1. C.M. No. 472-B/2015 SHAHID KARIM, J.---This application, and the questions raised in it, arise in somewhat unusual circumstances. The rights of an auction purchaser in the sale of immovable property in the execution of a decree are engaged in this application.
2. As a backdrop, the relevant facts are that the plaintiff-bank (MCB) filed a suit for recovery of Rs,756,316,92/- on 19.12.2006. The suit was decreed ex parte on 26.2.2007. Upon an application (C.M. No,122-B/2007), filed under section 12 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, the order of ex parte decree was set aside vide order dated 12.6.2007 with the consent of the parties on the payment of cost of Rs,10,000/-.
2. However, the cost was not paid and the Banking Court vide order dated 21.4.2008 was pleased to revive the decree dated 26.2.2007. Execution proceedings were set in motion on 10.11.2010. In pursuance thereof, the mortgaged property was put to auction and the present applicant was declared as successful bidder and deposited the entire amount of Rs,78.05 million. In the meantime, the defendants filed an appeal R.F.A. No,06/2009 against the order dated 21.4.2008.
3. No stay was so granted by the learned Division Bench. The appeal was allowed vide order dated 19.5.2012 subject to the payment of cost of Rs,250,000/-. An appeal C.A. No,646/2012 was filed before the Supreme Court of Pakistan and with the consent of the parties, vide order dated 01.11.2014, the matter was remanded to this Court for decision on the application for leave to defend.
4. The question which has been raised in the present application is regarding the confirmation of the sale in favour of the applicant as auction purchaser.
5. The learned counsel for the applicant submits that though the decree has been set aside, the applicant is entitled to the confirmation of sale in his favour and to the issuance of sale certificate. In this regard, the learned counsel relies upon the terms of section 65 of the Code of Civil Procedure, 1908 (C.P.C.) to contend that the property which was auctioned shall be deemed to have vested in the applicant/purchaser from the time when the property is sold and not from the time when the sale becomes absolute. The learned counsel for the applicant invites this Court to hold that in spite of the decree having been set aside, a right had come to vest in the applicant to the grant of the sale certificate in pursuance of the auction proceedings.
6. The learned counsel for the defendants, on the other hand, has controverted the submission made by the learned counsel for the applicant on the ground that the sale had not become absolute and thus the applicant is not entitled to the grant of sale certificate. According to him, once the decree had been set aside, there was no decree to be executed and thus it was otiose to contend that the proceedings in the sale of property be dilated upon and concluded.
7. Mr. Mehmood A. Sheikh, Advocate represents the subsequent vendees of the property which was auctioned. According to him, the subsequent vendees have filed an application under Order XXI, Rules 89 and 90, C.P.C. for the setting aside of the auction proceedings on the ground that the property was not available to be auctioned as it had been sold to the applicant as subsequent vendee and thus the confirmation of the sale cannot take place.
8. The issue in the instant application is narrowed down to whether if a sale has not been confirmed and the decree has been set aside, is the auction purchaser still entitled to the confirmation of the sale in his favour and the issuance of a sale certificate? In other words, notwithstanding the reversal of the order of passing of decree a right comes to vest in the auction purchaser to have his sale confirmed. As brought forth above, the entire reliance of the learned counsel for the applicant is on the provisions of section 65 of C.P.C. For facility, the provisions of section 65, C.P.C. are reproduced as under: "65. Purchaser's title.---Where immovable property is sold in execution of a decree and such sale has become absolute, the property shall be deemed to have vested in the purchaser from the time when the property is sold and not from the time when the sale becomes absolute."
9. It is clear from a reading of section 65, C.P.C. that the crucial words upon which the construction of this section will depend are "when the sale has become absolute". It is admitted on all hands that the sale in favour of the applicant has not been confirmed and no proceedings under Order XXI, Rule 92, C.P.C. have taken place whereby upon confirmation of the sale, a sale certificate had to be issued. Section 65 merely confers a right on the purchaser of property in execution of a decree whereby the property shall be deemed to vest in the purchaser from the time when the property is sold and not from the time when the sale becomes absolute. This right has an important caveat. It is triggered only when the sale has become absolute. The important provisions of Order XXI, C.P.C. which intervene between the auction of the property in execution of a decree and the confirmation of the sale, are contained in Order XXI, Rules 89 to 91 of C.P.C. Any sale which has taken place and any immovable property which is sold in execution of a decree is subject to the rights which accrue under the provisions of Order XXI, rules 89 to 91 of C.P.C. These are immutable rights and until such rights are determined by the executing court, the sale, in my opinion, does not become absolute. In other words, if an application under Order XXI, rules 89 and 90 of C.P.C. has been filed, it must be decided and the absoluteness of the sale would essentially depend upon any decision of such an application. In case such an application has not been filed, the executing court ought to proceed under Order XXI, rule 92, C.P.C. to make an order confirming the sale and "thereupon the sale shall become absolute". In other words, the provisions of section 65, C.P.C. are to be read in conjunction with Order XXI, Rule 92, C.P.C. Reading the two provisions together, it indubitably follows that a sale of immovable property made in execution of a decree only becomes absolute when no application is made under Rules 89 to 91 or where such application is made, it is disallowed by the executing court.
