LAHRASAP KHAN, J.--This regular first appeal under section 12 of the Banking Companies (Recovery of Loans) Ordinance, 1979, is directed against the final judgment and decree dated 9-8- 1984, passed by the learned Special Judge (Banking), Lahore.
2. The facts giving rise to this appeal, briefly stated, are that industrial plots bearing Nos. 333 to 340 and 349 to 356, measuring 39,111 square yards, situate in the industrial area of Sector 1/9, Islamabad, were allotted to Messrs Conforce Limited, a private limited company (respondent No.2 herein), by the Capital Development Authority. Vide agreement, dated 31-12-1980/1-1-1981, Messrs Conforce Limited agreed to transfer the afore-mentioned plots to Messrs Rafiq Industries Limited, also a private limited company (appellant No. 1 herein) for a consideration of Rs.17,50,000. It was agreed between Messrs Conforce Limited and Messrs Rafiq Industries Limited that after obtaining completion certificate from the Capital Development Authority, Messrs Conforce Limited would execute documents requiring further transfer of rights in favour of Messrs Rafiq Industries Limited.
Construc--tion of the structures on the plots in question were to be made by Messrs Rafiq Industries Limited according to their requirement at their own expense in conformity with the requirements of the Capital Develop--ment Authority. Completion certificate was also to be obtained by Messrs Rafiq Industries Limited from .The Capital Development Authority. It was also agreed that Messrs Rafiq Industries could incur loan from various financing institutions and banks by mortgaging the aforementioned plots and structures to be raised thereon for which Messrs Conforce Limited agreed to execute a power-of-attorney in favour of Mohammad Rafiq Bhatti, the Managing Director of Messrs Rafiq Industries Limited (appellant No.2 herein). In accordance with the terms of the agreement, a general power-of-attorney was executed by Messrs Conforce Limited in favour of Muhammad Rafiq Bhatti authorizing him to submit building plans and have them approved and to raise constructions on the afore--mentioned plots, to install machinery in the buildings so constructed and to create charge on the said plots in favour of any financing institution including the scheduled banks. This power-of-attorney was executed pursuant to a resolution passed by the Board of Directors of Messrs Conforce Limited on 14-1-1981 which was duly got registered on 17 1-1981. Messrs Raiq Industries Limited were allowed loan amounting to Rs.8,00,000 by the Allied Bank of Pakistan Limited on the condition that Messrs Conforce Limited would create a first legal charge in favour of the Bank by way of registered mortgage on the aforementioned plots together with buildings, sheds, structures and machinery etc. Constructed thereon. Mohammad Rafiq Bhatti, acting as general attorney of Messrs Conforce Limited, executed a mortgage deed on 13-3-1983 in favour of Allied Bank of Pakistan Limited, which was duly registered on 15-3-1983. Thus, a loan amounting to Rs.8,00,000 was obtained by Messrs Rafiq Industries Limited. The loan was not repaid by Messrs Rafiq Industries Limited by the stipulated time. Allied Bank of Pakistan, therefore, instituted a suit under Order XXXIV of the Code of Civil Procedure, which included the principal amount of loan as also the interest accrued thereon, as per stipulated terms, against Messrs Conforce Limited as well as Messrs Rafiq Industries and Mohammad Rafiq Bhatti. In addition to prayer for recovery of Rs.8,53,355 jointly and severally against the defendants together with the interest at one per cent above the bank rate with a minimum of 11% per annum with quarterly rests and cost of the suit and proceedings, it was also prayed for-- "(a)preliminary decree in respect of immovable property in suit declaring the amount due and directing the defendants to pay the amount into Court within one month or such time not exceeding six months, as the Court may fix and also to pay further. Costs, charges, expenses and interests; (b)direction that in default of payment as aforesaid, the plaintiff shall be entitled to apply for final decree for sale of the mortgaged immovable property detailed above and for decree accordingly; (c)further directions that if net proceeds of sale of the mortgaged property are found insufficient to satisfy the decretal amount due to the plaintiff, the plaintiff shall be entitled to recover the same from the defendants in person and out of their other properties, assets and for decree accordingly.
