JAWAD HASSAN, J. This appeal in terms of Section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (hereinafter to be referred as the "Ordinance") seeks setting aside of order dated 05.06.2017, whereby learned Judge Banking Court proceeded to dismiss the objection petition filed by the Appellants.
2. Facts of the case are that the Appellants filed objection petition in response to report submitted by the Respondent No.2/Punjab Small Industries Corporation under Section 15(10) of the "Ordinance" as regards to auction of mortgaged property. The said objection petition was dismissed vide order dated 29.02.2012, which was assailed through F.A.O.No.86 of 2012. The said appeal was allowed with consent of parties and matter was remanded to the Banking Court to decide objection petition afresh, as per law, pursuant to which impugned order has been passed.
Hence this appeal.
3. Learned counsel for the Appellants inter alia contends that the impugned order has been passed in utter disregard to the observations handed down in F.A.O.No.86 of 2012; that while passing the impugned order, the learned Judge Banking Court has not taken into consideration the mandatory requirement of Section 15 of the "Ordinance"; that publication/advertisement of auction was made in deviation to mandatory requirement of law only in Urdu Newspaper "Daily Khabrain" and that the auction was conducted at the office of Assistant Director Small Industrial Estate, Gojar Khan whereas it should have been at spot at mortgaged property hence it cannot be termed as public auction and as such mandatory provision of Section 15(4) of the "Ordinance" has not been taken into consideration.
4. On the other hand, learned counsel for the Respondent No.3 controverted the arguments advanced by the learned counsel for the Appellants and prayed for dismissal of appeal on the ground that there is no illegality or perversity in the impugned order which has rightly been passed.
5. We have heard the arguments and perused the record.
6. We have noted that the impugned order was passed by the Banking Court pursuant to order passed in F.A.O.No.86 of 2012; concluding part of the same is as below: "In view of the conceding statement made by the learned counsel for the respondents No.1&2, we allow this appeal and set-aside the order dated 29.02.2012. Consequently, the matter is remanded to the learned Banking Court, Rawalpindi for a fresh decision on the objection petition filed by the present appellants".
7. Mainly, the counsel for the Appellants has agitated before us the violation of Section 15(4) of the "Ordinance" which deals with the sale of mortgaged property. The said section is reproduced hereunder:
15. Sale of mortgaged property
(4) Where a mortgagor fails to pay the amount as demanded within the period prescribed under subsection (2), and after the due date given in the final notice has expired, the financial institution may, without the intervention of any court, sell the mortgaged property or any part thereof by public auction and appropriate the proceeds thereof towards total or partial satisfaction of the outstanding mortgage money in the following manner, namely:__
(a) the financial institution shall have the mortgaged property evaluated by a reputable valuation company on the panel of the Pakistan Banks Association as on the date of the final notice sent to the mortgagor under subsection (2)
(b) the financial institution shall cause to be published a notice in one reputable English daily newspaper with wide circulation and one reputable Urdu daily newspaper with wide circulation in the Province in which the mortgaged property is situated.
Emphases added
8. Plain reading of above said section makes it clear that the financial institution, before exercise of its powers under this subsection, shall cause to be published a notice in one reputable English daily newspaper and one Urdu daily newspaper with wide circulation in the Province in which the mortgaged property is situated, specifying particulars of the mortgaged property, including name and address of the mortgagor, details of the mortgaged property amount of outstanding mortgage money, and indicating the intention of the financial institution to sell the mortgaged property, moreover; the financial institution shall also send such notices to all persons who, to the knowledge of the financial institution, have an interest in the mortgaged property as mortgagees.
However, report of regional auction committee making part of record reveals that advertisement was published only in one newspaper Daily "Kabrain" though it was also required to be published in one reputable English newspaper as per requirement of Section 15(4) of the "Ordinance" hence this lapse alone is enough to vitiate the entire process of auction. In "Mst. SHAMIM AKHTAR Versus MUHAMMAD RIAZ and another" (2008 CLD 186), it was held that "before venturing upon the exercise of sale by auction of mortgaged property, a notice is required to be "published in an English and Urdu daily "Newspaper", in the Province where the mortgaged property is located". It was further observed that the "Financial Institution" itself exercises powers of sale, therefore, it is required to adopt a procedure, which is transparent, above-board, and also, strictly in consonance with the provisions of section 15 (ibid). Even a minor lapse or departure shall make the whole transaction questionable and vitiate entire proceedings of sale. Therefore, to safeguard the interest of "customer", the parameters prescribed by statute are mandatory and thus required to be followed as directed". Moreover, in "RAO MUHAMMAD SADAQAT ALI and another Versus Messrs RANA JAMAL AKBAR ICE FACTORY RAJAN PUR and another" (2013 CLD 546) it was observed that "under section 15(4) of the F.I.O., 2001 the mortgagee bank is bound to publicize the proposed auction in two daily newspapers."
