ASIM HAFEEZ, J. This Execution appeal ('Appeal') assails order dated 03.03.2022, in terms whereof petitioners' objection petition against auction sale dated 22.02.2020 was dismissed, by learned Judge Banking Court, and auction sale was confirmed in favour of the respondent No.7 ('auction purchaser').
2. Facts, necessary for adjudication of instant appeal, are that suit for recovery filed by respondent No.1 ('Financial Institution'), was decreed on 21.11.2014, whereupon execution proceedings ensued, where enforcement of decree was sought through the sale of mortgage properties, through the intervention of the executing court. Previously some unsuccessful attempts were made to auction the properties. Proclamation of sale was approved on 15.01.2020, based on which auction was conducted on 22.02.2020. Reserve price of subject matter property was fixed at Rs.29,155,000/- based on valuation report by M/s Harvester Services (Pvt) Ltd dated 14.07.2015. Property comprised of 41-Kanal - 17 Marla - two parcels of land approximately 37-Kanal and 3 Kanal - with superstructure, buildings, fittings and fixtures, as mentioned in the proclamation of sale. Finally, auction sale dated 22.02.2020 was declared successful in favour of auction purchaser, regarding property identified at serial No.1 of the sale proclamation (subject matter of challenge in instant proceedings). Auction purchaser was the only bidder turned at the auction site to participate, whose bid, being the only bid, was declared highest bid, who offered bid of Rs.29,525,000/-.
Appellants filed objections under Order XXI Rule 90 of The Code of Civil Procedure, 1908 ("CPC"), which objections were heard and dismissed, primarily in wake of failure of the objectors to deposit 20% of the auction amount, and auction sale was confirmed. Hence, this appeal.
3. Learned counsels appearing for the appellants contend that auction conducted was not a public auction, where only single bidder participated and was declared successful. Further submits that reserve price of subject property was fixed on alleged evaluation report, allegedly procured five years ago, which constitutes fraud played on the executing court by the decree holder. Adds that decree holder misled the court in fixing reserve price, knowingly that property put to auction was an expensive asset and fair sale would realize amounts, sufficient for adjusting the decree in full.
Adds that sale of the property cheaply had prejudiced appellants and resulted in substantial injury.
Learned counsel referred to various valuation reports, carried out at different points in time, to emphasize that sale was carried out at ridiculously low price. Adds that auction purchaser barely offered Rs.370,000/-, over and above the reservice price, which single factor is enough to discredit sale of any credence. Learned counsel referred to ratio settled in the case of "MUHAMMAD SHOAIB ARSHAD and another v. FEDERATION OF PAKISTAN through Secretary, Ministry of Law, Justice Human Rights and Parliamentary Affairs and 4 others" (2020 CLD 638) to elaborate the significance and requisites of conduct of public auction(s).
4. Learned counsel appearing for decree holder supported the auction. It is alleged that before having a successful auction, numerous unsuccessful attempts were made to auction the properties, which failed mainly due to the interference and influence exerted by the judgment debtors / appellants, who often intercepted, threatened, and browbeaten prospective bidders, frustrating the efforts for the execution of the decree. Submits that requirement of determining reserve price on fresh evaluation, not more than three years old, is not a binding rule but mere guidelines by the State Bank of Pakistan, which otherwise have had no relevance and applicability to the cases of conduct of auction sales by the courts with respect to distressed sales. And this is no ground to set-aside auction sale. Submits that ratio settled in the case of MUHAMMAD SHOAIB ARSHAD and another" (supra) is not attracted to the case at hand, which case deals with the sales carried out under section 15 of The Financial Institutions (Recovery of Finances) Ordinance, 2001 ('FIO') and obiter therein must necessarily be construed in the context of the rule 3(iv)(c)(iii) of the Financial Institutions (Recovery of Finances) Rules, 2018, which was declared ultra vires.
