' MUNIB AKHTAR, J.---Three applications fall for determination. Two, being C.M.A. Nos. 10121/2008 and 287/2009. Have been filed by the plaintiff. On the application first mentioned, certain interim orders were made on 27-10-2008. The third application`, C.M.A. No, 10600/2009 has been moved by the defendant No, 2 for recall and vacation of the said orders. The suit, which is for specific performance and injunction, arises in the following circumstances.
2. By means of an agreement dated 18-7-2007 ("the Agreement"), the plaintiff agreed to purchase from the defendant No, 1 the property identified in para.2 of the plaint (hereinafter "the suit property"). Learned counsel for the plaintiff referred to the last two recitals in the preamble of the Agreement in which it was recited that the defendant No, I had obtained financing from the defendant. No, 2 ("the Bank") in the amount of Rs,19,700,000 for purposes of constructing a house on the suit property. It was also recited that the title deeds of the suit property were with the Bank, and that the amount payable to the Bank, as on the date of the Agreement, was Rs,22,437,095.55. The consideration for the sale was fixed at Rs,23,437,095 between the plaintiff and the defendant No, 1.
This amount was payable in terms that an amount of Rs,2.000.000 was payable to the defendant No, I and the balance amount of Rs,22,437.095 was payable by the plaintiff to the Bank. Possession of the suit property (on which the house had been constructed by then) was handed over to the plaintiff by the defendant No, 1.
3. The amount payable to the Bank was to be (and was being) paid in terms of certain installments as had been agreed between the defendant No, 1 and the former in terms of a financing agreement. Learned counsel submitted that the plaintiff thereafter started making payments of the installments to the Bank, which were accepted by the latter and this position continued up to January, 2008. Thereafter, the Bank suddenly stopped accepting payments of the instalments. The plaintiff apprehended that-the defendant No, 1 intended, with the knowledge of the Bank, to dispose off the suit property to some other person and that a situation of default was being deliberately engineered. It was this that led to the filing of the present suit on 27-10-2008. On that date, interim orders were made (on C.M.A. 10121/2008) restraining the defendants from disturbing the plaintiff's possession of the suit property. Subsequently, the plaintiff also filed C.M.A. 287/2009 in which it is prayed that the plaintiff be allowed to deposit the instalments due and payable to the Bank with the Nazir of the Court. Learned counsel emphasized that the plaintiff was at all times ready and willing to make payment of the amount due to the Bank in terms of the instalments agreed between it and the defendant No, I. He submitted that a clear case for interim relief was made out and the equities lay in favour of the plaintiff. The interest of the Bank, which was that it be repaid its financing, was fully secured in all respects.
4. Learned counsel for the Bank opposed the plaintiff's applications and pressed his own application (C.M.A. 10600/2009) seeking recall and vacation of the interim orders. Learned counsel submitted that there was no privity of contract between the Bank and the plaintiff and that therefore the latter could not seek to enforce the terms of the financing agreement between the Bank and the defendant No,
1. Learned counsel referred to the financing documents (which were placed on record under cover of a statement dated 2-11-2011) and submitted that the defendant No, 1 was prohibited from selling the suit property to any person. He referred to certain case-law that is considered below. Learned counsel also submitted that in fact the Bank had filed a recovery suit in the concerned Banking Court, which had been decreed in its favour and that therefore the plaintiff was not entitled to any relief.
5. Exercising his right of reply, learned counsel for the plaintiff submitted that the instalments had been paid to the Bank, which had accepted the same and it could not therefore resile from that position. Learned counsel also referred to the plaintiff's letter dated 20-7-2007 that had been written to the Bank appraising it of the Agreement and the transaction of sale in terms thereof, and contended that the Bank was fully aware of all the material facts from the beginning. Learned counsel also submitted that the plaintiff had not been made party to the banking suit, and had moved an application under section 12(2), C.P.C. Therein on account of the alleged fraud and misrepresentation by the Bank.
6. I have heard learned counsel as above, examined the record with their assistance and considered the case-law relied upon. The charge on the suit property in favour of the Bank is by way of a mortgage created by a registered mortgage deed. I find nothing in the mortgage deed itself as would restrain or prohibit the defendant No, 1 from selling or alienating the suit property.
From the point of view of the mortgagor, the most important right that inheres in him after the creation of the 'mortgage is the right, known as the equity of redemption, to obtain the release (or redemption) of his property on discharge of the debt. The equity of redemption is, in essence, the interest that the mortgagor retains in the property after the interest of the mortgagee. It is settled law that the equity of redemption is itself immovable property and can therefore be transferred or assigned and if (for example) a second or subsequent mortgage is created, it is created with reference to this right. In Kanti Ram and others v. Kutubuddin Mahomed and others (1894) 22 Cal.
