C. M. No. 05 of 2018 This objection petition in terms of Section 19 of the Financial Institution (Recovery of Finance)
Ordinance, 2001 (the "Ordinance") was filed by the applicants/judgment debtors objecting to auction proceedings dated 14.12.2017 on the ground that the land measuring 180-Kanals (more than 22 acres) situated at Mauza Bauly, Tehsil Muridke, District Sheikhupura worth more than Rs.
400 million has illegally been auctioned @ Rs. 185,000,000 in favour of one Muhammad Fazal Muqeem.
I. Context
2. During execution proceedings, the auction of property was held on 14.12.2017 and the applicants/judgment debtors being aggrieved thereof filed this objection application on 13.01.2018 to set aside the same. The nub of the matter in this application is the alleged illegalities and irregularities committed by the Court Auctioneers in auction proceedings in connection with the execution of the decree of banking suit. In order to resolve the issue following banking moot points were framed on 22.11.2019:-- I. Under which provision of the Financial Institution (Recovery of Finance) Ordinance, 2001 (the "Ordinance") and the Code of Civil Procedure, 1908 (CPC), the Banking Court has to approve the auction schedule?
II. What should be included in terms and conditions of the auction approved by the Court in the light of the provision of the CPC?
III. Whether the objection petition is maintainable in case of non-deposit of 20% pre-auction/post- auction in every case when there is material illegality and irregularity in the auction proceedings?
IV. What is the time frame of the auction and its objection to be decided?
V. What are the vested rights of the bidders and auction purchasers after they have become successful bidder before the sale certificate is issued?
VI. Whether the pasting of poster in the Court Premises is mandatory?
VII. Whether the signing of attendance sheet and bidding sheet, is mandatory or directory?
VIII. The relationship of the Court auctioneer should be transparent with all the stakeholders and what is criteria of the same?
IX. What amounts to substantial injury Order XXI Rule 90 of CPC?
X. Whether the auction that has been conducted without following the procedure, violates the fundamental rights of the auction purchaser under Articles 23 and 24 of the Constitution?
II. Applicant/judgment debtors' submissions
3. Mr. Khalid Ishaq, ASC submits that this Court directed the decree holder/bank to publish the auction schedule in two daily newspapers (one Urdu and one English) with the purpose to inform maximum number of people from general masses regarding auction of the property so that the maximum bidders could participate in the bidding process but the decree holder/bank in sheer violation of order of this Court malafidely published the proclamation only in English language in newspaper daily "The Nation", therefore the auction proclamation does not fulfill the requirements of Order XXI Rule 66 of the Civil Procedure Code, 1908 (the "CPC"). He further submits that the Court Auctioneers were bound to affix the proclamation upon a conspicuous part of the Court and the property to be auctioned as per prescribed law but the same has not been done. He argues that it is mandatory provision of Order XXI Rule 68 of the "CPC" that no auction shall be held until the expiration of at least 15 days calculated from the date on which the copy of proclamation has been affixed in the Court i.e. 01.12.2017 but as per report of the Court Auctioneers the same was held on 14.12.2017, only after 13 days of fixation of proclamation in Court. He next adds that actually no open auction has been conducted and the proceedings shown in the auction report are false, fake, fictitious and are result of collusion between the decree holder/bank, auction purchaser and the Court auctioneers. He highlights that as per auction report, two bidders paid the earnest money amounting to Rs. 1,000,000/- through cheques instead of pay orders to participate in the auction proceedings, which also was not in accordance with law. He maintains that the property to be auctioned is undivided thus the same cannot be auctioned without proper partition and demarcation. He points out that evaluation report submitted by the evaluator i9 also incorrect, false and fictitious because the same does not give the actual value of the property. Lastly, submits that the alleged auction proceedings dated 14.12.2017 are result of fraud, hence the same be declared as illegal, fraudulent, null and be set aside.
III. Decree Holder Bank/Respondents Submission
4. Conversely, Mr. Muhammad Naeem Sehgal, ASC for the decree holder/bank submitted detailed reply to this application and defended the auction proceedings dated 14.12.2017 by denying the story narrated by the applicants/judgment debtors. Mr. Muhammad Naeem Sehgal, ASC also objected to maintainability of this application on the ground that the applicants/judgment debtors have neither deposited 20% of amount realized at the sale nor furnished security in term of Order XXI Rule 90 of the "CPC" and thus it has just been filed to frustrate auction proceedings and to deprive the decree holder/bank from its lawful rights. He added that whole auction proceedings were conducted strictly in accordance with law and the property was auctioned against sum of Rs.
