2007 PLP 2772 (YLR)

MRS. QAISAR IQBAL, J.--Auction Purchaser Messrs Popular Group of Industries have sought a direction for Official Assignee to pay a sum of Rs.5,963,750 out of the sale proceeds in respect of the charge created over the subject land by the Provincial Land Utilization Department and/or proceed to record mutation in favour of Auction Purchaser in terms of Sale Certificate. Messrs Popular Group of Industries purchased a factory known as Zarak Textile Mills Ltd., situated on Survey No.115, Deh Khanto, Tapo Landhi, Karachi, along with building, machinery, furniture, fixtures and fittings in the auction for a total sale consideration of Rs.32.25 crores offer was accepted on 14-2-2005. The purchaser deposited the entire sale consideration, took over the possession of factory on 4-3-2002 Initially sale notice was published for the auction of Messrs Zarak Textile Mills Ltd. on "as is where is basis", auction purchaser offer to purchase the property free from all encumbrances, liabilities, liens, burdens litigation's mortgages including any type of dues of Government as well as Financial Institutions vide letter, dated 4th September, 2001. Consequent thereupon the bidders improved the offer as is apparent from the report of Official Assignee, the auction purchaser offered to purchase the property on cash as well as installment basis. However, the offer was accepted in a sum of Rs.32.25 crores, Sale Certificate was issued in terms of Order XXI Rules 94, C.P.C. in favour of auction purchaser. Consequent thereupon Sale-deed was executed in favour of auction purchaser, title documents were delivered and sale proceeds were distributed in favour of the secured creditors on 1-11-2006 Official Assignee has proceeded for mutation of the name of auction purchaser In Reference No.1 of 2006, it was appraised that Secretary Land Utilization Department, Government of Sindh vide letter, dated 16-3-1995 had informed, that on the promulgation of Ordinance No.III of a 2000, land stood cancelled and can be regularized on payment of differential of a malkano on payment of Rs.59,63,750 consequently stood cancelled. Mr. Mushtaq A. Memon, learned counsel for Auction Purchaser has contended that from the sale proclamation published in newspaper on 5-9-2001, the property was sold on the basis of "as is and where is basis" free from all lien and encumbrances. Consequent thereupon auction purchaser has submitted his firs offer on 4th September. 2002, subsequent thereof amended offer was submitted Official Assignee was directed to issue Sale Certificate in favour of nominee of auction purchaser subject to payment of dues of KESC, telephone, Karachi Water and Sewerage Board and Property Tax due and payable to various departments. Consequent thereupon on 24th June, 2002, the sale proceeds were distributed to the secured creditors (a) N.D.F.C. (C.I.R.C.) now National Bank (b) A.D.B.P. (c) National Bank of Pakistan. Accordingly, all the creditors were paid. No claim was notified by Government of Sindh Land Utilization Department towards the cancellation of land and regularization of name of differential of malkano determined by the Committee, although the sale of the property was held under the order, dated 12th July, 2001 when the Official Assignee addressed the letter to the Government functionary for mutation of the name of the nominee of the auction purchaser in the record of rights, first time through letter dated 7th March, 2006 a claim was notified by the Government of Sindh for regularization of the land on the payment of the amount determined by the commission. Out. of the sale proceeds not only that the secured creditors were paid but a sum of Rs.l1 million towards the claim notified by the customs authorities were retained by the Official Assignee. During the course of the proceedings through Official Assignee's Reference, dated 1-12-2001 it was brought to the notice that the offers of the auction purchaser was free from all liabilities and taxes. It is urged that the auction purchaser had purchased the property free from all encumbrances, no claim was notified therefore, auction purchaser cannot be burdened to pay sum demanded by Government of Sindh. It is further contended that the Official Assignee has proceeded to file objections, dated 9-10-2006, in para. 3 it is averred that at the time of filing claim regarding property tax, the Land Utilization Department, Government of Sindh did not file claim pertaining to differential of malkano of sold out land, after the lapse of 4/5 years, the claim of differential malkano has been set-up. The Government by its conduct has waived the right, the sale proceeds have already been distributed amongst the secured/ preferential creditors with permission of the Court, Official Assignee shall not be liable to pay the Government claim. I have heard the learned counsel appearing for the parties at length. There is no cavil to the arguments raised on behalf of the auction purchaser, the property was sold out to the auction purchaser in a sum of Rs.32.25 crores in cash "as is where is basis" the claims notified were paid off, whereas the balance amount was distributed amongst the secured creditors. In order to specify the liability against the additional rnalkano claims by the Government of Sindh, reliance is placed on the case of Messrs Industrial Development Bank of Pakistan v. Messrs Maida Limited and others 1994 SCMR 2248, where it has observed that, the contentions seem to be correct, as the property was sold free from all encumbrances. In the sale proclamation the liabilities specified therein did not contain dues and charges of these claimants. In these circumstances, auction purchaser's title cannot be clouded by other claims. Section 55(1)(g) of Transfer of Property Act (IV) 1882, provides that the seller shall be bound to pay all public charges and rent accrued due in respect of the property up to the date of the sale, the interest on all encumbrances on such property due 'on such date, and except where the property is sold subject to encumbrances, to discharge all encumbrances on the property then existing. Section 69(4) of the Act, (ibid) substantially provides that the money received by the mortgagee, arising from the sale, after discharge of prior encumbrances, after payment into Court under section 57 of the Act a sum to meet any prior encumbrances, shall in the absence of a contract to the contrary, be held by him in trust to be applied by him, first, in payment of all costs, charges and expenses properly incurred by him as incident to the sale or any attempted sale; and secondly in discharge of the mortgage-money and costs and other money, if any due under the mortgage, and the residue of the money so received shall be paid to the person entitled to the mortgaged property, or authorized to give receipts for the proceeds of the sale thereof. It has been the consistent view of the Courts that concept of free from all encumbrances means that when the purchaser purchased the property, it was delivered free from any liabilities as is held in the case of Messrs United Bank Ltd. v Messrs Nephew and Nephew Ltd. 2004 MLD

