2013 PLP 546 (CLD)

MUHAMMAD KHALID MEHMOOD KHAN, J.

The appellants filed objection petition under section 19 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (hereinafter referred to as the "F.I.O., 2001") for setting aside the auction dated 8-11-2006 conducted by respondent No.2 under section 15 of F.I.O., 2001. The learned Banking Court accepted the said objection petition vide order dated 12-10-2010, hence, the present appeal.

2. Respondent No.1 availed finance facility of Rs.3,00,000 from respondent No.2 on 24-4-2004 and mortgaged his property for securing the said finance facility. Respondent No.2 by exercising powers under section 15 of F.I.O., 2001 auctioned the property of respondent No.1 by sitting in their office and the property of respondent No.1 by sitting in their office and declared the appellants the highest bidden respondent No.1 on coming to know about the private sale of mortgage property filed objection petition against the said sale claiming that the act of respondent No.2 is fraudulent; section 15 of the F.I.O., 2001 has been declared as without lawful authority by the learned Full Bench of this Court and as such the entire auction proceedings are sham, the auction of mortgage property is without notice to respondent. The learned Banking Court allowed the said application through the impugned order dated 12-10-2010.

3. Learned counsel for the appellants submits that the appellants invested the huge amount for renovation and construction of the mortgaged property purchased through the open auction; the objection petition was barred by time; the learned Banking Court has failed to consider the expenses incurred by the appellants for construction and revamping of the suit property; the learned Banking Court has set aside the auction after four years without any reason.

4. Learned counsel for the respondents submits that respondent No.1 was never informed about the sale of auction; the possession was forcibly taken over by respondent No.2 and the appellants in collision with each other; the respondent No.2 was not within his rights to auction the property as section 15 of the F.I.O., 2001 was declared ultra vires to the Constitution of Islamic Republic of Pakistan, 1973 by the learned Full Bench of this Court.

5. We have heard the arguments of learned counsel for the parties and perused the record.

6. It is an admitted fact that the suit property was auctioned on 8-11-2006 and the learned Full Bench of this Court in W.P.No.18196 of 2002 (Muhammad Umar Rathore v. Federation of Pakistan 2009 CLD 257) has declared the provisions of section 15 of the F.I.O., 2001 as ultra vires to the Constitution of Islamic Republic of Pakistan, 1973 on 23-12-2008 and as such the declaration by the learned Full Bench of this Court is not applicable on the facts of the present case.

7. Under section 15(4) of the F.I.O., 2001 the mortgagee bank is bound to publicize the proposed auction in two daily newspapers. The respondent bank claims that the auction publicized in daily "Express" and daily "The Post" but the news agent of Rajanpur has tendered a certificate which reads as under:-- The fact strengthens the argument of learned counsel for respondent mortgagee that no publication was issued and if issued that was manipulated.

8. Uinder section 15(10) of the F.I.O., 2001 the mortgagee bank has to submit the accounts to banking court within thirty days. Learned counsel for the appellant and mortgagee bank has failed to point out any accounts submitted to court. Further, the auction report itself shows that after conducting the auction the local office of respondent. No.2 sent the report to their head office for approval but the said approval is also not available on record. It seems that the said approval was not ever granted by the competent authority.

9. It is also an alarming fact available on record which shows that the property was sold on less than the reserve price. The collusion of the appellant and respondent No.2 is floating on the surface of the record. The possession of the property was taken over by the respondent No.2 without informing the court or even without informing the local authorities. The possession of the property was handed over to the appellants by respondent No.2 without preparing inventory. The report of the auction submitted with the court shows that no list of bidders who participated in the bid is annexed with the said report. Even the other proceedings conducted at the site were not placed on the court record.

10. The argument of learned counsel for the appellants is that they invested huge amount and as such they are entitled for the return of the said amount which the learned Banking Court failed to ascertain. The appellants have not provided any details for the expenses incurred. However, good sense prevails between the parties and it is settled that the order of Banking Court dated 12-10-2010 be maintained with the modification that instead of 5 % the respondent No.1 will pay 20 % amount on the price of auction to the appellants. In case the appellants have invested any amount or revamping the machinery the learned Banking Court will appoint a local commission who will prepare the list and will fix the amount of machinery installed. The outstanding liability as to the electricity bills etc. will he paid by respondent No.1 before the date of taking over the possession of the auctioned property by the appellants. The appellants will file application with Banking Court for the appointment of the local commission for preparing the quantum of machinery added by the appellants and the expenses incurred and also the liability as to the electricity connection etc paid by the appellants which was outstanding against respondent No.1.

11. This appeal is, thus, allowed with the said modification. SAK/M-354/L Appeal accepted.