ASIM HAFEEZ, J. This judgment shall also dispose of connected E.F.A.No.1041 titled Abid Hafeez v. Nice N Easy Fashion (Pvt.) Ltd., etc. both of which arise out of same order dated 03.11.2016, by learned Judge Banking Court No.III, Lahore, whereby objections filed by respondents No. 1 to 3 were accepted and auction sale, dated 02.06.2016, was set aside.
2. Before narrating facts, it is appropriate to indicate the reasons on the basis whereof auction sale was set- aside. It was observed that the court auctioneers had transgressed their mandate / authority by incorporating conditions regarding 'identity of venue for auction and time thereof in proclamation of sale, which conditions do not form part of the draft schedule approved. Another reason regarding bi-lingual drafting of report [part of it was in English and part in Urdu], is inconsequential, hence, repelled.
3. Bare minimum facts, necessary for adjudication of the lis, are that the suit filed by appellant bank was decreed on 1103.2014, against respondents No. 1 to 3. Mortgaged property was put to sale to execute, otherwise an unsatisfied decree. The eventful auction was conducted on 02.06.2016, wherein respondent No. 4 was declared as a highest bidder, who offered purchase price of Rs. 41,000,000/- against reserve price of Rs.
38,300,000/-. There was no dispute regarding payment of purchase price in terms of rules 84 & 85 of Order XXI Civil Code of Procedure, 1908 ("CPC"). Respondents No. 1 to 3 filed objections to the auction sale, which were heard and accepted and auction was set aside vide order dated 03.11.2016, impugned through these appeals, one by the decree holder bank and the other by auction purchaser.
4. Learned counsel, representing decree holder, submits that mere incorporation of conditions, to mention the venue and time of auction were neither material irregularities nor constitute an illegality, causing substantial injury to the respondents No. 1 to 3. Averred, that respondents remained closely associated throughout the execution proceedings at whose behest machinery was excluded from the list of items to be sold for satisfaction of decree. The respondents acquiesced to the appointment of evaluator namely Al-Noor Consultants and Evaluators, appointed vide order dated 03.06.2015, on the basis of which evaluation reserve price of Rs.
38,300,000/- was fixed by the court vide order dated 22.09.2015, which remain unchallenged. Further contends, that no prejudice was otherwise caused to the respondents, who was present at the time of auction, fact evident from the affidavits appended with the objections. Lastly submits, that application was illegally entertained without appreciating that 20% of mandatory deposit, in terms of rule 90 of Order XXI CPC, was not deposited. To support its contentions, reliance is placed on judgments reported as Messrs Nice N Easy Fashion (Pvt.) Ltd and others v. Allied Bank of Pakistan and another [(2014 CLD 1404), Zakaria Ghani and 4 others v. Muhammad Ikhlaq Memo and 8 others (2016 CLD 480), Nisar Ahmad Afzal v. Muslim Commercial Bank Ltd, (Civil Petitions No.1141 & 1142 of 2016) and Jaguar (Pvt.)
Ltd, Faisalabad & another v. MCB Bank Ltd, Lahore & others (Civil Petition No.1449 of 2016).
5. Learned counsel appearing for respondent No.5 -auction purchaser - adopted the arguments of the counsel of appellant bank, however, highlighted failure of the respondents No. 1 to 3 to requisite deposit of 20% of purchase price. Reliance was placed on judgments reported as National Bank of Pakistan v. Messrs Simnwa Polypropylene (Pvt) Ltd through Chief Executive and 6 others (2016 CLD 812 Lahore), Mumtaz-ud-Din Feroze v. Sheikh Iftikhar Adil and others [(2009 CLD 594), Messrs S.M Nisar and Company through Partner and 4 others v. Banking Court-III, Multan Camp at Sahiwal and 5 others, Mst. Noor Khatoon and others v. Messrs Habib Bank Ltd. and another [2013 CLD 702].
6. Learned counsel appearing for the respondents supported order of annulment of auction sale. Contends that, auctioneers had no authority to incorporate conditions in the proclamation, regarding fixation of venue and time, which constitute material irregularity and tantamount to fraud. Learned counsel, averred that substantial injury was caused to the respondents through sale of the auction at throwaway price. Further adds, that requirement of 20% deposit was not mandatory and no direction was passed by the court. The basic objection was that auction sale was postponed by the auctioneer, whereafter the respondent left the site --- allegedly on the advice of the bank officer to negotiate settlement, thereafter respondent left and auction was surreptitiously carried out later on. Learned counsel referred to various valuation reports to establish that took place sale at unrealistic price, much below the market price. Relied upon judgments reported as Muhammad Khalil v.Messrs Faisal M.B. Corporation and others (2019 SCMR 321), Aftal Maqsood Butt v.
Banking Court No. 2, Lahore and 8 others (2005 CLD 967), Fayaz Ali v. Dr. Ahmad Khan Hoti and others (2017 CLD 1158) and Muhammad Attiue v. Jami Limited and others (PLD 2010 Supreme Court 993).
