' AZIZULLAH M. MEMON, J.---Heard learned counsel appearing for the contesting parties.
The appellant/defendant filed an application under section 12 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 with a prayer to set aside the ex parte judgment and decree dated 31-8-2000, passed by the learned Banking Court No,IV, Karachi, in Suit No,16 of 2000, which was dismissed vide order dated 23-6-2006 by the said Banking Court.
' The facts giving rise to the filing of the above Suit No,16 of 2000 are, briefly, to the effect that respondent/plaintiff Messrs Habib Bank Limited filed the suit against Messrs Travel International Limited, appellant Haji Muhammad Yaqoob Akhtar and also against Abdul Salim Siddiqui for recovery of loan amount of Rs,14,66,166.49 on 23-3-2006; the Banking Court issued notices/summonses against the defendant/appellant Azhar Ahsan Thanvi on his address shown against his name in his memo. Of plaint of the suit; so also the summonses were got published in the Daily Newspaper Dawn Karachi dated 15-5-2000 (against the appellant) as well as in the Daily Newspaper Jang, Karachi, dated 15-5-2000; as no appearance was made for the appellants in the said suit, therefore, the learned Banking Court announced the judgment under subsection (4) of section 9 of the Act XV of 1997 and thus the suit was decred in the sum of Rs,208,623.33 with costs and with future mark-up; simultaneously sale of the mortgaged property was allowed by the learned Banking Court in case the decree was not satisfied.
' Thereafter, the plaintiff/respondent Bank filed execution application which was also allowed; as the property mortgaged with the respondent-Bank was situated at Faisalabad, Province of Punjab, therefore, the learned Banking Court transferred the said decree to the Banking Court situated at Faisalabad for its execution.
' When the appellant came to know about all such facts, he filed the above said application under section 12 of the Ordinance, 2001 specifically pleading therein that he was residing at Jeddah, Kingdom of Saudi Arabia, since January, 1985 and that he came to know on 20-5-2006 through his one, of the friends about the auction of the mortgaged property by the Banking Court at Faisalabad, and then appointed one Abbas Ali as his attorney to appear in the said suit/decree proceedings and to file an application; it was further specifically pleaded in the said application that the appellant had sent a letter specifically informing them that he had started residing at Jeddah and also provided his address of service of notice at Jeddah and further that the respondent-Bank had issued about 37 letters to the appellant (after he had filed address of Jeddah) for the purpose of correspondence with him but even then notice/summons of the suit itself was never served on him at the address of Jeddah.
The learned Banking Court dismissed the said application under section 12 of the Ordinance, 2001 for the reason that the mortgaged property had already been auctioned and the sale proceedings had been confirmed by the Banking Court at Faisalabad and therefore the decree cannot be set aside.
' Learned counsel for the appellant had heavily relied upon a copy of the letter addressed by him to the respondent-Bank dated 30-6-1985 available at page 99 of this file, which specifically mentions that the letter was so addressed by the appellant to the respondent-Bank wherein he had specifically stated that he had started residing at Jeddah and that his address of service was P.O.
Box No,9209 Jeddah 2143 KSA; learned counsel has further relied upon a copy of the, telex message which is telex message which is available at page 101 and which states that the respondent-Bank had acknowledged the receipt of the said letter from the appellant, dated 30-6-1985.
' Learned counsel has further relied upon copies of the letters dated 3rd November, 1985 and onwards addressed by the respondent-Bank to the appellant wherein the address of service is specifically stated to be "P.O. Box No,9209 Jeddah 2143 KSA Saudi Arabia"; hence learned counsel has argued that it being an admitted fact that the learned banking Court never issued any summons/notice to the appellant at the said address of Saudi Arabia, therefore, the judgment and decree passed in the suit in question would never be binding upon him. He has relied upon the case-law reported as Brig. (Retd.) Mazhar-ul-Haq and another v. Messrs Muslim Commercial Bank Limited Islamabad and another PLD 1993 Lahore 706 wherein following observations were recorded:-- "7. It is the .Burden of this judgment to examine as to how for these findings of the Special Banking Court are in conformity with the facts proved on the record and the law on the subject. It is on the record that House No,462/D belonged to Mian Muhammad Afzal, who deposed that it was requisitioned by GHQ and remained in occupation of Brig. Mazharul-ul-Haq, who in March, 1974 was transferred to Karachi and he sold away the property and handed over its possession to the.
