1. KHILJI ARIF HUSSAIN, J.---The plaintiff-Bank filed an application under section 16 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 read with Order XXXVIII, Rule 5, and section 151, C.P.C. To attach the property bearing Plot No.D-6/1, Block 4, KDA Improvement Scheme No.5, Clifton, Karachi.
2. Brief facts for the purpose of deciding the listed-application are that the plaintiff-Bank filed suit against defendants Nos.1 to 4 for recovery of Rs.201,437,343.25 and joined defendants Nos.5(i) to 5(vii) different Banking Companies having pari pasu charge on the assets of defendant No.
1. In the listed-application plaintiff-Bank prayed for attachment of the property referred hereinabove on which plaintiffs have no charge. Heard Mr. A.S. Pinger, learned counsel for the plaintiff, Mr. Abdul Sattar Lakhani, learned counsel for defendants Nos.1 to 4, Mr. Muhammad Zubair Quraishy, learned counsel for deendnat No.5(ii), Miss Farhat Ansari, learned counsel for defendant No.5(iv) and Mr. Amanullah Khan, learned counsel for defendant No.5(v).
3. Mr. A.S. Pinger, learned counsel for the plaintiff, in support of the application argued that the liability of considerable amount of is outstanding against defendants Nos.1 to 4. The plaintiff on having information through public notice, dated 1-11-2005 that defendant No.1 intends to sell the property in question, served notice informing the defendant No.1 that the sale is in violation of section 53 of the Transfer of Property Act as defendants are heavily indebted to the plaintiff-Bank on account of various finance facilities used and utilized by them. It was argued by the learned counsel that the plaintiff is entitled for the attachment of the property in question in terms of section 53 of the Transfer of Property Act and any sale of the property with intent to defeat or delay the creditors of the transferor is voidable at the option of any of the creditors in terms of section 53 of the Transfer of Property Act. Learned Advocate further relied upon Order XXVIII, rule 5, C.P.C. And argued that in case property is not attached it would become difficult for the plaintiff-Bank to adjust his liability.
4. Mr. Amanullah Khan, learned counsel for defendant No.5(v), while drawing my attention to para.2 of the application for leave to defend/written statement field by the defendants Nos.1 to 4 argued that with the permission of the secured creditors i.e. Defendant No.5(ii) to 5(v), defendant No.1 agreed to sell the property in question on which said four banks have their Pari Pasu mortgaged charged and contended that by sale of the said property the defendants would be in a position to adjust part of their outstanding liabilities. It was contended by the learned counsel for the defendant that the plaintiff is neither mortgagee of the said property nor have any other charge on the property in question and being a mortgagee they have allowed defendant No.1 to sell the property for the adjustment of mortgage charged on it. The other learned Advocates Mr. Muhammad Zubair Quraishy and Miss Farhat Ansari adopted the arguments of Mr. Amanullah Khan. Mr. Abdul Sattar Lakhani, learned counsel for defendants Nos. 1 to 4 argued that the property in question was not mortgaged with the plaintiff-Bank and out of total liability against defendants Nos. 1 to 4 the plaintiff-Bank has only 7% share in it, whereas 67% share is of defendant No.5(v). He, in support of his contention, relied upon the case of Messrs Virasat Ullah and another v. Messrs United Bank Ltd., Lahore, PLD 1975 Lahore 17 and argued that the plaintiff is not entitled for attachment of the property in question, by disposal of which mortgaged liability of defendant No.5(ii)(v) will be partly adjusted. I have taken into consideration respective arguments advanced by the learned Advocates for the parties, perused the record. From perusal of the record it appears that plaintiff has not filed any document along with memo. Of plaint or application to establish that they have charged on the property in question except letter of hypothecation for stocks as Annexure 'F' dated 14-6-2003, by which defendant No.1 hypothecated movable assets viz:-- "Schedule-I (Details of Movable Assets)
5. All my/our book debts, outstanding, monies, receivables, claims, bills, contracts, engagements, securities and rights (all of which are hereinafter referred to as "Receivable") goods, merchandise, products, stocks-in-trade and in transit, raw materials, work-in-progress, finished and unfinished goods, land, buildings, plant, machinery, spares, equipment and tools now or hereafter stored, or located or lying at any place in Karachi or any other place of storage/godown in Pakistan and all such aforesaid goods in the course of transit including goods released under trust receipts and all future goods/stocks that may be brought into the above place of storage/godown."
6. It is not disputed by the learned counsel for the plaintiff that defendants Nos.5(ii) to 5(v) have mortgaged charge on the property in question. Defendant No.5 produced along with his leave applications (agreement of hypothecation, dated 25-5-2002, and memorandum of deposit of title deed, dated 15-3-2002) in respect of the property in question prior in time of the agreement of hypothecation with plaintiff. Since defendant No.5(ii) has first prior mortgage charge on the property in question, the plaintiff cannot restrain the sale of the property for the adjustment of the first mortgaged charge. In terms of section 16(1) of the Financial Institutions (Recovery of Finances)
7. Ordinance, 2001, after filing the suit financial institutions can file an application to restrain the A customer or other concerned person from transferring, alienating, parting with the possession or for attachment of the property in respect of property which is mortgaged, pledged, A hypothecated assigned or otherwise charged or which is the subject of any obligation. Since the property in question is neither under mortgage of the plaintiff nor plaintiff have any charge over it nor same is subject to any obligation in favour of the plaintiff-Bank as the B security for their finance, application under section 16(1) of Financial Institutions (Recovery of Finances) Ordinance. 2001 is not maintainable. I would like to refer here section 23 of the Financial Institutions (Recovery of Finance) Ordinance, 2001, by which Legislature put restriction upon the right of customer to transfer, alienate, encumber remove or part with possession of any of the assets furnished to Financial Institutions (Recovery of Finances) Ordinance, 2001 as security by way of mortgage, hypothecation charge lien or otherwise, after publication of summons under subsection (5) of section 9. In the instant case notice for the sale of the property was published much before the filing of the suit. From reading the subsection
(1) of section 23 one can see that after publication of summons under subsection (5) of section 9 the customer cannot deal with his property over which charge has been created in favour of the Financial Institutions but after pronouncement of the judgment and decree by the Banking Court including interim decree the customer cannot without prior written permission of the Banking Court transfer, alienate, encumber or part with possession of any of his assets or property in terms of subsection (2) of section 23 of Ordinance, 2001.