(d)such further and/or other relief or reliefs as the nature and circumstances of the case may require."
After service of summons, Messrs Conforce Limited filed an application for permission to contest the suit. Similar application was also filed by Messrs Rafiq Industries Limited and Mohammad Rafiq Bhatti. However, on 11-4-1984, learned counsel for Messrs Rafiq Industries and Mohammad Ratq Bhatti made a statement to the effect that the defendants admitted the claim of the bank as correct. He further stated that suit of the bank might be decreed. It was claimed that if Messrs Conforce Limited were allowed to contest the suit then Messrs Rafiq Industries Limited be also allowed to contest the suit. Learned counsel representing Messrs Conforce Limited made a statement to the effect that the said defendant had no connection with the dispute between the bank and the other two defendants and that, in fact, fraud was played on Messrs Conforce Limited by Mohammad Rafiq Bhatti inasmuch as the power-of-attorney on the basis of which Muhammad Rafiq Bhatti had mortgaged the property in favour of the bank had been cancelled on 24-1-1983.
The cancellation deed was got registered on 29-1-1983. .This contention was repudiated by the learned counsel for the bank who maintained that defendant No.3 was duly authorized by Messrs Conforce Limited to mortgage the property in question with the bank; therefore, the cancellation deed, if any, did not affect the rights of the bank. The learned Presiding Officer of the Special Court (Banking) which was seized of the suit, after considering the arguments advanced by the learned counsel for the parties, observed that the question whether the property was mortgaged by a properly authorized person or not could be decided at the time of execution of the decree and it was not required to be considered at that stage. He might have formed this view on account of the fact that after the alleged execution of cancellation deed on 29-1-1983, Messrs conforce Limited received a sum of Rs.3 00,000 from Messrs Rafiq Industries Limited through pay order No. 078885, dated 3-5-1983 of Grindlays Bank Limited, Islamabad, out of sale price of Rs.17,50,000 in respect of the sale of the plots in question. A receipt was thus duly executed by Messrs Conforce Limited through Abdul Hamid Malik, Director/ General Attorney, on 3-5-1983. The learned Banking Court, therefore, passed a preliminary decree for the recovery of Rs.8,53,355, on 11-4-1984, in favour of the plaintiff-bank against the defendants with costs and interest at the stipulated rate or two per cent above the bank rate whichever was higher from the date of institution of the suit till the entire payment of the decretal amount. A period of two months from the date of preliminary decree was granted to the defendants to pay off the liability. A decree-sheet was duly drawn which was in accordance with the provisions of Order XXXIV of the Code of Civil Procedure and in the form prescribed for a preliminary money decree.
On the same day when the preliminary decree was passed i.e. 11-4-1984, at the request of the learned counsel for the bank the learned Special Court (Banking) ordered the attachment of the amounts of money of Messrs Rafiq Industries Limited which were deposited in Messrs Grindlays Bank Limited, Islamabad, in P.L.S. Account No.295751293. It was observed that this attachment was a step in aid of execution. The request of the learned counsel for the bank was, of course, vehemently opposed by the learned counsel for Messrs Rafiq Industries Limited, who maintained that -the suit being under Order XXXI V, C . P. C . And a preliminary decree having already been issued, no other property of the defendants could be attached before a final decree was passed and it was found that the sale proceeds of the mortgaged property were not sufficient to pay off the mortgage debt as decreed. This contention was overruled vide order dated 13-6-1984 passed by the learned Special Court (Banking) and it was directed by the learned Court that the earlier order of attachment of the amounts of Messrs Rafiq Industries Limited with Messrs Grindlays Bank Limited, passed on 11-4-1984, should hold good. The order, dated 13-6-1984 was unsuccessfully challenged by way of appeal before the High Court by Messrs Rafiq Industries Ltd. As their appeal was dismissed in limine. It was, perhaps, held that the appeal Was not competent.
