' MUHAMMAD FARRUKH IRFAN KHAN, J.---This appeal has been preferred against the auction proceedings dated 9-7-2002, order dated 12-12-2002 rejecting objection petition and order dated 17-12-2002 issuing Sale Certificate passed by the learned Banking Court-I, Faisalabad, praying for the same to be declared illegal, null and void and a nullity in the eye of law. It is further prayed that order for re-auction/re-sale of the mortgaged property may be issued.
2. The brief facts leading to the filing of the appeal are that the appellants obtained a loan in the amount of Rs,14.4 million from PICIC predecessor of the respondent No,1 Bank against mortgaged property (i) bearing Khewat No,203, Khatooni No,640, Sq. No,56, Khasra Nos,9/2 (7 - 7), 11/2/2 (2 - 0), 12/2 (6 - 13) Total 16 Kanal, share 182/320 measuring about 9 kanal, 2 marlas (ii) Khewat No,201, Khatooni No,636, Sq. No,56, Khasra No,13/2 (6 - 13), share 25/123 measuring about 1 kanal, 5 marlas and (iii) Khewat No,206, Khatooni No,643/1, Sq. No,56, Khasra Nos,2/2 (7 - 2), 3/1 (2 - 9), 8/2 (2 - 5), 9/1 (1 - 11) total measuring 13 kanal, 7 marlas, share 29/267 measuring about 1 kanal, 9 marlas: Gross total of 11 kanal, 16 marlas land situated at Chak No,268, Tehsil and District Jhang along with the building, machinery and fixtures of the factory (hereinafter referred to as the "Mills"). On failure by the appellants to repay the loan, suit for recovery of Rs,212,26,987.13 was filed on 24-9-1995 by Pakistan Industrial Credit and Investment Corporation Limited the predecessor-in-interest of respondent No,1 NIB Bank (hereinafter referred to as the "respondent Bank") wherein judgment and decree dated 5-11-1998 for recovery of Rs,17,321,903 was passed against the appellants by the learned Banking Court-I, Faisalabad. The respondent Bank challenged this judgment and decree in this Court by filing R.F.A. No,110 of 1999 which was subsequently dismissed as withdrawn vide order dated 30-6-2005. During the pendency of the appeal the respondent Bank also filed Execution Petition No,9 of 1999 on 12-2-1999 before the Banking Court, Faisalabad.On the request of the respondent Bank, on 20-5-1999 the Court appointed Sh. Sultan Ahmad. Advocate Jhang as Court Auctioneer. A perusal of the order dated 2-2-2000 of the Banking Court, Faisalabad, reveals that the reserve price for auction of the property was fixed by the decree-holder bank as Rs,23 million.
As the respondent Bank failed to deposit the auctioneer's fee, the auction could not be undertaken.
The order for auction was passed on 13-12-1999, however, the respondent Bank moved an application under Order XXI, Rule 66, C.P.C. On 2-2-2000 to the executing Court seeking order for amendment in the conditions of the auction by reducing the reserve price to Rs,13 million. This application was withdrawn on 19-5-2000, thus, the reserve price stayed at Rs,23 million. Further, pursuant to order dated 19-5-2000 the second auction proceedings were conducted on 24-6- 2000 at the site, however, no bidder participated in the auction proceedings which fact was reported by the Court Auctioneer to the Court on 11-8-2000.
3. On the petition of the respondent Bank for the third time on 2-5-2002 auction was ordered by the learned executing Court appointing M/ Sh. Sultan Ahmad, Advocate, Jhang and Mr. Javaid lqbal Bhinder, Advocate Lahore. As joint Court AuctioneeRs, There was, however, no order of the Court modifying the reserve price of Rs,23 million. Consequently, the Court Auctioneers conducted an auction on 9-7-2002 and sold the Mills for Rs,3.5 million submitting their report of auction on 18-7- 2002 to the Court. The respondent Bank objected to the sale of the Mills for Rs,3.5 million. The Court, with the consent of the respondent Bank and the Court Auctioneers, enhanced the sale price to Rs,3.9 million vide its order dated 28-10-2002,
4. The appellants Nos,2, 3 and 4 on 6-8-2002 moved an objection petition in the executing Court for setting aside the sale. The appellants were directed by the executing Court on 27-11-2002 to deposit 15% auction price before 12-12-2002 to enable it to consider the objection petition. The said amount was not deposited. The learned Banking Court accordingly did not consider and dismissed the objection petition filed by the appellants for non-deposit of 15% of the auction price and confirmed the sale on 12-12-2002. The Sale Certificate was issued on 17-12-2002 in favour of the auction purchaser respondent No,2. The auction purchaser submitted an application in the Banking Court on. 15-8-2002 after the lapse of thirty days of the third auction proceedings dated 9- 7-2002 seeking permission to deposit 1/4th of the bid money and also requesting to deposit the remaining 3/4th of the bid money. The Banking Court allowed depositing of 1/4th of the bid money in the Court on 2-9-2002.