8. Intention of the legislature on reading sections 16, 23(1) and 23(2) of Ordinance, 2001 together, made it clear that before pronouncement of the judgment and decree interim or otherwise the bank can ask for the attachment of the property of customer, over which they have charged and customer cannot transfer it but after passing of the decree, customer cannot deal with any of his properties, except with prior written permission of the Banking Court. However, a bank can apply for attachment of the property other than the property over which the bank has charge and in terms of Order XXXVIII, rule 5, C.P.C.
9. Coming to the objection of Mr. A.S. Pinger, learned counsel for the plaintiff that a transaction of sale is viodable at the option of the creditors under section 53 of the Transfer of Property Act. Suffice to say that, a transaction for sale of immovable property by debtors cannot be held void or viodable transaction at the option of the creditors if the same is carried out in normal course of business bonafidely and not with intent to defeat or delay the creditors. The plaintiff ought to have D established, to bring his case within the ambit of section 53 of the Transfer of Property Act, that the transfer of property was made with intent to defeat the right of the creditors. In the instant case defendants creditors are disposing of the property with prior permission and consent of the mortgagee banks to discharge their liabilities and such transfer cannot be termed as transfer with intent to defeat or delay the claim of the creditors. Even otherwise to attract section 53 of the Transfer of Property Act the plaintiff ought to have filed suit seeking declaration that the transaction is void and no such relief has been asked by the plaintiff in his suit. Another question which requires consideration in which the plaintiff is entitled for attachment of the property in exercise of powers under Order XXXVIII, rule 5, C.P.C., I would like to mention that notice for sale was published much prior to filing of the suit and as such it does not lie in the mouth of the plaintiff to say that defendants 1 to 4 are disposing of the property with intent to obstruct or delay the execution of any decree that may be passed against them. The object of Order XXXVIII, rule 5, C.P.C.
10. Is not to paralyze the normal and bona fide transaction, and unless it is established that defendants are about to dispose of the property with intent to delay or defeat the decree that may be passed, Court normally will not pass order for attachment of property before judgment. On reading section 53 of Transfer of Property Act together with Order XXXVIII, rule 5, C.P.C. One can see that by section 53 of Transfer of Property Act, legislature provided remedy to creditors to call in question transfer of immovable property made with intent to defeat or delay his claim whereas by Order XXXVIII, rule 5, C.P.C. Plaintiff can ask for attachment of property of defendant before judgment when defendant with intent to obstruct or delay the execution of any of the decree that may be passed against him is about to dispose of same. In the case of Messrs Virasat Ullah and another v. Messrs United Bank Ltd., Lahore, PLD 1975 Lah. 17:-- "The provisions of Order XXXVIII, rule 5, C.P.C., are quite drastic in their nature as the defendant can be put to great disadvantage in case application is accepted under the said provision at the initial stage of the case. The Court should be very careful in applying the said provision against a party and should be fully satisfied on the basis of the proper material on the record before taking any action in this regard. If the application filed under this provision along with an affidavit, does not contain a specific allegation with regard to the alienation of the property to be made during the pendency of the suit with intent to obstruct or delay the execution of the decree no such order can be passed under the said provision. Unless intention of the defendant to obstruct the execution of the decree is proved mere attempts to dispose of the property would not be a sufficient ground to pass any order under this provision. The Court has to be satisfied that the transfer of the property is going to be made after the institution of the suit with the said intention. Such allegations have to be proved positively as vague allegation to this effect will not be a sufficient ground under the law."
11. Even if for the sake of arguments it is accepted that plaintiff have a charge on the property in question such charge at best was created on 14-6-2003, whereas defendant No.5 charge as on the property in question is prior in time and on the principle of qui prior est tempore portior estjure (he has a better title who was first in time), the plaintiff has no prima facie case. From the facts narrated hereinabove it appears that balance of convenience also lies in favour of the defendants as by disposal of the mortgaged property outstanding dues of the defendants No.5(ii) to (v) who have mortgage charge on the property can be adjusted, whereas to restrain the sale of the property will result in increasing liabilities of the defendants. Even otherwise the intent of the sale of the property in question is not to obstruct the possible decree that may be passed in the matter but to adjust the outstanding dues of banks having 67% share in the liabilities of defendants Nos. 1 to 4, whereas the plaintiffs share in the liability is about 7% only. For the foregoing reasons, listed- application has no merits and is accordingly dismissed. However, the defendants are directed that before finalizing the sale, they will inform the Court about the amount likely to be received and in case any surplus amount is left after adjustment of the liability, the same will be deposited in Court.