Vendee. Appellant No,1 has deposed that at the time of grant of loan he was posted at Karachi but his family was residing in Rawalpindi and they vacated House No,462/D in the middle of 1974.
According to his statement in October, 1975 he was transferred from Karachi to Lahore Cantt. From where in 1979 he was sent to Army Medical College, Rawalpindi but towards the end of that year, he was re-transferred to Lahore; he was retired from Army from that station on 18th October, 1981 and shifted to his House No,64-B-1, Gulberg-III, Lahore, permanently. It is in his statement that during this period he has been corresporiding with the Bank. In this respect he has tendered in evidence letters Exhs. D.1 to D.2. It had already been stated that the suit was instituted against the appellants on 5-3-1981. It is evident from the statement of appellant No,1 that at the time, he was posted at Lahore, which finds ample support from the letters afore-said. In the letters dated 21-9-1977, 13-3- 1978 addressed by the Bank to appellant No,1 (Exhs.D.1 and D.2) his official address of Lahore Cantt.
Is mentioned. The same address appears in letters, dated 25-2-1976 and 2-10-1976 (Exhs. D.6 and D.7) sent to the Bank by the appellant. The address of appellant No,1 given in letters, dated 2-4-1984 and 12-7-1984 (Exhs.D.4 and D.5) issued to him by the Bank is "46-B/1 Gulberg III-Lahore". It is to be noticed that the factum of residence of appellant No,1 or for that matter of his family in House No,462/D, Rawalpindi, and its derequisitioning pertain to the year, 1974 or so. It was 13 years thereafter that in the year, 1987, appellant No,1 and his witness Mian Muhammad Afzal entered the witness-box. Even if there are some variations in their depositions, these are not of any significance and would not militate against the credibility of these witnesses. The fact that in the deed of power of .Attorney, mortgage deed and NOC relating to the years, 1974, 1975 and 1976 respectively the appellant's address was shown as 462/D, Rawalpindi, in the context of the controversy before us pales into insignificance. What is significant is that what was the correct address of the appellant at the time of institution of the suit and was its disclosure made in the plaint by the respondent- Bank. Technically, it might be considered as a little unfair on the part of appellant No,1 not to have specifically conveyed to the Bank the change of his address. But the fact remains that the latter had been in correspondence with appellant No,1, and as borne out from the said letters, was not unaware of his address and at least one thing is quite obvious that when the suit was filed the borrowers were no longer residing in Rawalpindi particularly when the process Server and the postal official had also submitted identical reports that none of the defendants was in occupation of the house in question. It was the obligation of the respondent-Bank to have given in the plaint the latest and' accurate address of the appellant. But it failed to discharge this obligation.
9. We may now examine the relevant provisions of law governing the service of summons issued to defendant in a suit filed under the Banking Companies (Recovery of Loans) Ordinance, 1979. A reference has already been made to Rule 8 of the rules made under section 15 of the Ordinance, as it stood at the time of institution of suit against the appellants. Subsequently on 31-1-1998 an amendment was introduced in this rule to the effect that service by any of the afore-said modes shall be deemed proper and valid service for the propose of the Ordinance. The effect of the amendment is obvious but as observed by their Lordship of the Supreme Court in Ahmed Autos v.
Allied Bank of Pakistan PLD 1990 SC 497 even under the un-amended provision; service was to be held good service if it was effected by any one or more of the modes of service provided for in Rule
8. Hence, for the purpose of the present case, the un-amended provision had the same effect as was intended to be given to it through the said amendment.
