2026 PLP 96 (CLD)

This Execution First Appeal under section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 is directed against order dated 03.11.2022 passed the learned Judge Bank Court No.1, Multan being an Executing Court pursuant whereto the objection petition filed by the appellants were dismissed and auction proceedings held on 16.09.2021 were upheld.

2. Learned counsel for the appellants has agitated all the grounds canvassed in his appeal and submits that not only the auction proceedings for sale of mortgaged property are liable to be set aside but all events subsequent thereto are also liable to be recalled.

3. Conversely, learned counsel for the respondent Bank as well as respondent No.3 being auction purchaser who has appeared in person have supported the impugned order by contending that the appellants absented themselves from the execution proceedings and learned Court was constrained to order auction of the subject matter property.

4. After hearing learned counsel for the parties, we have perused the record and examined that instant proceedings culminating into impugned order emanate from judgment and decree dated 16.06.2011 passed by learned Judge Banking Court No.III, Lahore. It is an admitted fact that the said judgment and decree has attained finality as the R.F.A. bearing No.671 of 2011 filed thereagainst also stood dismissed for non-prosecution through order dated 21.09.2022 and application for restoration thereof was also dismissed through order dated 19.10.2022.

5. The executing court at Lahore transferred the proceedings for realization of subject matter judgment and decree to the court of competent jurisdiction at Multan as one of the mortgaged property was situated here. The said proceedings were ordered in terms of Section 39, C.P.C. and under Chapter-12B of Volume-1 of the Rules and Orders of the Lahore High Court and the judgment and decree was liable to be executed as if the decree has been passed by the Court itself and all the modes upon transfer were mandatorily to be satisfied.

6. The perusal of order sheet of the Executing Court reflects that upon transfer through order dated 28.10.2019 notices were only issued to the decree holder Bank but no notice was issued to the judgment debtors. We consider that this was the first fatal error committed by the Executing Court upon transfer of decree. Pursuant to order dated 11.02.2020 notice under Order XXI, Rule 66, C.P.C. was directed to be issued to the judgment debtors for sale of property admeasuring 10 Marlas falling in khewat No.878, khatoni No.1377 situated in mouza Neel Kot, Tehsil and District Multan. The report received on this notice is reproduced hereunder:-

7. Thereafter instead of ensuring that present appellants could be served in accordance with law, the order dated 25.06.2020 recorded that Presiding Officer was on leave and auction expenses as well as proposed reserve price be filed. This order was not signed by the learned Judge rather by the Reader of the Court and through orders dated 10.10.2020 and 09.11.2020 the Executing Court recorded that terms and conditions of auction have been filed and reserve price has been submitted.

8. The proposed reserve price was not determined after following the mandate of law and was merely finalized upon proposal of respondent decree holder Bank and it was set for Rs.7,700,000/-. The order dated 27.05.2021 reflects that in order to fetch a maximum price the Executing Court instead of directing publication in widely circulated newspaper ordered the publication of proclamation in some local newspaper, namely Awami Darshan . The auction report was submitted on 25.09.2021 and subject matter property was auctioned for Rs.7,900,000/-, however the material steps of confirmation of sale and issuance of sale certificate were not ordered as yet.

9. The appellants on 01.11.2021 upon attaining knowledge of the proceedings filed their objection petition and the Executing Court through impugned order dated 03.11.2022 dismissed the objection petition on three counts; firstly that objection petition as barred by time; secondly that the objections with respect to reserve price and questioning the manner, modes and mechanism for determination of reserve price and auction proceedings were not raised at the relevant time, as the service of notices under Order XXI, Rule 66, C.P.C. were willingly avoided by the appellants; and thirdly that the appellant had failed to meet conditions laid under Order XXI, Rule 90, C.P.C.

10. The analysis of proceedings, order sheet and manner in which auction was dealt with reflect that proceedings before the Executing Court suffered from serious inherent defects as well as jurisdictional flaws. The most glaring defect floating on the surface is that the transferee Court while hearing execution petition never made any effort to affect service upon the judgments debtors upon transfer of proceedings from Lahore. Though notices were issued to the decree holder Bank yet it was equally important and mandatory that upon transfer of proceedings for realization of judgment and decree the notices should have also been issued to the judgment debtors as well.

11. Additionally, despite receiving the report on notices under Order XXI, Rule 66, C.P.C. that nobody was present at the address, instead of directing the decree holder Bank to provide fresh address of the judgment debtors the Executing Court proceeded in the matter without ensuring compliance of notices to appellants under Order XXI, Rule 66, C.P.C. which was mandatory duty of the Court to draw proclamation for notice to the judgment debtors.