319. Question of, "as is where is" has been dealt by a Division Bench in the case of United Bank Ltd. v. Messrs Al-Noor Enterprises and another 2006 CLC 822, the dictum laid down that the phrase, cannot be interpreted to include liability, charges or encumbrances attached to the property, when it is so specifically provided as referable to the physical attributes and when the purchaser purchased the property then he expects that it shall be given to him without there being any liability attached. This view was also followed in an unreported order, dated 18-4-2006 passed in Execution No.45 of 1999 by a Single Judge of this Court. By virtue of the improvement of the offer of purchase it appears that the offer was inclusive of the taxes and utility bills payable to different Government functionaries which were adjusted towards the sale proceeds as is apparent from annexure `P' annexed by Official Assignee with his Reference, dated February, 2Q

03. It is now well, settled proposition of law that the mortgaged property was offered and sold under the orders of Court, the auction purchaser would acquire clean and unencumbered right and title in the property. Unless such charge, lien or encumbrance is notified in the sale proclamation as required under Rules 61 and 66 of Order XXI, C.P.C. The auction purchaser had acquired right in the property free from all encumbrances, specifically notified in the sale proclamation. Consequent thereupon all liabilities were cleared including urban immovable property tax and the balance sale proceeds were distributed amongst the secured creditors. Government of Sindh through Land Utilization Department had claimed substantial sum towards differential malkano for regularization of the lane through letter, dated 7th March, 2006 where Official Assignee applied for the mutation of the name of nominee of the auction-purchaser in the record of rights. It may further be observed that the property was free from all encumbrances when purchased by the auction purchased possession was delivered, no claim was notified in connection with differentia malkano even at the time of the auction or in subsequent proceedings. Respectfully following the rule enunciated in the case of Maida Ltd, (supra) followed in subsequent pronouncement of this Court I am inclined to hold that the auction-purchaser is not liable to pay the sum demanded towards differential malkano in terms of section 111 of Ordinance, 2000, does not refer to all lands as suggested by the learned Official I Assignee that the property was free from all encumbrances when put to auction, Government claims was not notified, therefore, after the sale claim of Land Utilization Department through the Government of Sindh could not be entertained and termed as a charge upon the property. Consequently, C.M.A. No. 325 of 2006 is hereby allowed. Official Assignee is directed to get the name of the nominee of the auction I purchaser recorded in the record of rights. Order accordingly. H.B.T./N-3O/K Order accordingly.