1996 PLP 1450 (SCMR)

FAZAL ILAHI KHAN, J.

Respondent No.2 namely M/s. K. Agricole (Pvt.) Ltd., Shahrah-e-Kashmir, Islamabad entered into an agreement on 9-3-1986 with National Development Finance Corporation for financing the purchase of raw material etc. on mark-up basis. Under the terms thereof respondent No.1 purchased certain assets in the sum of Rs.2,250,000 for respondent No.2. The mark-up price was payable to respondent No.1 by respondent No.2 in ten six-monthly equal installments amounting to Rs.5,22,140 each within the period commencing from 1-7-1988 up to 1-1-1993. For securing repayment of the financial facilities promissory note for Rs.5,22,140, letter of hypothecation dated 24-7-1986 and deed of floating charge dated 24-7-1986 were executed and the last one was presented for registration under section 127 of the Companies Ordinance, 1984 which was duly registered by way of security respondent No.3 also executed a General Power of Attorney in favour of respondent No.1 and an equitable mortgage of his property bearing Plot No.C-1/A measuring 9.78 acres, Scheme No.2 Poultry and Vegetable Farm, Chak Shahzad, Islamabad. Defendant 1Vo.2 further handed over and executed the following: (a) Agreement to lease of immovable property, dated 20th November, 1984, executed between C:D.A., Islamabad and Mr. Khushnud Ali.. registered on 25-11-1984. (b) N.O.C. from C.D.A. Islamabad dated 19-6-1986. (c) Allotment Letter No.CDA/DEM (PVC-15) C-1 issued by Additional Director Environment, C.D.A., Islamabad. In addition documents regarding equitable mortgage pieces and parcel of land measuring 9.78 acre referred to above were also handed over to the respondent.

2. Respondent No.2 after availing the financial facilities failed to liquidate the liability under the terms of the agreement, therefore, after service of legal notices respondent No.1. filed a suit for recovery of . Rs.3,04,639.30.on 30-6-1991 with liquidated damages at 20 per cent. per annum till the date of his full and final payment with cost against respondents Nos.2 to 6 under the Banking Companies (Recovery of Loans) Ordinance, 1979. The respondents were summoned through ordinary service than through registered post acknowledgment due and lastly by publication in Daily Nawa-.i-Waqt and Nation. As such they were served but on their failure to appear, were proceeded against ex parte. Accordingly, ex parte preliminary decree was passed in favour of respondent No.1. Subsequently respondent No.1 made an application for final decree which too went uncontested in spite of service; hence, finally it was granted to respondent N6.1 on 23-10-1993.

3. In execution of the aforementioned decree the mortgaged property referred to above was attached and notice was published for its auction on 13-7-1995. It was at this stage M/s. Capital Farms, Islamabad (petitioner herein) filed an objection petition under Order XXI, Rules 97 and 99 read with section 151 of the C.P.C.

4. It was alleged by the petitioner that the property which was going to be auctioned in execution of the decree passed in favour of respondent No.1 was allotted to Syed Khushnud Ali Rizvi respondent No.3 which he had agreed to sell to the petitioner per agreement deed dated 27-10-1988 for the sale consideration of Rs.35 lacs out of which the objector has already paid Rs.20 lacs. That as the plot was not so far transferred by the C.D.A. and respondent No.2 had left for Canada the objector has filed the suit for specific performance of the contract pending adjudication in the Court of Civil Judge, Islamabad. That the objector came to know of the auction for the first time, therefore, it being bona fide purchaser for consideration and is in possession in its own right shall be excluded from auction. After notice to the decree-holder the objection petition was fixed for hearing on 19-7-1995 on which date the objector failed to appear; hence, the objection petition was dismissed for non-prosecution, as similar objection had already been raised at the time of auction on.13-7-1995 which subsequently took place on 19-7-1995.

5. In the auction proceedings besides Javed Mawaz Khan respondent No.9 and others and Mehmood Alam husband of Mst. Sysha, a partner of M/s. Capital Farms and another partner of the Farms who is the real brother of Mst. Aysha Alain participated. in the auction. Respondent No.9 being the highest bidder purchased the plot it question for Rs.62,00,000 which has subsequently been confirmed and sale certificate issued in his favour vide order dated 22-8-1995. The execution proceedings, therefore, were consigned.

6. Petitioner challenged the aforementioned preliminary, final judgment and decree and the subsequent execution proceedings in R.F:A. No..44 of 1995 in August, 1995 with a prayer that the preliminary decree dated 22-2-1992 and the final decree, dated 23rd October, 1993 passed by the Special Judge Banking as well as the order of execution dated 29-11-1994 and the auction proceedings held on 19-7-1995 be set aside and the suit of the respondent No. l be dismissed. Alongwith the memo. of application an application under section 12(6) of the Banking Companies (Recovery of Loans) Ordinance 1979 seeking condonation of delay was also filed, and the ground given therein is that the petitioner being not impleaded as party to the suit acquired' knowledge of the decree on 13-7-1995 when the plot was going to be put to auction on which the petitioner immediately filed application before the executing Court and .on obtaining the copies filed an appeal on 9-8-1995 which is to be considered as filed within time.

