1. ' ZAFFAR HUSSAIN MIRZ A, J.--This is an appeal by right from the judgment of a Division Bench of the Lahore High Court, dated 16th October, 1985, whereby the appeal filed by respondents 1 and 2 and others was accepted,' and the order and final decree passed by the learned Special Judge Banking, Lahore, were set aside, and the case was remanded with a direction to decide the same afresh in the light of the provisions of rules 5 and 6 of Order XXXIV of the C .P . C .
2. ' The case of the plaintiff, bank was that it had allowed loan facility to respondent No,1 in the sum of Rs,8,00,000 against the security of registered mortgage of plots Nos.333 to 340 and 349 to 356, situated in 1/9, Industrial Area, Islamabad, with additional security of hypothecation, of personal guarantee of Directors etc. It was pleaded that on the strength of a registered general power of attorney, dated 15th January, 1981, Mr. Rafiq Ahmad Bhatti, (respondent No,2), Chief Executive of M/s. Rafique Industries Limited (respondent No,1) executed a Deed of Mortgage in favour of the bank, in pursuance of the conditions for the grant of loan facility on 27th March, 1983. In addition respondents Nos.1 and 2 also executed documents in favour of the bank undertaking and guaranteeing due payment and discharge of all the advances made to respondent No,l. Finally respondent No,1 also executed and delivered a demand promissory note for Rs,8,00,000. As the respondent No,1 and others, who had been impleaded as defendants had failed to clear the outstanding dues M/s. Allied Bank Limited (respondnet No,3) filed a suit under the Banking Companies (Recovery of Loans) Ordinance, 1979 (hereinafter referred to as 'the Ordinance') with the prayer in the relief clause of the plaint as under: "The plaintiff prays for judgment and decree against the defendants jointly and severally for:
(a) Rs,8,53,355.00
(b) Interest at one per cent above the Bank Rate with a minimum of 11/ per annum with quarterly rests.
(c) Cost of the suit and proceedings.
(d) Preliminary mortgage deceree 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 this learned Court may fix and also to pay further costs, charges, expenses and interest.
(e) 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 fully detailed in para 7 above and for decree accordingly.
(f) 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.
(g) Such further and/or other relief or reliefs as the nature and circumstances of the case may require."
3. ' Upon being served with the summons the appellant and respondent No,1, both applied separately under Order XXXVII, rule 3, C.P.C., for grant of leave to defend the suit. The main plea raised by appellant No,1 was that the loan was taken by respondent No,1 through its Chief Executive Mr. Rafiq Bhatti (responder t No,2), who had illegally and fraudulently mortgaged the property belonging to the appellant as a security for the repayment of the loan. It was alleged that the power of attorney on the authority of which the mortgage deed was executed had already been cancelled on 24th January, 1983. On the other hand respondent No,1 justified the mortgage security and maintained its validity. On these pleas respondent No,1 prayed that the suit be decreed against the appellant, but if leave to defend the suit is granted to the appellant, respondent No,1 submitted that leave should also be granted to it to enable it ".To assist this honourable Court to sort out the above legal issues".
4. ' On 11th April, 1984, the respective learned counsel for respondents Nos.1 and 2, and the appellant made statements before the Court, in line with the pleas taken by them in their applications for permission to defend the suit. On the same date, after considering the applications of the parties and the statements of their counsel, the learned Special Judge expressed the view that the controversy with regard to the authority of respondent No,2 to execute the mortgage deed did not require to be determined at that stage and could be decided at the time of execution of the decree. But since-there was no dispute with regard to the advancement of the loan and the factum of execution of the mortgage security, the bank was entitled to a decree for the repayment of the amount. Accordingly the learned Judge decreed the suit of the bank by his order dated 11th April, 1984. The operative part of the order reads as under: "Since the suit is based on the mortgage of ignorable property so I hold that a sum of Rs,8,53,355 were due from the defendants at the time of filing the suit. A preliminary decree of this amount is granted in favour of the plaintiff against the defendants with costs and interest at the stipulated rate orr two per cent above the bank rate whichever is the higher from the date of institution of the suit till the entire payment of the decretal amount. A period of two months from today is granted to the defendants to pay off the liability."
5. ' Immediately after the passing of the order on the request of the bank, the learned Judge ordered attachment of an amount of Rs,7,10,895.25, lying in the Grindlays Bank Limited, Islamabad, in the account of respondent No,1. Pursuant to the order decreeing the suit, dated 11th April, 1984, a preliminary decree under Order XXXIV, C.P.C. Was drawn up, the material part of which reads as follows: "It is ordered that a preliminary decree for the amount of Rs,8,53,355 is granted to the plaintiff against the defendants with costs and interest at the stipulated rate or two per cent above the bank rate whichever is the higher from the date of institution of the suit till the entire payment of the decretal amount. A period of two months from today is granted to the defendants to pay off the liability."