5. The learned counsel for the appellants has strenuously emphasized that the reserve price was fixed at Rs,23 million and was not modified by the Court, however the Court Auctioneers, namely, M/s. Sh. Sultan Ahmad, Advocate and Mr. Javaid Iqbal Bhinder, Advocate illegally reduced it to Rs,3.5 million in an arbitrary and fraudulent manner without the permissions of the learned Banking Court; that the auction proceedings were not conducted in accordance with the requirements of Rule 66 of Order XXI, C.P.C. And the directions given by the executing Court; that proceedings of the auction undertaken at the site were a sham and in fact an actual auction was not conducted. The respondent No,2 auction purchaser being a neighbour, of the Court Auctioneers Sh. Sultan Ahmad, Advocate was handed over the mortgaged property/Mills at a throwaway .Price of Rs,3.9 million against the reserve price of Rs,23 million which was not warranted. Relies on Messrs A.M. Rice Corporation and others v. Bank of Punjab and others (2003 CLD 1783) and Mrs, Salma Javaid v.
Deutsche Bank and others (2004 CLD 1560).
6. That the learned executing. Court failed to take into consideration the - mandatory provisions of Order XXI, Rules 84, 85 and 86 of the C.P.C. Under Rule 84. C.P.C. It was mandatory that an amount equivalent to 25% of the sale amount be paid to the Court Auctioneers at the spot when the sale was concluded but the said amount was not paid to the Court Auctioneers rather it was paid in the Court. Relies on Messrs S.P.R.L. Rehman Brothers and others v. Judge Banking Court No,II, Lahore (2000 MLD 1957), Messrs Uawood Flour Mills and others v. National Bank of Pakistan (1999 MLD 3205) and Messrs Magi Chemicals Industries (Pvt.) Ltd. And others v. Habib Bank Ltd. And others (2003 CLD 571)..
7. That according to the requirements of the proclamation dated 2-5-2002 auction was to be conducted amongst the three highest bidders, however, as per report of the Court Auctioneers dated 18-7-2002 only two parties, namely respondent No,2 and one Mr. Naeem Iqbal participated in the auction proceedings, therefore, the Court Auctioneers should not have proceeded with the auction and should have postponed the matter pending reference to the Court for further ordeRs, The auction report has been signed and submitted by only one Court Auctioneer, namely, Mr. Javaid Iqbal Bhinder, Advocate which fact also nullifies the said auction proceedings. In the presence of an objection from the decree-holder Bank and the judgment-debtor the executing Court could not have unilaterally enhanced/ changed the sale price and was bound to set aside the sale and should have ordered its re-auction.
8. Learned counsel for the appellants further relies on Messrs Majid and Sons and others v. National Bank of Pakistan (2002 CLD 1742) to contend that deposit of 15% of actual price by the appellants is not a pre-requisite for hearing the objection petition against the illegal auction proceedings.
9. The learned counsel for respondent Bank has not advanced any arguments on the ground that the said respondent is only interested in the execution of the decree and recovery of its outstanding loan.
10. Learned counsel for respondent No,2 auction purchaser has stated that no illegality has been committed by the learned Banking Court; that the auction proceedings were conducted and concluded fairly and after two failed auctions and consequent upon notice to all the parties; that the Court Auctioneers and the Banking Court have acted in accordance with the law.
