in Chambers, the same could be taken up and disposed of in accordance with the law. ' Mr. Afsar Abidi, the learned counsel for the hospital, supported the contentions of Mr. S.S. Pirzada to the extent that the appeal before the H.C.A. Bench was not maintainable. He further stated that the amount of Rs.2,32,25,000. Deposited by the appellants towards the sale price of the properties belonging to the hospital, was invested and by now this amount alongwith the interest accrued thereon, is not only sufficient to cover the claim of the Bank but perhaps some amount may also be available for disbursement among the shareholders. ' We will first take up the contentions of the learned counsel for the appellants that no appeal was competent against the order of the learned Judge in Chambers confirming/accepting the bid of the appellants. It is contended by Mr. S.S. Pirzada, the learned counsel for the appellants, that J.M. 84 of 1990 was filed under a Special Law, which provided appeal only against specified category of orders under section 39 of the Ordinance. It is contended by the learned counsel that the right of
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appeal having been made available under a Special Statute under special circumstances, appeal against any other order was not available under the General Law. It is further contended by Mr. S.S. Pirzada that the learned Single Judge while deciding the application under section 39 of the Ordinance, acted as a District Judge in the capacity of Principal Court of Original Jurisdiction in the Civil District of Karachi and as such no High Court Appeal was competent against such an order. In order to appreciate the contention of the learned counsel for the appellants, it is necessary to examine in depth the provisions of section 39 of the Ordinance, which reads as follows:-- "39. Special provisions for enforcement of claims by the Bank.---(1) Where the bank becomes entitled to require the immediate payment of any loan by reason of the breach of any condition of any agreement between the bank and an industrial concern to which the loan has been granted or any person liable for repayment of that loan fails to repay the loan or where an industrial concern to which any loan has been granted or any person liable for repayment of that loan fails to repay the loan in terms thereof or in compliance with the notice under section 38, an officer of the Bank, generally or specially authorized by the Board in this behalf, may apply to the District Judge within the local limit of whose jurisdiction the concern carries on the whole or a part of its business, or the office or branch of the bank from which the loan was disbursed is situated, for one or more of the following relief, namely-- (a) an order for the sale of the property pledged, mortgaged, hypothecated or assigned to the Bank as security for the loan and any other properties, disclosed or undisclosed, of the industrial concern or the properties, disclosed or undisclosed, of persons liable for the repayment of the loan, including guarantors; or (b) an order for the transfer of the management of the industrial concern to the bank or its nominee, provided that when such management is so transferred to the bank, the bank shall be deemed to be the agent of the industrial concern and shall manage the industrial concern on its behalf and all actions taken by the bank on such transfer shall be deemed to be those of the industrially concern; or (c) an injunction ad interim where there is apprehension that machinery or equipment may be removed from the premises of the concern without the permission of the board. (2) An application under subsection (1) shall state particulars of the loan and the sums claimed in respect of the same, particulars of the concern and any other person or persons liable for the repayment of the loan and such other particulars as may be prescribed by rules. (3) Where the application is for the relief mentioned in clause (a) of subsection (1), the District Judge shall,-- (a) pass an order ad interim attaching such properties referred to in clause (a) aforesaid as are likely in the estimation of the Court to fetch, on being sold, an amount equivalent to the sums claimed by the bank together with the costs of the proceedings taken under the section, and (b) pass an order appointing one or more Receivers of the properties referred to in clause (a) aforesaid where in the application filed by the bank such remedy is specifically sought. (4) The Bank shall have the option to seek an order under clause (b) of subsection (3) in the first instance or at any subsequent time prior to grant of the relief mentioned in clause (a) of subsection (1). (4A) Where the application is for the relief mentioned in clause (b) of subsection (1), the District Judge shall grant an injunction ad interim restraining the concern or the person liable for repayment of the loan from transferring any of the properties, including machinery, equipment and stocks, without the permission of the bank and shall issue a notice calling upon the concern and the persons liable for repayment of the loan to show cause on a date to be specified in the notice why the management of the concern should not be transferred to the bank.
