ORDER SHEET
IN THE HIGH COURT OF SINDH AT KARACHI
Execution No.23 of 2008
In Suit No.B-68 of 2000
Bankers Equity Limited & others
Versus
M/s Pangrio Sugar Mills Ltd.
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Date |
Order with signature of Judge |
Date of hearing: 05.12.2016
Mr. Muhammad Ali A.Hakro for decree holders.
Mr. Asim Mansoor Khan for judgment debtor.
Mr. Jam Asif Mehmood a/w Mr.Omer Pirzada for auction purchaser
Mr. Abdul Qayyum Abbasi for applicant/intervener.
Mr. Perwez Chang, Official Assignee.
-.-.-
Muhammad Shafi Siddiqui.- The Official Assignee in his Reference No.7 of 2016 dated 09.11.2016 has prayed for acceptance of offer of Rs.188 Million of M/s Omni Sugar Mills (Pvt.) Limited plus Rs.5 lacs as utility charges for purchase of all assets of M/s Pangrio Sugar Mills Limited. The objections in shape of an affidavit were filed by the judgment debtor through its Chief Finance Officer. In substances the judgment debtor raised following objections:
i) That M/s Joseph Lobo appointed by Official Assignee to conduct valuation of the mill which valued the property at Rs.405 Million and calculated forced sale value at Rs.325 Million is incorrect. The judgment debtor disagreed as it claimed the property to be far in excess. In any event judgment debtor claimed the property could not have been disposed of to a value less than 700 Million and the offer of the auction purchaser is far less than the reserved price of 325 Million.
ii) It is further claimed that the notices to the judgment debtor were not issued for approval of terms of Sale Proclamation and that the approval of the Court was also not taken.
iii) That a solitary bid of the auction purchaser was received which by negotiation was enhanced to Rs.188 Million which too was conditional.
iv) That the liabilities of the judgment debtor are 372 Million. These liabilities are in respect of unsecured creditors and the bid should have been at least to the extent of Rs.372 Million and/or forced sale value.
I have heard the learned counsel for decree holder, judgment debtor and auction purchaser as well as learned Official Assignee insofar as above objections are concerned and perused the record.
The decree in the matter was passed on 26.01.2006 as under:-
“i) That the outstanding liabilities of M/s Pangrio Sugar Mills Ltd. would be settled at the forced sale value of Rs.215,770,000/- on the basis of the decision taken in the 85th meeting held on October 1, 2004 by the State Bank Committee for Resolution of Dispute annexure ‘C’, Bankers Equity’s share in the Forced Sale Value is Rs.114,099,176/- (against total outstanding liability of Rs.199,336,373/- as on 31.12.2004).
ii) That the payment by the company would be made as per the Statement of Prorata Distribution which has been verified/signed by all secured creditors Annexure “D” in the following manner:
a) 10% down payment of settlement amount of Rs.215,770,000/- in which Bankers’ Equity’s share isRs.11,409,918/-.
b) Balance of Rs.194,000,000/- in 12 quarterly installments in three years. Bankers Equity’s share in 12 quarterly installments is Rs.102,689,258/-.
iii) That the company will be eligible for any write off/waiver under State Bank Circular No.29 after payment of entire settlement amount of Rs.215,770,000/- in which Bankers Equity’s share is Rs.114,099,176/- according to the repayment schedule.
iv) In case of any single default in payment of settlement installment, the above arrangements would be cancelled and Bank would be entitled to recover entire outstanding liabilities as per their record/decree issued by the Hon’ble Court.
v) That the settlement of liabilities shall be implemented through a consent decree in recovery suit No.B-68/2000 pending before the Hon’ble High Court of Sindh, Karachi.”