11. In the case in hand, the principles underlying provisions of Order V, Rule 20 of C.P.C. Shall also be attracted in that the order for service by publication was not made simultaneously with the order for issuance of summons in ordinary manner. Thus, it was a case, identical to the one contemplated by Order V, Rule 20, C.P.C. When all the three modes had not been adopted simultaneously and service had not been effected through the two processes, publication was not to be ordered mechanically without adverting to the reports. Before granting service through publication it was incumbent upon the Court to have applied its mind to the fact of the case and found out that whether inspite of the best efforts on the part of the plaintiff, the defendant could not be served for the reason that he was avoiding service with the object of obstructing the disposal of suit. The case of the principal defendant who was not residing at the given address and had changed place of abode to the knowledge of the plaintiff was all the more decipherable. We may refer here with the advantage to the following observations appearing in the judgment rendered by Saleem Akhtar J. (now Judge of the Supreme Court) in United Bank Ltd. v. Nishat Chemical Industries Ltd. 1986 CLD 1985.
' The third situation may arise where the summons has been published in newspaper but the summonses issued through bailiff and by registered post A/D, have not been served or not issued at all. In such circumstances mere publication of summons cannot he treated as proper and valid service. Rule 8 prescribes mode of issuing summons but the provisions of Ordinance or Rules are silent over the effect of publication of summons. In these circumstances in view of section 3 of the Ordinance the provisions of C.P.C. Which are not inconsistent with the Ordinance can be pressed in service. In my views the summons published Rule 8 can be held to the due and proper service if it is established that the defendant is avoiding the service through bailiff and by post or his whereabouts are not known".
' Before ordering publication the Court should have, therefore, satisfied itself that all the essential conditions for recording of this mode of service and to proceed ex parte against the appellants existed. The view taken by the Special Court that the publication had to be made in routine, divorced from the circumstances of the case is wholly untenable. A Court, Judicial Tribunal or even a quasi-judicial Tribunal, entrusted with the duty to determine the valuable rights of the parties arraigned before them are required to act deliberately and after proper application of mind to the matter before them.
12. Be that as it may, during the trial of the applications, under appeal it became crystal clear that the appellants were not residing at the address given in the plaint and their subsequent place of living was known to the plaintiff-Bank. Much emphasis has been laid down on behalf of the respondent that the Bank had no mala fides to sue the appellants on a wrong address that for this reason along the impugned order should be maintained.
13.Let the question of mala fides for the sake of arguments be presently excluded from consideration. The point for determination then would be whether the appellants were lawfully served or not. It is a mixed question of fact and law which is to be answered independent of the intention of any party. The defendants/appellants had a right to defend their cause and for that purpose, the plaintiff Bank was under a legal obligation to make best efforts in effecting the service on the defendants through the process of Court. It could provide to the Court alternate and correct address for the service of the defendants; the address where the Bank has itself been corresponding with the defendants. The claim that the Bank had no mala fides regarding the address for service, therefore, for the purpose of adjudication of the limited point under consideration, has no relevancy. It may be added that from jurisprudential angle, what is done without due care and caution cannot be considered to have been done in good faith. It is clear to us that the plaintiff-Bank failed to perform its legal obligation, which amounts to mala fides in law.
Appellant No,1 could have well been served through GHQ but no effort was made, we, therefore, have no hesitation in holding that the respondents were not duly served; consequently the ex parte decree is not in conformity with law and cannot be sustained. The findings on Issues Nos.1 and 2 are, therefore, reserved.