185,000,000/-as per law therefore, the applicants/judgment debtors have not approached this Court with clean hands and are not entitled to any relief.
IV. Court Auctioneer's submissions
5. The Court Auctioneers have also submitted their written arguments in response to this application and argued that allegations levelled and pleaded by the applicants/judgment debtors are totally False, flimsy, frivolous, baseless and have no force or value in the eyes of law. They urged that all the auction proceedings have been conducted in accordance with law and no illegality or irregularity has been committed on their behalf.
V. Amicus Curiae's submission
6. Mr. Majid Ali Wajid, ASC submitted that where property/security before the Court for realization of the decretal amount is a mortgaged property, there is no requirement of its attachment before its sale in execution of decree passed by the Court and the Court may directly order the said property to be sold through public auction in terms of Order XXI Rule 64 of the "CPC". He adds that once such order is made, the Court causes a proclamation of intended sale, after notice to the decree holder and the judgment debtor under order XXI Rule 66 of the "CPC", containing material details such as description of the property, its reserve price, the terms and conditions of the auction, and its time, date and venue, to be published in terms of Order XXI Rule 66 and Rule 67 of the "CPC". He added that in terms of the Lahore High Court Amendment in Order XXI Rule 66, sub-rule (2), which has come into effect from 1-11-2020, such proclamation shall be drawn by the Court Auctioneer from now onwards, and contain all the aforesaid material details which shall be submitted before the Court for its approval which shall add to it the reserve price of the property under sale, based upon the evaluation report submitted by any evaluator appointed by the Court from amongst the evaluators approved by the Pakistan Bankers Association. Hence, once the Court has satisfied itself from the perusal of the record of case that requirements under the afore-mentioned rules have been complied with, the Court has to approve the auction schedule and to proceed with the auction of the property in terms of Order XXI Rule 66 of the "CPC". He pointed out that the term `auction schedule' is merely used in practice, and is not a term that can be found in the procedure provided in the "CPC". It is in fact the term "proclamation" which is used in Order XXI of the "CPC" for this purpose. Therefore, it may not be correct to use the term 'auction schedule', as the said term only gives an indication of the schedule/timing/date of auction, rather than the terms and conditions mentioned therein. The term "proclamation" is a comprehensive term as the approved proclamation includes both the schedule of auction sale, as well the terms and conditions of auction.
VI. Determination by the Court
7. Before discussing the aforementioned points of determination, it would not be out of place to mention here that in a similar case "Faysal Bank Limited versus Sajjad Aslam and others" (2022 CLD 123), where auction proceedings were challenged, this Court besides elaborating the term "substantial injury" has held that in order to get an auction sale set-aside, it was mandatory for the judgment-debtor to fulfill two basic conditions. Firstly, he has to satisfy the Court on the merits, the existence of a material irregularity, or fraud in publishing or conducting an auction. Secondly, he has to establish that he had sustained a substantial injury by reason of such irregularity or fraud.
Keeping the said yardstick in view, the aforementioned points of determination are discussed and decided respectively as under: POINT Nos. 1 & 2 (Provisions regarding approval and terms and conditions of auction)
8. There is no cavil to the proposition that Section 19 of the "Ordinance", Section 151 read with Order XXI of the "CPC" deals with execution proceedings before the Banking Court and gives discretion to it to execute a decree of Banking Court as per the provisions of the "CPC", or in any manner the Court deems fit. Section 51 of the "CPC" generally provides the modes which can be adopted by a Court for execution of a decree while Order XXI provides detailed procedure regulating the powers of the Court in respect of execution.
Order XXI Rule 64 envisages power of executing Court to order sale of property already attached but in case of a mortgaged property, an executing Court can order the sale through public auction and attachment would not be necessary. Reliance is placed on Messrs Hanif Metal Store through Proprietor and others v. Bank of Punjab through Manager and others (2017 CLD 447), wherein it was held that: "Mortgaged property being already secured, the Court was not required to adopt protective measures through attachment in respect of mortgaged properties. There is no cavil with the settled proposition that once Executing Court opted and invoked provisions of C.P.C., then it cannot avoid its express provisions. However, as already discussed above, provision of Order XXI, Rule 54 or Section 60, C.P.C. does not specifically required attachment of mortgaged property, therefore, Court was not bound to attach the mortgage property before its sale in execution".