The execution application was filed on 14.04.2008. In August 2008 two weeks’ time was granted to the judgment debtor to file objections to the Execution Application. On 20.08.2008 a week’s time was again requested to file objections to which the judgment debtor was directed to deposit the decretal amount within one month with the Nazir of this Court and in the meanwhile he was directed to file objections, if any. On 01.11.2011 a suggestion of Mr. Asim Mansoor Khan, counsel for judgment debtor, for payment of the outstanding amount in 12 quarterly installments spreading over a period of three years, was declined in view of the decision of the decree holder as they were dissatisfied on giving remissions in the agreed amount payable in terms of the compromise decree. In terms of order dated 22.11.2011 this Court directed the Official Assignee to auction the mill of the judgment debtor by issuing sale proclamation within 15 days and to pay a sum of Rs.187,926,455/- out of the sale proceeds to the decree holders. The Official Assignee moved Reference No.1/2014 praying for appointment of Joseph Lobo for evaluating the assets of the judgment debtor so that the reserve price be mentioned in the sale proclamation. The said Reference was taken on record on 23.12.2014 without any substantive order.
Against the order dated 22.11.2011 High Court Appeal No.10 of 2012 was dismissed on 04.09.2014. Against the said order of learned Division Bench, the judgment debtor filed Civil Petition No.368-K of 2014 wherein a statement was filed by judgment debtor as under:-
“1. That, the petitioners are ready and willing to make a payment of Rs.51,000,000.00 being 50% of the total outstanding of Rs.102,000,000.00 within one week from today.
2. That the balance of Rs.51,000,000.00 shall be paid within three months from the date of the above payment.
3. In the meanwhile the Official Assignee shall not proceed to sell the mortgaged property.”
The Hon’ble Supreme Court on 22.01.2015 passed following order:-
“..We have heard both the learned ASCs. In the facts and circumstances of the case, it is directed that the matter shall come up for hearing after three months and one week from today and the amount of Rs.102,00,000/- as admitted by the petitioner owed from the respondents is paid to the official liquidator/official assignee as proposed. The matter shall be decided by us on the next date of hearing on merits ignoring the question of limitation as propounded before the learned High Court. This has been agreed to by both the learned ASCs’ for the parties.
In the meanwhile, operation of the impugned judgment is suspended subject to payment of first installment of Rs.51,000,000/- by the petitioner to the Official Liquidator.”
Reference No.2/2015 was then filed by the Official Assignee on 13.05.2015 for taking over possession of the assets of M/s Pangrio Sugar Mills Limited and for appointment of security guards till disposal of the mortgaged property. The first trench, as agreed to be deposited in the sum of Rs.51 Million was not complied with. On this the Official Assignee sent letter dated 14.04.2015 to the judgment debtor to be present at site/Mill on 17.04.2015 for evaluation of the property. Reference No.3/2015 dated 24.06.2015 is in respect of re-auction of the mill on account of lapse of time and since no bid was received in pursuance of earlier sale proclamation of May, 2015. Reference No.04/2015 is in respect of receipt of both the vehicles being the property of the judgment debtor.
One offer of the auction purchaser in relation to a sale proclamation of May, 2015 was declined on account of the fact that it was tendered beyond the prescribed time of 1:30 p.m. and in view of such fact permission to re-auction the mill was sought as mentioned in Reference. Reference No.6/2016 is in respect of compliance of order of this Court to the effect of release of pay order in pursuance of earlier auction proceedings of May 2015. Finally the subject Reference No.7/2017 was filed which is in respect of an offer of bidder in pursuance of sale proclamation dated 05.10.2016. The offer by the auction purchaser was enhanced from Rs.185 Million to Rs.188 Million to cover the decretal amount of Rs.187,926,455/-. As against this the judgment debtor has filed objections referred above.
Insofar as the reserved price is concerned that was never observed to be made part and parcel of sale proclamation yet both, the value of mill and forced sale value was mentioned. Initially the bid was invited for sale of the mortgaged properties of the judgment debtor on 11.06.2015 pursuant to which no bids were received. However, at around 1:35 a representative of Omni Sugar Mills came and submitted a bid, which was objected to by the judgment debtor. Subsequently the publication for resale/re-auction was made on 05.10.2016 in respect of the mortgaged property on 25.10.2016. It seems that the judgment debtor’s objections in relation to this sale proclamation are again claim of notice for the preparation of sale proclamation. On 25.10.2016 the bid was received by the Official Assignee in the sum of Rs.185 Million which was subsequently enhanced to Rs.188 Million plus Rs.5 lacs for utility bills.
