Sale of mortgaged property
Sale of mortgaged property legal meaning, translation and judicial precedents.
Meaning & Judicial Interpretation: (اردو مفہوم اور قانونی تشریح)
Report of the auction committee revealed that the advertisement was published only in one Urdu newspaper, although it was also required to be published in one reputable English newspaper as well
Additionally, the place of the auction was mentioned as the Office of Assistant Director, but as per S. 15(4), it must be a public auction
In the present case, the auction was conducted only three days after the issuance of publication
Three notices in terms of S. 15(2) were purportedly issued by the respondents in the name of appellants, but the record was absolutely mute about their effective service
Respondents were required to file the auction report before the Banking court within thirty days of the auction, as per S. 15(11), but it was filed after almost 13 months
Only the auction of the mortgaged property was alleged to have been conducted, and no further steps were taken
Thus, the impugned auction by no means had attained finality to be rendered as a past and closed transaction
Impugned order was set aside, allowing the matter to be open for the re-auction of mortgaged property
Appeal was allowed.
Section 15 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, reveals that the financial institution, before exercise of its powers under subsection (4), shall cause to be published a notice in one reputable English daily newspaper and one Urdu daily newspaper with wide circulation in the Province in which the mortgaged property is situated, specifying particulars of the mortgaged property, including name and address of the mortgagor, details of the mortgaged property amount of outstanding mortgage money, and indicating the intention of the financial institution to sell the mortgaged property; moreover, the financial institution shall also send such notices to all persons who, to the knowledge of the financial institution, have an interest in the mortgaged property as mortgagees.
Petitioners claimed to be bona fide purchasers of suit property and sought permission to deposit decretal amount in installments
Executing Court dismissed the application
Validity
Petitioners were strangers to the lis and had no locus standi to file application in question for making deposit of decretal amount in installments
Such proceedings were tainted with mala fide to frustrate execution proceedings pending since 4-4-1991
Petitioners failed to point out any illegality or material irregularity in the order passed by Executing Court
Revision was dismissed, in circumstances.
Petitioner impugned order of Banking Court whereby his objections to notice of sale of mortgaged property, in execution proceedings of Banking Court, were rejected
Validity-Sections 15(11) & 19(7) of Financial Institutions (Recovery of Finances) Ordinance, 2001 pertained to disposal of disputes by Banking Court relating to sale of mortgaged property, and therefore orders passed under same were final orders which were appealable under S. 22 of said Ordinance
High Court observed that in presence of remedy of appeal, Constitutional petition was not maintainable, and same was disposed of with observation that petitioner may avail remedy of appeal under S. 22 of Financial Institutions (Recovery of Finances) Ordinance, 2001.
Appellants assailed order of executing court whereby it had approved the valuation determined by the valuator appointed with the consent of parties
Contention of appellants were that the impugned order was passed in violation of O. XXI, R. 68, C.P.C.; that the impugned schedule of auction was approved without affording opportunity of hearing to the appellants; that mandatory requirements of O. XXI, Rr. 66(2) & 67(2), C.P.C. were not fulfilled; that the description of property given by the Court Auctioneers in the schedule of auction was not correct and that the report of valuators was self-contradictory
Validity
Order relating to appointment of valuator was passed by providing proper opportunity to the parties therefore, it could not be said that the appellants were not provided any opportunity of hearing
Schedule of auction revealed that time and place of auction was mentioned under the heading "Schedule of Auction" and the requirement of O. XXI, R. 67(2), C.P.C. was fulfilled by giving publication of proclamation in the newspaper
Record revealed that the court had appointed several valuators for valuation of property from time to time, and the reports submitted by them reflected the same property
Valuation report and the schedule of auction approved by court mentioned the same property falling under the same khasra number
Impugned order was passed strictly in accordance with law
Appeal, being devoid of any merit, was dismissed in limine.