10. In the instant case, there are applications made under Rules 89 and 90 which are pending adjudication and have yet to be decided. Thus, it cannot be held by any stretch of imagination that the sale in favour of the auction purchaser/applicant has become absolute and he is entitled to the benefit of section 65, C.P.C.
9. The learned counsel for the applicant has relied upon a number of precedents in order to bring home his point of view. I shall proceed to deal with these judgments cited by the learned counsel for the applicant. In Hudaybia Textile Mills Ltd. and others v. Allied Bank of Pakistan Ltd. and others (PLD 1987 Supreme Court 512), the question primarily was whether a sale in execution of a decree could be set aside on the ground that the judgment-debtor and the decree-holder had entered into a settlement whereby the decree had been satisfied. Further, the question was with regard to the confirmation of sale on account of the failure to make the requisite deposit under Rule 89 of Order XXI, C.P.C. The issue decided in the said judgment of the Supreme Court of Pakistan is not attracted to the facts and circumstances of the present case and the reliance of the learned counsel on the said judgment is misplaced. The learned counsel next relied upon Mian Muhammad Abdul Khalid V. M. Abdul Jabbar Khan and others (PLD 1953 Lahore 147). The following observations of the learned Division Bench of this Court are relevant and are being reproduced hereunder: "...The opinion was expressed in them that when a sale in execution of a decree has taken place, the debt is wiped off to the extent of the purchase price although the sale may not yet have been confirmed. No distinction was made in those rulings between cases where the auction purchaser was the decree-holder himself or where he happened to be unsound. As was pointed out by Sir Abdul Rahman, J. in Megha Ram V. Moti Ram, the debt could not be held to have been realized until the sale had been confirmed, and there seems to be no provision of any law that would entitle one to hold a debt to have been wiped off temporarily. At best it could only be argued that till confirmation of an auction- sale, the right to take further proceedings for realization of the debt, ate suspended but the debt would undoubtedly continue to exist. The decree-holder would not be entitled to withdraw the money deposited by the auction-purchaser in Court till such confirmation.
11. This is supported by a decision of the Bombay High Court in Ganesh v. Purshottam. On the date of the sale the purchaser does not obtain any indefeasible right, as was pointed out by their Lordships of the Privy Council in Raghunandan Prasad Singh v. Commissioner of Income-tax Bihar and Orrisa. We have no hesitation, therefore, in repelling the contention raised in this respect on behalf of the appellant".
12. It is evident from the portion reproduced above that the argument was repelled that the debt is wiped off to the extent of purchase price although the sale had yet to be confirmed. It was, however, held that at best it could only be argued that till confirmation of an auction-sale the right to take further proceedings for realization of the debt are suspended but the debt would undoubtedly continue to exist. However, the following paragraph of this judgment is more pertinent to the controversy in hand:- "The preponderance of authority, therefore, seems to be in favour of the view that once a sale has validly taken place in execution proceedings, confirmation of the sale cannot be withheld merely on the ground that the decree has been wiped out or reversed in the meantime. A consideration of the language of section 65, C.P.C. as compared with the provisions of section 316 of the old Code, supports this proposition. In such a case, therefore, the Court is under a duty to confirm the sale under Order XXI, rule 92, C.P.C. unless objections have been successfully taken under rules 89 to 91 of that Order."
13. The conclusion drawn in the paragraph reproduced above is to the effect that once a sale has validly taken place in execution proceedings, confirmation of the sale cannot be withheld merely on the ground that the decree had been wiped out or reversed in the meantime.
14. Reliance in this regard was placed upon the tenor of section 65, C.P.C. and a comparison was made with the erstwhile section 316 of the old Code. It was thus held that the court was under a duty to confirm the sale under Order XXI, rule 92 unless objections had been successfully taken under rules 89 to 91 of that Order. It will be seen from the holding of the Division Bench of this Court in the cited judgment that once again the proposition that a sale does not become absolute until the objections under rules 89 to 91 of Order XXI, C.P.C. have been dealt with and decided, was reiterated.
