' ABID AZIZ SHEIKH, J.---This judgment will dispose of the instant appeal as well as the connected F.A.O. No,166 of 2007, as both the appeals are against the same impugned order dated 7-12-2007 and common question of law and facts are involved in both these appeals.
2. This appeal filed under section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 against the order dated 7-12-2007 passed by the learned Judge Banking Court No,1, Multan, whereby the objection petition of respondent No,1 was accepted and sale of mortgaged property in favour of the appellant, was set aside.
3. Brief facts in this case are that Messrs Munawar Hasham Cotton Factory situated at Quetta Road, Dera Ghazi Khan, is a partnership firm, which obtained a cash finance facility from the Allied Bank Limited (respondent No,7) in the year 2000. To secure the finance, respondents Nos.1 to 5 mortgaged their property in favour of the aforesaid financial institution through mortgage deeds registered on 3-8-2000. Allied Bank Limited also got memorandums of deposit and title deed executed by the owners of the property including respondent No,1 for the purpose of equitable mortgage in its favour. Subsequently the firm could not adjust the outstanding finance facility, resultantly, the Allied Bank Limited after giving notice under section 15 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, auctioned the property to the appellant being successful bidder for amount of Rs,31,10,000 which was subsequently confirmed by the Auction Committee of the Bank on 10-5-2004 and the sale deed of the Cotton Factory was registered on 19-6-2004.
Against the said auction objection petition was filed by some of the owners of the mortgaged property namely Khalifa Riaz Ahmad, Khalifa Hashim Riaz and Khalifa Noman Riaz, (respondents Nos.4, 5 and 6). The objection petition was dismissed by the learned. Banking Court on 28-7-2004, against which order, F.A.O. No, 170 of 2004, was filed by respondents Nos.4, 5 and 6 but the same was withdrawn on 27-7-2006. After the withdrawal of the appeal, respondent No,1, who is also one of the owners of the mortgaged property also filed objection petition on 3-8-2006 before the learned Judge Banking Court No,1 at Multan, along with an application under section 5 of the Limitation Act. The aforesaid application was duly replied by the appellant. The learned Banking Court vide order dated 7-12-2007 accepted the objection petition and the auction proceedings dated 6-5-2004 of the mortgaged property in favour of the appellant, were set aside. It was also directed that Bank/respondent No,7 shall also pay penalty at the rate of 15% of the sale proceed amounting to Rs,31,10,000 on account of the committing irregularity while conducting the auction of the mortgaged property. The appellant being the auction purchaser has assailed the aforesaid order through this appeal whereas the Allied Bank Limited also challenged the aforesaid impugned order and the penalty on the bank at the rate of 15% of the sale proceeds imposed, through a separate F.A.O. No, 166 of 2007.
4. The learned counsel for respondent No,1 raised a preliminary objection that as the auction was conducted under section 15 of the Financial Institutions (Recovery of Finances) Ordinance 2001, which section is already declared ultra wires of the Constitution by this. Court in judgment reported as Muhammad Umer Rathore v. Federation of Pakistan (2009 CLC 257), therefore, both the appeals have become infructuous. Further argued that the appellant claims to be the highest bidder, who cannot be treated as an "aggrieved person" for filing an appeal under section 22 of the Ordinance ibid. The learned counsel for the appellant in response to the preliminary objection argued that before passing of the judgment dated 23-12-2008 by this Court in case of Muhammad Umer Rathore (supra), the sale deed was already executed, sole proceed stood adjusted and the possession of the mortgaged property was also delivered to the appellant, therefore, the case of the appellant falls under para 31 of the judgment in the case of Muhammad Umer Rathore (Supra) where such transactions are protected being past and closed transactions. Further argued that the appellant was the auction purchaser, who has not only paid the entire auction amount but sale deed was also executed in his favour and possession was also delivered, therefore, he is an "aggrieved person" in terms of section 22 of the Ordinance 2001 to file an appeal against the cancellation of auction proceedings by the learned banking Court. The learned counsel for the Bank in connected R.F.A. No,166 of 2007 adopted the same response.
