' Gulzar Ahmed, J.--The appellant, National Bank of Pakistan, has extended finance facility of Rs, 1.2 million to Respondent No, 1 Paradise Trading Company. Respondent No, 2, Bashir Ahmed, was its sole proprietor while Respondent No, 3 Mrs. Tehmeena is the wife of Bashir Ahmed. Besides the other securities which were furnished for securing the said finance facility, Respondent No, 3 created an equitable mortgage of her property being House No, 1115/A Off Shami Road, Lahore Cantt., (the Property) and in this respect signed, executed and delivered to the appellant a memorandum of deposit of title deeds dated 23.04.1990 along with certified copy of the title deed, extract from general rent register, "approved building plan,' evaluation certificate, copy of FIR notifying loss of original title deeds, non-encumbrance certificate issued by the Sub-Registrar, Lahore, permission to mortgage issued by Military Estate Officer (MEO) and affidavit sworn by Respondent No, 3 of loss of original title deeds. The appellant's dues were not paid, consequently the appellant filed a suit for recovery under Banking Tribunals Ordinance, 1984. The suit was contested by Respondents No, 3 and 4, who filed their, separate replies. Respondent No, 3 took up objection that no equitable mortgage was created by deposit of certified copy of title deeds. The Banking Tribunal, however, after relying upon the documents, given by Respondent No, 3, for creating equitable mortgage found that such mortgage was valid. In the end, the Banking Tribunal vide its order dated 12.01.1994 decreed the suit for Rs, 27,02,587.86 against Respondents No, 1 to 4 jointly and severally and against Respondent No, 7 as an Indemnifier in respect of the value of insured goods and ordered that the decree in the first instance be executed by the sale of mortgaged properties. The appellant initiated execution in which the properties were attached.
Respondents No, 5 and 6 filed objections claiming to have purchased, in good faith, the property through registered sale-deed dated 21.04.1991 for a consideration of Rs, 7,50,000/- and original title deeds were handed over to them by Respondent No,
3. The Banking Tribunal through its order dated 01.02.1995 rejected the objections of Respondents No, 5 and 6 and directed the Court Auctioneer to proceed with the auction of the property. Aggrieved by this order, Respondents No, 5 and 6 filed Writ Petition No, 3305 of 1995 in the Lahore High Court, Lahore, which came' to be decided by a learned Division Bench by the impugned judgment dated 17.10.2000 declaring the attachment and sale of the property to be without lawful authority and of no legal effect. Leave to appeal was granted vide order dated 15.09.2003 which is as follows:-- "This petition is directed against a judgment dated 17.10.2000 of the Lahore High Court passed in Writ Petition No, 3305 of 1995.
2. The petitioner-Bank had allowed a cash finance facility of rupees two millions to Respondent No, 1 with Respondent No, 2 as its sole proprietor. Respondent No, 3, namely, Mrs. Tehmina Bashir is the wife of Respondent No,
2. The security offered by Respondents No, 1 and 2 for the re-payment of the above-mentioned loan, inter alia, included a house Bearing No, 11/15-A Off Shami Road, Lahore Cantt., which was owned by the third respondent i.e, Mrs. Tehmina Bashir above-mentioned and which property was required to be mortgaged with the petitioner-Bank through deposit of title deeds. For the purpose of creating the said mortgage the said Respondent No, 3 was required to deposit the original sale/title deed of the said house and when called upon to do so she informed the petitioner-Bank that she had lost the original title deed and in support of her said claim the said respondent produced before the petitioner-Bank a , certified copy of a report dated 17.12.1989, Bearing No, 31 lodged at Police Station Shalimar of Distt. Lahore. She also swore an affidavit dated 23.04.1990 deposing therein that she was the absolute owner in possession of the property in question through a registered sale-deed dated 05.06.1985 having purchased the same from Arshad Saeed and Azmat Saeed sons of Anwar Saeed; that she had not created, any lien, charge or encumbrance on the said property with respect to which she was creating an equitable mortgage in favour of the National Bank of Pakistan for the purpose of securing the cash finance facility of an amount upto rupees two million which was allowed by the said Bank to M/s. Paradise Trading Company Lahore; that she had mis-placed the above mentioned original sale-deed dated 05.06.1985 which was, therefore, not in her possession or .Power; that she had not deposited the said original sale-deed with any Bank, corporation or any other financial institution etc, for the purpose of raising any loan and through the said affidavit she also made a commitment to the petitioner-Bank that she shall deposit the said title deed with it as and when the same became available.In the circumstances, Respondent No, 3 secured a certified copy of the said sale-deed dated 05.06.1985 from the Sub-Registrar of Lahore Cantt. And deposited the same with the petitioner-Bank creating an equitable mortgage with respect to her property in question. She also obtained a no objection certificate from the Lahore Cantonment Board grating her permission to create the said charge on the said property. She then executed a Memorandum dated 23.04.1990 regarding the Deposit of Title Deeds with the petitioner-Bank and also provided the Bank with a Non-Encumbrance Certificate dated 29.11.1989 issued by the Sub-Registrar of Lahore with respect to the said property. She also executed a guarantee dated 15.04.1990 in favour of the Manager of Sunny-View Branch of the National Bank of Pakistan, Lahore and became the guarantor committing her person to satisfy the liability of Respondents No, 1 and 2 towards the petitioner- Bank.