11. We have heard the matter at great length and have perused the record with the assistance of the learned counsel for the parties. Keeping in view the description of the Mill which was mortgaged to the respondent No,1, which comprised of the land, building along with its machinery and all the fittings/fixtures thereof, which was duly evaluated by a well reputed firm of valuators, namely, Iqbal Bhai and Company, offering and actually selling the said property for a value of Rs,3.9 million against its reserve price of Rs,23 million is illegal. Reliance is placed on Noor Badshah v. House Building Finance Corporation and others (PLD 2006 Lahore 771).
12. The argument of learned counsel for the appellants has force that the reserve price which was fixed at Rs,23 million could only be modified by the Banking Court and not by the Court AuctioneeRs, Perusal of the so-called proclamation, appended as Annexure-C/2 with the appeal, shows that the proclamation states the reserve price to be .Rs,3,500,000. There is no provision in the law which authorizes the Court Auctioneers to modify the terms of the auction, in particular, the reserve price fixed by Court. It was mandatory upon the Court Auctioneers to have followed the terms of auction settled in the proclamation and to have paid due regard to the provisions of Order XXI, Rule 66 of the C.P.C. Which are reproduced herein below:- "Proclamation of sales by public auction.
(1) Where any property is ordered to be sold by public auction in execution of a decree, the Court shall cause a proclamation of the intended sale to be made in the language of such Court
(2) .
(3) every application for an order for sale under this rule shall be accompanied by a statement signed and verified in the manner hereinbefore prescribed for the signing and verification of pleadings and containing, so far as they are known to or can be ascertained by the person making the verification, the matters required by sub-rule (2) to be specified in the proclamation.
(4) For the purpose of ascertaining the matters to be specified in the proclamation, the Court may summon any person whom it thinks necessary to summon and may examine him in respect to any such matters and require him to produce any document in his possession or power relating thereto."
' It is clear from the record that no notice was given to (B the decree-holder and the judgment- debtor for drawing up the said proclamation. In this respect <>u>MRs, Salma Javaid v. Deutsche Bank A.C. Lahore through Attorney and 4 others (2004 CLD 1560) lays down that "obviously, if the auction has not taken place as alleged, there is no valid sale in favour of respondent No,4, which could be confirmed."
13. The next argument of the learned counsel for the appellants as to non-observance of the mandatory provisions of Order XXI, Rules 84, 85 and 86, C.P.C. Is also supported from the record as the report dated 18-7-2002 of the Court Auctioneer Mr. Javaid Iqbal Bhinder, Advocate, does not mention deposit of 1/4th amount of Rs,3.5 million, the highest bid by the successful bidder with the Court Auctioneers at the time and place of auction. The said amount was deposited later with the Court by the successful bidder. There is a reference in the auction report about the receipt of a pay order amounting to Rs,200,000 from Mr. Jamil Ansari the successful bidder and that too has been stated to be retained by the Court Auctioneer. But the fate of this pay order or its amount is not ascertainable from the record of the proceedings. The record further reveals that after thirty six days of the impugned auction an application was moved on 15-8-2002 by the auction purchaser to the Banking Court seeking permission to deposit 25% of the sale amount. The Banking Court allowed the said deposit of 1/4th of the bid money on 2-9-2009 after a lapse of fifty five days of the said auction. The failure on the part of the successful bidder to pay 25% of the reserve price on the spot to the Court Auctioneer was sufficient to vitiate the whole proceedings as is required under Order XXI, Rule 84, C.P.C. Which provides that in the absence of failure of the deposit of 25% of the purchase money to the officer conducting the sale, the property shall forthwith be resold. Reliance is placed upon Messrs Dawood Flour Mills and others v. National Bank of Pakistan (1999 MLD 3205) wherein it is held as under:-- "The auction-purchaser was required to pay immediately after he was declared to be the purchaser, 25% of the bid money to the Court auctioneer and in default of such deposit the property shall be resold. Learned counsel for the alleged auction purchaser admits that such a deposit was not made and instead a cheque in the sum of Rs,1,200,000 was handed over to the officer conducting the auction. It is not clear from the record as to when the cheque was cashed.
