C.M. No.390-B of 2015 Through this application judgment debtor No.1 company has challenged the proclamation of sale (filed in Court on 20.04.2015 by the Court auctioneers) and in particular the forced sale value determined therein which is based on the evaluation report of Harvester Services (Pvt.) Limited.
2. Amongst others, it is asserted that the value of the property sought to be auctioned is much more than what has been assessed by the evaluator; that the evaluator has not correctly mentioned the covered area of the building and has also not mentioned the boundary wall; that judgment debtor No.1 company has got the mortgaged property evaluated from SAS International Corporation which has assessed the forced sale value thereof to be Rs.280.818 Million; that the chief executive of judgment debtor No.1 company died prior to the passing of the decree but this fact was not brought to the knowledge of this Court by the decree holder.
3. The decree holder bank has filed its written reply to this application contesting all the allegations.
It is stated that the report prepared by SAS International Corporation does not consider certain vital facts such as the demolition of the buildings inside the boundary wall and that certain land the ownership whereof is claimed by judgment debtor No.1 company falls outside the boundary wall. It is further stated that the forced sale value has correctly been determined by Harvester Services (Pvt.) Limited. Regarding the death of the chief executive of the judgment debtor company, it is stated that predecreetal matter cannot be raised in execution proceedings.
4. The respective contentions of the counsels have been heard and the record perused with their able assistance.
5. In this case, the court auctioneers were appointed vide order dated 12.02.2015 and they were directed to get the mortgaged property evaluated from Harvester Services (Pvt.) Limited and to place the report thereof on the record as also the proposed proclamation of sale. The court auctioneers placed the report of the evaluator and the proclamation of sale on the record on 20.04.2015 where-after the present objection application was filed by the judgment debtors.
6. The objection regarding the forced sale value of the mortgaged property being on the lower side has no valid basis. Auctions conducted by the courts are often termed as distressed sales and by their very nature it is accepted that the price an asset will fetch in such sales shall be well below the market price as the purchaser(s)/bidder(s) run the risk of getting entangled in court processes for considerable length of time. In a court auction, where several bidders participate, the reserve price of an asset is often the base price from where bidding of the property exposed to auction may start. In other words, reserve price means the price with which the public auction starts and the auction-bidders are prohibited from giving bids below the said price. The reserve price, however, must still reflect the minimum price the property may fetch at the auction being conducted by the court.
7. The courts are often faced with the vexed question as to what should be the reserve price of a property sought to be put to auction. It will not be inappropriate to say that the law on the subject is not in a very satisfactory state. The judgments on the topic, and there are many, show that the courts have alternated between showing concern for the judgment debtor and to protect his interest against a decree holder who not unexpectedly desires to sell off the mortgaged property concerned only to recover the decretal debt and the need to ensure that the decree is executed in a timely manner. It would also not be inappropriate to state that the courts are not well equipped to place their own value upon properties which are of varied character and often times include plant and machinery, the estimate whereof can only be carried out by a professional evaluators.
Pakistan Banker's Association (PBA) has made a list of approved professional evaluators who, amongst others, assess the value of the assets that are subject matter of the auction. Such assessm ent includes the forced sale value and the market price of the assets. The forced sale value so determined is the price that in the opinion of the evaluator the property will fetch in a court sale. It should, however, not be mistaken that the reserve price, which was historically fixed by the courts, and the forced sale value determined by the evaluator are one and the same thing.
Forced sale value is often the maximum price that in the estimation of the evaluator a property might fetch in a court sale whereas the reserve price is the price at which the bidding begins.