3. On the failure of the said Respondents No, 1 and 2 to discharge their liabilities towards the petitioner-Bank the said Bank instituted a suit for the recovery of Rs, 27,02,587.86 which was decreed in favour of the petitioner-Bank and against the first four respondents.
4. In the meantime it came to the notice of the petitioner-Bank that Respondent No, 3 was trying to sell the said mortgaged property to one Muhammad Rafiq who.Is the father of present Respondents No, 5 and 6. The petitioner-Bank consequently sent a registered notice A.D. Dated 28.02.1991 to the said Muhammad Rafiq notifying him of the said property being mortgaged with the petitioner-Bank which letter was, as per the petitioner-Bank, duly received by the said Muhammad Rafiq. The petitioner-Bank also issued notice through publication in the 'Daily Jang' and the 'Daily Nation' on 09.08.1991 regarding the petitioner-Bank's mortgagee interest in the property in question. The petitioner-Bank took further step to notify the Military Estate Officer of the Lahore Cantonment through a communication dated 10.04.1991 about the above-noticed charge on the property in question and about the efforts of the mortgagor to surreptitiously sell the said property and thus, prejudicing the rights and the interest of the petitioner-Bank in the same.
5. Pursuant to the execution proceedings the learned Banking Court, inter alia, directed the sale of the said property and appointed an auctioneer for the purpose but before the said house could be auctioned, an objection petition was submitted by Respondents No, 5 and 6 stating therein that they had purchased the said property from Respondent No, 3 for a consideration of Rs, 7,50,000/- and submitted further that the said property was thus not liable to be sold in execution of the above-mentioned decree. The said objection petition of Respondents No, 5 and 6 was dismissed by the learned Executing Court through an order dated 1.2.1995 by holding that the property in question stood legally and validly mortgaged with the petitioner-Banking; that Respondents No, 5 and 6 were not bona-fide purchasers of the said property for value in good faith and consequently directed the sale of the property. Aggrieved of this order, Respondents No, 5 and 6 approached the Lahore High Court through the above-mentioned Writ Petition No, 3305 of 1995 which was allowed by the said Hon'ble Court through a judgment dated 17.10.2000 which is the subject matter of this petition before us.
6. The learned counsel for .The petitioner submits that an equitable mortgage could be validly and legally created without depositing the original title deeds and by merely depositing a certified copy/copies of the title documents where the mortgagee was made to believe that the original title documents had been lost and where the mortgagee had exercised due diligence ensuring the non-availability of such original documents. Adds that in the present case the respondent- mortgagor had provided a certified copy of a report lodged by her with the concerned police station regarding the loss of the said documents and she had also sworn an affidavit deposing about the said fact which would demonstrate that the petitioner-Bank had taken the necessary steps as a result whereof it stood assured that the original title documents were not available.
Adds that the petitioner-Bank had exercised further caution and had also secured an irrevocable general power of attorney from Mrs. Tehmina Bashir authorising the Bank, inter alia, to alienate the property in question. Reliance in this connection had been placed on AIR 1932 Calcutta 798, AIR 1936 Lahore 286, AIR 1938 Rangoon 149 and AIR 1939 Lahore 398. The learned counsel further submitted that the case of Mst. Rabia Bai vs. National Bank of Pakistan and another reported as NLR 1981 CLJ 371 which had been relied upon by the purchaser-respondent and which had in turn been relied upon by the Hon'ble High Court was a case which was clearly distinguishable on facts.
7. The learned counsel added that it transpired only during the Court proceedings initiated at the instance of the alleged purchasers of the property in question that the original title documents were had become available with the mortgagor-respondent; that she had sold the mortgaged house to Respondents No, 5 and 6 and that she had handed over the original documents of her title to them, Submits that the question is whether Respondent No, 3 should be allowed to reap the fruits of the fraud committed by her thereby depriving the petitioner-Bank of a valuable security.
8. The learned counsel further argued that the alleged sale of the house in question was a fake, fraudulent and a sham transaction designed only to defraud the creditor bank as was obvious from the fact that the house built on an area of more than one kanal of land situated in a prime locality of Lahore Cantt; and which was worth much more than six millions of rupees was, as per the sale-deed, sold only for a song i.e, for Rs, 71/2 lacks which 'alleged price could never be said to be a valuable consideration for the property in question. Also submitted that the declaration by the Hon'ble High Court that Respondents No, 5 & 6 were bona fide purchasers of the said property was a finding given without a trial of the said proposition; without the petitioner having had an opportunity to- show otherwise and without an iota of evidence that the alleged purchasing respondents had taken any step to inquire or verify about the encumbrance or otherwise of the said property. The learned counsel contended that such a finding by the learned High Court in such like proceedings and in suchlike manner could never be sustained either in law or in equity.