9. Order XXI Rule 66 deals with proclamation of sales by public auction while Rule 67 deals with mode of making proclamation. Once an order for sale under Rule 64 is made, the Court causes a proclamation of intended sale, after notice to the decree holder and the judgment debtor under order XXI Rule 66, CPC. Under the amended Rule 66 sub-rule (2) of Order XXI, any proclamation of sale of any such., property by public auction, shall be drawn by the Court, Auctioneer which shall be submitted before the Court for its approval which shall add to it the reserve price of the property under sale, based upon the evaluation report submitted by any evaluator appointed by the Court from amongst the evaluators approved by the Pakistan Bankers' Association. Hence, once the Court has satisfied itself from the perusal of the record of case that requirements under the afore- mentioned rules have been complied with, the Court has to approve the auction schedule and to proceed with the auction of the property in terms of Order XXI Rule 66. It is pertinent to mention here that the term "auction schedule', only gives an indication of the schedule/timing/date of auction, rather than the terms and conditions mentioned therein while the term "proclamation" is a comprehensive term as the approved proclamation includes both the schedule of auction sale, as well the terms and conditions of auction. In the light of Order XXI Rule 66 the "CPC", following elements should be included in the terms and conditions of the auction schedule/proclamation approved by the Court:- i. Time and place of sale of auction property. ii. Description of the property to be sold at auction. iii. The revenue assessed upon the estate or part of the estate, where the property to be sold is an interest in an estate or in part of an estate paying revenue to the Government. iv. Any encumbrance to which the property is liable. v. The amount for the recovery of which the sale is ordered. vi. Every other thing which the Court considers material for a purchaser to know in order to judge of the nature and value of the property. vii. The reserve price of the property.
10. Order XXI Rule 67 sub-rule (2) further provided that such proclamation shall be published in the official gazette or in a local newspaper, or in both however the said sub-rule is substituted by Lahore High Court in 2018 and now the sub-rule (2) (i) requires that where the reserve price determined by the Court exceeds rupees two million, the proclamation shall be published in at least one widely circulated national daily newspaper while under sub-rule (2)(ii) video recording of the auction proceedings is also required to be made by the Court auctioneer.
POINT NO. 3 (Maintainability in case of non-deposit of 20% amount)
11. The objection regarding the maintainability of the instant petition due to non-deposit of 20% of amount in terms of Order XXI Rule 90 of the "CPC" as raised by learned counsel for the Respondents is not without substance. This is because as per the second proviso of Rule 90, Order XXI of the "CPC", until and unless, the judgment debtors deposit an amount equal to 20% of the sum realized at the sale or furnish such security as the Court may direct, in every case, any objection would not be maintainable even when there is material illegality and irregularity in the auction proceedings.
The requirement to deposit 20% of the auction price, or such other security as directed by the Court, along with an application under Order XXI Rule 90 of the "CPC" is mandatory, and any application that fails to fulfil this requirement cannot be entertained and is liable to be dismissed by the Court. Reliance is placed on "Zakaria Ghani versus Muhammad Ikhlaq Memon" (PLD 2016 SC 229), wherein it was held (Para. 4 on Pg. 238) that: "Yet another condition is prescribed by the second proviso which states that no application shall be entertained in terms of this provision of law unless and until the judgment deposits an amount equal to 20% of the sum realized at the sale or furnish such security as the Court may direct. These are stringent conditions which make the policy of the law crystal clear. A mere allegation is not sufficient. It has to be established that not merely an irregularity, but a material irregularity has taken place or, in the alternative, that fraud has been perpetrated in the process of carrying out the sale. Then is super added the requirement that even if these conditions are complied with the judgment debtor must satisfy the Court that he has sustained a substantial injury by reason thereof. Finally, in order to discourage frivolous applications intended to delay the execution of the decree it is mandatory on the judgment debtor to deposit 20% of the sale amount. or furnish such security as the Court may direct."
12. The plain reading of the second proviso to Order XXI Rule 90 of the "CPC" mandates every application under the provision to be accompanied by 20% of the auction price in order to be entertained. Reliance is also placed on "Messrs HABIB AND COMPANY and others versus MUSLIM COMMERCIAL BANK LIMITED & others" (PLD 2020 SC 227), wherein it was held (Pg. 231) that: "A bare reading of the second proviso to Order XXI Rule 90 clearly shows that the deposit of a sum of 20% of the auction price is mandatory for the application to be entertained in the first place, i.e. an application will not be maintained unless such a sum is deposited. A closer reading of the provision also shows that the discretion provided to the Court is not with respect to furnishing of the security at all, but rather the amount of the security to be deposited."
13. It is not out of place to mention here that in order to evade the requirement of depositing 20% of the sum realized at the sale, the objectors often seek to circumvent the application of provisions under Order XXI Rule 90 the "CPC" by filing the objection petitions under Section 19(7) of the "Ordinance". However, the said objection petitions would be deemed to be the applications under Order XXI Rule 90 of the "CPC". Reliance is placed on "Messrs NICE 'N' Easy Fashion (PVT.) LTD. and others versus Allied Bank of Pakistan and another" (2014 SCMR 1662), wherein it was held (Pg.