7. Arguments heard. Available record perused.
8. The propositions which emerged for adjudication of this appeal are; a) Whether the court auctioneers committed material irregularities while mentioning the venue and time of auction, in the proclamation of sale; and if so, b) Whether such alleged irregularities had resulted in substantial injury to the respondents No. 1 to 3? c) Whether the objection qua sale of the property at unrealistic price can be raised in view of the facts and circumstances of this case, when, despite knowledge and opportunity, fateful evaluation and fixation of reserve price was not challenged before the conduct of auction sale?
9. In order to understand and adjudicate upon the issues, it is apt to reiterate basic but material facts of the case. It is not disputed that respondent's / judgment debtors are not aware of the pending execution proceedings, it is not disputed that earlier reserve price of the property was fixed at Rs. 31,492,500/- in terms of order dated 10.12.2014, whereafter upon objections of the respondents to the draft proclamation of sale, particularly in relation to the reserve price proposed, fresh valuation was procured through appointment of M/s Al- Noor Consultants & Evaluators -- fee fixed was ordered to be shared by the parties. It is not disputed that respondents were not aware of the evaluation carried out, report submitted and fixation of reserve price. It is not denied, before us, that respondents were not represented on 21.09.2015, date of fixation of reserve price. The respondent No. 2 filed objections on 30.11.2015, wherein objection regarding non-issuance of notices under rule 66 of Order XXI CPC and deficient description of address were raised, which were decided accordingly vide order dated 16.01.2016. On 21.04.2016 objection was raised regarding lack of valuation of the machinery, whereupon machinery was excluded from the schedule of sale. Proclamation was approved on 26.04.2016, whereafter action was held on 02.06.2016.
10. When confronted, the learned counsel for the respondents conceded that no objections were raised to the evaluation report submitted, pursuant to order dated 03.06.2015 by evaluator appointed with concurrence, on the basis whereof reserve price was fixed. It was not the respondent's case that they had no knowledge of the reserve price fixed. In view of the above, the objection regarding sale of property at throw away price is an obvious afterthought. Such an objection at this stage -- when it was not raised at an appropriate time -- is otherwise hit by the principle of constructive res-judicata in terms of Explanation IV of section II of CPC. Reference is made to the judgments reported as AMANUL MULK v. Mian GHAFOOR-UR REHMAN and others (1997 SCMR 1796), relevant portion therefrom is reproduced hereunder;
6. We have not been impressed by this submission of the learned counsel. The learned Judge in the High Court has held that the suit, out of which, this petition has arisen, was hit by the principle of constructive res judicata This doctrine is embodied in Explanation IV to section 11, C.P.C. and is an essential constituent of doctrine of res judicata. It is because of principle of res judicata that the doctrine of res judicata is rendered fully effective. The aim of the doctrine is to compel both the parties to the suit to raise before the. Court in support of their contentions all the grounds of attack and defence available to them. By force of this doctrine, the parties have to bring their whole case to the Court and cannot reserve for the purpose of a second suit grounds available to them in support of their case. The rationale behind the constructive res judicata is that if the parties have had an opportunity of asserting a ground in support of their claim or defence in a former suit and have not done so, they shall be deemed to have raised such grounds in the former suit and it shall be further deemed that these grounds had been heard and decided as if these matters had been actually in issue. As such such parties shall be precluded from raising these grounds in a subsequent suit. Such matters will by virtue of this legal fiction be construed to be res judicata."
Even otherwise such an objection cannot be raised in view of the proviso to rule 90 of Order XXI CPC, added by virtue of Lahore Amendment. It is expedient to reproduce it, which reads as; High Court Amendments--Lahore--Add following proviso;
11. The issue of sale at throw away price is repelled.
12. The issues at point (a) & (b) of para 8, above, are connected and can be dealt together. It is essential to assess the implications of adding conditions of venue and time of auction in the proclamation of sale. How those conditions would prejudice the auction proceedings and cause substantial injury to the respondents? Auction report showed that six bidders participated and made competitive bids. Nothing is available on record to show any incidence of cartelization amongst the bidders. Distress sales cannot be compared with Black Friday or Boxing day sales, where consumers throng in mass numbers. It is notable that, since the conduct of auction sale on 02.06.2016, at no point in time respondents had endeavored or brought any willing buyer to offer price higher, then fetched at auction sale. It is evident from the auction report that judgment debtor was present at the site, who refused to sign the attendance sheet.
13. Learned counsel for the respondent insisted that incorporation of conditions, by way of adding venue of sale and time of sale, constitute an illegality, bordering fraud. Whether sale can be set-aside merely on the allegation -- without any tangible proof-- without showing any substantial injury to the rights and interests as alleged. It is expedient to reproduce rule 90 of Order XXI CPC, which reads as; "90. Application to set aside on wound of irregularity or fraud; Where any immovable property has been sold in execution of a decree. the decree-holder, or any person entitled to share in a rateable distribution of assets, or whose interests are affected by the sale, may apply to the Court to set aside the sale on the ground of a material irregularity or fraud in publishing or conducting it: Provided that no sale shall he set aside on the ground of irregularity or fraud unless upon the facts proved the Court is satisfied that the applicant has sustained substantial injury by reason of such irregularity or fraud.
