1. SHAMS MEHMOOD MIRZA, J.---This appeal is filed under section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (the Ordinance) challenging order dated 02.10.2015 passed by the banking court.
2. 2.Brief facts of the case are that the appellant filed a suit against respondents Nos.1 to 6 which was decreed in its favour on 31.03.2010 for an amount of Rs. 15,724,957.45. An auction of the mortgage properties was held in the course of the execution proceedings in which respondent No.7 was declared to be successful bidder having purchased the said properties for an amount of Rs.4,010,000/- The auction in favour of respondent No.7 was confirmed on 03.03.2015 and the requisite sale certificate was also issued. After issuance of the sale certificate, respondent No.7/auction purchaser filed an application before the executing court complaining that the Faisalabad Development Authority (FDA) refused to transfer the properties in his name on account of outstanding dues and requested the Court to deduct the outstanding dues of FDA from the sale proceeds. The appellant filed reply to the said application by controverting the stance of respondent No.7. The executing court on 02.10.2015 accepted the application of respondent No.7 and passed orders for deduction of Rs.481,720/- and Rs.38,100/- from the sale proceeds of the auction for their onward payment to FDA, hence this appeal.
3. 3.Learned counsel for the appellant contended that the auction of the properties took place on "as is where is basis" and as such the executing court without application of mind passed order dated 02.10.2015. It was further stated that the executing court failed to furnish any reason for accepting the application of the auction purchaser. Learned counsel for respondent No.7/auction purchaser, on the other hand, supported the order passed by the executing court and stated that the auction schedule contained the stipulation that the properties were not under any lien/encumbrances and as such the appellant bank was liable to pay the amounts due towards FDA.
4. 4.Arguments heard and record perused.
5. 5.The auction schedule has been perused which contains the unambiguous stipulation that the properties were being sold on "as is where is 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 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".
6. "As it is" as it stands means that, the property offered for sale in its present state, condition or form.
7. 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.
8. 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.
9. 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.
10. It was simply stated in the auction schedule that the property was under no lien/encumbrance to the knowledge of the decree holder. This stipulation did not absolve respondent No.1 from making the necessary inquiries regarding the dues outstanding in respect of the properties in question before taking part in the auction.
6. In the present case the FDA did not approach the executing court for claiming its dues. It is also clear that FDA did not have any court order in its favour adjudicating upon its alleged liability. Be that as it may, the outstanding amount owed to FDA did not have preference over the dues of the decree holder bank which had a mortgage charge over the properties. (See Messrs Industrial Development Bank of Pakistan v. Messrs Maida Limited and others 1994 SCM R 2248 and Collector of Custom Karachi v. Naya Daur Motors (Pvt.) Limited 2015 SCM R 1376. The executing Court without application of mind mechanically passed order dated 02.10.2015 requiring the outstanding amounts allegedly owned towards FDA to be paid from the sale proceeds.
7. In the result, this appeal is allowed and orders dated 02.10.2015 is set aside.