1666) that: "The appellants themselves moved the Banking Court under Section 19(7) of the Ordinance and have not made an application under Order XXI Rule 89 or 90, C.P.C. Even if the objection petition of the appellants is treated as an Application under Order XXI Rule 89 or 90, C.P.C., then the said Rules mandate that the objector should deposit the amounts mentioned therein along with the application. In absence of the deposit, as mandated by the Rules, the application and or objections cannot be entertained by a Banking Court. In the case in hand, the appellants have not deposited any of the amounts required under the aforesaid Rules, therefore, the objections were rightly rejected by the Banking Court."
14. In another judgment reported as "Messrs Habib and Company and others versus Muslim Commercial Bank Limited and others" (2019 SCMR 1453) it was held (Pg. 1455) that: "The provisions of Order XXI Rule 90, C.P.C. have come under discussion in various judgments pronounced by this Court in which it has conclusively been held that the statutory deposit of 20% by this judgment debtor is mandatory and that without such a deposit the objection application under Order XXI Rule 90, C.P.C. is not maintainable."
POINT NO. 4 (Time frame of the auction and decision of objections)
15. Order XXI Rule 68 deals with the time frame of sale through auction. Under this Rule an interval of 15 days must elapse between the date of proclamation and the date of sale an immovable property. Although non-compliance of this provision may amount to material irregularity but any such sale would not be liable to be set-aside until and unless it is proved that it caused substantial injury to a party. Reliance is placed upon "Zakaria Ghani and 4 others versus Muhammad Ikhlaq Memon and 8 others" (PLD 2016 Supreme Court 229). This Court has also held in "Faysal Bank Limited versus Sajjad Aslam and others" (2022 CLD 123) that: It has to be established that no merely an irregularity but a material irregularity had taken place, or, in the alternative that fraud had been perpetrated in the process of carrying out the sale. Even if these conditions were complied with the judgment debtor must satisfy the Court that he had sustained a substantial injury by reason thereof It has further held that mere an irregularity, even if material, should not suffice unless it could be shown that material loss had been caused.
16. As far as the time frame for decision of the objection petition against auction is concerned, Section 19(7) the "Ordinance" envisages that, notwithstanding anything contained in the "CPC", or any other law for the time being in force, the Banking Court is required to follow the summary procedure for purpose of investigation of claims and objections in respect of attachment or sale of any property, whether or not mortgaged, pledged or hypothecated, and shall complete such investigation within 30 days of filing of the claims or objections.
POINT NO, 5 (Vested rights of bidders and auction purchasers)
17. After a successful completion of an auction proceedings, the highest bidder is under an obligation to deposit the sale price in terms of the proclamation of sale and then the Court Auctioneer sends a report to the Court describing various particulars of the proceedings including the detail of participants, the bids offered by them, the information about the highest bidder, and the notification of earnest money as deposited by the latter under Order XXI Rule 84 of the "CPC".
The Court then applies its judicial mind on the report in order to choose the most appropriate bid, preferably the highest, for the realization of the decree and costs. The Hon'ble Supreme Court of Pakistan has repeatedly held that the nature of a bid made in the auctions, whether it is the highest or the lowest, is that of an offer which does not by itself give rise to any rights to the bidders or auction purchasers, as the same is always subject to acceptance by the Court after proper application of its judicial mind and deposit of full purchase-money under Order XXI Rule 85, CPC.
Reliance is placed on "Muhammad Attique versus Jami Limited" (PLD 2010 SC 993), wherein it was held that: ..... It is well settled that a bid made at an auction is in the nature of an offer which does not mature into a contract till its acceptance. The auctioneer acts as an agent of the seller to accept the bid, a concluded contract comes into being the moment the bid is accepted by a word of mouth or in any other customary method like fall..........hammer at public auction. If however the auctioneer is not vested with the power to accept the bid and said power is with another authority (i.e. the Court in a matter), the contract/sale comes into being when the bid is accepted by that authority......" .......................In an auction proceedings, title in the property not transferred in favour of the highest bidder, at the time when was held and offer was forwarded to the 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 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."
18. In another pronouncement, the Hon'ble Supreme Court of Pakistan in "Afzal Maqsood Butt versus Banking Court No. 2, Lahore" (PLD 2005 SC 470), has held that "..........The bid in an auction is only an offer and without the confirmation of sale, it does not create any right in the property in favour of the successful bidder, therefore, the confirmation of sale cannot be claimed as of right."
