1. MUSHIR ALAM, J.--- Appellant Bank has impugned the order, dated 19-12-2002 in C.M.A. No,2237 of 2002 passed by the learned Single Judge, in Execution Application No,42 of 1999. Learned Judge in Chamber relying on the judgment rendered in I.D.B.P. v. Messrs Maida Limited 1994 SCM R 2248, observed that the auction-purchaser acquired the property free from all encumbrances and further directed "that decree-holder shall clear all the liabilities".
2. It appears that pursuant to a decree followed by attachment and direction for sale of the immovable and movable property of the judgment-debtor, under the orders of the Court, dated 1- 6-2000 the Bank advertised and invited the bids for sale. At Serial No,1 of the advertisement (at page 471 of R&P) immovable mortgaged property is detailed. At Serial No,2 detail of Immovable property, is followed by 'condition "as is where is basis". It seems that no other liabilities or charges against the properties advertised were mentioned. From the record it also appears that, respondent No,1 offered to purchase the property "from all encumbrances and Government dues".
3. The decree-holder through .C.M.A. No,2698 of 2000 placed such offer before the Court. in para. 9 of the application, the Bank incorporated the term of the offer of respondent No,1 "free from all encumbrances". At the request of the Bank, the Court on 8-.11-2000, gave 15 days time to the judgment-debtor to bring a better offer, otherwise offer of the respondent No,1 was to be confirmed without any further orders.
4. It seems that, entire sale consideration was deposited, sale certificate issued, property transferred and .possession was delivered to the respondent No,1/auction-purchaser.
5. The controversy that has given cause for instant appeals to be that various utility departments raised demand against the auction-purchaser the respondent No,1 herein in respect of utility services provided to the judgment-debtor Company. Such demands prompted them to file an application being C.M.A. No,2237 of 2002 seeking orders of the Court that the auctioned property is free from all encumbrances and dues if any, are to be paid by the decree-holder. After hearing the parties learned Judge in Chamber placing reliance on the case reported as I.D.B.P. v. Maida Ltd.
6. 1994 SCM R 2248 decided and observed as follows:-- "Whether an order was passed calling upon the auction-purchaser to pay the utility bills not the fact remains that the decree-holder is expected and should pay all the utility charges as is observed from the citation quoted above in similar disputed raised earlier. It is clear that the Courts have maintained a consistent view that the concept of free from all encumbrances means that when the purchaser purchased the commodity then he excepts that it shall be given to him without (there) being any liability attached.
7. The decree-holder shall clear all the liabilities. The application is allowed in view of the above."
8. It was contended by Mr. Abdul Haleem Siddiqui, learned counsel for the appellant that, the property was auctioned on "as is where is basis", therefore, all the liabilities, charges and taxes etc. included utility bills are to be paid by the auction-purchaser and not by the decree-holder..
9. It was contended that the principles as laid down in the case of I.D.B.P. (supra) were not appreciated in proper perspective by the learned Single Judge. He, therefore, contends that 'all the liabilities now claimed against the property are the liability of the auction-purchaser and not that of decree-holder as, observed by the learned Judge in chamber.
10. As against above, Mr. Ainanullah Khan, learned counsel appearing for respondent No,1 supports the impugned orders. According to the learned counsel, the immovable property offered for sale was not subject to any conditions according to him only the movable were Offered on "as is where is basis". It was contended that the. respondent No,1 made qualified offer "free from all. encumbrances". Without prejudice, it was further contends that the term "as is where is basis is referable to the quality and defects if any in the property offered and not the liabilities against property. He has referred to quote a few Law Dictionaries to support his contention.
11. It was further contended that, auction-purchaser acquired the mortgaged property free from all encumbrances. It was, therefore, urged that the respondent No,1 could not be called upon to pay any charges or dues payable by the judgment-debtor or any liability against the property. He further urged that no liabilities were notified as mandated in terms of Order XXI, rule 66, C.P.C. therefore, none could be enforced against the property. Accordingly to him, the Court accepted the conditional offer of respondent No,1 to which no exception could be taken now.