16. (sic) We now proceed to deal with issue No,5 to the effect as to whether special circumstances exist for setting aside the ex parte decree end the execution. On this issue as well as the Special Court rendered a verdict against the appellants. The reasons given by it in this behalf were that the appellants' assertion that they were not served, by itself did not constitute a special circumstance for setting aside the ex parte decree. That upon the terms of the loan, the Bank had the authority to dispose of the property without intervention of the Court. That the contents of the mortgage-deed posed a bar for the appellants to question the fairness and correctness of the sale price. In the course of its decision on this issue, the Special Court also found justification, for the commencement of execution proceedings as the time limit mentioned in the decree for payment of decretal amount had expired. In the opinion of the Court below, the auction proceedings did not suffer from any illegality. It may be stated that before the trial Court it was urged that the property worth more than Rs,65 lacs was fraudulently auctioned away for a paltry sum of Rs,5,10,000, its monthly rent was Rs,40,000, since the decretal amount could be recovered through attachment of rental income of a few months, there was no need to sell away the property. These contentions were however, turned down by the Special Court. It was maintained that inadequacy of sale price was no ground for interference with the sale. The learned trial Court also relied upon the application, dated 19-4-1981 (Exh.R.W.3/3) addressed to United Bank Limited by appellant No,1, stating therein that after his retirement he had no funds to clear, the liability of that Bank. The fact that the appellant had obtained loan from other Banks which he failed to repay also influenced the decision of the Court, in answering this issue against the appellants.
17. We have gone through the record to assess the correctness of the reasoning which prevailed with the learned Court below and feel that the decision of the afore-said issue has been influenced by irrelevant considerations and the conclusions drawn by it are contrary to the facts proved on the file. We have already held that the appellants' service through publication was no service in law and the ex parte decree passed on the footing of such service was a nullity. Where a defendant satisfies the Court that he was prevented by sufficient cause from appearing in the Court, the decree passed against him would be set aside and permission granted to him to contest the suit.
We are firmly of the view that the appellants' failure to appear in the Court can fairly be attributed to sufficient reasons. The argument founded by the Special Court on the terms of the loan and mortgage-deed and that the appellants owned debt to other Banks are hardly genuine to the controversy falling her decision under the said issue. As regards the sale price and rental value of the property, the record before us clearly demonstrates that it is a four-storeyed building inclusive of basement, having an area of 3,000 sq. Ft. Located in Supper Market, Islamabad, which is the important commercial area of the capital. The fact that Pakistan Railway Board and Lawrencepur Woolen Textile Mills hired parcels of this building is suggestive of the interference that the premises are somewhat prestigious ones. It is in the statement of Haji Mumtaz who is serving as supervisor with Messrs Royal Furniture, Peshawar that this concern is a tenant in a shop in the building at the monthly rent of Rs,5,500 since the year, 1980. The statement of Ch. Muhammad Iqbal (A.W.2) shows that Messrs Lawrancepur Woolen and Textile Mills hired first floor of the building from 1980 to 1986 and paid rent to appellant No,1 @ Rs,8,500 p.m. The details of the tenants occupying different tenements of the building and rent paid by them have been disclosed by the appellant in his statement as under:--
1. Name of Tenant Monthly rent Pakistan Railways Board
(a) Basement
(b) 2nd FloorRs.4,400 9,000
2. Victoria Furniture
(a) Basement
(b) 3rd shop in ground2,000 6,500
3. Progressive Traders: (One shop in ground floor)3,500
4. Royal Furniture Peshawar: (2nd shop in ground floor)5,500
5. Lawrancepur Woolen and Textile Mills: 1st Floor8,500 Total Rs. 39,400 ' While discussing issue No,5, the learned Special Court has not adverted to the evidence of the appellants regarding rental value of the property and rejected their claim on the ground that had that much rental income accrued to them, they would have cleared their liability. This argument should carry no weight. The fact of the matter is that unfortunately the appellants committed default in clearing the outstanding debt and, therefore, were sued by the Bank. The evidence regarding rent is in consonance with the appellants' claim that the value of the property which is a commercial building at the relevant time was not less than Rs,6,50,000. The appellants' evidence in this behalf has remained unrebutted. We are aware that mere inadequacy of sale price by itself is not a sufficient ground for interference by the Court. But if the inadequacy of price is by reason of fraud and material irregularity it provides a ground for setting aside the ex parte decree as well as the sale. (See Ganapathia Pillai v. Malaiperunmal Chettiar and another AIR 1925 Mad. 202 at 203.