Appellants assailed order of executing court whereby it had approved the valuation determined by the valuator, which was appointed with the consent of parties
Contentions of appellants were that the impugned order was passed in violation of O. XXI, R. 68, C.P.C.; that the impugned schedule of auction was approved without affording opportunity of hearing to the appellants; that mandatory requirements of O.XXI, Rr. 66(2) & 67(2), C.P.C. were not fulfilled; that the description of property given by the Court Auctioneers in the schedule of auction was not correct and that the report of valuators was self-contradictory
Validity
Order relating to appointment of valuator was passed by providing proper opportunity to the parties therefore, it could not be said that the appellants were not provided any opportunity of hearing
Schedule of auction revealed that time and place of auction was mentioned under the heading "Schedule of Auction" and the requirement of O. XXI, R. 67(2), C.P.C. was fulfilled by giving publication of proclamation in the newspaper
Record revealed that the court had appointed several valuators for valuation of property from time to time, and the reports submitted by them reflected the same property
Valuation report and the schedule of auction approved by court mentioned the same property falling under the same khasra number
Impugned order was passed strictly in accordance with law
Appeal, being devoid of any merit, was dismissed in limine.
Question before High Court was whether procedure prescribed by R. 3 of Financial Institutions (Recovery of Finances) Rules, 2018 for sale of mortgaged property would apply to sale of mortgaged property with as well as without intervention of Banking Court
Held, that S. 19(3) of Financial Institutions (Recovery of Finances) Ordinance, 2001 envisaged dichotomous measures to be adopted for satisfaction of decree in terms of sale, inter alia of mortgaged property with or without intervention of Banking Court
Rules 3 & 4 of Financial Institutions (Recovery of Finances) Rules, 2018, when viewed in prism of such dichotomy, then it was apparent that same would apply only when a financial institution acted to undertake sale of mortgaged property on its own accord without intervention of Banking Court and use of words "where relevant" and term mutatis mutandis signified such interpretation of said Rr. 3 & 4
Rule 3 of Financial Institutions (Recovery of Finances) Rules, 2018, if same were to apply to both situations, (sale of mortgaged property with intervention of Banking Court and without intervention); then R. 4 of same would have only stated said R. 4 would apply to proceedings under S. 19(3) of Financial Institutions (Recovery of Finances) Ordinance, 2001 without further qualification and thus there existed raison d'etre of said R. 4 from a purposive interpretation standpoint.
Question before High Court was whether auction proceedings could be compelled to continue if during pendency of same, decretal amount was deposited by judgment-debtor
Held, that very concept of execution proceedings was to give effect to a decree and such proceedings subsisted until said decree was satisfied and an array of methods were employed to execute a decree including, without limitation, auction of property securing the debt
Realization of such security was warranted only in event that judgment-debtor was unable or unwilling to satisfy decree by other means and in event a decree was satisfied, by or on behalf of judgment-debtor, there would exist no justification to perpetuate execution proceedings for discharge of debt
No reason existed to compel continuation of execution proceedings once a judgment debtor was no longer at default.
Bid in an auction was only an offer and it conferred no benefit unless it culminated into issuance of confirmation of sale and confirmation of sale could not merely be claimed as of right
Submission of bid does not vest the bidder with any proprietary rights in a property
Where no confirmation of sale had ever been issued and consequently no sale certificate had been issued, in such a case no rights were created in favour of an auction participant with respect to a mortgaged property that was the subject-matter of auction proceedings.
Plea of appellants was that they were bona fide purchasers and the property was not mentioned either in the suit or in the fard taliqa and was introduced for the first time in the auction schedule
Validity
Held; prior to alleged alienation of the property by mortgagor, same had been mortgaged with the Bank which continued to be in possession of the title document ever since
Appellants could not assert title over the mortgaged property ahead of and in preference to the Bank
Appellants could not claim to be bona fide purchasers in view of the fact that the original sale deed of property was tendered with the Bank much earlier to the alleged sale in favour of appellants
Description of property was rightly mentioned while executing memorandum of deposit of title deeds
Mis-description of khasra number in fard taliqa was of no significance and appellants were not labouring under any misapprehension regarding the identity of property
Banking court after issuance of sale certificate had become functus officio qua the mortgaged property
Appeal was dismissed.
