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Petitioner: INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN VS Respondent: MUHAMNIAD AYUB STONE CRUSHERSHonorable Justice Sarmad Jalal OsmanyAinuddin Khan,Nemo
2009 C L D 756
2009 C L D 756
[Supreme Court of Pakistan]
Present: Sabihuddin Ahmad and Sarmad Jalal Osmany, JJ
INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN---Petitioner
Versus
MUHAMNIAD AYUB STONE CRUSHERS and others---Respondents
C.P.L.A. No.88-K of 2009, decided on 23rd February, 2009.
(On appeal from judgment of High Court of Sindh at Karachi dated 12-12-2008 passed in H.C.A. No.274 of 2007).
(a) Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001)---
----S. 19---Industrial Development Bank of Pakistan Ordinance (XXXI of 1961), S.39---Civil Procedure Code (V of 1908), O.XXI, R.52 & O.XXXIV, R.13---Transfer of Property Act (IV of 1882), Ss.48, 50 & 78---Registration Act (XVI of 1908), S.50---Execution proceedings---Mortgage of same property by borrower in favour of Bank 'N' through prior registered deed and then in favour of another Bank by deposit of title deed---Sale of property by Banking Court to satisfy decree of said another Bank, but failure of Official Assignee to deliver possession of property to auction-purchaser for being attached by another court---Application by Bank 'N' for recalling such order of sale for having been obtained by concealment of its prior registered charge on property already attached by another Court in execution of decree---Acceptance of such application by Banking Court with direction to said another Bank to return sale proceeds to Bank 'N'---Validity---Registered mortgage in favour of Bank 'N' was prior in time, while simple mortgage by deposit of title deed in favour of said other Bank was later in time and unregistered---Other Bank's case was not that due to fraud, misrepresentation or gross negligence of Bank 'N' the other Bank had been induced to advance money to judgment-debtor on security of already mortgaged property---Registered mortgage would be a notice to entire world of factum of its registration---Other Bank should have made efforts and exercise due care and diligence before advancing amount to judgment-debtor on strength of property over which Bank 'N' had already a registered mortgage---Registered mortgage, even though later in time, would take priority over an earlier unregistered mortgage---Sale proceeds as per O.XXXIV, R.13, C.P.C., would be applied towards satisfaction of a prior mortgagee's debt before a subsequent mortgage could have any interest therein---Other Bank, despite having full knowledge about property being in custody of another Court on basis of attachment, had approached Banking Court for its sale and started inviting purchase offers on its own---Only Banking Court could determine question of priority of interest as between both the Banks and NBP---Such order of sale was not only illegal, but also without jurisdiction---Supreme Court upheld impugned judgment in circumstances.
(b) Registration Act (XVI of 1908)---
----S.50---Transfer of Property Act (IV of 1882), S.58---Mortgage---Registered mortgage would be a notice to entire world of factum of its registration.
Ainuddin Khan, Advocate Supreme Court and Suleman Habibullah, Advocate-on-Record for Petitioner.
Nemo for Respondents.
Date of hearing: 23rd February, 2009.
JUDGMENT
SARMAD JALAL OSMANY, J.--- Briefly stated the facts of the matter are that the Petitioner Bank had filed a petition before the learned Sindh High Court under section 39 of the Industrial Development Bank of Pakistan Ordinance, 1961 for the recovery of outstanding dues against respondent No.1, who was the principal debtor as well as respondents Nos.2 to 4, who were the sureties having mortgaged certain properties in order to secure the debt. An ad-interim order of attachment was passed by a learned Single Judge on 28-12-1988, which was confirmed on 23-10-1989, whereafter on 5-4-1999 the mortgaged properties were ordered to be sold through the aegis of the Official Assignee. Consequently, one of the properties bearing Survey No.2170 admeasuring 189.3 square yards situated at Karbala Road Rohri, District Sukkur was sold for a total consideration of Rs.300,000 whereafter the possession was handed over to the purchaser/highest bidder on 3-2-2002 and accordingly sale certificate was issued in his favour on 9-3-2002.
2. On 20-4-2006, respondent No.5 National Bank of Pakistan (NBP) filed an application under section 151, C.P.C. for recalling the order dated 5-4-1999 regarding the sale of the property, as according to it, the petitioner Bank had obtained the said order by misrepresenting the facts since it i.e. National Bank of Pakistan had a prior registered mortgage over the said property and in fact had obtained a decree for sale of the same in Suit No.586 of 1989 from the learned Sindh High Court. Thereafter, due to change of pecuniary jurisdiction, execution proceedings were filed before the Special Banking Court Sukkur, in consequence of which the property had been attached by the said Court. However, when N.B.P approached the concerned Registrar for attachment of the said property, it was discovered that the petitioner-Bank had, obtained an order of sale of the property, which according to N.B.P was based on misrepresentation, as the former had knowledge of the prior mortgage of the latter. After hearing the learned counsel for the parties, the learned Single Judge, vide order dated 25-10-2007, while maintaining the sale conducted by the Court, ordered the Petitioner Bank to return the sale consideration received by it within 30 days to N.B.P. The petitioner questioned the legality of the said order in High Court Appeal before the learned Sindh High Court, which was dismissed vide impugned judgment and, hence this petition.