12. We have heard the arguments advanced by the learned counsel for the parties, perused the R&P of Ex.No,42 of 1999 as well.
13. It is now settled position in law that, when the mortgaged property is offered and sold under orders of the Court, the auction-purchaser acquires clean and unencumbered right and title to the A property. Unless such charge, lien or encumbrance is notified in the sale proclamation as required under rules 61 and 66 to Order XXI, C.P.C. even then, the auction-purchaser can challenge the validity of such charge, lien or encumbrance.
14. In a leading case on the subject cited as Industrial Development Batik of Pakistan v. Messrs Maida Limited 1994 SCM R 2248, Honourable Supreme Court, set at rest the controversy, prescribed litmus test for determining priority amongst the contesting claimants. It was ruled that the dues and charges, which ranked as a 'charge on the property' will rank top on list of priority as against the other claimants. In.this view of the matter claim of K.D.A., KW&SB and WAPDA were rejected not being a charge on the property under relevant laws. As against the claim of Property Tax, which in view of section 16(4) of the Act was declared to be first charge on the property even in suppression of. the decree in favour of registered mortgagee: In other words amount claimed if established to be a charge on the property sold, then such charge would have precedence over the sale proceed of the sale as it had in the property sold. Priority could be asserted and enforced in terms of section 73 and Order XXXIV, rule 13, C.P.C. as the case may be. It may be observed that the charge, claim, or encumbrance against the mortgage property if sold, could be enforced against the sale proceed and not against the property that has fallen in the hands of auction-purchaser in a Court sale, free from all liabilities and encumbrances.
15. In the instant case, it is noted that it is only the immovable property that was offered on "as is where is basis". No such condition appears to be attached to the immovable property, no claim, lien, charge or encumbrance is mentioned in the sale notice.
16. Vide order, dated 17-8-2004 this Court directed the learned counsel for the parties "to clarify and establishes to what is meant by the phrase "as is where is basis". Whether the monetary/financial liabilities by way of taxes, rates dues electricity/gas charges etc. outstanding against the property will be included even by use of the phrase or will be excluded".
17. In order to appreciate contentions of parties it will be beneficial to first consider the meaning of phrase "as is where is basis", as defined in various Law Dictionaries, which reads as follows:-- "(i) Legal Thesaurus (William C. Burton): "As it is as it stands, as offered, as presented, as represented, as seen, as shown as things are, in its present condition, in its present form, in its present state."
(ii) Words and Phrases, Permanent Edition, 1658 to Date, Volume 4, Arc-Assessing Unit: "Words, "as is, where is", as used in bill of sale, referred only to condition of article sold;"
(iii) Words and Phrases, Permanent Edition Volume 4 Arc-Assessing Unit in 1997-1998: "As is" clause generally means purchaser is acquiring real property in its present state or condition.
18. "Term "as is" implies that real property is taken with whatever faults it may possess and that vendor or lessor is released of any obligation to reimburse purchaser or lessee for losses of damages that result from condition of property."
19. "Phrase "as is" generally understood to mean that buyer is purchasing goods in their present condition with whatever faults they may possess; term is similar to terms such as "with all faults".
(iv) Copus Juris Secundum (American Law) Volume 6a: As is, Generally defined, the phrase has been held to mean in its then condition, position or state.
20. The phrase is generally unambiguous one.
21. The phrase when applied to a reality relates to both condition and repair and import qualities of a 'certificate of estoppel'. It merely means that a purchaser must take that for which he bargained, reasonable use, wear tear and natural deterioration excepted.
22. Applied specifically to goods or like personal property sold, the term means that the article .to which it refers is sold in the condition shown. Without warranty, in the condition it was when sold; in its then physical and mechanical condition.
23. The phrase refers merely to the condition of the goods not to their kid or quality as represented; nor to their identity when fixed by the phrase itself.
24. Under particular circumstances, its use implies that the buyer is taking delivery of the goods in some way defective and upon express condition that he must trust to his own examination; although\ under other circumstances, its use may not carry any such implication. In any event the use of such phrase does not relieve a seller of all warranty."