5. Learned counsel appearing for auction purchaser [respondent No.7] submits that auction was conducted in accordance with the law, and impugned order manifests no illegality. Report of the auctioneers depicted unlawful and forcible interference by the appellants in the auction proceedings, which interference, on previous occasions too, had frustrated attempts to carry auction. Adds that appellant failed to deposit 20% of the amount in terms of second proviso of Order XXI Rule 90, CPC; appellants failed to raise objections against fixation of reserve price, at the time of approval of terms of sale and no objection was raised qua the determination of reserve price on the valuation report, hence, same are estopped from raising any objection after the conduct of auction in light of the rule of Res-judicata. Adds that mere inadequacy of the price realized at auction is per se no ground to set aside auction sale, when no substantial injury was otherwise caused, as appellants failed to bring any matching bid on the record to substantiate allegation of sale at unrealistically low price. Learned counsel referred to the decisions reported as "Messrs NICE 'N' EASY FASHION (PVT) LTD. and others v. ALLIED BANK OF PAKISTAN and another"
(2014 SCMR 1662), "Messrs HABIB AND COMPANY and others v. MUSLIM COMMERCIAL BANK LIMITED and others" (PLD 2020 SC 227), "Agha ABBAS HAIDER KHAN v. ZARAI TARAQIATI BANK LIMITED through Branch Manager" (2006 CLD 764), "Mian SHAHID NADEEM v. BANK ALFALAH and others" (2019 CLD 741) and "Messrs CHAUDHRY WEAVING FACTORY and 2 others through Partner v. NATIONAL BANK OF PAKISTAN through Vice-President / General Attorney and another" (2005 CLD 1445).
6. Arguments heard. Record perused.
7. Pivotal question calling for determination is whether appellants had sustained substantial injury as consequence of alleged illegalities / irregularities pointed qua the publishing and conduct of under challenge auction sale. It is not disputed that execution of the decree was sought through the sale of charged / mortgaged properties through conduct of public auction, through the intervention of the court, and not by inviting sealed tenders. Section 19 of the FIO and Rules (65) &
(66) of Order XXI of CPC refers to the public auction, as one of the modes of sale under execution proceedings. Whether a bid offered by a single / sole bidder could be classified as 'public auction'.
By no stretch of imagination auction sale involving a single participant could be construed as public auction. We are afraid that the argument, that bid by a single bidder tantamount to public auction, must fail, being fallacious and somewhat misconceived. We take this opportunity to add that allegations, simplicitor, alleging criminal interference by the appellants during the conduct of auction sale would not per se extend legitimacy to single-bidder sale, since there are ways and mechanism to deal with such situations. In the wake of absence of any competitive bidding, devoid of participants, court auctioneers could have deferred the sale and lodged a complaint against the delinquents / rogue elements - why police assistance was not sought by the court auctioneers if various attempts, earlier made, remained unsuccessful. Failure to hold / conduct public auction clearly manifests defiance and disregard of the provision(s) of law, which constitutes an illegality, patently causing substantial injury to the appellants. We have examined the ratio settled in the case of MUHAMMAD SHOAIB ARSHAD and another" (supra), wherein rational, legality and necessity of public auction(s) were discussed in the context of rule, enabling sales with single bidders. Hypothetically thinking what if a judgment debtor is the only bidder present and offers price nominally higher than the reserve price, would it be appropriate to declare such bid successful and cause prejudice to the decree holder. Same principle holds good for the judgment debtors as well. Public auction(s) are sine qua non for securing interest of the decree holder, judgment debtors and persons, otherwise having interest in the property sold.