19. As far as the infringement of legal right of the highest bidder in the auction proceedings is concerned, reliance is placed on "Captain-PQ Chemical. Industries (Pvt.) Ltd versus Messrs A.W.
Brothers and others" (2004 SCMR 1956), wherein it was held that: "We have examined the entire record also perused the judgment impugned. We may mention here at the outset that mere floating of the bid in respect of the fact whether it is the highest or the lowest, does not create a legal right in favour of the bidder, hence the question of its infringement does not arise."
20. The declaration of the highest bidder at the end of an auction is merely to let the participated bidders know who has to deposit the earnest money in terms of Order XXI Rule 84 of the "CPC". As to the creation of legitimate expectation in favour of the highest bidder to the sale of subject property, such expectation is of course created in favour of the highest bidder but against the other bidders, making him expect that his offer shall be accepted by the Court and the property in question against other bidders will he transferred in his name after all the legal requirements have been met. However, such expectation does not give rise to any right much less vested right in the property, for such rights to be created, only when a bid is accepted by the Court after proper application of its judicial mind.
21. While discussing the accrual of valuable rights in favour of the bidders, the Supreme Court of Pakistan in case titled "Muhammad Khalil versus Faisal M.B. Corporation" (2019 SCMR 321) held that: "We are not impressed by the argument of the learned Counsel for the Petitioner that by virtue of being declared the highest bidder and depositing the entire sale price in Court, valuable rights had accrued in favour of the Petitioner. It needs no reiteration that an auction is always subject to confirmation by the Court. Till such time such confirmation is granted by the Court, after hearing all hearing concerned parties in accordance with law, the powers available to the Court under Order XXI Rules 89 or 90 can always be exercised."
Therefore, unless the Court confirms the auction by accepting the bid of the highest bidder, no vested/third party right accrue in favour of the auction purchaser.
POINT Nos. 6 & 7 (Pasting of poster in Court and signing of attendance/bidding sheet)
22. The pasting of poster in the Court premises is one of the modes of making proclamation under the provisions of Order XXI Rule 67 which enables due publicity to an auction sale. Every proclamation is to be made and published, as nearly as may be, in the manner prescribed by the Order XXI Rule 54 sub-rule (2), which is reproduced is as under: "54(2) The order shall be proclaimed at some place on or adjacent to such property by beat of drum or other customary mode, and a copy of the order shall be affixed on a conspicuous part of the property and then upon a conspicuous part of the Court-house, and also, where the property is land paying revenue to the Government, in the office of the Collector of the district in which the land is situate."
23. Thus, a substantial compliance of the provisions of the Order XXI Rule 54 sub-rule (2) is enough for the purposes of sale proclamation and attracting the prospective bidders, and in the absence of any specific complaint in this regard, the entire auction proceedings cannot be vitiated by the Court. Reliance is placed on "GHULAM ABBAS versus ZOHRA BIBI and another" (PLD 1972 SC 337), wherein it was held that:- "The next contention of the learned counsel for the appellant is that the non-publication of the sale proclamation by beat of drum in the locality, as prescribed by sub-rule (2) of rule Order XXI of the Code of Civil Procedure, was a non-compliance with a mandatory provision of the law, which vitiated the entire proceedings. Again, it is no doubt true that the sale proclamation was not published at some place on, or adjacent to the property by beat of drum, but due publicity was given to it, as is evident from the reports of the bailiff and the Nazir, both by publication in newspapers as also by the distribution of hand bills at the site and at other important places in the city. The affixations at other place, as required by the rule, were of course, duly complied with, and complaint is made with regard thereto.
There is nothing in this to show that the provisions of Order XXI Rule 54, of the Code are mandatory and substantial compliances is not enough.
Indeed, it would appear that the view of the Courts has consistently been that the 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 only material irregularities but illegalities which render the sale in disregard of those provisions a nullity. A sale cannot be set aside unless "direct evidence of substantial injury resulting from the irregularity has been given, as was observed in the case of Tassaduk Rasul Khan vs. Ahmad Hussain and the onus of proving this prejudice is on the party complaining thereof."
It may also be pertinent to point out here that under Order XXI Rule 67 of the Code of Civil Procedure itself, all that is required is that "every proclamation shall be made and published, as nearly as may be, in the manner prescribed by rule 54 sub-rule (2)" and in this sub-rule it is provided that the proclamation shall be "by bet of drum or other customary mode". Proclamation by beat of drum, therefore, is not the only mode by which the order can be proclaimed. The object of these rules is to ensure that due publicity is given to the fact that sale is to be held and proper opportunity is given to bidders to attend the sale.