15. The learned counsel for the applicant lastly relied upon a judgment from the Indian jurisdiction reported as Janak Raj v. Gurdial Singh and another (AIR 1967 Supreme Court 608). In the said judgment, the history of section 65 was traced and upon a comparison of section 316 of old Code with section 65 of the Code of 1908, it was concluded that a sea- change had been brought about by the Legislature while enacting section 65 and the intention of the Legislature was clear while doing away with the condition that no sale of immovable property would become absolute until the sale had been confirmed by the court and after the sale had become absolute, the court was to grant a certificate to the purchaser stating that he had purchased the right, title and interest of the defendants in the property. The precise question that fell for determination in the cited Indian judgment was stated thus: "The question is whether the same result ought to follow when the reversal of the decree takes place before the confirmation of sale".
16. The following conclusion was drawn upon a consideration of various provisions of law: "Nothing has been urged before us which would lead us to take a contrary view. Under the present Code of Civil Procedure, the Court is bound to confirm the sale and direct the grant of a certificate vesting the title in the purchaser as from the date of sale when no application as is referred to in R. 92 is made or when such application is made and disallowed."
17. The following observations of the Court are also relevant and are being reproduced as under: "For the reasons already given and the decisions noticed, it must be held that the appellant-auction purchaser was entitled to a confirmation of the sale notwithstanding the fact that after the holding of the sale the decree had been set aside. The policy of the Legislature seems to be that unless a stranger auction purchaser is protected against the vicissitudes of the fortunes of the suit, sales in execution would not attract customers and it would be to the detriment of the interest of the borrower and the creditor alike if sales were allowed to be impugned merely because the decree was ultimately set aside or modified. The Code of Civil Procedure of 1908 makes ample provision for the protection of the interest of the judgment-debtor who feels that the decree ought not to have been passed against him. On the facts of this case, it is difficult to see why the judgment-debtor did not take resort to the provisions of 0. XXI, R.
89. The decree was for a small amount and he could have easily deposited the decretal amount besides 5 per cent of the purchase money and thus have the sale set aside. For reasons which are not known to us he did not do so."
18. The learned counsel for the defendants, on the other hand, has relied upon Muhammad Attique v. Jami Limited and others (PLD 2010 Supreme Court 993) and Afzal Maqsood Butt v. Banking Court No,2, Lahore and 8 others (PLD 2005 Supreme.
19. Court 470). In the case of Muhammad Attique', the Supreme Court of Pakistan observed as follows: "36. Term 'sale' has also been defined in section 45 of the Transfer of Property Act, 1882 as "the transfer of ownership of immovable property for a price paid or promised". In an auction proceedings title in the property not transferred in favour of the highest bidder, at the time when auction was held and offer was forwarded to the Court for acceptance, the Court sale for immovable property under Order XXI, Rule 84 is subject to proceedings under Order XXI, Rules 89, 90 and 91, as result of which sale may either be set aside or confirmed. Once the sale is confirmed, section 65, C.P.C. provides that ownership right in the immovable property will be deemed to have vested in the succeeding bidder retrospectively from the date when auction was held."
20. It will be seen from the judgment of the Supreme Court of Pakistan reproduced above that the rule has been reiterated that the sale of immovable property in an executing proceedings does not become absolute until the proceedings in terms of Order XXI, rules 89 to 91 have been taken and either allowed or rejected by the executing court. The case of Afzal Maqsood Butt merely laid down the principle that a bid in an auction was merely an offer and without confirmation of sale it does not create any right in the property in favour of successful bidder. However, in the present case, the auction-purchaser has deposited the entire bid amount and seeks the confirmation of the sale.
21. In any inquiry, the first step is to ask the right question. The right question, in my opinion, for the determination of the present applications is not whether the applicant has acquired an indefeasible right in the property sold and that the sale has become absolute. It is whether the applicant is entitled to the confirmation of sale and a sale certificate notwithstanding the setting aside of the decree by the Supreme Court of Pakistan. The simple answer to this question is that the applicant's right has not become absolute and it is subject to the determination of the applications filed under rules 89 to 91 of Order XXI, C.P.C. by the objectors, one of which is being represented by Mr. Mehmood A. Sheikh, Advocate. This aspect of the matter has been dealt with by the judgments cited by the learned counsel for the applicant and which have been referred to hereinabove. The preponderance of view is that the absoluteness of any sale depends upon the determination of applications filed under rules 89 to 91 of Order XXI, C.P.C.