The question of commission of fraud has been discussed in the later part of this judgment (16-A).
Elsewhere it has also been discussed that in exercise of its civil jurisdiction the Special ; Court has to follow the procedure provided in C.P.C. Except to the extent that a contrary provision is found in the Banking Companies (Recovery of Loans) Ordinance, 1979. Section 7(2) of the Ordinance expressly lays down that even in suits based on mortgage the summary procedure provided for in Order XXXVII, C.P.C. Shall be followed. The combined reading of the relevant provisions of the Ordinance will reflect that in a recovery suit before the Special Court, a defendant cannot appear and defend the suit as a matter of right and has first to obtain the leave of the Court to defend the suit. Thus except for this deviation, other provisions of the C.P.C. Will apply to a suit for recovery heard by the Special Court. Under Order XXXIV, rule 4, C.P.C. In a suit based on mortgage a preliminary decree has to be passed necessarily if the defendant fails to pay the amount due from him, only then the plaintiff can apply to the ,Court for final decree. It is the practice of this Court while acting as a Special Court under section 2(b)(ii) of the Ordinance to pass a preliminary decree in suit founded on mortgage. In the instant Case the learned Judge banking Court failed to pass a F preliminary decree. In the impugned judgment, it is stated the ex parte decree is the final decree. The appellants were thus deprived of the opportunity to pay into the Court the amount due from them and avoid the Court sale, in terms of Order XXXIV, C.P.C. The non-compliance with Order XXXIV, C.P.C. Provides sufficient reason for setting aside the impugned decree. It may be added that the existence of a valid decree is the condition precedent for substance?? Of the auction proceedings and the orders passed in such proceedings. Since there was no valid decree, the entire superstructure would be knocked down.
' The learned Court's reliance on the application of appellant No,1 (Exh.R.W.3/3) is also misconceived. The reason is that it was never put to ,him as required by Article 144 of "Qanun-e- Shahadat" which is mandatory.
For all these reasons, we find that there are special circumstances for setting aside the ex parte decree and other proceedings and allow the appellants to defend the suit. The Special Court's findings on issue No,5 cannot be sustained. This issue should have been answered in favour of the appellants.
18. An application under Order XXI, rule 90, cannot be entertained "unless the applicant deposits such amount not exceeding twenty per cent of the sum realized at the sale, or furnishes such security, as the Court may direct." In the prayer clause of the appellants' application, a specific request was made that if directed by the Court they were prepared to deposit, in accordance with law the requisite amount in the Court. The learned Special Court did not give any such direction.
The appellants however moved another application on 30-10-1986 for permission to deposit 20% of the sale price in the Court. The permission was given on 1-1-1986 and the amount was deposited by them in the Court. The respondents objected to the maintainability of the application under Order XXI, Rule 90, C.P.C. On the ground that it was not accompanied by the deposit at the time of its institution. This objection which is reflected by issue No,7 has been accepted by the learned trial Court. It is also reiterated before us by the learned counsel for the respondents, but we are unable to agree with the learned trial Court. We feel that under the 2nd proviso to rule 90 ibid the Court is duty bound to pass an order specifying the amount not exceeding 20% of the sale price, requiring the applicant to deposit the same or furnish security in lieu thereof. It is only when the applicant fails to comply with the order that the application can be rejected. This view finds support from the following observations made by Zafar Hussain Mirza, J. (as he then was) who spoke for the D.B. In Alhamdi Begum v. National Bank of Pakistan PLD 1976 Kar.
723.