We are satisfied that such publicity was given and full opportunity was furnished to intending bidders.
Learned counsel for the appellant contends that this is an additional requirement of the rules of the Sindh Chief Court which do not abrogate the provisions of the Code of Civil Procedure. We are inclined to agree with him, but, nevertheless, we are of the opinion that these Rules are not mandatory in nature and substantial compliance with them is sufficient. The object of these Rules is to give the order of attachment or the sale proclamation as wide a publicity as possible in the circumstances of the case, having regard to the nature of the property to be sold and the place of its location. If this has substantially been done and a fair offer received at the auction, then the Courts would be inclined to hold that there has been substantial compliance with Rules, unless, of course, the appellant can establish by cogent evidence that the irregularity has resulted in prejudice to him. The Appellant has not been able to do in the present case."
24. As far as the issue of signing of attendance sheet and bidding sheer is concerned, the Civil Procedure Code is silent on this point. By way of practice the signing of the attendance sheet and the bidding sheet is for the purpose to establish that the sale is conducted in a fair and transparent manner at site in terms of the proclamation of auction approved by the Court. It further establishes that the auction proceedings and the auction report are not bogus or sham. The presence of attendance and bidding sheets on the record shows the number of the parties were present on the auction date at the site, and who were the persons who submitted their pay orders and participated in the auction. The presence of a greater number of persons on the attendance and bidding sheet also proves that due publicity of the auction sale of the property was given and full opportunity was furnished to the intending bidders to participate in the auction proceedings.
POINT NO. 8 (Transparent role of Court Auctioneer)
25. Order XXI Rule 65 of the "CPC" provides that every sale in execution of decree shall be conducted by an officer of the Court or by such other person as the Court may appoint, and shall be made by public auction in the manner prescribed. Once an order of sale through public auction is made under Order XXI Rule 64 of the "CPC", and a Court auctioneer is appointed by the Court under Rule 65 of the same Order, then the Court causes a proclamation of the intended sale, after notice to the decree holder and the judgment debtor under order XXI Rule 66 of the "CPC", containing material details such as description of the property, its reserve price, the terms and conditions of the auction, and its time, date and venue, to be published in terms of Order XXI Rule 66 and Rule 67 of the "CPC".
26. The role of Court Auctioneer has become much relevant in an Auction proceeding subsequent to the amendment in Order XXI Rule 66, sub-rule (2), because under the amended Rule, such proclamation shall be drawn by the Court Auctioneer and contain all the aforesaid material details which shall be submitted before the Court for its approval. Every proclamation is to be made and published in terms of the provisions of Order XXI Rule 67 of the "CPC" which enables due publicity to an auction sale for the purposes of attracting the potential prospective bidders in the auction proceedings.
27. Moreover, in terms of the Lahore High Court Amendment in Order XXI Rule 67, sub-rule (2), to make the auction proceedings more transparent, the above mentioned proclamation shall also be published in at least one widely circulated national daily newspaper where the reserve price determined by the Court exceeds rupees two million, and the Court Auctioneer appointed by the Court shall cause video recording of the auction proceedings while ensuring transparent and fair bidding process of the public auction.
28. After complying with all the said requirements, the Court Auctioneer conducts the auction in accordance with the terms and conditions mentioned in the proclamation of sale approved by the Court. Upon completion of the auction proceedings relating to sale of immovable proper6, the Court Auctioneer declares the highest bidder to apprise him of his obligation to deposit 25% of the sale price in terms of the proclamation of sale as required under Order XXI Rule 84 of the "CPC".
However, in view of the Lahore High Court Amendment, 2018, under Order XXI Rule 84 sub-rule (1), C.P.C., on every sale of immovable property, the person declared to be the purchaser shall pay to the officer or other person conducting the sale the amount equal to the reserve price of the property through pay order or bank draft or banker's cheque immediately after such declaration and in case such payment is not made, the property shall forthwith be resold in the manner provided under this Order.
29. The balance amount of the bid price or purchase money shall be deposited by the purchaser/highest bidder within 15 days from the date of sale in the Court or with the Court Auctioneers as per provisions of Rule 85, Order XXI of the "CPC".
30. The Court Auctioneer, then, sends a report to the Court describing various particulars of the proceedings including the detail of participants, i.e. attendance sheet, the bids offered by them (bidding sheet), the information about the highest bidder, and the notification of amount paid by the purchaser.