Use of the word "shall" in S. 19(7)(a) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 made it mandatory for Banking Court to investigate every claim and objection in respect of attachment or sale of mortgaged property
Banking Court could not dismiss claim/objections of a purported lessee of mortgaged property on ground that existence of lease in their favour did not constitute a claim under S. 19(7) of the Financial Institutions (Recovery of Finances) Ordinance, 2001
Any claim or objections which were preferred by a lessee of mortgaged property could not be rejected by Banking Court straightaway without first determining whether such lease was bona fide or not
Criteria for determining whether a lease was bona fide or not was contained in S. 15(7) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 where it was provided that if a lease was created after date of mortgage which appeared to have been created so as to adversely affect value of mortgaged property or to prejudice rights and remedies of the financial institution, then such lease would be presumed to be not bona fide unless proved otherwise
Creation of lease after date or mortgage was therefore not the sole criteria for determining whether a lease was bona fide or not
Once a determination per the criteria was made, Banking Court through a speaking order, would decide if a lease of mortgaged property was bona fide or not.
Alleged agreement to sell was signed by the defendant/vendor in presence of two witnesses who had supported its execution
Execution of agreement to sell with free consent of defendant/vendor had been proved through overwhelming and cogent evidence by the plaintiff
Plaintiff had been delivered possession of suit property after redemption of the same from House Building Finance Corporation by the vendor
Mere mortgage of suit property would not make the agreement to sell as non-existent
Fraud had not only to be specifically alleged but also proved on record
No element of fraud or misrepresentation in the execution of agreement to sell had been proved
Judgments and decrees passed by the courts below were based on proper appreciation of available record
Revision was dismissed in circumstances.
Contention of the judgment-debtor was that mortgaged property was a "joint khata", and unless partition of the mortgaged property took place, the same could be auctioned
Validity
Impugned order of the Banking Court dealt with issue of partition of the mortgaged property and no infirmity existed in the said findings
Mortgaged property could, in fact, be put to auction till formal partition takes place
Any person who purchased a property in an auction simply stepped into the shoes of the one of the owners in the "joint khata", whose share of the said property was then sold
Appeal was dismissed, in circumstances.
Provisions of O. XXI, R. 54 or S. 60 of the C.P.C. did not require attachment of mortgaged property by the Banking Court, therefore, the same was not bound to attach mortgaged property before its sale in execution of decree of Banking Court
Mortgaged property was already secured, therefore, the Banking Court was not required to adopt the protective measure of attachment of such property
In respect of mortgaged property, under the provisions of the Financial Institutions (Recovery of Finances) Ordinance, 2001; Banking Court was to directly pass an interim or final decree for foreclosure or sale and on such pronouncement/order; the decree shall automatically convert into execution proceedings and no fresh notice was needed to be issued to the judgment-debtor in such regard, but only particulars of the mortgaged property were to be filed by the decree-holder
Under provisions of the Financial Institutions (Recovery of Finances) Ordinance, 2001 there existed no need for attachment of mortgaged property before its sale in execution.
Lien of Bank against pledged land would remain intact till the payment of outstanding amount but said lien could not be used to deprive a person to alienate his property during continuation of mortgage
Loanee was bound to repay the loan availed by him but said fact did not deprive him of his right to transfer his property according to his own wishes
Constitution ensured protection of a right of private owner to utilize his property according to his own wishes
Original owner was competent to transfer land in question in favour of petitioners even during the currency of mortgage
District Officer (Revenue) had no jurisdiction to adjudge the validity of mutation attested in favour of petitioners in exercise of powers under S. 163 of Punjab Land Revenue Act, 1967
High Court could take note of subsequent proceedings to arrive at a just conclusion
All possible care and caution was taken by the petitioners and no adverse inference could be drawn against them
Impugned orders passed by the revenue hierarchy were set aside subject to clearance of outstanding dues of the Bank within three months after rendition of account
Mutation attested in favour of petitioners would stand restored
Constitutional petition would be deemed to have been dismissed in case of failure of petitioners to deposit the outstanding due within specified time.