9. Whilst dilating upon requisites of a valid public auction, in another pronouncement cited in "KAMRAN and another Versus ZONAL MANAGER and another" (2014 CLD 304), the Court held that "the 'auction proceedings' have not been conducted transparently. Rather, it was conducted in a fraudulent and in collusive manner 'ex-facie' to extend favour to the respondent No.2. Besides, no auction was conducted at the site on 16-11-2009. Neither the names nor the number of participants in the 'auction proceedings' have been disclosed. The violations so committed, inter alia non-mentioning of the 'RESERVE PRICE', auction of the 'Subject Flat' at thrown away price of Rs.1,40,000 [Rupees One Lac Forty Thousand only], much below the 'Forced Sale Value' [FSV] of Rs.4,50,000 [duly determined by SBP's valuer in the year-2009] and 'NON-DEPOSIT' OF THE BID AMOUNT' strictly in accordance with law and/or the terms and conditions of the 'PUBLIC AUCTION', of course, have rendered the sale of the 'Subject Flat' [i.e. Flat No.L-18, Block/L, Siddique Plaza Unit No.8 Latifabad, Hyderabad measuring 620-00 sq. feet] in favour of respondent No.2 as fake and nullity in law."
10. We have also seen that the publication for auction of mortgaged property was issued in daily Khabrain dated 28.05.2007 for the auction of mortgaged property on 31.05.2007 according to which the place of auction was mentioned as the Office of Assistant Director, Small Industrial Estate, Gojar Khan but as per Section 15(4) of the "Ordinance" it must be the public auction. Admittedly, the auction was conducted on 31.05.2007 and before issuance of publication on 28.05.2007, three notices in terms of Section 15(2) of the "Ordinance" were purportedly issued by the Respondents in the name of the Appellants, but record is absolutely mute about their effective service, hence, the Respondents without strict observance of the legal formalities sold the properties at throw-away price. In "IRFAN NAWAB through attorney Versus SONERI BANK LIMITED" (2012 CLD 1922), it was held that "the assumption of powers under subsection (4) of section 15 of the Ordinance, 2001 are of such nature that it takes away certain valuable rights of the borrower/mortgagor and hence the compliance of the provisions of subsection (2) of section 15 of the Ordinance, 2001 becomes mandatory".
11. Moreover, the auction report was to be filed by the Respondents before the Banking Court within thirty days of auction in terms of Section 15(11) of the "Ordinance", but the same was filed on 27.06.2008 as observed in the impugned order. It is noted that when auction report under Section 15(10) of the "Ordinance" was submitted on 27.06.2008, the Banking Court in its order dated 15.06.2008 observed that documents with regard to proceedings of auction were not appended and notices were issued to the Appellants for 28.10.2008. On the said date, none was present on behalf of the Respondents and notice pervi was issued to them for 18.12.2008 as they did not deposit process fee for service of the Appellants. On 18.12.2008, again process fee was not deposited by the Respondents and notices were issued to the Appellants for 07.05.2009, when Appellants put their appearance first time on 07.05.2009 and filed objection petition on very next date on 01.06.2009 against the auction report submitted in terms of Section 15(10) of the "Ordinance". No service or attendance of appellants is pointed out in alleged auction proceedings nor they stand established having been served with process after submission of report of said auction. Thus, we are not convinced by the observation of Banking Court that the objections filed by the Appellants are time barred rather the respondents have been noticed suffering with fault in discharge of duty of submitting auction report within thirty days of the auction proceedings otherwise casting serious doubts regarding genuine conduct of subject auction proceedings.
Respondents were bound to follow & accomplish all requisites of Section 15 of the "Ordinance" in course of conducting auction proceedings. Dilating upon auction conducted under Section 15(4) of the "Ordinance", it was observed by August Supreme Court of Pakistan in case titled "IZHAR ALAM FAROOQI, Advocate and another Versus SHEIKH ABDUL SATTAR LASI and others" (2008 CLD 149) reading that "the sale of mortgaged property through auction without the compliance of the requirement of law in letter and spirit certainly invalidates the transaction as a whole".
12. As per record, only auction of mortgaged property is alleged to have been conducted and no further step sounds having been taken ahead. Thus, impugned auction by no means had attained finality for being rendered as a past & closed transaction as is observed in impugned order by learned Banking Court. Reliance in said regard can be placed upon judicial pronouncement in case titled "MUHAMMAD ISMAIL Versus DUBAI ISLAMIC BANK PAKISTAN Ltd" (2016 CLD 5) reading that: "9. From perusal of hereinabove findings as recorded by the learned full bench of the Lahore High Court, and keeping in view the facts of instant appeal, we are of the view that without prejudice, to any other objection as raised by the learned Counsel for the appellant, the case of the appellant is not of a past and closed transaction, as in the instant matter, neither the possession has been delivered to the Bank, nor any sale deed has been executed, whereas, only proceedings of auction have taken place in terms of section 15 of the Ordinance, 2001, ..."
13. Moreover, August Supreme Court of Pakistan held in case titled "MUHAMMAD MOIZUDDIN and another Versus MANSOOR KHALIL and another" (2017 SCMR 1787) reading as follows: "13. ... In the circumstances, we are of the view that the cases where sale itself has not been challenged, or such challenge has remained unsuccessful, and the sale proceeds stood adjusted towards outstanding liability of the principal debtor, and sale deed in favour of the auction purchaser stood registered under the provisions declared ultra vires the Constitution, would be saved from the effect of such declaration being past and closed transactions."
14. For the forgoing reasons, having noticed defective status of auction proceedings in question, we are inclined to allow this appeal and set-aside the impugned order letting the matter open for re- auction of mortgaged property following and complying with all requisites enacted in mandatory provisions of Section 15 of the "Ordinance".