31. For the purposes of maintaining the transparency in the auction proceedings, it is the duty of the Court to check whether the afore mentioned criteria for the public auction of the property as envisaged under Order XXI has been complied with, and whether at the time of drawing up the proclamation of sale, the Court Auctioneer kept in his mind the requirements under Order XXI Rules 66, 67, 84 and 85. Then the Court should apply its judicial mind before the confirmation of the auction sale in favour of the purchaser, even in the absence of the objection petition. Otherwise, failure of the Court Auctioneers to adhere to the said Rules could vitiate the auction proceedings on account of the material irregularity resulting in lack of transparency and rendered the proclamation of sale illegal.
POINT NO. 9 (Substantial injury under Order XXI Rule 90)
32. A plain reading of Order XXI Rule 90 of the "CPC" shows that mere allegations of irregularity are not sufficient to set aside the sale but the objector must satisfy the Court that he has suffered substantial injury by reason of such irregularity or fraud. For a Court to set aside the sale under Order XXI Rule 90 of the "CPC", it is necessary for the objectors to raise in the objection petitions not only irregularity or fraud in the auction proceedings, but they also have to prove before the Court that they have sustained substantial injury as a result of such irregularity or fraud. The Hon'ble Supreme Court in "Zakaria Ghani and 4 others versus Muhammad Ikhlaq Memon and 8 others"
(PLD 2016 Supreme Court 229) held that for setting aside of sale under Order XXI Rule 90 of the "CPC", mere irregularity is not sufficient but there must be material irregularity or fraud in the process and in addition, there must be substantial injury to the judgment debtor. The relevant observation of apex Court is reproduced hereunder:- "A mere allegation is not sufficient. It has to be established that not merely an irregularity but a material irregularity has taken place, or, in the alternative, that fraud has been perpetrated in the process of carrying out the sale. Then is super added the requirement that even if these conditions are complied with the judgment debtor must satisfy the Court that he has sustained a substantial injury by reason thereof Finally, in order to discourage frivolous applications intended to delay the execution of the decree it is mandatory on the judgment debtor to deposit 20% of the sale amount or furnish such security as the Court may direct. It is also material to note that once again a time frame of 30 days has been specified under Article 166 of the Limitation Act in this behalf Failing compliance with the provisions of Order XXI Rule 90 once again the, inevitable consequence is that the judgment debtor is precluded from making any such allegation in order to challenge the validity of the sale at a subsequent stage".
33. In view of law laid down by august Supreme Court and express provision of Order XXI Rule 90 of the "CPC", an aggrieved person may apply to Court to set aside "sale" on the ground of material irregularity or fraud in publication or conducting it, however, no sale be set aside unless upon the facts proved, Court is satisfied that applicant has sustained substantial inquiry due to such irregularity or fraud.
34. It is clear and obvious that unless any material irregularity, coupled with substantial injury, is shown to have been committed, no sale can be set aside. Reliance is placed on "Ghulam Abbas versus Zohra Bibi and another" (PLD 1972 SC 337), wherein it was held that:- "Indeed, it would appear that the view of the Courts has consistently been that the 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 only material irregularities but illegalities which render the sale in disregard of those provisions a nullity. A sale cannot be set aside unless "direct evidence of substantial injury resulting from the irregularity has been given, as was observed in the case of Tassaduk Rasul Khan vs. Ahmad Hussain and the onus of proving this prejudice is on the party complaining thereof.
If there was any doubt as to the correctness of the above view, this doubt is laid at 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."
35. Following are the instances that could amount to substantial injury under Order XXI Rule 90, C.P.C., i. Presence of evidence on record that the auction proceedings are not conducted at the site.
Reliance is placed on Muhammad Ashraf vs UBL 2019 SCMR 1004. ii. The property has been sold at a throw away price.
Reliance is placed on Muhammad Khalil vs Faisal M.B.Corporation 2019 SCMR, 321, wherein it was held that:- "We are therefore in no manner of doubt that the land in question was indeed sold at a throw away price causing substantial injury and loss to the Judgment Debtor. There was a huge gulf between the value represented by the auction price and the real market value and there is no plausible or reasonable explanation for such difference. Further, there is evidence on record that the auction proceedings were not conducted at the spot. This has cast serious doubts upon the sanctity of the auction and the entire process which led to such auction. It is now well settled that the Court has the power to set aside any auction if the same is proved to have been conducted in an unlawful or irregular manner or the property has been sold at a throw away price. We are unable to agree with the assertion of the learned counsel for the petitioner that inadequacy of the sale price cannot constitute basis for setting aside a sale."