Suit house was given in the possession of plaintiff on term of tenancy and rent deed cum mortgage deed was executed wherein defendants admitted acknowledgment of Rs.3,00,000
During the subsisting of rent agreement defendants sold suit property and concealed the fact of said deed
Remedies available to the plaintiff was that of a suit for foreclosure whereas defendants had to file a suit for redemption but both the parties did not adopt the proper course either of foreclose to for redemption of the suit house
Mortgagee-plaintiff was entitled to receive the mortgage money
No bar existed on the sale purchase of a mortgaged property except that mortgage was always considered a charge over the property sold which was previously mortgaged
Buyer of suit house would step into the shoes of mortgagor/vendor and he could not acquire better title than which was at the time of sale
Right of such buyer and mortgagee had been protected under S.56 of Transfer of Property Act, 1882
No prejudice had been caused to the plaintiff as he had been compensated and a decree for mortgage money had already been awarded to him
Equity would demand that plaintiff should be relieved of the costs imposed upon him by the courts below
Plaintiff being mortgagee of suit house might retain its possession till the said house was redeemed in accordance with law
Plaintiff was entitled to receive back the mortgage money of Rs.3,00,000
Findings rendered by the courts below were based on correct appreciation of law and facts except the amount of costs imposed on the plaintiff
Revision was dismissed in circumstances.
Property in question was mortgaged property and was sold by Official Assignee under the direction of Executing Court to satisfy decree passed in favour of financial institutions
Plea raised by Customs Authorities was that in sale proceeds government dues had preferential right of clearance
Validity
Though amount was determined against judgment debtor company by way of Order in Original dated 15-2-2000 passed by Customs Authorities but even such determination had been done by the authorities after almost 8 years of issuance of show cause notice dated 14-9-1992; in between such period, Custom Authorities did not make any effort to approach High Court and not even after passing of Order-in-Original in the year, 2000
Customs Authorities approached High Court with application under S.73, C.P.C. only in 2005
Determination of any such amount by government department, which was not directly against or in respect of property being sold by court, the same could only be given a priority if such determination was made prior to mortgage or creation of charge in respect of such property of defaulter and not otherwise
Mortgage/charge was created in year, 1987, in favour of financial institutions, whereas even if Order-in-Original dated 15-2-2000, were to be taken as crucial date, the same had been passed much after the date of mortgage of the property
Division Bench of High Court declined to interfere in judgment passed by Single Judge of High Court declining clearance of government dues from sale proceeds
Intra Court Appeal was dismissed in circumstances.
Suit for recovery was decreed whereafter during execution proceedings, the appellants made application to the effect that they were bona fide purchasers of the suit property and were not aware of the decree
Contention of the appellants was that when they had purchased the mortgaged property they had taken all precautions before the purchase and had no knowledge of the decree and there was no mention in the record of rights of any charge created over the property by the Bank , and therefore, the said property could not be cast away for satisfaction of the decree
Appellants had purchased the mortgaged property three months after the passing of the decree
Under S.23 of the Financial Institutions (Recovery of Finances) Ordinance 2001, a suit was automatically converted into an execution application and no formal application was required to be made by the Bank
Appellants had purchased the suit property at a rate less than the one paid by the previous purchaser, and therefore, purchase did not seem to be bona fide
Principle of lis pendens, in the present case, defeated the right of the appellants
Appeal was dismissed.
Suit for recovery was decreed whereafter during sale of mortgaged property, some of the defendants made application under S.15(10) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 for filing of proper accounts of the sale proceeds, which was allowed, and the Bank was ordered to remit the excessive amount to the defendants
Subsequently, the other defendants/applicants made application under S.12(2), C.P.C. for setting aside order for filing of accounts, on grounds of fraud and contended that the rest of the defendants had connived with the Bank to sell away the property at throw away price
Said application under S.12(2), C.P.C. was rejected by the Banking Court
Defendants/applicants impugned the said order inter alia on the ground that no notice was served upon the defendants/applicants before the order for filing of accounts was made
Validity
Bank had adopted the procedure laid under S.15(4) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 by putting to auction the mortgaged property and had published two notices, one in an English daily and one in an Urdu Daily, both having country-wide circulation
After receipt of an application under S.15(10) of the Ordinance, the other defendants/applicants would be deemed to have been validly served by the Banking Court by publication in the newspaper
After the property had been put into auction, and the highest successful bid was offered, the Financial Institution/Bank was only to file the proper accounts of the sale proceeds in the Banking Court, which was done
Application made by the applicants/defendants after a lapse of ten years was of no avail and they should have availed remedy of appeal against decree of Banking Court
Impugned order was a final order and even otherwise an application under S.12(2), C.P.C. was not maintainable as there was no element of fraud, misrepresentation and lack of jurisdiction in the present case
Application under S.12(2), C.P.C. was rightly rejected by Banking Court
Appeal was dismissed, in circumstances.
