1985 PLP 504 (MLD)

AKHTAR HASAN, J.--This R.F.A. arises from a decree dated 10-2-1981 of Sh.Ijaz Nisar, the then Special Judge, Banking, Lahore, whereby he allowed the appellant-Bank's claim for recovery of Rs.4,65,763 through sale of the mortgaged property belonging to the respondent/loanee, primarily on his own admission. The repayment was to be made in annual instalments of Rs.50,000 each, the first being payable on 31-10-1981. In default of any instalment, the whole was to be paid in lump-sum. It was further ordered that he will pay simple interest at the rate of 8 per cent from the date of the institution of the suit viz. 28-11-1979, till the date of the decree, and 12 per cent thereafter till the realization of the whole amount.

2. The suit was based upon two mortgage deeds dated 7-8-1976 and 21-3-1978, whereby the respondents Ice Factory detailed therein was charged as security for the repayment of his two loans respectively for Rs.2,40,000 and Rs.1,00,000 in quarterly instalments of Rs.38,000 each with interest at the rate of 13 per cent per annum.

3. The respondent did not make any application for leave to defend the suit as it was of summary nature triable under Order XXXVII, C.P.C. and instead offered to repay -the amount if he was allowed some concession in the interest and easy instalments. The learned Special judge accordingly recorded his statement dated 10-2-1981 and passed the impugned decree without the appellant's consent and making any reference whatsoever to the sale of the mortgaged property. He also reduced the rate of interest as indicated above. The appellant-Bank aggrieved by it, preferred this appeal.

4. There is no dispute as to the main liability. However, according to the counsel since these were contractual loans, the rate of the interest could not have been reduced without the consent of the appellant-bank. He placed reliance upon section 34-A, C.P.C. and section 8(2) of the Banking Companies (Recovery of Loans) Ordinance, 1979 which made it obligatory that the decree shall provide interest on the judgment-debtor from the date of decree till payment at the contracted rate or 2 per cent above the bank rat whichever is higher, He emphasised that the contracted rate was 13 per cent per annum till payment and thus the Court had no power to reduce it either from the date of the suit or the decree. It was next contended that it being a case for .recovery through sale of the mortgaged property, provisions of Order XXXI V, C . P. C . had to be meticulously complied with, but the learned lower Court made no reference to it and passed the final decree straightaway without making the demised property liable for its recovery through the process of sale etc. It was claimed to have had released the secured property against the terms of the contracts exposing the appellant to uncalled for insecurity. Besides, counsel assailed the yearly instalments of Rs.50,000 each as offending against the contracted quarterly instalments of Rs.38,000 each and pointed out that those would have the effect of un-necessarily prolonging the period for the clearance of the whole debt.

5. Counsel for the respondent had nothing to defend the impugned. decree vis-a-vis the statutory provisions referred to above. Since the claim was based upon written contracts, there could have been no unilateral alterations in their stipulations. Therefore, the interest had to be paid according to the agreed rate. The lower Court wrongly reduced it from the date of institution of the suit and that of the decree. So was the case with the fixation of instalments which appeared to be detrimental to the interest, of the appellant-bank. Equally there was considerable substance in the objection that the security in the shape of hypothecation of the property was totally rendered ineffective by the impugned decree. In fact, the relief being recovery of money through sale of the mortgaged property, the decree had to be in the form al prescribed by Order XXXIV, rule 4, C.P.C. Accordingly, in the first instance, it should have been only a preliminary decree keeping intact the charge on the secured property till the decretal amount was paid either through its sale-proceeds or otherwise. The impugned decree in H so far as it did not contemplate such a course was bad in law and could not be sustained.

6. As the respondent admitted the liability in his statement date 10-2-1981,the suit had to be decreed in any event. The appeal accepted, the decree of the lower Court is set aside, and, instead a preliminary .decree is passed for taking an account as to what was due to the appellant-bank till today as principal amount, interest at the rate of 13 per cent on the mortgage debt, the costs of the suit and expenses and charges, properly incurred by it till today in respect of the mortgaged security together with interest thereon. The lower Court will appoint a Local Commissioner to take such accounts which shall, of course, be confirmed /countersigned by it subject to all just exceptions. It is further decreed that the judgment-debtor shall pay the sum so found due into the Court by a date to be fixed by it or else, it will be open to the decree-holder to apply for final decree for the sale of the mortgaged property, whereupon all documents concerning it shall be produced by the judgment-debtor. The property shall then be put to auction for realization of the decretal amount including all the incidental charges. If the same fell short to satisfy the decree, the decree-holder may apply for a personal decree against the judgment debtor. The Commissioner's fee shall be adjusted in costs. A . A . Appeal accepted.