"In my humble opinion the Court had to pass an order either to direct the deposit of sum up to twenty per cent of the auction amount or to direct furnishing of security as was deemed appropriate, under the circumstances, and then give an opportunity to the appellant to comply with such order, It was only when the appellant had failed to comply with such an order that his application under rule 90 could be summarily dismissed."
' To the same effect is the opinion expressed by this Court in M. Shafique Shah and others v. Mst, Irshad Begum and others 1981 CLC 369. Since the special Court did not pass -any order regarding deposit at the initial stage, the application could not be ignored on the ground of non-deposit. The deposit made by the appellants in pursuance of the order, dated 1-11-1968 would be treated as in order. Issue No,7 was also wrongly decided and is answered in favour of the appellants.
19. In order to show that the sale was liable to be set aside on the ground of material irregularity and fraud in publishing and conducting sale, several points highlighting the gross violations of mandatory provisions of Order XXI, C.P.C. And other provisions of law were passed into service on behalf of the appellants, which were rejected by the Special Court without a detailed examination.
Thereof on the ground that after the confirmation of the sale in favour of a third party, the Court becomes functus officio and ceased to have jurisdiction to examine the correctness of the objections raised by the appellants. This led the learned Special Court to decide issues Nos.8 and 8-A against the appellants. In the course of decision of these issues, the Court also made an observation that it has been established under a Special Statute and is not bound to follow C.P.C. In stricto senso. Before proceeding further, we feel it advantageous to refer to even at the cost of repetition, what has already been stated, regarding the procedure to be followed by the Special Court in hearing a suit for recovery of loan. Section 4(1), 141, C.P.C. Sections 3 and 6(a) of the Ordinance, if read together, clearly demonstrate that while exercising civil jurisdiction the Special Court has to follow the procedure laid down in C.P.C. And for the purpose of execution of the decree it can adopt Order XXI and allied provisions of the said Code. Of course, if there is conflict between the provisions of C.P.C. And the Ordinance, the latter shall prevail.
20. It is obvious from the record of the case that the Special Court did proceed under Order XXI, C.P.C. The concept of confirmation of sale by the Court and the consequences flowing from such confirmation owe their origin to Order XXI, Rule 92, C.P.C. Once the Special Court had chosen to adopt C.P.C., the correctness of the orders passed by it in conducting the sale of the property in dispute shall have to be necessarily adjudged on the touchstone of C.P.C. If the appellants succeed in establishing the illegalities or material irregularities committed in the course of auction of the property and confirmation of the opinion of the Special Court, it may pick and choose the provisions of the C.P.C., and where gross violation of that law is identified by the aggrieved part, express the view that it is not bound to follow C.P.C. Strictly. Such a course can hardly advance the cause of justice.
' Further reliance is placed on Messrs Mahmood Brothers and another v. National Bank of Pakistan and another 2004 CLD Lahore 771, Asim Shahzad v. Muslim Commercial Bank Ltd. And another 2002 CLD Lahore 1288, Lt. Col. (Retd) Muhammad Akhter v. Bank of Punjab 2004 CLD Lah.821, Muhammad Saeed Sheikh v. Citibank N.A. 2002 CLD Lahore 1697 and Apex International Associates v. Bank Al- Falah Limited 2002 CLD Lahore 639.
Under the circumstances, the appellant has provided that he was not properly served as neither notice was properly issued for service upon him nor he was ever served with notice of the suit; ex parte judgment and decree is not binding upon him. As such the appeal is hereby allowed, impugned order passed by the learned banking Court is set aside, with the result that the application under. Section 12 of the said Ordinance, 2001 filed by the appellant/defendant before the banking Court stands allowed; ex parte judgment and decree passed by the Banking Court against the appellant stand set aside.
' However, the parties will be at liberty to approach the learned Banking Court with their respective further pleas as to the action, in ceded to be taken by the Banking Court with regard to their respective rights, which may be involved in the suit as well as the property mortgaged by the appellant with the respondent-Bank.