Suit for recovery filed by respondent-Bank was decreed and during execution proceedings, the appellant filed an objection application to auction of mortgaged property on the ground that the appellant had purchased said property and had an agreement to sell in the appellant's favour
Application was dismissed for non-prosecution and subsequent second application was also dismissed as being barred by law
Validity
Contention of the appellant that the case was only fixed on the day of hearing for submission of written reply which had been submitted, was not acceptable and could only be a ground for restoration of original objection application but not for making another application
Even otherwise, an agreement to sell did not defeat the right of a decree holder and did not equip a person with any legal right
Decree holder had not been impleaded by the appellant in a suit for specific performance of agreement to sell instituted by the appellant
Second application was not maintainable under principle laid down in O.IX, R.9 of C.P.C.
Appeal was dismissed.
Bank filed suit for recovery of loan amount against the mortgagor who did not file application for leave to defend nor did he appear and suit was decreed ex parte
Execution petition was filed and mortgaged property was ordered to be attached
Petitioner filed objection petition for protection of his possession being tenant of mortgaged property which was dismissed by the executing court
Validity
Section 15 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, applied to cases where notices were issued by the financial institution to the mortgagor demanding payment of the outstanding mortgage money and such notices could be issued even without approaching the Banking Court
No notices were issued by the Bank and suit for recovery was filed before the Banking Court which resulted into passing of the decree
Upon pronouncement of judgment and decree, S.19 of the Ordinance would come into play, which provided the mechanism for execution of the decree and sale of the mortgaged property with or without intervention of the Banking Court
Applicability of subsection (3) of S.15 of the Ordinance had been specifically excluded in the sale of mortgaged, pledged or hypothecated property by a financial institution in exercise of its power conferred by S.19(3) of the Ordinance
Burden was on the petitioner to prove the assertion that lease in his favour was bona fide and the question as to whether the lease was bona fide or not, could be proved only through evidence and not otherwise
Question as to the presumption of the lease to be not bona fide, was to be left at the discretion of the Banking Court, and such question was to be decided and such discretion was to be exercised by the Banking Court according to the facts and circumstances of each case
Lease was created in favour of the petitioner during the subsistence of the mortgage in favour of Bank
Consent of Bank/mortgagee was also not obtained by the mortgagor
Lease was created for a term of five (5) years through an unregistered document, the purpose of not getting the lease registered was obvious
Had the lease been submitted for registration, the Sub-Registrar would have immediately refused to register the same in view of the mortgage already registered with him
Mala fides on the part of mortgagor and collusion on the part of petitioner were apparent
Facts about creation of the lease in favour of the petitioner after creation of the mortgage, petitioner having failed in establishing that Rs. 1,060,000.00 was paid by him towards the rent, and the collusion on his part, were noticed by the Banking Court
Lease was not bona fide and petitioner was not entitled to the protection under the proviso of S.15(6) of the Ordinance
Mortgagor did not file any appeal against the decree passed by the Banking Court for the sale of the mortgaged property and said decree had attained finality
Duty of the Banking Court was to execute the decree in accordance with law
No infirmity or illegality in the impugned order passed by the Banking Court was found
Constitutional petition was dismissed.
"Sale of mortgaged property", Pakistan Law Portal, available at: https://paklawportal.com/words-terms-maxims/124939921
Precedents & Case Laws citing "Sale of mortgaged property"
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