Subsequently, the bank applied that as the appellants (herein) had not availed the opportunity of two months granted to them through the preliminary decree, therefore, a final decree was to be passed in favour of the bank. The learned Special Court (Banking), in view of the non-compliance of the preliminary decree, proceeded to grant a final decree to the bank with costs and interest in terms of the preliminary decree to the bank against the appellants. It was, however, ordered that a sum of Rs.7,10,895.25 lying in the Grindlays Bank, Islamabad, belonging to defendants Nos. 2 and 3 had already been attached and as the final decree had been passed, the aforementioned amount was to be paid to the bank decree-holder. The remaining decretal amount which worked out as Rs.1,44,000 was also paid in Court by the learned counsel for Messrs Conforce Limited through a bank draft and in this manner the entire amount was paid to the plaintiff-bank and the matter stood disposed of. The order in respect of final decree in this behalf was made on 9-8-1984.
Surprisingly the decree-sheet drawn pursuant to the judgment, dated 9-8-1984 is not in accordance with the judgment. The decree sheet is in the prescribed form and in accordance with the provisions of Order XXXIV, rule 5, C.P.C. Meant for final decree for sale. The decree-sheet provided for the sale of the mortgaged property.
3. Thus, feeling aggrieved of the final judgment and decree, dated 9 8-1984, the present appeal has been filed.
4. In the light of the circumstances detailed above, the sole question which requires to be determined by us is that whether before the sale of the mortgaged property, a decree could be passed against the other property of the defendants. The suit which was filed against the appellants by the plaintiff-bank was under Order XXXIV of the Code of Civil Procedure. Rule 4 of Order XXXIV (ibid) deals with preliminary decree in suits for sale This rule provides that in a suit for sale, if the plaintiff succeeds, the Court shall pass a preliminary decree in respect of the amount due together with interest and other charges directing further that in default of the defendant paying the amount so found due by the stipulated time, the plaintiff shall be entitled to apply for final decree directing that the mortgaged property be sold and the proceeds of the sale be paid into Court and applied to payment of what has been found or declared under or by the preliminary decree due to the plaintiff. In the present case, the preliminary decree was precisely passed in terms of Order XXXI V , rule 4 , C . P. C . On 11-4-1984. Rule 5(3) of Order XXXIV (ibid) further provides that where payment in accordance with the terms of the preliminary decree has not been made, the Court shall, on application made by the plaintiff in this behalf, pass a final decree directing that the mortgaged property or a sufficient part thereof be sold, and that the proceeds of the sale be dealt with in the manner provided in rule 4. The eventuality where the sale-proceeds are not sufficient to meet the decretal amount as decreed. Through the preliminary decree, has been met through the provisions of rule 6 of Order XXXIV (ibid). This rule is to the effect that where the net proceeds of any sale held under rule 5 are found insufficient to pay the amount due to the plaintiff, the Court, on application by him may, if the balance is legally recoverable from the defendant otherwise than out of the property sold, pass a decree for such balance.
5.After the considered analysis of the provisions of rules 4, 5 and 6 of Order XXXIV of the Code of Civil Procedure, we find that where a mortgagee has obtained a decree for the payment of money in satisfaction of a claim arising under the mortgage, his claim has to be satisfied first by sale of the mortgaged property and if the sale-proceeds of such property are insufficient to satisfy the claim, in that eventuality he can make an application under rule 6 of Order XXXIV, C.P.C. For the recovery of his balance and the Court may pass a decree for such balance. The decree so passed can, of course, be executed against the person or other property of the defendant. Before the sale of the mortgaged property, pursuant to the final decree, envisaged in rule 5 of Order XXXIV (ibid), execution against the person and other Property of the defendant is not legally in order.
6. In Krishna Prasad v. Ram Prasad Singh and others AIR 1921 Patna 357 (1), it was observed: "The decree of the High Court of Calcutta, which is under execution, is plainly a mortgage decree as far as the father's share is concerned and a personal decree as far as the sons's shares in the property are concerned- The execution can, therefore, proceed against the son's shares; in order to obtain execution against the father, a decree under Order XXXIV, rule 6 is necessary." It was thus concluded that the execution could proceed against the shares of the son, and if the decree- holders desired to proceed against the property of the father other than the mortgaged property, they must obtain a decree under Order XXXIV, rule 6.