Provided further that no such application shall be entertained unless the applicant deposits such amount not exceeding twenty per cent of the sum realized at the sale, or furnishes such security, as the Court may direct].
14. The respondents failed to prove, that any substantial injury had been caused, particularly when no objection was raised qua the fixation of reserve price. It is not the case before us that Court had fixed a venue and time for auction but auctioneer changed the venue or time to the disadvantage to the judgment debtors. We have examined the objections, wherein the respondents admitted that court auctioneer and bank official came at the site of the property on 02.06.2016 at 1:00 P.M., when respondent No. 2 was present. There is nothing available on record to substantiate that auction was postponed, as alleged by the respondent. We doubt that such bald assertions could justify setting-aside auction sale, otherwise conducted showing substantial compliance of the procedural requirements of Order XXI CPC.
15. The executing court erred in setting-aside sale merely on the ground that adding conditions of venue and time of auction in the proclamation of sale was an incurable material irregularity, which declaration has been made without appreciating that conditions prescribed under rule 90 of Order XXI CPC for setting-aside auction sale were missing. It is clear and obvious that unless any material irregularity, coupled with substantial injury, was shown to have been committed or caused to the respondents, no auction sale can be set-aside. Before any indulgence is shown it is imperative for the judgment debtor -- whose liability is being adjusted through sale of the property under charge of the bank -- to make out plausible case to show / establish conduct of material irregularity and resultant substantial injury, which requisite condition precedent remained elusive in this case.
Reliance is placed on a celebrated judgment by the August Supreme Court of Pakistan reported as PLD 1972 SC 337, wherein the ratio laid down was that: "non-compliance with the provisions of the Code of Civil Procedure, with regard to the proclamation of sale, its publication and the conduct of the sale in execution, are not material irregularities but not illegalities, which render the sale in disregard of those provisions a nullity. It there was any doubt as to the correctness of the above view, this doubt is laid to rest by the proviso to rule 90 of Order XXI of the Code of Civil Procedure which clearly prescribes that "no sale shall be set-aside on the ground of irregularity or fraud unless upon the facts proved the Court is satisfied that the applicant has sustained substantial injury by reason of such irregularity or fraud".
16. The judgments relied upon by learned counsel for the respondents are not applicable to the facts and circumstances of the case. The facts in Muhammad Khalil case (supra), are different, wherein auction was not conducted at the site and property was sold at the price below the rate fixed by Deputy Commissioner for revenue purposes. In Afzal Maqsood Butt's case (supra), ratio laid down enunciates general principle that mere submission of bid does not create any right of the auction purchaser. Fayyaz Ali's case (supra), reiterated the ratio in Afzal Maqsood Butt's case (supra). In Muhammad Attique's case, (supra), the question was that whether the court can adopt any other mode for conduct of sale in execution of decrees once mode provided under the Code of Civil Procedure Code, 1908 was adopted. And, sale was challenged for non-compliance of the provisions of Order XXI CPC. In the case at hand, notices were served under rule 66 of Order XXI CPC, respondents repeatedly filed objections and were aware of the conduct of sale and acquiesced to the fixation of reserve price. A reference to leave granting order dated 28.03.2019 in CPLA No.2546-17 is insignificant as no law' has been enunciated therein. The judgments referred by the learned counsels for the appellant and auction purchaser are authorities in the context of their own facts and circumstances.
17. The heart of the matter is that whether any substantial injury has been sustained by the respondents; merely due to the mentioning of venue and time of auction in the proclamation of sale by the auctioneers, which conditions were not specified in the draft proclamation approved by the court. In view of the submissions made and record available, the respondents judgment debtors failed to establish incidence of substantial injury. No violation of any order / direction of the court was committed, mere supplying of condition of venue of auction and time thereof, incorporated in the proclamation of sale and affixed on the court premises and at the site much before the conduct of auction, was not an illegality.
18. The failure of the respondents to meet condition of 2nd proviso of order XXI rule 90 CPC may have its own legal consequences but since the court has not passed specific order for deposit of requisite 20% of the purchase price, in terms of 2nd proviso to rule 90 of Order XXI CPC, before entertaining the objections / application, we are not taking into consideration alleged failure of the respondents No. 1 to 3 as ground for deciding this appeal, which is otherwise decided on merits on other points raised.
19. Under the circumstances, the, order of accepting objections and setting aide of auction sale dated 02.06.2016 is illegal and without any basis, justification and without appreciating that no injury, let alone substantial, has been caused to respondents No. 1 to 3 merely by adding conditions of venue and time of auction.
20. In view of aforesaid, we accept this and connected appeal No 1041 of 2016, set aside the order date 03.11.2016 and direct the learned Banking Court No-III, Lahore to proceed to complete the Sale carried out on 02.06.2016.
21. No order as to the costs.