9. Referring to the provisions of Section 53 of the Transfer of Property Act, 1882, the learned counsel for the petitioner also contended that the petitioner would, at all times, be within its right to establish that the transfer of the property in question was a fraudulent transfer made with the obvious intention to defeat the creditor and finding to the contrary in Para 13 of the impugned judgment was illegal and invalid.
10. Having heard- the learned counsel for the petitioner and having examined the available record, v find that the submissions of the learned counsel are, at least, prima facie not without merit and the questions -noted in Paras 6, 7, 8 and 9 above do require' an authoritative pronouncement by this Court. This petition is, therefore, allowed and leave is granted, inter alia to consider the above question.
11. The operation of the impugned judgment of the High Court shall remain suspended till the disposal of the appeal".
2. It may also be noted that one Mst. Afifa Sikandar claimed to have purchased the property vide sale-deed dated 28.03.2003 from Respondents No, 5 and 6. She filed application in the Banking Court for setting aside the order of confirmation of sale of the property which was dismissed vide order dated 06.05.2005. She filed EFA No, 410 of 2005 which also came to be dismissed vide judgment dated 06.03.2009 of a learned Division Bench of the Lahore High Court, Lahore. Leave to appeal was granted vide order dated 10.06.2009 on the ground that leave has already been granted in Civil Appeal No, 1366 of 2003 and both the appeals were ordered to be heard together:
3. We have heard the learned counsel for the parties and have gone through the record.
4. It 'was vehemently argued by Kh. Muhammad Farooq, learned Sr. ASC for the appellant that the equitable mortgage created by Respondent No, 3 of the property by depositing certified copies of the title deeds and giving of FIR and affidavit stating that the original title deeds have been lost was a valid mortgage in that not only the documents for creating of equitable mortgage are to be looked into but also the intention of the parties is of paramount importance and in this respect he has also referred to the execution of irrevocable. General power of attorney by Respondent No 3 in favour of the appellant. He further contended that when the appellants came to know that Respondent No 3 is trying to sell the mortgaged property, to Respondents No 5 and 6, appellant through letter dated 28.02.1991 informed Haji Muhammad Rafique, father of Respondents No, .5 and 6, of the property being mortgaged with the appellant and the fact that the property is mortgaged was published in the daily "Jang' and the daily 'Nation' dated 09.08.1991. Vide letter dated 10.04.1991 the MEO Lahore Cantt was also infornied of the mortgage of the property in favour of the appellant.
He contended that there was no bona fide sale of the property by Respondent No, 3 to Respondents No, 5 and 6 and such sale of the property in any case is not binding upon the appellant which is illegal and meant to defraud the appellant of the valuable security, against the finance availed by Respondents No, 1 and 2, in respect of which a decree has already been passed by the Banking Tribunal and no appeal has been filed against the decree. He further contended that the decree having' attained finality, the impugned' judgment which arose from the proceedings in execution had in fact modified the decree. He has further contended that criminal prosecution initiated by the appellant against Respondent No, 3, ended by judgment dated 22.11.1994 of the Lahore High Court reported as Mrs. Tehmina Bashir v. Abdul Rauf & others (1995 CLC 973) while quashing the criminal proceeding, the Court has observed that as mortgage runs with the property it can be proceeded against for the satisfaction for decree. In support of his submissions, the learned Senior ASC for the appellant has relied upon the cases Mst. Rabia Bai v.
National Bank of Pakistan & another (NLR.1981 CLJ 371); Kanigalla Prakasa Rao v. Nanduri Ramakrishn'a Rao & others (AIR 1982 Andhra Pradesh 272); Punjab & Sindh Bank Ltd., Lyallpur v.
(Firm) Ganesh Das-Nathu Ram & other (AIR 1935. Lahore 721); Punjab & Sindh Bank Ltd., Guiranwala v. Amir Chand &. Others (AIR 1930 Lahore 731); Amulya Gopal Maiumdar v. United Industrial Bank Ltd., & others (AIR 1981 Calcutta 404); and &I. Nathan v. Maruthi Rao & others (AIR 1965 SC 430).