Along with Reference No.2/2015 the Official Assignee has filed copy of judgment passed in High Court Appeal No.10 of 2012 which was dismissed. The valuation report of Joseph Lobo also accompanied said Reference No.2/2015 which inspection was carried out on 17th and 18th of April, 2015 and the report prepared and filed on 30.04.2015 available as Annexure ‘D’ page 481 to Official Assignee Reference No.2/2015. Reference No.3/2015 was filed on 24.06.2015 along with copies of letters of the Official Assignee sent to decree holders and judgment debtor in relation to the terms of sale. First letter is dated 20.01.2012 while the second and third letter are dated 27.01.2012 and 06.02.2012 respectively available with Reference No.3/2015. Since subject High Court Appeal was disposed of 04.09.2014 wherein till such time the interim order was effective, the Official Assignee again issued reminders on 23.09.2014 regarding terms of the sale of the mortgaged property. This was replied by judgment debtor on 25.09.2014. It is only through this letter that judgment debtor requested for some time to settle the above matter. Another letter of 24.09.2014 was again acknowledged by the judgment debtor on 01.10.2014 which again reminded him of the terms of the sale proclamation.
The Hon’ble Supreme Court suspended the judgment and decree on 22.01.2015 subject to payment of installments as referred above. Learned Official Assignee again reminded the judgment debtor in respect of this trench on 30.01.2015 and again on 14.04.2015. Again a letter was issued for the settlement of the terms of sale proclamation on 05.05.2015 on account of failure of the judgment debtor to deposit the requisite amount. Sale proclamation was then issued on 09.05.2015 in five leading newspapers. Vide letter dated 09.06.2015 objections were raised that their CPLA No.368 of 2014 is pending and that the terms of sale proclamation was not approved by this Court. They also disputed the evaluation report of Joseph Lobo. The judgment debtor raised objections in the letter that there were some material irregularities in issuing sale proclamation and that the genuine price has not been ascertained and that no proper publicity was effected. On account of default for payment of Rs.51 Million, the sale proclamation was issued in five leading newspapers i.e. Jang, Dawn, Business Recorder, Kawish and Nawa-e-Waqt. With reference to these material facts when objections of judgment debtor are considered, they appear to be meaningless.
The judgment debtor only for the sake of objections claimed that a notice before issuance of sale proclamation was not issued to the judgment debtor whereas the precise objection taken in relation to terms of sale proclamation is only to the extent that the evaluation of the property was not in accordance with law and hence reserved price mentioned is incorrect.
In order to succeed in the first objection regarding receipt of notice before issuance of sale proclamation, the counsel has failed to satisfy. A number of notices were issued by Official Assignee which remain un-replied. The counsel for judgment debtor had to establish the rights as to the reserved price and the forced sale value of the property/ mill, despite the fact that it was mentioned in the sale proclamation. On each auction the sale proclamation was issued in the newspapers which are widely circulated, therefore, it is inconceivable that sale was not widely publicized. In the last endeavor i.e. in pursuance of last sale proclamation the bidder came forward whose offer was accepted in the sum of Rs.188 Million.