6. ' In the events that happened, except that the amount, aforementioned remained under attachment in the bank account of respondent No,1 as none of the defendants made payment of the decretal amount to the plaintiff bank a request was made for passing a final decree and the Court passed an order, dated 9th August, 1984, passing a final decree in the following words: "In view of this non-compliance of the order of the preliminary decree I proceed to grant final decree as prayed to the plaintiff-bank with costs and interest at the stipulated rate or two per cent above the bank rate whichever is the higher from the date of institution of the suit till the entire payment of the decretal amount."
7. ' The Court further directed, after recalling the factum of attachment of the sum of Rs,7,10,895.25 belonging to respondents Nos.1 and 2, that the said amount be paid to the plaintiff-bank and also recorded the fact that the appellant's counsel had handed over a bank draft to the plaintiff bank of the value of Rs,1,44,000 being the balance of the decretal amount, so that the decree was fully satisfied. On the same date the Court directed the Grindlays Bank Limited, Islamabad, that the attached amount be paid to the plaintiff bank "towards the discharge and satisfaction of the decree".
8. ' Strangely enough, notwithstanding the recording of the satisfaction of the decree by payment of the entire decretal amount to the plaintiff bank, a final decree in form No,6 Appendix D of Schedule to the C.P.C., for sale of the mortgaged property was drawn up.
9. ' Being dissatisfied respondent No,1 filed an appeal in the Lahore High Court, Rawalpindi Bench, Rawalpindi, under section 12 of the Banking Companies (Recovery of Loans) Ordinance, 1979, challenging the order and final decree passed by the learned Special Judge (Banking), Lahore, dated 9th August, 1984.
10. ' We have been informed that during the pendency of the aforesaid appeal a learned. Division Bench of the High Court by order, dated 20th November, 1984, directed that the present appellant furnish an unconditional bank guarantee in the sum of Rs,7,10,000 subject to orders of the Court on the decision of the appeal. By the impugned judgment the Division Bench accepted the appeal and remanded the case to the trial Court as stated earlier.
11. ' The main argument advanced before the learned Division Bench on behalf of the respondent No,1 herein, was that the Court was not competent to proceed against the property of respondents Nos.1 and 2 by way of attachment of money in the hands of their bank, for the reason that the suit of the plaintiff tank being based on the mortgage security, the only course left open to the Court was to pass a final decree for the sale of the mortgaged property and it was only if the sale proceeds of that property were insufficient to satisfy the decree, a further personal decree could be passed for recovery of the balance amount from the defendants. On this basis the order of attachment of the amount owned by respondents, 1 and 2 was also assailed. The learned Judges of the Division Bench accepted this argument and referred 1.9 rule 4 of Order XXXIV, C.P.C. Which, inter alia, provides that in a suit for sale the' Court shall pass a preliminary decree in the specified manner and further direct 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 sale proceeds be applied in payment of the amount declared to be due to the plaintiff. It was held that it is only in case the sale proceeds are not sufficient to meet the decretal amount,- declared by the preliminary decree that a further decree under rule 6 of the said Order can be passed on the application of the plaintiff for recovering the balance due from the defendants personally. According to the view taken by the learned Judges of the Division Bench the bank had obtained decree for the payment of money on a claim arising under a mortgage and accordingly in terms of the rules contained in Order XXXIV, no personal decree could be passed, until the mortgage security was exhausted through a Court sale pursuant to the final decree. In ordering payment of the attached amount belonging to respondents Nos.1 and 2, therefore, it was held the Court proceeded in violation of the law. The final conclusion was recorded by the Division Bench as follows: "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."
12. ' From the facts narrated above several complicated questions of law seem to arise, which would have had material effect on the litigation between the parties before the Courts below.
13. Unfortunately these questions were not raised, nor noticed by the Courts dealing with the hatter.
14. Further, the Banking Companies (Recovery of Loans) Ordinance, 1979, which is a very special type of enactment, has also not received proper consideration in the light of special provisions contained in it; which have provided for a special forum and a special procedure, in certain respects making a radical departure in regard to the frame of suit, jurisdiction of the Court and the procedure governing the trial of the suit.