5. On the other hand, Mr. Shahid Hamid, learned Sr. ASC for Respondents No, 5 and 6, has contended that despite having knowledge of the sale of said property by Respondent No, 3 to Respondents No, 5 and 6, the appellant did not implead, Respondents No, 5 and 6 as defendants in the suit, which was a mandatory requirement. He contended that there being no decree against Respondents No 5 and 6, they had no occasion file an appeal against the decree of the Banking Tribunal. He further contended that there was no advertisement of mortgage, no lien was marked with MEO and no token registered mortgage and on these submissions contended that no case for mortgage in terms of Section 58 of the Transfer of Property Act was made out. He further contended that no equitable mortgage can be created without delivery of original title documents and in this respect relied upon the cases Sadiq Ali & 2 others v. National Bank of Pakistan & 2 others (2002 CLD 1245); Allied Bank of Pakistan Limited v. Messrs Sainjees Restaurant & Hotel through its partners & 2 others (1985 CLC 391); Haji Abdullah Halepota v. Allied Bank of Pakistan Limited (1990 M LD 532); Mst. Irshad Bibi v. Muslim Commercial Bank Limited through Manager & 3 others (2003 CLD 46); Mst. Rabia Bai v. National Bank of Pakistan & another (NLR 1981 CLJ 371); Hem Raj & another v. Simla Banking & Industrial Co. Ltd. & others (AIR 1935 Lahore 10); Punjab & Sindh Bank. Ltd. Lyallpur v. (Firm) Ganesh Das-Nathu Ram & others (AIR 1935 Lahore 721); Punjab & Sindh Bank Ltd., Lyallpur v.
Gurdot Sindh & another (AIR 1935 Lahore 957); V.E.R.M.A.R. Chettyar. Firm v. Ma Joo Teen & others (AIR 1933 Rangoon 299); Peoples Bank of Northern India Ltd., Lahore v. The Forbes, Forbes, Campbell & Co., Ltd., Karachi & others (AIR 1939 Lahore 398); and (Firm) Jowala Das Govind Ram v. Thakar Das (AIR 1936 Lahore 251). He admitted as a fact that Respondent No, 3 has committed fraud with the appellant. He admitted that no public notice was issued while purchasing the property by Respondents No, 5 and, 6 and as regards the amount of sale consideration, the learned Sr. ASC contended that such amount of consideration in the sale-deed was mentioned because of the rate of stamp duty notified by the Deputy Commissioner. He, however, did not mention the actual amount of sale. He admitted that on 07.05.2003 the property was sold by Respondents No, 5 and 6 to Mst. Afifa Sikandar for consideration of Rs, 6,00,000/- and further contended that there was no collusion between Respondents No, 3, 5 & '6 nor the High Court has modified the decree of the Banking Tribunal.
6. In Civil Appeal No, 732 of 2009 filed by Mst.Afifa Sikandar, Mr. Shahid Hamid, learned Sr. ASC appearing for the appellant has contended that the Banking Court in confirming the sale in favour of Respondent No, 7 namely Muzaffar Ahmed Qureshi has acted illegally inasmuch as such sale and its confirmation was made merely on making application of offer by Respondent No, 7 and not through a proper auction, as provided by law. He contended that such, sale is altogether void and in this respect relied upon the case of Muhammad Attique v. Jami Limited & others (PLD 2010 SC 993).
7. On the other hand, Kh. Muhammad Farooq, learned Sr. ASC appearing for Respondent No, 2 National Bank of Pakistan has contended that on the basis of sale of the said property by the Banking Court wherein Respondent No, 7 had deposited with the Banking Court the purchase price of Rs, 60,00,000/- and the appellant has drawn an amount of Rs, 33,74,393.86 in payment of its decretal amount and that the appellant has no subsisting claim for recovery in the matter.
8. The first question that needs to be considered is about the validity of the equitable mortgage i.e, whether by delivering to the appellant along with the memorandum of deposit of title deeds, certified copies of the title deeds will create an equitable mortgage of the property. Section 58 of the Transfer of Property Act provides for various modes of mortgage of immovable property and the of the types of mortgage provided in it is by way of deposit of title deeds and such provision is as follows:- "Mortgage by deposit of title-deeds. (f) Where a person delivers to a creditor or his agent - documents of title to immovable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds".