The Banking Court while executing a decree passed under Financial Institutions (Recovery of Finances) Ordinance, 2001 is entitled to adopt any procedure deemed appropriate by it to effect sale of mortgaged properties in execution of a decree. Judicial sanctity in disposing of the mortgaged property through Court auction is required to be reaffirmed. Such sanctity could only be disturbed if there is a material irregularity which leads to fraud to cause loss to any one which is not the attribution. Mere allegation that the property worth more than it was evaluated is not sufficient. Every judgment debtor, if allowed to plead the value of his property there can hardly be any auction which could be conducted. There was nothing to prevent the judgment debtor during these ten years since decree was passed in 2006 to bring a buyer of its choice who could offer a price as it (judgment debtor) desires. The Court while considering the objections of the judgment debtor has also to weigh and consider the miseries and pain undertaken by the decree holder. It is within the domain and propagative of the banking Court to adopt any of the procedure it deems fit and proper and hence this question is not of any material importance that the bid is substantially low as compared to the reserved price or forced sale price.
In this matter the decree was passed in the year 2006 and it has been almost a decade that the decree holder is running pillar to post to have the fruits of the decree. During this period indulgences were also given to the judgment debtor but he paid no respect. In order to be successful in the objections it is inevitable that not only irregularity but material irregularities have to be established leading to fraud which may eventually end up at a substantial loss as far as the judgment debtor is concerned. The judgment debtor has not cared to move application either in terms of Order XXI Rule 89 or 90 CPC purposely and just objections in the shape of affidavit have been filed. Perhaps either the case is not made out within the parameters of Rule 89 and 90 of Order XXI or the judgment debtor does not want to entangle itself in the recourse of the requirement of such rules.
On the point of inadequate price during auction the Hon’ble Supreme Court in the case of Zakaria Ghani v. Muhammad Ikhlaq Memon reported in 2016 CLD 480 observed as under:-
“25. We are now in a position to revert to the observation made by us earlier as to the circumstances in the present case in which for a period of one and half years repeated attempts were made to obtain offers by means of public auction for the sale of the properties in question without any success. The sale proclamations, as noted earlier, were published in widely circulated newspapers. The first three elicited no response whatsoever and the last one led to only one offer being made. The question arises as to what could be the possible reason for this unhappy state of affairs. Unfortunately the reason is all too clear. There is a general impression in the market, which is not without foundation, that to purchase a property in a court auction is to purchase not property but litigation. In the normal course purchasers are interested in concluding a transaction as soon as possible and thereafter to take over possession of the property and use it for whatever purposes they have in mind. The unfortunate facts in this case reveal that although the process started as far back as the year 2000 and 15 years have elapsed in the meanwhile a definitive resolution of the case has been delayed up till now. This delay provides vindication of the wide spread belief that prudent buyers should refrain from participating in court auctions of property. This leads to two deeply unfortunate consequences. On the one hand the decree holders suffer since the collateral which is being attempted to be sold is eventually sold at a price which may well be far below the market value in a private sale and thus the full decretal amount cannot be recovered. It is not merely they, but even the judgment debtors, who suffer. Obviously it is in their interest to obtain the highest possible price for their property. If, however, the above market perception continues to prevail they also will be deprived of a fair value since very few people will be interested in purchasing their property. This therefore, is a case not merely of one party's legal rights suffering but of both parties suffering. If the valuable lessons contained in the judgment of this Court in the Hudaybia case had been observed and followed by banking courts such a state of affairs could perhaps have been averted. The sanctity of judicial sales needs to be reaffirmed authoritatively and definitively in the public interest as well as in the interest of decree holders and judgment debtors. This can only be done if judicial sales are only set aside if it is clearly established that there has been fraud. A mere irregularity, even if material, should not suffice unless it can be shown that material loss has been caused. It is also important to note that where the irregularity consists of errors by the court, or by court officials such as the Nazir, no party should be made to suffer by reason thereof. The maxim of law that no one should suffer because of an error by a court is well known and has been reiterated again and again. Thus if, for example, the judgment debtor was of the view that the insertion of reserve price would help him in getting a good offer for it he could and should have raised this objection before the executing court at the initial stage. He did not do this either in relation to the first sale proclamation, or the second one, or the third one, or the fourth one. A legal right which inheres in a party should be asserted and ex post facto objections should not be entertained thereafter, especially when the law provides a machinery for raising objections as set out in Order XXI, Rule 89 and Rule 90. In fact if the judgment debtor had asked for setting a reserve price at the initial stage there is no reason to doubt the fact that the court could easily have ordered that. The Bank had given its own valuation but the judgment debtor did not trouble to do so.