18. The question still remains as to whether despite reversal of the decree and its setting aside by the Supreme Court of Pakistan, the matter relating to the confirmation of sale will still remain alive and liable to be determined by this Court or does the matter, as an inevitable consequence of the setting aside of the decree, come to an end by the mere fact. The answer to this question can also be found in the judgments which have been relied upon by the learned counsel for the applicant. Upon a review of the history of section 65 and an analysis of the provisions of Order XXI, rules 89 to 91, C.P.C., the courts have concluded that the setting aside of a decree will not cast away or obliterate the right of an auction purchaser to assert his claim. The issue has thus authoritatively been dealt with by a Division Bench of this Court and on the doctrine of precedents, I am bound by it. Since I have no reason to disagree with the conclusions drawn in the case of Mian Muhammad Abdul Khaliq, I shall respectfully follow it. I shall, however, elaborate upon the reasons which found favour with the courts in so concluding.
19. The primary reason which weighed with the Division Bench of this Court in Mian Muhammad Abdul Khaliq case and the Indian jurisdiction case of Janak Raj was the historical perspective of the provisions of section 65 and Order XXI, rule 94, C.P.C. on the one hand and sections 256 and 259 of the Act of 1859. Section 316 of the Act of 1859 contained an explicit proviso to the effect that the purchaser of property was to have title to the property sold from the date of the confirmation of the sale only if the decree under which the sale took place was subsisting at that date. This proviso was conspicuously done away with in the C.P.C. An inference was rightly drawn that the intention of the Legislature was clear and without equivocation. This conforms with the settled principle of construction where the court is entitled to look to the previous state of the law in order to resolve an ambiguity.
20. The mere fact that the proviso was deleted is not without a purpose. The single most important purpose seems to be based on the policy to lend certainty to the process of court auctions and shield the auction purchasers from the vicissitudes of the fortunes of the suit. This is a matter of general public policy and the balancing of competing rights. It is nobody's case that the C.P.C. does not provide for adequate provisions for the protection of the interest of the judgment debtor who feels aggrieved of the decree. In order to retain faith in the court sales, it is imperative that the confirmation of a sale be not made contingent upon the ultimate fate of a decree and until then the sale be kept in a nebulous state, but that the path of the court auctions be clearly mapped and spelt out. The C.P.C. does not place a bar on the execution of the decree till it is finally decided. There are specific provisions, especially in money decrees, which allude to the fact that an appeal shall not operate as a stay of proceedings under a decree appealed from. (See Order XLI, Rule 5, C.P.C.). Likewise, no provision in C.P.C. empowers the executing court to set aside a sale of property validly sold if a decree is reversed. Mr. Mehmood A. Sheikh Advocate made a frontal attack on the whole concept on the basis that if there was no decree in field, an execution petition and a sale is inconceivable. This argument loses sight of the rights which have accrued to the auction purchaser meanwhile as also to a situation where the property has been sold and sale has become absolute before the decree is set aside or reversed. Will the sale, which has become absolute, be set aside too on a parity of reasoning? The answer is clearly a resounding no!
22. This argument also ignores the concept of sale to become absolute as encapsulated in section 65 and Order XXI, rule 92, C.P.C. In the matter of movable property, the sale shall become absolute in terms of Order XXI, rule 77, C.P.C. on payment of the purchase money.
23. Order XXI is a code unto itself. A close analysis of Order XXI leads to an ineluctable conclusion that the mattes relating to auction can be bifurcated into two stages. At the conclusion of the first stage, the property shall be deemed to have been "sold in execution of a decree".
24. (see Order XII, R. 89, C.P.C.). This stage shall be taken to have been crossed once the purchase-money has been paid in full. Once this threshold is crossed, the auction and the sale of property can only be set aside on the basis of rules 89 to 91, C.P.C. and the reversal or setting aside of a decree will not impact its continuance. To complete the analysis, rule 92 of Order 'XXI, C.P.C. does not envisage any other ground to set aside a sale except those given in rules 89 to 91 of Order XXI, C.P.C. The use of the expression "where immovable property has been sold in execution of a decree" are significant and convey a meaning that the property has in fact been sold and the position to that extent is irretrievable. In other words, the matter of sale, having passed through the conductor of auction proceedings, has shaped into a right to vest in the auction purchaser to have the sale confirmed in terms of rules 89 to 91 of Order XXI, C.P.C. The right comprised in rule 69 of Order XXI, C.P.C. relates to a stage when the immovable property has not been sold in execution of the decree. It has to be exercised before 'the lot is knocked down'. This is the stage where the sale may be stopped.
25. In view of the above, it is held that, notwithstanding, the setting aside of decree by the Supreme Court of Pakistan, the proceedings for the confirmation of the sale of immovable property in favour of the applicant shall continue, subject to the objection petitions filed in terms of rules 89 to 91 of Or der XXI, C.P.C. which shall be taken up and dealt with on their merits.