' The requirement of law, for creation of a mortgage by deposit of title deeds are (i) existence of debt (ii) delivery of documents of title and (iii) intention that the documents of title shall be security for the debt. Before we proceed to dilate' upon the question as to whether equitable mortgage in fact was created in the present case where certified copies of title deeds were delivered to the appellant, we would like to scan the case cited before us. In the case of Mst. Rabia Bai (supra), essence of the case was of delivering to the Bank a forged copy of PTD for creating of an equitable mortgage and, therefore, it was ruled by the learned Single Judge of the High Court that such being not a document of title, as such no equitable mortgage was created. In the case of Kanigalla Prakasa Rao (supra), the dispute was that a prior equitable mortgage in favour of State Bank of India was created by the defendants by depositing certified copy of sale-deed with assurance to the Bank that the original deed was lost. The defendant created another equitable mortgage in favour of the plaintiff and while doing so handed over the original title deed. The Division Bench of the Andhra Pradesh High Court observed that the Bank in accepting the statement of the defendant that the original title deed was in fact lost did not constitute gross negligence and the plaintiff being made aware of subsisting prior equitable mortgage in favour of the Bank, no equities therefore arise in favour of the plaintiff mainly because the original title deed was delivered to him at the time equitable mortgage was created.In his favour. In the case of Punjab & Sindh Bank Ltd., Lyallpur (supra), an equitable mortgage was created on two properties; one building and the other house. In respect of building, a copy of sale-deed was deposited and in respect of the house, a copy of jamabandi was deposited. The Court; in respect of copy of sale-deed held that in the absence of any proof of its original being lost, a copy would not be a document that evidences title and therefore held that the equitable mortgage in favour of the Bank is not proved. In respect of jamabandi, it was held that such was not a sufficient document to constitute an equitable mortgage. In the case of Punjab & Sindh Bank Ltd., Gujranwala (supra), Defendants No, 2 and 3 have created an equitable mortgage by deposit of title deeds in respect of three properties with the Bank. The Bank obtained decree but in the meanwhile Defendant No, 2 affected another mortgage in favour of Amin Chand, who also filed a suit and obtained decree on the basis of mortgage. The Division Bench of the Lahore High Court, while dealing with the question of prior and subsequent mortgage also dealt with the question of equitable mortgage by deposit with the Bank a copy of the registered deed of relinquishment executed by defendant Dewan Chand in favour of his father Amin Singh and in consideration Dewan Chand got the property in dispute. A copy of this document was deposited by Dewan Chand with the Bank as title deed and the Court came to the conclusion that this document was the only document of title to the property held by Dewan Chand and the deposit of this document with the Bank was sufficient to create an equitable mortgage, and thus came to the conclusion that the Bank had prior lien on the property in the suit.
In the case of Amulya Gopal Majumdar (supra), the question was whether delivery to bank an agreement for sale of an immovable property could be considered as a title document for creating an equitable mortgage. On facts it was noted that initially for a finance of Rs, 20,50,000/- agreement for sale was delivered to the Bank but subsequently the debtor on obtaining of further finance from the Bank delivered registered deed of the property who by then have become owner of the property. In such circumstance, the learned Division Bench observed that at the time when the agreement was delivered to the Bank, the mortgagor was in lawful possession of the property and possessory title could very well in law be furnished as security for the mortgage and on deposit of the registered deed on obtaining of further loan the equitable mortgage became perfect as the debtor has acquired the title to the property. In the case of K.J. Nathan (supra"), Defendant No, 1 had obtained loan from the Bank and while executing pro notes has also delivered on 26.01.1947 list of title deeds of his properties by way of equitable mortgager. The tile deeds at that time were in the custody of Kumbakonam Bank. The loan amount obtained by Defendant No, 1 from the Bank, among others, was used in paying the loan of Kumbakonam Bank and obtaining the title deeds from it. Title deeds were obtained and delivered to the Bank on 10.05.1947. An agreement dated 05.07.1947 was made between the Bank and Defendant No 1 which was presented for registration on 31.10.1947 and registered on 22.06.1948. In this agreement defendant acknowledged depositing with the Bank title deeds of his property and the date of such deposit was given as 10.05.1947. The Defendant No, 1 has also executed a mortgage deed in favour of 3rd defendant on 10.10.1947. The trial Court as well as the first appellate Court gave finding that there was no equitable mortgage of the property by Defendant No, 1 in favour of the Bank. Their lordship in the Supreme Court, however, did not agree with such conclusion of the two Courts and expressed their view that even if there was no mortgage by deposit of title deeds on 10.05.1947 but by agreement dated 05.07.1947 such a mortgage was created and in this respect relied upon the intention of the parties in creating of an equitable mortgage by agreement dated 05.07.1947 and that in terms of Section 47 of the Registration Act, the agreement will take effect from 05.07.1947 and thus the mortgage dated 10.10.1947 in favour of 3rd defendant will, not effect equitable mortgage with the Bank. In the case of Sadiq Ali (supra), one Nazir Ahmad had created equitable mortgage on three properties in favour of National Bank of Pakistan. Nazir Ahmad deposited certified copies of title deeds of two properties with affidavit and power of attorney. Sadiq Ali and others were holding the original title deeds of the two properties claiming to be bonafide purchaser for valuable consideration from Nazir Ahmad. The Court did, not accept the Bank's plea that an equitable mortgage was created for the reason that the title documents were not lost and such fact was disclosed by Nazir Ahmed to the Bank., The Court observed that Nazir Ahmad has defrauded the.