8. In the case at hand, besides lack of conduct of public auction, another glaring irregularity is regarding the determination of the reserve price based on valuation report dated 14.07.2015 - terms of sale were approved in January 2020, showing gap of five years. Determination of the reserve price, in the instant case, based on five years old report manifests conspicuous disregard for the appreciation of real-estate prices during last five (5) years. There is no cavil that determination n of reserve price, based on latest valuation report arranged / conducted, ensures reasonableness, rationality, fairness, and otherwise promotes transparency, besides extending credibility to the judicial sales. Argument that distressed sales are immune from the guidelines of the State Bank of Pakistan - which guidelines suggest determination of reserve price of property based on valuation report having a shelf-life - is misconceived. Fixation of reserve price of the properties, put to auction sales, is an important judicial business and cannot be left to be determined on the basis of valuation report, procured five years before consideration of terms and conditions of proclamation of sale. The statutory obligation of the court executing the decree, to determine and settle terms and conditions of sale, inclusive of question of fixation of reserve price, in particular requirements prescribed under Order XXI Rule 65 & 66, in the context of public auction, have had to be enforced and adhered to in letter and spirit to ensure that no undue advantage is gained by the decree holder against the judgment debtor and vice versa. In this case the decree holder bank failed to arrange for fresh valuation of the property and factum of five years old valuation report was not highlighted. In view of the above, sale of property, allowed to be conducted based on the valuation of property, carried out in the year 2015, is an illegality, which had the effect of causing substantial injury to the appellants - who were deprived of taking an obvious advantage of phenomenal surge in real-estate prices during relevant time. This fact, regarding appreciation in prices, need not to be established or proved but a public knowledge, so conspicuous that courts can per se take judicial notice of this fact. There may be other, equally fatal, illegalities in the conduct of auction, evidently apparent in the wake of disagreement amongst counsels that what was offered for sale, was it a bare land or land with structure, buildings, fitting, and fixtures - proclamation of sale contained references to construction, building, fitting, and fixtures. This discrepancy too has serious implications in the context of sale under reference, coupled with other illegalities highlighted above. We consider that illegalities discussed above are fundamental enough to denude alleged auction of any credence or legality, which is prejudicial and caused substantial injury to the appellants - judgment-debtor(s). Judgments referred by the learned counsel for auction purchaser may constitute authorities in the context of the facts involved therein, which are not attracted to the case at hand.
9. Learned counsel for the auction purchaser emphasized that 20% of the amount was not deposited by the appellants, despite directions by the executing court, hence, objections could not be entertained. Objection is misconceived, in the circumstances of the case where court is dealing with an invalid sale - not qualified to be termed as a public auction and wherein settlement of reserve price was based on five years old valuation report. Learned counsel misconstrued second proviso to Order XXI rule 90 CPC, which extends discretion to the court to direct deposit of amount not exceeding 20% of the sum realized or furnishes such security, as the Court may direct. The discretion rests with the Court, and opting for either direction to deposit in cash or a security has to be examined in the context of the facts of each case. It is evident that various properties [at serial 1, 2 (i) & (ii) & 3] were put to auction sale, out of which property at serial 1 was allegedly auctioned, and rest of the properties could not be auctioned. Auction purchaser offered a bid of Rs.29,525,000/-, 20% whereof comes to Rs.5,831,000/-. The reserve price(s) of other properties comes to Rs.12,380,625, which is more than the limit of 20% of the amounts realized and said properties could be treated as security for entertaining the objections - for ensuring compliance of the second proviso of Order XXI rule 90 CPC. Executing court, in the wake of gross illegalities, causing substantial injury thereby, in the context of the facts of this case, could treat other properties as security and entertain objections against alleged auction. The discretion vested was not exercised fairly, in the context of illegalities in the conduct of auction under reference. It is observed that executing court has otherwise dealt with the objections on merits, despite non- deposit of the directed 20%. Submission that no objection could be raised once reserve price was fixed is misconceived. Objections raised fall within the scope of Order XXI rule 90 CPC. In the circumstances, alleged sale is found disadvantageous to the appellants - causing substantial injury - and, unless there are some extraneous considerations, alleged auction was equally detrimental to the decree holder bank - which is likely to benefit in case of public / competitive auction. Offering bid, notionally better than the reserve price fixed - in the wake of uncompetitive and uncontested sale, not a public auction - is another stark illegality.
10. We are of the considered opinion that sale under reference is a nullity, in the wake of the scale of lapses and illegalities in the conduct of auction. Sale in question is inherently defective. We take cognizance of the objections raised and upon judicial determination thereof hold that sale is not lawfully qualified to be confirmed.
11. Instant appeal is allowed, order dated 03.03.2020 of dismissal of the objections is set-aside, auction sale and confirmation thereof, including all steps taken in pursuance thereof are declared void and of no legal effect. No order as to costs. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.