12. Banking Court had violated the mandate of law and contravened the provisions of Order XXI, Rule 66 and as a consequence thereof the sale rendered nullity in the eyes of law. Reliance in this regard is placed upon judgment reported Brig. (Retd.) Mazhar-ul-Haq and another v. M/s. Muslim Commercial Bank Limited, Islamabad and another (PLD 1993 Lahore 706). The Hon'ble Supreme Court in judgment reported as Zakria Ghani and 4 others v. Muhammad Ikhlaq Memon and 8 others (PLD 2016 SC 229) has underlined enlightening observations that where the irregularity consisted of errors by the Court, or by Court officials, no party should be made to suffer by reason thereof.

13. It must be borne in mind that in public auctions it is imperative that reserve price is determined in most transparent manner because it is in the interest of all the parties that mortgaged asset must fetch best and highest price. Before finalization of reserve price there are two conditions precedents; firstly to ensure that an independent evaluators from the list of Pakistan Banks' Association (PBA) have been appointed who may evaluate the property according to its location, commercial value as well as assess rate compatible to the DC rates' value. In the instant case the Executing Court proceeded with unnecessary and undue haste and instead of determining the reserve price through an independent source proceeded on the wishful thinking of the decree holder Bank and record is bereft of sufficient material justifying that on what clue or commercial assessment the Bank presented the reserve price in the sum of Rs.7,700,000/-; and secondly, while attempting the sale of property of a judgment debtor for execution and satisfaction of decree wide publicity should be given through proclamation of sale in order to fetch a highest and most handsome price for the property. Such an exercise assists to attract the attention of the participation of public at large and compliance thereof will maintain the balance and protect the rights and liabilities of the parties according to established norms and standards.

14. It is imperative to understand that the compatible bidding is key factor for fair and transparent public auction. Reliance is placed upon judgment reported as Summit Bank Limited, Lahore v. Messrs M.M. Brothers, Proprietorship Concern through Proprietor and others (2023 SCMR 374). In the instant case instead of ordering publication of proclamation in at least one widely circulated newspaper, the Banking Court chose a local newspaper with the name of Awami Darshan. This obviously did not satisfy the mandate of justice rather betrayed the mandatory provisions of law which nullified the whole process and proceedings before the Executing Court.

15. So far as the findings with respect to time barred objection petition is concerned, it is observed that same also suffers from inherent flaws. In a situation where appellants were not served with any notice in accordance with law upon transfer of execution proceedings to Multan nor the notice under Order XXI, Rule 66, C.P.C. was served despite having report that the judgment debtor was not available at the provided address the limitation is not governed under Article 161 of the Limitation Act, 1908 and since the objection petition contended that auction was not conducted in accordance with the provisions of rules 66, 67 and 68 of Order XXI, C.P.C., the limitation was to be governed under Article 181 of the Limitation Act which prescribed limitation of three years. Reliance in this regard is placed upon Abdul Jabbar Shahid and others v. National Bank of Pakistan and others (PLD 2019 Lahore 76).

16. The failure of the Executing Court to comply with the provisions of Order XXI, Rule 66, C.P.C. cannot be defended by the Bank nor this Court can permit that, especially when it tended to damage rights of the judgment debtors. Simply that a sale had been effected in favour of third party the mandate of law cannot be compromised as the provisions of Order XXI, Rule 66, C.P.C. laid a sure foundation for judicious and judicial determination of the rights and liabilities of the parties, therefore, it is imperative that a balance be struck to protect the rights and liabilities of the parties. Failure to adhere to the mandatory provisions would either imperil or even extinguish the sale.

17. We hold that the arguments raised before us by respondent decree holder Bank as well as the Court Auctioneer appear to be meritless and by failing to strictly adhere to the mandatory ethics contained in the provisions of law and on account of other serious defects in the impugned proceedings, we consider that impugned order has been passed in grave violation of law and consequently, we set aside the impugned order and steps subsequent, thereto. The objection petition is allowed and the execution proceedings shall be deemed to be pending before the Executing Court who shall hold the auction proceedings afresh from the stage of issuance of notice under Order XXI, Rule 66, C.P.C. and before holding auction in future the reserve price shall be determined after receiving evaluation report for the subject matter property through an independent evaluator.

18. Instant Appeal is allowed with no order as to costs. MH/V-1/L Appeal allowed.