15. ' But reverting to the facts of the present case it may be pointed out at the outset, that the decision of the Division Bench of the High Court proceeds on the assumption that the suit instituted by the plaintiff bank was a suit on mortgage, governed entirely by the procedure provided in Order XXXIV, C.P`: C. This to our mind appears not entirely to be correct and may amount to an over simplification of a complicated situation. As pointed out in H .T.M. Limited v. Allied Bank of Pakistan (PLD 1987 SC 512), having regard to the various provisions of the Ordinance, the special Court is required to follow the procedure laid down in the C.P.C. While trying a suit and particularly the summary procedure provided for in Order XXXVII. The only rider to this proposition is where any deviation is provided for in the Ordinance from the ordinary procedure laid down by the C .P.C. , in which case the provisions of the Ordinance in that respect will take over. The s'pecial procedure provided in Order XXXVII, C.P.C. Was designed to apply in respect of suits on negotiable instruments, therefore, under the C.P. C. a suit on mortgage was not governed by the special procedure provided for in Order XXXVII. On the other hand suits relating to mortgages of immovable property were regulated, in the matter of procedure for trial, by the provisions of Order XXXIV, C.P.C. The provisions of this Order provided for the frame of a suit relating to mortgages, as well as for decrees, preliminary and final to be passed in such suits and generally B for the substantive rights of the mortgagee, and mortgagor. The rules of procedure contained in this Order correspond to the provisions relating to mortgages in the Transfer of the Property Act 1882. Whether the last mentioned Act has been extended to Islamabad or not is a question not raised or discussed during the arguments. However, the Ordinance under which the suit was filed seems to contemplate institution of suits in the special Court by a banking company or borrowers which may be based on negotiable instruments, statements of account, personal undertakings to repay loans extended by such banking company, or on mortgages of all kinds. This is clear from subsection (2) of section 7 of the Ordinance.
16. ' In view of the said provisions of the Ordinance it seems permissible to institute a single suit against the principal borrower based on the loan as defined in section 2(d) of the Ordinance as well as a person having interest in the mortgage security on the basis of the mortgage of any kind, joining the several causes of action. Rule 1,, Order XXXIV, C.P.C. Would come into operation in such a suit by virtue of section 3 of the Ordinance. Speaking generally in respect of loans extended by a banking company, the principal borrower himself would be the mortgagor furnishing the mortgage security in support of the loan. But in case another person furnishes the mortgage security, then the question would arise whether the suit against the principal borrower would be a suit based upon a mortgage. In the case of a mortgage Order XXX1V, rule 14, C.P.C. Creates a bar against bringing the mortgaged property to sale, if the mortgagee has obtained a decree for the payment of money in satisfaction of a claim arising under the mortgage, unless he brings a separate suit for sale in enforcement of the mortgage. In other words if a mortgagee obtains a money decree on a claim arising under a mortgage personally against the borrower, he cannot realize the decretal amount by having the mortgaged property sold in execution of such money decree. But subsection (2) of this rule excludes its application to any territory to which the Transfer of Property Act, 1882, has not been extended. Under section 68, the right of mortgagee to sue for the mortgage money in certain conditions has been recognized, one of them being where the mortgagor binds himself to repay the same. In such a suit the Court has a discretion to stay the proceedings until the mortgagee has exhausted all his available remedies against the mortgaged property unless, of course, the mortgagee abandons his security, and if necessary, retransfers the mortgaged property.
17. ' It seems unnecessary to go into the question as to the nature of the suit brought in this case, particularly whether the suit was in respect of a claim arising under a mortgage, qua all the defendants. From the plaint and the prayer clause it would appear that as far as respondent No,1 is concerned the suit was based on the loan advanced and the securities as well as undertakings furnished by it for the repayment of the same. The appellant was impleaded as a defendant because it had furnished the security by way of hypothecation of its property through the mortgage deed. Therefore, the suit respecting the appellant was based on the mortgage security.
18. That is why the prayer clause, as reproduced above, sought a money decree simpliciter, apart from a decree on mortgage. The reason is that the effect of dismissal of the applications for leave to defend the suit, in terms of Order XXXVII, rule 2(2), was that the allegations in the plaint were deemed to be admitted and in pursuance thereof the Court passed order, dated 11th April, 1984, granting a preliminary decree in the sum of Rs,8,53,355, Although the Court in passing referred .To the mortgage, and also fixed the period of two months for the payment of the amount, no specific direction was given in the said order for drawing up a preliminary decree in form 5-A of Appendix 'D" in the Schedule of C .P.0 . The result was that no such decree was prepared and the decree that was actually drawn up, as reproduced above, was also not in the prescribed form with the requisite directions prescribed by rule 4 of Order XXXIV, C.P..C.
19. ' Section 97 of the C.P.C. Debars a party from questioning the correctness of a preliminary decree in an appeal preferred from the final decree. Therefore, if a party fails to challenge a preliminary decree within the prescribed period of limitation, the party would be precluded from challenging the same in an appeal against the finale decree. None of the parties filed an appeal against the preliminary' decree passed and drawn up by the Court in this case.
20. ' The question, therefore, is whether pursuant to the preliminary decree in the present case and the form in which it has been drawn up, the final decree for sale of the mortgaged property could be passed, as the learned Division Bench seems to have directed. The entire basis of the decision of the Division Bench under challenge before us, was that the preliminary decree was a mortgage decree which is clear from the following observation in the judgment: "In the present case, the preliminary decree was precisely passed in terms of Order XXXIV, rule 4, C.P. C. On 11-4-1984."