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(5) Before passing any order under subsection (3) or subsection (4), the District Judge may, if he thinks fit, examine the person making the application. (6) At the time of passing an order under subsection (3), the District Judge shall issue to the concern a notice accompanied by a copy of the order; the application and evidence, if any, recorded by him and calling upon it to show cause on a date to be specified in the notice why the order of attachment ad interim should not be made absolute or the injunction be not confirmed. (7) If no cause is shown on or before the date specified in the notice under subsection (4) or subsection (6), the District Judge shall forthwith make the order ad interim absolute and direct the sale of the attached property or transfer the management of the concern to the bank or confirm the injunction. (8) If cause is shown the District Judge shall proceed to investigate the claim of the Bank and the provisions of the Code of Civil Procedure, 1908 (Act V of 1908), shall as far as practicable, apply to such proceedings. (9) On completing an investigation under subsection (8) the District Judge shall pass an order-- (a) confirming the order of attachment or directing the sale of the attached property, or (b) varying the order of attachment so as to release a portion of the property from attachment and directing the sale of the remainder of the attached property, or (c) releasing the property from attachment, if he is satisfied that it is not necessary in the interests of the Bank to retain it under attachment, or (d) confirming or vacating the injunction, or (e) transferring or refusing to transfer the management of the concern to the bank: ' Provided that when making any order under clause (c) the District Judge may make such further orders as he thinks necessary to protect the interests of the Bank and may apportion the cost of the proceedings in such manner as he thinks fit: ' Provided further that unless the Bank intimates to the District Judge, that it will not appeal against any order releasing any property from attachment such order shall not be executed until the expiry of the period mentioned in subsection (11), or if an appeal is preferred, unless the High Court otherwise directs, until the appeal is disposed of. (10) An order under this section for the attachment or sale of property shall be carried into effect as far as may be in the manner provided in the Code of Civil Procedure, 1908 (Act V of 1908), for the attachment or sale of property in execution of a decree as it' the Bank were the decree-holder. (11) Any party aggrieved by an order under subsection (7) or subsection (9) may within thirty days from the date of the order, appeal to High Court or, where the order is of a Judge of High Court exercising original civil jurisdiction, to the Court to which an appeal from a judgment of such Judge lies; and upon such appeal the Appellate Court may, after hearing the parties, pass such orders as it thinks proper. (12) Nothing in this section shall be construed, where proceedings for liquidation in respect of the industrial concern have commenced before an application is made under subsection (1), as giving the bank any preference over other creditors of the concern not conferred on it by any other law for the time being in force." ' Section 39 of the Ordinance is a self-contained provision which provides for the detailed procedure for enforcement of the claims by the Bank against the defaulting party. Subsection (1) of section 39 lists the circumstances under which the Bank would become entitled to require immediate payment of loan. It further provides that in such an event the Bank may apply to the District Judge of the area, where the defaulting concern is carrying on the whole or part of its business, for one or more of the several reliefs mentioned in clauses (a) to (c) of subsection (1) of section 39. Subsection (2) of section 39 (ibid), prescribes the particulars required to be mentioned in the application of the Bank to the District Judge under section 39 (1). Subsection (3) of section 39
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provides for the kind of interim order which the Court shall pass on the application of the Bank, A when relief is claimed in terms of section 39(1) (a) (ibid). Subsection (4) of section 39 gives an option to the Bank to seek appointment of receiver of the properties of the defaulter in terms of clause (b), subsection (3) of section 39 either in the first instance or at any time before the grant of relief under section 39(1) (a)(ibid). Subsection (4-A) provides that where the Bank files application seeking relief in terms of clause (b) of subsection (1) of section 39, the Court shall, through an ad interim order, restrain the respondents from transferring any of the properties, including machinery, equipment and stocks without the permission of the Bank. In addition to it, the Court may also call upon the person liable to repayment of loan to show cause why the management of the concern be not transferred to the Bank. Subsection (5) provides that the Court may if it thinks it necessary examine the person making the application. Subsection (6) provides that at the time of passing of the order under section 39(3), the District Judge shall issue notice to the concern accompanied by the copy of the ad interim order and the evidence if any recorded to show cause why the ad interim order…
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