Bank and the Bank has to suffer the consequences of such fraud. The Court allowed enforcement of mortgage only to the extent of the property, the original title document of which was deposited with the Bank and not in respect of two other properties. In the case of Allied Bank of Pakistan Limited (supra), the Bank had filed a suit for recovery against M/s. Sainjees Restaurant & Hotel and others. The defendants have obtained finance facilities and among other documents have also deposited documents to create equitable mortgage. Such documents included certified copy of extract from property register card. The Court, after examining the law on the point came to the conclusion that extract from, the Property Register or Jamabandi and documents of similar nature are government record for fiscal or revenue purpose and are not document of title and that these documents are in the nature of presumptive evidence which is rebuttable and not the conclusive and concluded that no equitable mortgage was legally created in favour of the Bank. In the case of Haji Abdullah Halepota (supra), a learned Judge of the High Court of Sindh has held that an allotment letter of a plot was not a title deed in the absence of registered lease/transfer deed no mortgage was created in favour of the Bank. In the case of Mst. Irshad Bibi (supra), MCB had granted finance facility and Irshad Bibi furnished security of equitable mortgage of her property by depositing certified copy of sale-deed, PT-1, LDA letter regarding share of Mst. Irshad Begum, transfer letter of LDA in favour of Irshad Begum, clearance certificate, irrevocable general power of attorney, registered mortgage deed. Agreement to create registered mortgage etc. The Court noted that deposit of duplicate or second copy of title deed creates no equitable mortgage but as there was a registered mortgage and irrevocable general power of attorney and memo. Of deposit of title deeds, original allotment order handed to the Bank the mortgage of the property was made out. In the case of Hem Raj (supra), for obtaining loan from the Bank equitable mortgage of property was created by depositing a copy of sale-deed. The Court observed that copy of deed deposited was not a document of title and no mortgage could be effected by its deposit inasmuch as no good reason has been pleaded or is apparent for extending the doctrine of equitable contracts in a manner to widen the risk of fraud and perjury by virtually giving effect to the proposition that in any case a property may be validly charged by the deposit of copies of document of title in place of documents themselves. The Court held that the doctrine of equitable mortgage required the mortgagor to deprive himself of the possession of document which create a title so as to render him unable to deal with the property upon the assertion that the title is still with him. In the case of Punjab & Sindh (supra), the question was whether equitable mortgage was created by deposit of a certificate of receipt of money and copy of jamabandi entries and mutation entry. Such documents were not considered to be documents of title and it was held that no equitable mortgage was created. In the case of V.E.R.M.A.R. Chettyar Firm (supra), the question was whether a tax receipt, certified copy of survey map relating to the land delivered to the creditor with intent to create security is a mortgage by deposit of title deeds. It was held that such documents were not documents of title. In the case of Peoples Bank of Northern India (supra), the Bank had claimed equitable mortgage of property by Khan Sahib Mian Asmatullah in respect of two properties; one house and other Ice factory. The title deeds of the factory were described as ' map' accompanied by other documents in favour of Khan Sahib Mian Asmatullah. The map appears to have been prepared by a draftsman at the time of execution of promissory note and other documents. The Court found that these documents were not documents of title and no equitable mortgage in favour of the Bank was created. In the case of (Firm) Jowala Das Govind Ram (supra), an equitable mortgage was also sought to be enforced on the basis of documents namely certified copies of mutation entries, jamabandi entries and receipts. The Court concluded that these documents were not documents of title and thus no equitable mortgage was created.
9. The case law, as discussed above, inasmuch as it goes to show is that no equitable mortgage could be found on a forged `document of title nor on entries in the Record of Right or Jamabandi nor on the basis of receipts and maps of the property. Even the allotment letter has not been' considered as a document of title for making an equitable mortgage by deposit of title deeds.
However, there is another category of cases where the copy of relinquishment deed was accepted as a document of title for creation of an equitable mortgage so also an agreement for sale of an immovable property and also list of el properties and subsequent agreement and delivery of title documents was considered to be sufficient document of title for creation of an equitable mortgage for that the -intention of the parties was found to be that of creating security by way of an equitable mortgage. The third category of case is in which certified copies of title deeds were deposited with the Bank for equitable mortgage with an assurance that the original title deeds have been lost and in accepting such assurance it was observed that there was no element of gross negligence on the part of the Bank and equitable mortgage thus was found to be valid Fourth category comprises of three cases, it was noted that where there was no evidence of title documents having been lost or no good reason was assigned for not depositing the original title documents, copies of title documents were not accepted to be the one on the basis of which equitable mortgage could be created.