Regardless of the obvious difference, often times both the expressions are conflated in an auction proceedings. Another argument that is often introduced in the discourse by the judgment debtors is that market value of the property ought to be fixed as the reserve price, which argument has no logical basis. Market price is the maximum price that a property will carry in the market in a bi- lateral sale. If market price is set as the criterion for fixing the reserve price, there will hardly be any bidding at the auction as bidders cannot go past the maximum price. Historically, reserve price was fixed to protect the interest of a judgment debtor against a collusive and insufficiently competitive auction or where only one bidder participated. The object of the reserve price was to ensure that the property is sold at a price that has some semblance of and reflects the value closest to the price at which the property is expected to be sold off in a court auction. In a sale by auction that is subject to a reserve price, the acceptance of every bid is conditional as the bidder is required to give the bid that is equal to or higher than the reserve. As such, the reserve price limits the authority of the auctioneer in that he cannot accept a price below the reserve price. It is, therefore, not unsurprising that the courts do fix the reserve price of the property that is the subject matter of the auction and in order to allay the fears of the judgment debtors the forced sale value of the property is sometimes fixed as the reserve price.
8. In the context noted above regarding the fixation of the reserve price, it would be useful to mention the amendment brought about by Lahore High Court in Order 21 Rule 66 CPC, which added a proviso to sub-rule 2 (e). It reads as under Provided that it shall not be necessary for the court itself to give its own estimate of the value of the property; but the proclamation shall include the estimate, if any, given by either or both of the parties.
Fixing the value of the property is a matter of opinion, and the court cannot give its opinion on such a point. It appears that the object of the above proviso is to relieve the court from the burden of affirming the accuracy of the value of the property shown in the proclamation of sale and to enable the prospective purchaser to form his own opinion relying upon the estimates given by the parties. After all, Order 21 Rule 66 (2) (e) CPC stipulates that the proclamation shall contain every other thing which the court considers material for a purchaser to know in order to judge the nature and value of the property. Notwithstanding the afore-mentioned provision, with the availability and benefit of the evaluation reports from the PBA approved evaluators, the courts do fix the reserve price of the properties being put to auction based on the basis on the value placed therein.
9. In the present case, the two evaluation reports show disparity in terms of the forced sale value of the mortgaged property with the evaluation report relied upon by judgment debtor No.1 company showing higher forced sale value. Judgment debtor No.1 company while relying upon its evaluation report has invited this Court to disregard the report prepared by Harvester Services (Pvt.) Limited.
The contention so raised cannot be accepted. The fact that the evaluation report prepared under the instructions of the judgment debtors places higher price of the mortgaged property than the evaluation report which the court auctioneers got prepared under the directions of this Court should not form basis for rejecting the latter report. In the first instance, the report prepared by Harvester Services (Pvt.) Limited clearly mentions that it is for "court purposes" while the evaluation report placed on the record by the judgment debtors does not so indicate. This Court had directed the court auctioneers to appoint Harvester Services (Pvt.) Limited to carry out the evaluation of the mortgaged assets in order to fix the reserve price for the said properties. The object and purpose of fixing the reserve price in the proclamation, as stated earlier, is to ensure that the bidding in the auction starts from the reserve price. This Court would always give preference to the evaluation report prepared under its orders rather than a report which is prepared at the behest of the judgment debtor. It is not uncommon for the judgment debtors to prepare the evaluation report showing exaggerated value of the mortgaged properties in order to delay and frustrate the auction process. It may again be emphasized that evaluation report by M/s Harvester Services (Pvt.) Limited was prepared under the orders of this Court and, therefore, the selection is not between the evaluation reports of the contesting purchasers that the Court is merely accepting the value placed by one side as ipse dixit. It must also be kept in mid that determination of the value of any property is always subjective and opinions in this regard differ. The consistent view expressed by the Courts that the reserve price of a property is always based on a tentative estimate, therefore, appears to be correct. Notwithstanding the concern of the courts to balance out the interests of both the judgment debtor as well as the decree holder, a transparent auction which is well advertised with competitors taking part in the bidding process is itself the biggest safeguard against collusion amongst the bidders and shall ensure that the final price received will largely be independent of the reserve price and reflect the best price that the property can obtain.
10. Objections of such nature by the judgment debtors are always meant to delay the process of auction. Nothing stops a judgment debtor to locate bring forward a buyer of his choice either in the auction or before the Court prior to the sale if the property is being sold for a price which in the estimation of the judgment debtor is on the lower side. For this very purpose Rule 83 Order 21 CPC has been enacted under which court sales can be postponed to enable a judgment debtor for raising money through private sale of the property. A judgment debtor cannot be allowed to derail the auction process by submitting evaluation report prepared at his instance instead of arranging a buyer for the properties to be auctioned. It may further be added that the condition of confirmation of sale by the court also operates as a biggest safeguard against the property which has been sold at inadequate price irrespective of the fact whether any irregularity or fraud in the conduct of the sale has been committed or not.