5. We have heard the learned counsel for the parties on the preliminary objection. It is admitted position that after the confirmation of the auction on 10-5-2004 by the Bank's auction committee, the total sale proceed was paid by the appellant and the sale deed was duly executed on 19-6- 2004 in favour of the appellant and the possession of the mortgage property was also handed over to him therefore, the transaction falls under the purview of past and closed transaction which is not in conflict with the law laid down by this Court in the case of Muhammad Umer Rathore (Supra), as held in para No,31 of the aforesaid judgment. Regarding the other preliminary objection we are of the view that the appellant being the auction purchaser against the consideration and having already registered sale deed dated 19-6-2004 in his favour and the possession of the property also delivered to him, the cancellation of the auction proceedings will undoubtedly effect the rights of the appellant, therefore, he is an "aggrieved person" for filing an appeal under section 22 of the Ordinance ibid .The case-law relied upon by the learned counsel for respondent No,1 only related to the rights of a "bidder" and therefore, inapt to the facts and circumstances of this case. In view of the above the preliminary objections raised by respondent No,1 are over ruled and we are inclined to decide the appeals on merits.
6. On merits the learned counsel for the appellant argued that the objection petition filed by respondent No,1 was under Order XXI, Rule 89 of the Civil Procedure Code, 1908 (C.P.C.) which was subject to deposit of 5% of the purchase money but no such amount was deposited by respondent No,
1. Further submits that once application under Order XXI, Rule 89, C.P.C. Is filed, it amounts to abandon the right to file an application under Order XXI, Rule 90 of the C.P.C. On the basis of fraud or irregularity, therefore, the objection petition could not be allowed on the basis of any irregularity as alleged by respondent No, 1 . Further argued that application under section 5 of the Limitation Act was not maintainable, as the Financial Institutions (Recovery of Finances) Ordinance 2001 is a special law and section 5 of the Limitation Act is not applicable. Reliance is placed on the case of Mir Wali Khan and another v. Manager, Agricultural Development Bank of Pakistan, Muzaffarqarh and another (PLD 2003 SC 500). Submits that the respondent/No,1 is admittedly a mortgagor and therefore, under section 15 of the Ordinance ibid, the Bank had the right to auction and transfer the mortgaged property after giving due notice 'rhich requirement was complied with. Submits that the impugned order was passed without taking into consideration that earlier against the same auction proceedings, objection petition was filed by respondents Nos. 4 to 6 and petition was dismissed on 28-7-2004, by the learned Banking Ccurt, against which order, F.A.O. No, 170 of 2004 was withdrawn from this Court. The learned counsel submits that the objection petition is not only hit by principle of res judicata but also proved the collusion of respondents Nos.1 to 6. Submits that after the auction proceedings the entire accounts were filed before the learned Banking Court, as required under section 15 of the Ordinance ibid. The learned 'counsel for the appellant contends that Munawar Hussain respondent No,2 was the attorney of respondent No,1, through power of attorney dated 10-9-2003, who appeared during the hearing of the first objection petition, which was dismissed on 28-7-2004 and therefore, it cannot be argued that respondent No,1 only came to know about the auction on 2-8-2006. Argued that the plea that respondent No,1 was not in Dubai from September, 2003 to August, 2006 is belied from the fact that the suit was filed by respondent No,1 against Wapda Authorities in September 2004 before the learned Senior Civil Judge Dera Ghazi Khan and in para 4 of the said suit it is mentioned that property was auctioned in faovur of the appellant, therefore, there was no occasion to condone the limitation. Further contends that respondent No,1 was in Pakistan is also evident from the fact that he got married on 10-12-2004 as marriage certificate is on record. Regarding valuation of property it was argued that the property was valued at Rs,2.6 Millions on 7-9-2001 whereas it was auctioned for Rs,3.1 millions. Contends that in any case, in the objection petition the valuation of the property was not under challenge. It is argued that all the three notices under section 15 of the Ordinance were duly issued to respondent No,1 but the learned Banking Court without framing of any issues and recording of any evidence held that notices were not issued. The learned counsel further contends that objection petition was time barred as under section 15(11) of the Ordinance, no period of limitation is provided, therefore, the Article 166 of the Limitation Act will apply as per provisions of section 7(2) of the Ordinance, under which the period of limitation for filing the objection is 30 days from the date of sale. Further contends that objection petition was collusive and afterthought as subsequent to the auction vide letter dated 29-7-2004, respondent No,1 himself requested the bank to release the additional security and since the security was released this objection petition was filed collusively. Submits that the impugned order is patently illegal and without jurisdiction, and therefore, the same is liable to be set aside. The learned counsel for the appellant-Bank in the connected F.A.O. No, 166 of 2007 adopted the aforesaid arguments and in addition submits that as the auction proceedings were valid, there was no occasion for imposing penalty on the Bank.