10. In the present case, as noted above, Respondent No, 3 for securing a loan granted to. The Firm of her husband had delivered to the appellant a duly signed memorandum of deposit of title deeds with certified copy of sale-deed along with a copy of FIR reporting that the original sale-deed has been lost and also an affidavit claiming herself to be the absolute owner of the property by virtue of a registered sale-deed dated 05.06.1985 and that she has not created any lien or charge on the property and that the sale-deed dated 05.06.1985 has been misplaced and is not in her possession and ultimately stated that as and when the sale-deed becomes available, she will deposit the same with the appellant. Such documents are not in dispute and upon their examination we are of the considered opini9n that these documents were sufficient for the appellant to have accepted the assurance of respondent. No, 3 of the original sale-deed being lost and not in her possession and as when the same is found, it will be deposited with the appellant. In face of these documents was it possible for the appellant to probe for ascertaining the truth of the fact of original sale-deed being lost. To our mind, that could not be practically possible. The only thing the appellant was left to rely upon were the assurances given by Respondent No,
3. Thus, it is not a case where Respondent No, 3 has not informed the appellant that the original sale-deed of the property was lost nor is it a case where no good reason has been assigned by Respondent No, 3 for not depositing the original sale-deed of the property. Respondent No, 3, in categorical terms, had informed the appellant, of the original sale-deed being lost and such assertion was substantiated by her own affidavit and the FIR. Memorandum of deposit of title deeds was signed by Respondent No 3 albeit with certified copy of sale-deed with FIR and affidavit. These acts of the Respondent No, 3 shows that it was done by her with intent to create, an equitable mortgage as after all the intent has to be gathered from the document to which one is a party and this is quite manifest of the Respondent No,
3. In this way, three ingredients necessary for creation of an equitable mortgage also stood, established i.e, (i) there was an existing debt; (ii) there was a delivery of documents of title and; (iii) there was also an intention that the documents of title were meant as security for the debt. Such three ingredients are necessarily to be found at the time when the transaction of creation of equitable mortgage takes place 'and in the absence of any proof to the contrary the three ingredients in the normal course of business will have to be accepted as established.
11. Mr. Shahid Hamid, learned Sr. ASC has contended that in the first place, the appellant being aware of the sale of the property to Respondents No, 5 and 6 did not implead them as defendants in the suit filed by the appellant for recovery and enforcement of mortgage and secondly that the said Respondents No, 5 and 6 are not bound by the decree of the Banking Tribunal. As regards the earlier submission of the learned Sr. ASC it may be noted that Section 6 of the Banking Tribunals Ordinance, 1984, (Ordinance) provided for procedure of Banking Tribunal in the term that where a customer commits default in fulfilling any obligation to a banking company, the banking company may file against such customer with the Banking Tribunal a plaint verified on Oath by the Branch Manager or an officer of the rank of Assistant Vice President or Assistant Manager or such other officer as the Board of Director of the banking company may authorize in this behalf. The term 'customer' was defined in clause (c) of Section 2 of the Ordinance to be "a person who has obtained finance from a banking company or is the real beneficiary of such finance, and includes a surety and an indemnifier'. The appellant was, therefore, not required to implead Respondents No, 5 and 6 as defendants in the suit before the Banking Tribunal as they were not customers. So far the argument that decree is not binding on Respondents No, 5 and 6, it may be noted that the decree of the Court binds the property and Respondents No, 5 and 6 to this extent are bound by the decree. The further submission of the learned Sr. ASC as to the measure which the appellant ought to have adopted for safeguarding its interest, we may note that it was for the appellant to have taken measures to safeguard its interest and to the extent it had taken measure to safeguard its interest have been found by us to be a sufficient for the case in hand.
12. There is another aspect that is of much significance and. Needs to be mentioned is that when the appellant came to know about the purported design of selling of the property by Respondent No, 3 to Respondents No, 5 an 6, the appellant through letter dated 28.02.1991 informed Haji Muhammad Rafiq, father of Respondents No, 5 and 6, of the fact of existence of a mortgage on the property and has also published public notice in the daily 'fang' and 'Nation' dated 09.08.1991 and also notified the MEO, Lahore Cantt., by its letter dated 10.04.1991 of the existence of a mortgage.
Despite the said letter dated 28.02.1991 and having knowledge of the fact of existence of a mortgage by Respondent No, 3 in favour of the appellant, Respondents No, 5 and 6 proceeded to purchase the property from Respondent No, 3 vide registered sale-deed dated 21.04.1991, which was much after the date of the letter of the appellant. The learned Sr. ASC during the course of his submissions before us has admitted the fact that in selling the property to Respondents No, 5 and 6, Respondent No, 3 has committed fraud. He also admitted that the sale of the property was made without publishing notice and also contended that the consideration of Rs, 7,50,000/- was mentioned in the sale-deed for the purpose of stamp duty notified by the Deputy Commissioner but did not disclose the amount of actual consideration that passed between the parties. The matter becomes more intriguing, when we find that the same property which was sold in the year 1991 for an amount of Rs, 7,50,000/- came to be resold by Respondents No, 5 and 6 to Mst. Afifa Sikandar (Appellant in C.A.No, 732 of 2009) on 07.05.2003 for lesser amount of Rs, 6,00,000/- although it is common ground that value of the property-had increased manifold from the year 1991 to the year 2003. Mst. Afifa Sikandar in the application under Order 39(1) dated 20.07.2004 in the Banking Court has claimed that market value of the property is 100% higher of auction price of Rs, 58,00,000/-. This application is at page 24 of CMA No, 6181 of 2014. All these factors are reflective of active connivance of not only Respondents No, 5 and 6 but also of Mst. Afifa Sikandar in commission of fraud along with Respondent No, 3 with the appellant in depriving it of its valuable security. It may be noted that in the very memorandum of deposit of title deeds dated 23.04.1990, the amount secured by this mortgage was Rs, 3.500 million and if not much more, the value of the property at the time of mortgage was declared by Respondent No, 3 herself to be that of 3.500 million.