26. At this point we can conveniently examine the concept of reserve price. What exactly does it means. This is a well known concept and we can, by way of example, refer to the following definition contained in Business Dictionary.com.
"Reserve price; lowest fixed price at which an item is offered at an auction sale and (1) at which it will be sold if no higher price is bid, or (2) below which the seller is not obligated to accept the winning bid."
The reserve price is often, although not invariably, fixed in sales of property by the owners thereof. Its relevance and importance depends on the circumstances in which the sale is being held. For example, in cases of Government owned property which is being privatized a reserve price is often fixed but is deliberately not disclosed to the public at all. The fixation of the reserve price is intended to be an internal guide to the Government in taking a decision as to whether or not to carry out a sale of the property at the highest price bid. The reason it is not disclosed to the bidders is that this may actually cause a loss to the Government. This would be because bidders would assume that if the Government, on the basis of its internal evaluation of the property, had come to a conclusion as to the actual value of the property, they would be reluctant to offer amounts substantially higher. This then is the reason why fixation of a disclosed reserve price could cause a loss to the owner of the property. We now turn to Court auctions. In the case of property which is being privatized it is within the sole discretion of the owner, namely the Government, to decide whether it wishes to sell or not to sell and at what price. However in the case of Court auctions the judgment debtor has no such right. Indeed if it were left to him he would say that no sale should be carried out, or, he would indicate an exorbitantly high price, so as to ensure that no bid would be received and the property would remain in his possession indefinitely. In auction sales it is the Court which therefore has to decide. The court in taking the decision essentially strikes a balance in terms of which it is fair to both the decree holder and the judgment debtor. It however always bears in mind the fact that, after a decree has been passed, the decree holder has a crystallized legal right to get the property sold if the judgment debtor persists in not paying the decretal amount. A judgment debtor cannot plead that prices are abnormally low at present and if the sale is delayed for some months or years a higher price could be obtained. The court will simply ensure a fair and even playing field and then proceed to sell or dispose of property at the highest price someone is prepared to pay at the prevalent time and in those circumstances. A judgment debtor cannot object to the same because when he fails to discharge his obligation to pay the decretal amount he must suffer the consequences. Insofar as potential bidders are concerned it is obvious that the Nazir's valuation of the property is not likely to be decisive one way or the other. All bidders would unquestionably carry out their independent valuation of the property before making an investment. Thus the reserve price in the normal course has no special significance. However the position would be different in cases of manifest fraud. If, for example, an auctioneer is acting in collusion with someone and proceeds to dispose of the property at a nominal price without making the requisite publicity then most certainly the court would intervene to prevent such a fraud taking place. It is for this very reason that if a judgment debtor is apprehensive of foul play he should make a specific request in advance, or as soon as practicable thereafter, to have a reserve price fixed. The Nazir always issues a notice before issuing a sale proclamation so the judgment debtor has an opportunity to object. It is primarily in his interest to decide whether fixation of a reserve price is in his interest or not. He may for example feel that it is not advisable since lower bids may come as a result thereof. He has to take a decision, one way or the other.”
No doubt the judgment debtor has raised such objections as to the reserved price and the auction price however it could hardly be of any benefit in view of the above observations of the Hon’ble Supreme Court. The judgment debtor has failed to substantiate as to what rights are being infringed, the relaxation and restoration of which could enabled him to assert the rights. Needless to mention that the defendant never objected to the de novo re-auction order on 28.09.2016 and fresh public notice which was ordered to be issued which was for a shorter date hence the urge to claim notice as to the terms of such sale proclamation is also a futile attempt in this regard.
I do not see any substantial objections against the Official Assignee Reference which is hereby accepted. The sale is confirmed and the auction purchaser is directed to deposit balance sale consideration within 15 days.
Dated: Judge