7. Conversely, the learned counsel for respondent No,1 argued that the property which was mortgaged with the bank was not the property of the firm but belongs to the individuals including respondent No,
1. Submits that failure to issue notice under section 15 of the Ordinance ibid will render the auction proceedings, as void ab initio. Reliance is placed on the case of Izhar Alam Faroogi, Advocate v. Sheikh Abdul Sattar Lasi and others (2008 SCM R 240). Further submits that the property was auctioned on an inadequate price. In this regard the learned counsel referred to the evaluation reports of year 2001 and submits that in the year 2001 the total valuation of the building and machinery was 5.4 million whereas reserved price was fixed at Rs,2.8 million and the property was auctioned at Rs,3.1 millions, therefore, it was rightly set aside by the learned Banking Court. In response to a court query, the learned counsel for respondent No,1 further clarified that his objection was only to the extent of respondent No,1 and he seeks setting side of the auction to his extent only. Reliance is placed on cases of Izhar Alam Faroopi, Advocate v. Sheikh Abdul Sattar Lasi and others (2008 SCM R 240), Tehsil Nazim TMA, Okara v. Abbas All and 2 others (2010 SCM R 1437).
8. We have given our anxious consideration to the arguments of the learned counsel for the parties and have gone through the record.
9. We have gone through the impugned order dated 7-12-2007 passed by the learned Banking Court No,1 Multan. The main reason for setting aside the auction proceedings was that the bank failed to issue notice to respondent No,1 in terms of section 15(2)(3) and (4) of the Ordinance, 2001 and it was for this reason that even the question of limitation was also decided in favour of the respondent No,
1. There is no cavil with the proposition that the provisions of section 15 subsections (2), (3) and (4) of the Ordinance are to be adhered strictly to enable the bank to auction the mortgaged property without intervention of the Court, however, the stance of the bank (respondent No,7) as well as of the appellant was that all the three notices as required under section 15(2)(3) and (4) of the Ordinance were issued to respondent No,1, therefore, the auction proceedings were not tainted with any procedural defect. No doubt the said assertion of the Bank and the appellant was denied by respondent No,1 but this being a factual controversy touching the root of the matter should have been decided by the learned Banking Court after framing of issues and recording of evidence of the parties. Even the other questions raised by the learned counsel for the parties including question of limitation, inadequacy of auction price, irregularity in the sale proceedings and collusiveness of the parties were also the mixed questions of law and facts, which could only be resolved after recording of evidence and giving reasonable opportunity to the parties to produce the documents and to cross-examine the witnesses of both sides.
10. We have also noted that property,- which was auctioned by the Bank, was mortgaged by various individuals including respondents Nos.1 and 4 to 6. The objection petition against the auction proceedings in favour of the appellant was earlier challenged by respondents Nos.4 to 6 and their objection petition was dismissed by the learned Banking Court on 28-7-2004. Against the said order F.A.O. No, 170 of 2004 was filed by respondents Nos. 4 to 6, however, the said appeal was also dismissed as withdrawn on 27-7-2006, therefore, the auction of the mortgaged property to the extent of respondents Nos. 4 to 6 had already attained finality. This aspect of the matter was not taken into account by the learned Banking Court while deciding the objection petition of one of the mortgagors i.e, respondent No,1 and the auction proceedings in respect of the entire property were set aside vide impugned order dated 7-12-2007. We are, therefore, of the view that even for this reason the impugned order is not sustainable and the learned Banking Court was bound to decide the fate of auction proceedings only to the extent of respondent No,1, who filed the objection petition. This fact of the matter is also admitted by the learned counsel for respondent No,l.
11. In view of the above discussion the impugned order dated 7-12-2007 passed by the learned Banking Court, is set aside. Resultantly, both the F.A.Os. Nos. 165 of 2007 and 166 of 2007 are allowed and the matter is remanded back to the learned Banking Court No,1 Multan, who will decide the objection petition of respondent No,1 afresh only to the extent of his share in the auctioned property, after framing of issues and recording of evidence. As the matter relates to the year 2004, this Court is sanguine that the learned Banking Court will decide the same expeditiously. The appeals are allowed in the aforesaid terms.