13. The transaction of the sale of property in presence of a mortgage, being based on fraud, stands vitiated and could not be allowed to be sustained. Thus, the registered sale-deed dated 21.04.1991 between Respondents No, 3, 5 and 6, in respect of the mortgaged property, is declared to be illegal and void, which is accordingly cancelled. For the similar reasons, the sale-deed dated 05.07.2003 of the property by Respondents No, 5 and 6 in favour of Mst. Afifa Sikandar is also declared as illegal and void, which too is cancelled. As a result of cancellation of the two sale-deeds, Respondents No, 5, 6 and Mst. Afifa Sikandar are directed to deposit both the original sale-deeds within one week of this judgment with the Banking Court for taking measures of notifying their cancellation and other measures in accordance with law. They are also directed to deposit the original sale-deed dated 05.06.1985 of the mortgaged property in the Banking Court also within one week.
14. Now it is admitted fact that in execution proceeding, the. Banking Tribunal has adopted the procedure of selling of the mortgage property by public auction. Once such procedure for selling of mortgage property through public auction is adopted by the Banking Tribunal then no other mode or procedure is permissible for selling of mortgage property except by public auction. As the fact in this emerges are that one Saleem Butt has made a bid in auction of Rs, 58,00,000/-but he withdrew his bid and got refund of advance amount deposited by him. Instead of going for fresh auction, the Banking Court on a bare application of offer of Rs, 60,00,000/- of Muzaffar Ahmed Qureshi confirmed the sale of the mortgage property to him. This mode of sale by the. Banking Court in favour of Muzaffar Ahmed Qureshi was obviously not in accordance with law and could not be allowed to be sustained. The payment to appellant from the sale price deposited by Muzaffar Ahmed Qureshi was also not legal. These facts and the legal position being not in dispute, therefore, the appellant shall also deposit with the Banking Court the amount of Rs, 33,74,393.86 within one week of this Judgment and on receipt of this amount, the Banking Court shall immediately refund to Respondent No, 7 Muzaffar Ahmed Qureshi the amount of Rs, 60,00,000/, The Banking Court shall proceed with the auction of property in accordance with law and on finalization of the auction, appellant will be entitled to receive its dues from the Banking Court, as per the decree and applicable law.
15. It may be noted that the appellant has filed a criminal prosecution against. Respondent No, 3, in the Banking Tribunal, in which Respondent No, 3 had filed an application under Section 265-K, Cr.P.C. For her acquittal. Such application was dismissed by the Banking Tribunal, which order was challenged by Respondent No, 3 by filing W.P.No, 673 of 1994 in the Lahore High Court, Lahore. A learned Division Bench of the High Court vide judgment dated 22.11.1994 allowed the said application of Respondent No, 3 and while quashing the proceeding acquitted Respondent No,
3. In arriving at such conclusion, the learned High Court has dealt with the provision of Section 7 of the Ordinance which relates to offences and has concluded that under the said section only loanee i.e, the real beneficiary of loan is liable to be proceeded and not the surety. Thus it was a case where the. Banking Tribunal had no jurisdiction in the case. High Court has also observed that the complaint was not competently filed. Once the High Court has come to the conclusion that the Banking Tribunal had no jurisdiction in the matter, it should have spared its hand from expressing any view on the probability of Respondent No, 3 being convicted of the offence or not. Such an exercise was to be left to be undertaken by the Court of competent jurisdiction. The High Court ought to have made order of returning the complaint for presentation in the forum having jurisdiction in the matter. The judgment of the High Court acquitting Respondent No, 3 under Section 265-K, Cr.P.C. Was without jurisdiction and there is no acquittal of Respondent No,
3. The appellant is, therefore, free to take whatever action against Respondent No, 3 and other persons involved in commission of fraud against it in a proper forum as per applicable law.
16. For what has been discussed above, Civil Appeal No, 1366 of 2003 is allowed and the impugned judgment is set aside. However, Civil Appeal No, 732 of 2009 is also allowed to the extent that the sale of the property to Respondent No, 7, Muzaffar Ahmed Qureshi, is set aside. The parties are left to bear their own costs.