In Ch. Karam Rabbani and 11 others v. The Central Exchange Bank Ltd. Lahore and 3 others PLD 1973 Lah. 695, a Letters Patent Bench of this Court observed: "Rule 4, Order XXXIV, C.P.C. Provides for the passing of a preliminary decree in a suit for sale by which, the amount due on that date is declared and a direction is made requiring the defendant to pay into Court the amount so found due within a stipulated period; and further directing that in default of the defendant paying the amount the plaintiff shall be entitled to apply for a final decree directing that the mortgaged property or a sufficient part thereof be sold and the proceeds of sale be paid into Court. The decree in such a suit has to be in Form 5-A provided in Appendix 'D to the First Schedule of the Code of Civil Procedure. A preliminary decree is not capable of execution and it is only a decree absolute under rule 5 of Order XXXIV that can be executed. Till the mortgaged properties are sold, it is not possible to say whether the sale-proceeds would be sufficient to pay off the decretal amount. It is only when the sale proceeds are not sufficient to cover the whole of the decretal amount that the personal liability to pay the balance arises if the document sued on provides for personal remedy against the mortgagor, and a preliminary decree cannot, therefore, give a personal remedy against the mortgagor. No application for execution of any decree can be entertained unless the executable decree exists. No preliminary decree for sale can be executed."
S.R.M.M.C.T.M. Firm v. Ko Po Sin and others AIR 1936 Ran. 127, Makhan Singh v. Lakhmi Das and another AIR 1937 Pesh. 31, Gurupadappa Mallappa Kalasgond v. Basappa Shidappa Kalaqi AIR 1940 Bom. 276 can also be referred to with advantage in this behalf and the rule of law laid down in these judgments is also to the effect that in a suit based on mortgage, decree has to be satisfied in the first instance from the sale-proceeds of the mortgaged property and if the balance is left, on the application of the decree holder. a decree in respect of the balance may be passed which, of course, can be executed against the person and other property of the judgment-debtor.
7. Reliance on behalf of the bank has been placed on Karnail Singh v. Viru Mal and another AIR 1943 Lah.
189. In this case, it was held that in the case of a compromise decree in a suit under Order XXXIX, rule 4, C.P.C., no final decree was necessary. In the circum--stances of the present case, there has been no compromise between the parties to the effect that decree could be executed against the property of the appellants other than the property which was mortgaged with the bank.
In Mohiuddin Molla v. The Province of East Pakistan and 2 others PLD 1962 SC 119, it was held that in case of an instalment decree, where the very first instalment had not yet fallen due, so that an execution application was not competent, and the judgment-debtor, in the meantime had entered into an agreement with a third party to sell his property, the Court had inherent jurisdiction to preserve the property of the judgment-debtor in order that it may be available for realization of the decretal amount. This authority is distinguishable on merits. In the present case, the decretal amount was 'not to be paid through instalments and there was no material on the records to suggest that the mortaged property was laible to be sold to some other person. Moreover, the under consideration case is that based on mortgage under Order XXXI V , C . P. C . In which a preliminary decree was passed.
8. We have closely considered the case-law cited before us by the parties and as a result of thorough consideration and considered analysis of the facts of the case and relevant legal provisions, we come to a positive conclusion that in the circumstances of the present case in which a preliminary mortgage decree under Order XXXIV, rule 4, C.P.C. Was passed in favour of the bank against the appellants, a final decree could only be passed for the sale of the mortgaged property and the application of the sale-proceeds for the satisfaction of the mortgage debt. The other property of the appellants could be proceeded against only in the eventuality if the sale-proceeds of the mortgaged property, were found to be insufficient to meet the amount decreed in favour of the bank. The learned Special Court (Banking), however, has acted in utter disregard of the provisions of rules 5 and 6 of Order XXXIV C . P. C . It has straightaway passed a decree against the property of the appellants other than the mortgaged property which could not be legally done. In this view of the matter, we allow this appeal with costs, set aside the impugned judgment and decree and remand the case to the learned Special Court (Banking), Lahore, with a direction to decide the case afresh in accordance with law in the light of the provisions of rules 5 and 6 of Order XXXIV of the Code of Civil Procedure.