7. The learned High Court in its detailed- judgment dated 12-10-1995 repelled all the contention raised by the petitioner, which are reiterated here before us; that the allegation that while entering into agreement with respondent No.3 petitioner had no notice of the property in question being mortgaged and other charges; that the petitioner is bona fide interest holder and in possession of the suit property; the pendency of the suit for specific performance, jurisdiction of the Special Court for Banking; and several other grounds connected therewith. These grounds have been repelled by the learned High Court one by one support being sought by the law applicable and the precedent case cited at the Bar; and it was held that neither the appellant was party to the proceedings in which the impugned decree was passed nor respondents Nos.1 and 2 are parties to the alleged agreement to sell on the basis of which the appellant is claiming interest in the property and has' tiled suit for specific performance. That respondent. No.2 mortgaged the property in question in favour of respondent No.1 in March, 1986 through respondent No. 3 in his capacity as Director of the company. That respondent No.3, allegedly, in the year 1988 entered into an agreement of sale with the petitioner in his personal capacity, It was further held that the mortgage created in the year 1986 was duly certified by the Deputy Registrar, Joint Stock Companies, Islamabad under section 127 of the Companies Ordinance, 1984. There being created a charge in favour of financicl institution (respondent No. 1) through a registered deed prior to the date of alleged execution of the agreement of sale in favour of the petitioners by one of the Directors of the Company in his personal capacity it has got no overriding right or interest in favour of the petitioner. That execution of an agreement of sale in favour of the petitioner by itself does not per se create any interest or right in the suit property unless sale-deed is executed in pursuance thereof either by the real owners or by the Court in execution of a decree for specific performance of the said agreement. Such being the case preliminary and final decree passed in favour of the respondent and the auction conducted in execution were found untenable. It was further held that partners of the petitioner firm participated in the auction proceedings without any reservation. Respondent No.9 being the highest bidder the auction in his favour was confirmed and sale certificate issued. The petitioner's application for condonation of delay in challenging the preliminary and final decree, on facts and circumstances of the case, in which petitioner failed to appear on 16-7-1995 to pursue his objection petition in the executing Court and getting the same dismissed for default prevailed with the learned High Court in refusing such prayer in rejecting the application and in consequence dismissing the appeal.

8. We have heard the learned counsel for the petitioner, the learned counsel for the caveator, perused the record and have gone through the judgment of the learned High Court.

9. The learned High Court in its detailed judgment dated 12-10-1995 took up for consideration all the contentions raised before it, and reiterated the same before us one by one in the light of the relevant law and precedent cases relied upon by the parties. The, learned High Court has rightly held that the petitioner was not a party to the, transaction between respondents Nos.1 and 2 nor in the proceedings culminating in the decree in question. Respondents Nos.1 and 2 were also not parties to the alleged agreement of sale on which the petitioner has, based its claim. The mortgage in respect of the propety in question was created in favour of respondent No.1 by respondent No.2 through respondent No.3 a director of the company in the year 1986. Respondent No.3, therefore, in his such capacity even if found to have entered into an agreement of sale with the petitioner in the year 1988 the same will be ineffective and not binding on the respondents. Admittedly the mortgage was duly registered in accordance with law, therefore, it was sufficient notice to the petitioner of the rights of respondents Nos.1 and 2 and of the charge created. Furthermore, as pointed out by the learned counsel for the respondents, respondent No.3 has challenged the agreement of sale as a forged and fraudulent document and has denied its execution in his written statement filed in the suit for specific performance. Even otherwise such agreement, till its execution by a person competent to enter into such agreement, is proved in Court of law it does not create any interest in the property. Participation of some of the partners of the petitioner in the auction proceedings and their failure to out bid the respondent No.9 rightly prevailed with the learned High Court in holding that the petitioner was est6pped from challenging the auction in execution of the decree which had attained finality.

10. As far as limitation is concerned the plea that the petitioner came to know of the decree on 13-7-1995 and thereafter filed the objection petition, rightly did not find favour of, the learned High Court for sound and cogent reasons. As. the decree was validly passed against the judgment-debtor through whom the appellant claimed interest in the property on the basis of the agreement of sale stated above it was rightly held by the learned High Court that such decree is not open to any challenge on the pleas which were not available to judgment-debtor. The judgment-debtor did not contest the suit, neither challenged the decree nor has objected to the auction of the property. The objection petition filed by the petitioner in which prayer was made for deletion of the property from the auction list on the basis of the agreement of sale stated above was not pursued and ultimately dismissed for non-prosecution. Respondent No.9, therefore, having offered the highest bid in the auction is a bona fide purchaser of the property for valuable consideration. For all these reasons we find no infirmity in the judgment of the learned High Court and refuse to grant leave to appeal. Petition is dismissed. A.A./C-172/S Leave refused.