36. This Court while interpreting substantial injury as envisaged under Order XXI, Rule 90, C.P.C, has already held in Faysal Bank Limited v. Sajjad Aslam and Others (2022 CLD 123), that the First Proviso of Order XXI, Rule 90 of the "CPC" guides that no sale shall be set aside on the ground of irregularity or fraud unless upon the fact proved the Court is satisfied that the Applicant has sustained substantial injury by reason of such irregularity or fraud; that due to such an irregularity the judgment debtor has not suffered from any substantial injury.
37. In this regard, we seek support from a judgment reported as "Zakaria Ghani and 4 others versus Muhammad Ikhlaq Memon and 8 others" (PLD 2016 Supreme Court 229) wherein it has been observed that Order XXI, Rule 90 of the "CPC" proceeds on different basis. In order to succeed it was mandatory for the judgment-debtor to satisfy the Court, on the merits, that the sale should be set aside on the ground of a material irregularity, or fraud, in publishing or conducting it.
Another condition was prescribed by means of the proviso thereto which stipulated that no sale shall be set aside on the ground of irregularity or fraud unless, upon the facts proved before the Court, it was established that the judgment-debtor had sustained substantial injury by reason of such irregularity or fraud.
A mere allegation was not sufficient. It has to be established that not merely an irregularity but a material irregularity had taken place, or, in the alternative that fraud had been perpetrated in the process of carrying out the sale. Even if these conditions were complied with the judgment debtor must satisfy the Court that he had sustained a substantial injury by reason thereof. It is further held that mere an irregularity, even if material, should not suffice unless it could be shown that material loss had been caused. The more enlightening observation made by the Hon'ble Supreme Court are that where the irregularity consisted of errors by the Court, or by Court officials, no party should be made to suffer by reason thereof. So, under these guidelines it can safely be said that even irregularities made in this case by the Court -Auctioneer are not lethal to the rights of judgment- debtor causing any substantial injury to him.
POINT NO. 10 (Violation of fundamental rights of the auction purchaser)
38. An auction that has been conducted by following the procedure does not violate the fundamental rights of the auction purchaser under Articles 23 and 24 of the Constitution as the same are subject to certain restrictions imposed by the law. The validity of auction is reasonably protected under the law through the provisions of the Ordinance and the CPC. It is also the duty of the Court to check whether the provisions under the Order XXI of the "CPC" for the public auction of the property have been complied with, even in the absence of any objection petition.
39. The Hon'ble Supreme Court has held in the case of "Afzal Maqsood Butt versus Banking Court No. 2, Lahore" (PLD 2005 SC 470) that a bid in an auction is only an offer and it confers no benefit unless it culminates in the issuance of a confirmation of sale. It was further observed that confirmation of sale cannot merely be claimed as of right.
40. The vested/third party rights accrue in favour of a bidder when the auction-sale becomes complete, i.e. when the Court confirms the auction sale. However, such vested rights again are defeatable and would not take away the right of the mortgagor/judgment debtor to redeem his property if he brings his case within the parameters of Order XXI Rule 89, Rule 90, or Rule 91 of the "CPC". However, position of the auction purchaser is different when the Court confirms the auction sale in favour of the auction purchaser. Reliance is placed on Hudaybia Textile Mills Ltd. vs. Allied Bank of Pakistan Ltd. (PLD 1987 SC 512) wherein the Court had accepted the bid and the sale had been completed, giving rise to vested rights in the auctioned property. It has also been held that once a sale has been affected, a third party interest intervenes which cannot be disregarded.
41. As far as the objection of the petitioner regarding the deposit of cheque instead of cash is concerned, it has already been held in "Messrs Spinghar Textile Mills Ltd. and another versus United Bank Limited and another" (2011 CLD 1683) as follows: "In the present day law and order situation, it would be unfair, if not impossible, for a prospective bidder to carry with him a huge amount of funds running into million in cash in order to fulfil the requirement of Rules 84 and 85 of Order XXI of C.P.C. This should not be taken as amendment of the said Rule. In fact, the Banking Judge, while settling the terms of the proclamation, ought to taken into account all aspects of the case and depending of the peculiar circumstances of each case determine the mode of payment. In this regard, the site of auction, time of auction and the value of property being auctioned would be relevant factors for determining the said mode of payment. The paramount consideration being that the auction proceedings were validly carried out and no prejudice was caused to any party, then in that case, the entire auction proceedings cannot be brought to a halt merely for the reason that the initial payment was made through cheque. In this regard, we seek guidance from the judgments of the august Supreme Court of Pakistan in Muhammad Ikhlaq Meman v. Zakria Ghani (2005 CLD 1589) and Shaukat Ali Mini v.
Trust Leasing Corporation (2002 CLD 1071)."
42. Keeping the aforesaid in view, the instant objection petition (C.M. No. 05 of 2018) is dismissed being not maintainable.