21. But unfortunately this is not the correct position as it appears that only a money decree was passed by the Court. Learned counsel for respondents 1 and 2 justified the decision of the Division Bench urging that the other property of the borrowers can be proceeded against for the satisfaction of the decree only after the mortgage security is fully exhausted. On the other hand the learned counsel for the appellant tried to seek assistance from section 8(3) of the Ordinance, in urging that the learned Special Court was competent to execute the decree in any manner it deemed fit and submitted that having recorded the satisfaction of the decree vide order, dated 9th August, 1984, the Court was not competent to pass a final decree for the sale of the mortgaged property.
22. ' After considering the facts of the case in the light of the relevant provisions of law it appears to us that although the decree granted by the Special Court was described as a preliminary decree in substance it was a final decree as it did nct contemplate any further proceedings. Explanation to section 2(2) of the C .P. C. Reads as under:- "Explanation. A decree is preliminary when further proceedings have to be taken before the suit can be completely disposed. Of. It is final when such adjudication completely disposes of the suit. It may he partly preliminary and partly final."
23. ' It is also well-settled that a final decree cannot amend or go behind a preliminary decree.
24. Therefore, it follows that the Court could not pass a final decree for sale, as it did in the present case, in view of the terms in which the preliminary decree was granted. Also having regard to the nature of the so-called preliminary decree, the Court having ordered the payment of the attached amount to the plaintiff bank as well as the short-fall, towards the full satisfaction of the decretal amount, the Court seriously erred in still granting a final decree for sale of the mortgaged property, with the result that the plaintiff-bank having received the mortgage money, could twice over realize the mortgage debt by executing the decree for salt the Court itself seems to have treated the decree passed by it in the first instance as a money decree by ordering attachment of a liquidated amount in the bank account of the judgment-debtors. A preliminary mortgage decree under Order XXXIV, rule 4, is obviously incapable of execution. Therefore, the view taken by the learned Judges of the Division Bench is wit sustainable in the circumstances of this case and the final decree for sale passed by the Special Court was liable to be set aside.
25. ' Learned counsel for the appellant also argued that the authority granted by the appellant to respondent No,2, inter alia, to encumber its property to secure the loans had been terminated before the execution of the mortgage deed by cancellation of the power of attorney and therefore the morgage security was invalid. This plea was raised in the application for leave to defend the suit on the part of the appellant but the Court had erroneously deferred the determination of this question to the time of execution of the decree and dismissed the application. As no appeal was filed against this order, the appellant is not entitled to raise this question at this stage. In any case in the view we have taken it is not necessary to go into this question.
26. ' In the course of the arguments it was submitted before us that the property which was the subject-matter of mortgage has been disposed of, of which the High Court had notice. Besides we find from the record (page 100 of the printed paper book) that the plaintiff-bank has released the property from the mortgage which stands redeemed on payment of the dues by the appellant and respondent No,1 on 12th August, 1984. The endorsement on the mortgage deed to this effect duly signed on behalf of the plaintiff-bank states as under: "In consideration of the sum of Rs,890,176 paid by M/s. Rafique Industries and M/s. Conforce Limited, the break cf which is as under:. Rafique Industries Rs,685,176 and M/s. Conforce Limited Rs,205,000 (on behalf of M/s. Rafique Industries Ltd., Mr. Rafiq Ahmad Bhatti, Mr. Rizwan Ahmad and Mst. Safia Zareen) of 75-1/9 Islamabad hereinafter called the borrower/ mortgagor (the receipt of which the bank hereby acknowledges) the mortgagee-Bank hereby redeems, releases and reconveys to the aforesaid borrower/mortgagor. All the mortgaged property described in the Schedule to the Deed of Mortgage dated 15-3-1983 registered with the sub-Registrar Islamabad at No,1118 Book No,1, Volume No,95 to hold the same to the mortgagor for ever freed and absolutely discharged from all principal money and interest secured by the said Deed of Mortgage dated 15-3-1983 and all claims and demands on account thereof.
27. ' All the title-deeds and other documents received from the aforesaid Mortgagor have been returned to him." . ' It would seem that with the consent of all concerned parties the mortgage security has come to an end and it would, therefore, befutile to pursue the matter of enforcing the mortgage security and would be contrary to the interests of justice.
28. ' In view of the finding that the decree first passed was a mor y decree issued against the defendants jointly and severally, and the amount having been received by the decree-holder, we hold that the decree has been fully satisfied. An the result, this appeal succeeds, the judgment of the Division Bench is set aside, as well as the final decree passed by the trial Court, dated 9th August, 1984. The appeal is allowed in these terms with costs.