11. The objections regarding the constructed area not being accurately mentioned in the auction schedule has also no valid basis in view of the language of Order 21 Rule 66 (2) CPC which insofar as it is relevant simply stipulates that the description of the property should be fairly and accurately mentioned. The prospective purchasers are of course free to ascertain for themselves the constructed area within the boundary wall of the property. In this regard, reference may be made to clause 9 of the Terms and Conditions of Auction contained in the auction schedule, which reads as under: The property will be sold on "As is where basis". The expression "as is where is" came up for interpretation in United Bank Limited v. Al-Noor enterprises and others 2006 CLC 822 wherein it was described it in the following terms From preponderance of the meaning assigned to the phrase "as is, where is"; what is deducible is that phrase "as is, where is" could be divided in two parts, "as is" and where is".
"As it is" as it stands means that, the property offered for sale in its present state, condition or form.
It refers only to condition of the property sold no warranty, or assurance of any nature as to state or quality of the property is neither attached nor is to be presumed. It implies that the property is taken with whatever attributes good or bad known or inherent it may possess and that seller or lessor is released of any obligation or liability to reimburse purchaser or lessee for any defect that may be discovered later on. In other words it is generally understood to mean that, buyer is purchasing property with open eyes and consciously in whatever condition with whatever attributes it may possess. In a sale on 'as is, where is' basis implies that the purchaser has to depend on his own skill and ability to assess and evaluation the property as to its status, nature or quality and attributes.
Other part of the phrase "where is" implies and meant 'at the place, location where the property happens to be or situated at the time of the examination, assessment, evaluation and making offer. It also implies the place where the transaction is to be effected, concluded materialized or the place where from the delivery of the property is to be taken by the intended purchaser.
Similarly, in Messrs Julandar (Pvt.) Limited v. Official Assignee and 2 others 2003 CLD 1336, while referring to the clause "as is where is" contained in the auction schedule, it was held that ".... At the same time it has its own meaning, significance and import in the field of commercial activity as it warns customers/buyers to be wary, prudent and to act at their own risk while giving their offer or entering into a transaction."
It is settled law that court sales do not entail warranty of title and accordingly auction schedules normally contain clauses to this effect. Clause 6 of the proposed auction schedule is no different and further brings into sharp focus the issue under discussion. It reads as under The particulars of the property are given as per best possible information and the court will not be answerable for any error therein. The prospective bidders must satisfy themselves with regard to the title of the property and the status of the assets under auction prior to the auction. Neither this court nor the decree holder hold any warrants with respect to the title of the property or any mortgage, charge, or other encumbrances thereon if any.
In view of clause 6 in the auction schedule and the interpretation of the phrase "as is where is" by the aforementioned judgments, it matters little whether some minor part of the constructed area falling in the mortgaged property has accurately been given or not. Besides, the auction schedule further invites the prospective bidders to visit and inspect the property to be auctioned. Be that as it may, it is not the requirement of Order 21 Rule 66 CPC that exact measurements of the constructed area be given in the auction schedule. Of course, the assertion to this effect by judgment debtor No.1 company is strongly refuted by the decree holder bank which contends that certain buildings have been demolished and as such the report of Harvester Services (Pvt.) Limited correctly mentions the constructed area. This aspect of the matter need not arrest the progress of the case in view of the clear language of Order 21 Rule 66 CPC which does not require the auction schedule to contain the details about the superstructure or the constructed area. The next contention of judgment debtor No.1 company that its chief executive had died prior to the passing of the decree has no valid basis in view of the clear provisions of Order 22 CPC. This argument in any case has no bearing on the issue at hand it is, therefore, unnecessary to elaborate any further on the matter and the counsel's submission in this regard seem to be hardly well-conceived.
12. For the reasons stated above, this application being devoid of any merit is dismissed.