33, the property with reference to which the second mortgage is created was described as "...The specific immoveable property of the mortgagor, burdened as it is with the prior in cumbrance, i,e, the property of the mortgagor minus the interest which he had already transferred to the prior mortgagee: or, in other words, the interest which the mortgagor possessed at the time of the second mortgage" (pg. 37) and the Calcutta High Court went on to hold expressly that the equity of redemption was specific immoveable property within the meaning of section 58 of the Transfer of Property Act, 1882 ("T.P. Act"). It is also settled law that the mortgagor cannot, as such, be prevented from assigning/transferring his rights in the equity of redemption and if there is such a provision in the mortgage deed that may well amount to a clog on the equity of redemption and would therefore be invalid. Thus, in the case just cited, it was observed that: "[it] is, we think, now settled law that a mortgagor may either absolutely sell or mortgage his remaining interest in the property which he has already mortgaged, notwithstanding there may be a covenant in .The earlier mortgage prohibiting such a sale or subsequent mortgage. The purchaser of the second mortgagee, in that event ,stands in the place of the mortgagor and takes the property subject to the prior lien.." (at pg. 42, emphasis added)
' In my view, law that was considered settled more than a hundred years ago can hardly be disturbed today. Reference may also be made to Shyampeary Dasya and another v. The Eastern Mortgage and Agency Co., Ltd. (1917) 22 CWN 226; 40 I.C. 865, wherein the mortgage deed contained a clause restraining alienation by the mortgagor. The Court noted that such a clause was void in law and went on to observes follows: "The clause restraining alienation of the mortgaged property is generally inserted in mortgage bonds in this country though .That of course does not prevent alienation subject to the right of the.
Mortgagee". (pg. 235)
7. The cases cited by learned counsel for the Bank do not assist his case. In Industrial Development Bank of Pakistan v. Saadi Asmatullah and others 1999 SCM R 2874 the question was whether a subsequent purchaser of property mortgaged by deposit of title deeds could take the benefit of section 41 of the T.P. Act. That section protects a transferee who takes the property from an ostensible owner with the consent of the persons "interested in the immoveable property". The purchaser had acqUired the property without even verifying the title deeds of the seller (who was the mortgagor). It was in these circumstances that the Supreme Court concluded that section 41 had no application. As is clear, the facts of the cited case are quite different from those at hand. In Muhammad Hussain Khan v. NIB Bank Ltd. And another 2009 CLD 42 (SHC; SB), the subsequent purchaser claimed that he took the property without notice or knowledge of the fact that it had already been mortgaged with the bank. Again, the crucial facts are quite different from those at hand, since here the Agreement itself clearly and expressly refers to the financing obtained from the Bank and the bulk of the sale consideration is payable to the latter. Muslim Commercial Bank Ltd. v. Ataullah Shah and others 2003 CLD 888 (LHC; DB) also raised the question whether section 41 of the T.P. Act was applicable or not. As already noted, this question does not arise in the present case. Finally, Muhammad Tariq v. Citibank Housing Finance Co. Ltd. 2002 CLD 1090 (LHC; DB) also raised the same or similar issues and is likewise not applicable to the facts and circumstances of the present case.
8. It is no doubt correct that the finance agreement between the Bank and the defendant No, 1 does contain negative covenants, which inter alia restrict the latter from alienating or selling the suit property. However, that is only a personal covenant between the Bank and the defendant No, 1 and does not affect the position of the property itself as noted above. In any case, this agreement should he read along with the mortgage deed. This is so because the agreement itself refers to the mortgage to be created on the suit property in favour of the Bank: The negative covenants in the finance agreement may well therefore amount to a clog on the equity of redemption. Which could entail the consequence of invalidity as noted above.
9. In my view. The most important aspect of the matter is the fact, which prima facie appears to be correct as averred by the plaintiff, that he had informed the Bank concerning the Agreement right from inception and had thereafter made payments of instalments that were accepted by the latter. If so, then prima facie the Bank has accepted that the plaintiff has stepped into the place of the defendant No,l. It would seem therefore that the Bank may well be estopped from questioning or challenging the position of the plaintiff and thus, after initially accepting the instalments from the latter, it could not thereafter do a turnabout and refuse to accept any further payments. In my view, the equities in the present matter lie clearly in favour of the plaintiff. The interest of the Bank in the suit property is only to the extent, and for the purposes, of repayment of the financing provided by it, and this was something that the plaintiff was at all times ready and willing to do. The plaintiff has done nothing that would jeopardize the position of the Bank, whose position as mortgagee of the suit property is also, secure. The balance of convenience clearly lies in favour of the plaintiff and against the Bank, and he would suffer irreparable loss and injury should he be dispossessed from the suit property.
10. Insofar as the banking suit filed by the Bank is concerned, the plaintiff has moved an application under section 12(2) therein. If that application is still pending, then a copy of this order shall be placed before the Banking Court for its consideration while disposing of the same. If the application has since been disposed of, then the party aggrieved by the order is of course at liberty to seek such remedy as is available to it in accordance with law. However, it is clarified that if the application is disposed of adversely to the plaintiff, then nothing in this order shall come in the way of the Banking Court taking any steps or further proceedings in the matter before it in accordance with law.
11. In view of the foregoing position, C.M.A. 10121/2008 filed by the plaintiff is hereby allowed as prayed, while C.M.A. 10600/2009 filed by the Bank is hereby dismissed. However, this is subject to the plaintiff depositing with the Nazir of this Court the balance amount due and payable to the Bank within three months from today. By "balance amount" I mean the difference between the sum of Rs,22,437,095 and the amounts deposited with the Bank on or after 18-7-2007. This shall be without prejudice to the Bank making a claim for any other or additional amounts. Which shall be payable (if established in accordance with law) by the plaintiff in the same manner and to the same extent as would have been payable by the defendant No, 1 to the Bank pursuant to the finance agreement. The balance amount, if deposited by the plaintiff, shall be paid over to the Bank on an application made in this regard to the Nazir after proper verification and confirmation. If the plaintiff fails to pay the balance amount within the stipulated period, then the interim orders shall automatically stand recalled and vacated. Civil Miscellaneous Application No, 287 of 2009 stands disposed of in the foregoing terms.