(iv) Dictionary of Marine Insurance Terms (Robert H. Brown): "Term used in ship valuation. The value to be calculated on the vessel, in whatever condition she happens to be and at the place where she happens to be at the time of the valuation."
(vi) Black's Law Dictionary (sixth Edition) 1990: "A sale of goods by sample "as is" requires that the goods be of the kind and quality represented, even though they be in a damaged condition. Use of expression in sales agreement that goods are sold "as is" implies that buyer takes the entire risk as to the quality of the goods involved and he must trust to his own inspection."
25. From preponderance of the meaning assigned to the phrase "as is, where is"; what is deducible is that the phrase "as is, where is" could be divided in two parts, "as it" and "where is".
26. "As it is" as it stands means that, the property offered for sale in its present state, condition or form.
27. It refers only to condition of the property sold no warranty, or assurance of any nature as to state or quality of the property is neither attached nor is to be presumed. It implies that the property is taken with whatever attributes good or bad known or inherent it may possess and that seller or lessor is released of any obligation or liability to reimburse purchaser or lessee for any defect that may be discovered later on. In other words it is generally understood to mean that,, buyer is purchasing property with open eyes and consciously in whatever condition with whatever attributes it may possess. In a sale on 'as is, where is' basis implies that the purchaser has to depend on' his own skill and ability to assess and evaluation the property as to its status, nature or quality and attributes.
28. The phrase, cannot be interpreted to include liability, charge or encumbrance attached to the property, unless it is specifically so provided. Such view is also supported by decision reported as Amjid Ali v. Official Assignee, High Court 2001 CLC 671, where the learned Division Bench was confronted with some what similar proposition. In said case, it appears that the Motor Vehicle Tax liability was being enforced as against the vehicle auctioned by the official assignee on, 'as is where is' basis. It was held that 'as is where is only referable to the physical attributes and not the intent motor vehicle tax liability against these vehicles.
29. Other part of the phrase "where is" implies and meant 'at the place, location where the property happens to be or situated at the time of the examination, assessment, evaluation and making offer. It also implies the place where the transaction is to be effected, concluded materialized or the place where from the delivery of the property is to be taken by the intended purchaser.
30. It may further be observed that liability of utility bills is always on the consumer. In the instant case the consumer was the judgment-debtor company and not its property, merely providing utility services at the subject property will not create any charge over the property unless by law it is so declared, as in the case of Urban Immovable Property Tax Act, 1958. Even in case where such demand. Claim is a 'charge' on the property, which is sold in Court auction, then such 'charge' may be given preference over any other claims. If at all, the utility service providers have any claim then they may follow the judgment-debtor and not the property in the hands of auction-purchaser.
31. Claims and, dues of service provider at the best could only be ranked at par with the claim of unsecured creditor and be adjudged accordingly. In any event, it is not for this Court to advise the utility service providers to claim any priority in terms of section 73 or Order XXXIV, rule 13, C.P.C. or to file appropriate proceedings against the consumer/ Judgment-Debtor and obtain decree. They may adopt any course as may be available to them under law to enforce their legitimate dues and demand against the consumer.
32. Under the circumstances, no exception could be taken as regards conclusion of the learned trial Court is concerned to the effect that when the purchaser purchased the commodity then he excepts that it shall be given to him without there being any liability attached. However, in view of the discussion made above, we do not subscribe to the view of the learned Single Judge in chamber to the effect that "the decree-holder shall clear all the liabilities". It may be observed that, liabilities if any of the judgment-debtor cannot be claimed or enforced against the decree-holder or for that matter the auction-purchaser. Encumbrance and charges due against the judgment- debtor could only be enforced against the judgment-debtor personally or against his property before it is sold in auction by the Court. After the property is sold at the motion of any creditor mortgagee or charge holder then prior charge or encumbrance holder may have same right and interest in the order of priority, in the proceeds of the sale as he had in the property itself.
33. Appeals stand disposed off in terms above, with no order as to cost.