3. We have heard Mr. Ainuddin Khan, learned Advocate Supreme Court appearing for the petitioner-Bank. It would be seen that as per section 48 of the Transfer of Property Act, a later right created over any property, in the absence of a special contract or reservation binding the earlier transferee, is normally subject to the rights previously created. This self-evident proposition is expressed in the equitable maxim qui prior est tempore est jure. However, section 78 of the Transfer of Property Act creates an exception to this equitable doctrine of priority i.e. where through the fraud, misrepresentation or gross-negligence of a prior mortgagee another person has been induced to advance money on the mortgaged property, the prior mortgage shall be postponed to the subsequent mortgagee. It is not disputed before us that N.B.P. had an earlier registered mortgage over the property in question whereas the petitioner-Bank acquired a simple mortgage by deposit of title deeds later in time over the same property. It is also not the case of the petitioner-Bank that due to the fraud, misrepresentation or gross negligence of the National Bank of Pakistan it i.e. the petitioner-Bank had been induced to advance money to the concerned debtor on the security of the mortgaged property. In fact, when we raised this issue before the learned Advocate Supreme Court, he was unable to answer the same. In our opinion, a registered mortgage is a notice to the entire world of the factum of registration and to the contrary it is the petitioner-Bank who should have made the efforts and exercised, due care and diligence before advancing any amounts to the principal debtor on the strength of the property in question over which N.B.P already had a registered mortgage.
4. It would also be seen that section 50 of the Registration Act is another exception to the equitable doctrine of a prior mortgagor being superior to subsequent mortgagor. The said section provides that a registered mortgage, though created later in time, over any property takes priority over an earlier mortgage, which has not been registered. However, again this would not be applicable in the facts of the present case, as the mortgage created in favour of the petitioner-Bank was a simple one and, hence unregistered.
5. Finally, it would be seen that as per Order XXXIV, rule 13, C.P.C., the sale proceeds are to be applied towards the satisfaction of a prior mortgagee's debt before a subsequent mortgagee can have any interest in the same.
6. For the foregoing reasons, we find no substance in this petition, which is dismissed as such and leave declined.
7. I agree and have appended a separate concurring note stating additional reasons.
SABIHUDDIN AHMAD, J.---While fully concurring with the profound reasoning recorded by my learned brother I like to add that the order of sale of the property on the basis of reference of the official assignee dated 5-1-2002 was not merely illegal but also without jurisdiction. In this context it may be appropriate to reproduce the provisions of Order XXI, rule 52, C.P.C. which read as under:--
"52. Attachment of property in custody of Court or public officer.--Where the property to be attached is in the custody of any Court or public officer, the attachment shall be made by a notice to such Court or officer requesting that such property, and any interest or dividend becoming payable thereon, may be held subject to the further orders of the Court from which the notice is issued:
Provided that, where such property is in the custody of a Court, any question of title or priority arising between the decree-holder and any other person, not being the judgment-debtor, claiming to be interested in such property by virtue of any assignment, attachment or otherwise, shall be determined by such Court."
2. As is evident from the reference of the official assignee dated 12-6-1999 the property in question was found to be in custody of the learned Banking Court, Sukkur and therefore possession could not be taken by him. A learned single Judge vide order dated 24-8-1999 simply directed that the Banking Court may be apprised of the proceedings and the order of attachment passed by the Honourable High Court apparently with the object of proceeding according to law. As is evident from the proviso to the above quoted rule the question of priority of interest as between the petitioner and the respondent could only be determined by the aforesaid Banking Court. It is extremely unfortunate that in complete violation of the requirements of law and despite full knowledge of the fact that the property was already in the custody of another Court the petitioner never cared to find the basis of attachment by the Banking Court or approach such Court for its sale. On the contrary the petitioner started inviting purchase offers on its own and the official assignee proceeded to submit a reference and obtained an order of sale to deprive the respondent of their lawful prior claim on the property. The order of sale was also passed as a matter of routine without considering the factual background.
3. It is important particularly in view of the deference that other Civil Courts show to the High Court that Honourable Judges exercising original jurisdiction need to be extremely cautious in ensuring that the jurisdiction of another competent Court is not impaired. Under the circumstances the impugned orders undoing the wrong were entirely appropriate and it is sad that instead of being thankful that the Honourable High Court had not annulled the sale (keeping in view third party interests) and saddled the petitioners with direction to pay heavy compensation they have chosen to prefer this frivolous petition for leave to appeal at the expense of public exchequer.
S.A.K./I-5/SC Petition dismissed.