However, this fact is certain that the requisite amount was not deposited or handed over to the officer conducting the sale. The consequence of this default is that the property was to be resold forthwith. It was not done by the Court auctioneer. Thus, no sale took place in favour of the alleged auction-purchaser on 12-9-1998 as because of the failure of the purchaser to make the required deposit, sale stood nullified by operation of law. Needless to say that no resale took place. The manner and mode in which payment was to be made is prescribed by law, and the consequence also laid down in law in clear terms. Over and above this, the matters were made clear in terms of proclamation itself. A cheque can, in no circumstances, be held to be a substitute for the deposit required to be made under the law. The learped Banking Court has dealt with this objection in a very callous manner. This lapse on the part of the Court auctioneer, as seen in the light of patent fact that property worth fifty millions had been managed to be sold for less than five millions also supports the contention of the learned counsel for the appellants that there was fraud in the conduct of sale. Even if we were to hold that there was no intentional fraud, the said lapse on the part of the auction/ purchaser and consequently of the executing Court, constituted a material irregularity within the meaning of Order XXI, Rule 90, C.P.C. It was held in Manilal Mohanlal v. Sayed Ahmed (AIR 1954 SC 349) that,the provisions of Order XXIX, Rules 84 to 86 are mandatory and upon non-compliance with this provision there is no sale at all and the sale proceedings were completely a nullity. It was further observed that the very fact that the Court was bound to re-sell the property in the event of default shows that the previous proceedings for sale were completely wiped out as they do not exist in the eye of law."
14. Further irregularity appearing from the record is that under Order XXI, Rule 85, C.P.C. The remaining 3/4th amount was to be deposited with the Court within fifteen days from the date of the sale. Record does not show that any such amount was ever deposited. When confronted with this, the learned counsel for the auction purchaser had no answer to offer.
15. The argument of the learned counsel for the appellants that the Court had appointed two Court Auctioneers while the report was submitted by only one of them, thus, the Court acted mechanically by entertaining the said report and by acting on it. We observe that such action by the executing Court disregarding the mandatory provisions of the law and non-adherence of the directions of the said Court is contrary to law. In fact, the Banking Court was bound to annul the auction proceedings and offer the property for resale.
16. We also consider that the order dated 27-11-2002 requiring deposit of 15% of actual price by the appellants for entertaining the objection petition has no legal basis or authority in law for the same.
Reliance in this respect has been placed upon Messrs Malid & Sons and others v. National Bank of Pakistan (2002 CLD 1742) wherein it has been held as under:-- "In view of the clear and unambiguous terms of section 18(6) of the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 and as interpreted by the honourable Supreme Court of Pakistan in the case of Pakistan Industrial Credit and Investment Corporation Limited, Peshawar Cantt. And others v. Government of Pakistan through Collector Customs, Customs House Jamrood Road, Peshawar and others (2002 CLD 1), we find that unlike Order XXI, rule 90, C.P.C., the application whereof stands excluded, the Banking Court has to decide the claim or objection in respect of attachment or sale of any property within 30 days and upon a decision thereon if it is found that the objections were mala fide or filed with ulterior motives, penalty at a rate up to 20% of the sale price of the property for the period of delay can be imposed."
' It has been further held in the above judgment as under:-- "Having thus examined the case we find that the learned Executing Court has acted in violation of law as contained in the Statute and as declared in the said judgment, by the honourable Supreme Court by directing the appellant to make a deposit of 20% of the sale proceeds as a condition precedent for the hearing of the objection."
17. The requirement under section 19(7)(a) Financial Institutions (Recovery of Finances) Ordinance, 2001 is that the Banking Court, inter alia, will entertain the objection petition in respect of sale of mortgaged property and shall complete such investigation within 30 days of filing of the objections. Under Clause (b) of the Section ibid if the objections are found by the. Banking Court to be mala fide or filed merely to delay the sale of the property, it shall impose a penalty upto 20% of the sale proceed of the property. Therefore, the requirement for depositing upto 20% of the sale proceed could be imposed by the learned Banking Court after making necessary investigation on the objection petition filed by the appellant and not as a prerequisite condition to consider it.
18. In view of the above discussion, we find the auction proceedings dated 9-7-2002, order dated 12-12-2002 rejecting objection petition and order dated 17-12-2002 issuing Sale Certificate passed by the learned Banking Court-I, Faisalabad, to be illegal and nullity in the eye of law and, as a consequence, the mortgaged property is ordered to be re-auctioned/re-sold. Appeal is allowed with no order as to costs.