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Civil Petition for Leave to Appeal No. 553‑K of 1985, decided on 19th December, 1985.

(On appeal from the judgment of the Sind High Court, dated 21‑10‑1985, in 1st Appeal No. 65/81).

Constitution of Pakistan (1973)‑‑

‑‑‑Art

185(3)‑‑Civil Procedure Code (V of 1908), O. XXXVII, R.3‑ Banking Companies (Recovery of Loans) Ordinance (XIX of 1979), Ss‑3, 7 & 12‑‑Suit for recovery of loan by sale of mortgaged property‑ Petitioner's application for leave to defend suit refused‑‑Dispute about adequacy of value of mortgaged security‑‑Case remanded to High Court for decision afresh in accordance with specific directions‑‑High Court passed orders without giving its finding as directed in remand order without making reference to any evidence and without properly considering documentary evidence 'produced before it‑‑Leave to appeal granted to examine contentions raised by both parties.

A. A. Zari, Advocate Supreme Court with A. Aziz Dastgir, Advocate‑on‑Record for Petitioner.

Naimur Rehman, Advocate Supreme Court with Nizam Ahmad, Advocate‑on‑Record for Respondent.

Date of hearing: 19th December, 1985.

Dubai Bank Limited, the respondent in this case has filed a suit No. 67/81 against the petitioner company and two of its Directors, in the Court of Special Judge et Karachi, under the Banking Companies (Recovery of Loans) Ordinance 1979, inter alia, for the recovery of a sum of Rs.1,09,57,899.30, by the sale of the mortgaged property. The petitioner filed an application for leave to defend the suit under Order XXXVII, Rule 3, C.P.C. read with sections 3 and 7 of the Banking Companies (Recovery of Loans) Ordinance 1979 The learned Special Judge refused to grant leave to the petitioner to defend the suit and accordingly decreed the suit for the respondent as prayed, vide judgment, dated 12th November, 1981. In consequence of this judgment a preliminary decree was prepared under Order XXXIV, Rule 4, C.P.C for the sale of the mortgaged property.

2. Being aggrieved by the aforesaid order refusing leaver to defend and judgment passed by the learned Special Judge, the petitioner filed an appeal in the High Court of Sind at Karachi, under section 12 of the Banking Companies (Recovery of Loans) Ordinance, 1979 (first appeal No. 65/81). The first appeal was admitted to regular hearing by a Division Bench of the High Court but by order, dated 15th February, 1982, another Division Bench of the Court rejected the application for interim stay of the execution of the decree passed against the petitioner. This order gave rise to some further proceedings before the High Court but it is not necessary here to describe the details thereof: Suffice it to say that the matter was eventually brought before this Court out of which civil appeals No. K‑67, K‑68 and K‑71/82 arose and were disposed of by a common judgment of this Court, dated 25th January, 1984, whereby the case was remanded to the High Court to be decided afresh in the light of the said judgment in accordance with directions as follows:‑‑

"In consequence the cases are remanded to the High Court to be decided afresh in the light of this judgment, namely that the sufficiency and adequacy of the value of the mortgage security vis‑a‑vis the decretal amount in the two appeals shall be examined and in case of a short fall it will be open to the High Court to order cash deposit to meet the short fall or in its discretion to order security equal in value to the same. In such case on the non‑compliance of the order of the Court the consequences provided in section 12(5) of the Ordinance shall follow and the appeals shall not be admitted to hearing. It is further directed that in case the Court finds the existing mortgage security sufficient in value to the decretal amount in the two cases, the said securities shall be considered as securities for the purposes of the said provision of law, but in case they are found insufficient then to the extent of sufficiency they shall be treated as security for the same purpose along with additional security or deposit as ordered by the Court. Further no fresh security shall be ordered on the stay application. All the appeals are disposed of in these terms."

3. Accordingly appeal No. 65/81 along with another appeal No. 65/81 were placed before a Division Bench of the Sind High Court to determine the matter as directed in the remand order. Tire High Court bar its order,

dated 22nd August, 1984, appointed the Naazar of the High Court as a Commissioner to examine whether the security that has been furnished by the petitioner is sufficient to cover the decretal amount together with costs and interests. In pursuance of this direction of the High Court, the Nazar inquired into the matter, and submitted his report giving the valuation of the property in respect of Civil Appeal No. 65/81 as Rs.16 million. The Nazar's report was considered by the High Court and the petitioner was directed to file an affidavit disclosing other liabilities if any, on the property offered as security. The petitioner in compliance of this direction furnished an affidavit stating that there were no other liabilities in respect of the said property. The respondent in First Appeal No. 65/81, however, disputed the valuation of the security as given by the Nazar of the High Court and contended that Municipal Corporation is the authority who is empowered to give no objection certificate for conversion of residential plot for the purpose of commercialisation. The objection seems to be that the Naazar's evaluation of the market price of the plot which was the subject‑matter of the security, proceeded upon the basis that the said plot of land was a commercial property, whereas the respondents assertion was that it being a residential plot, its conversion to commercial purpose, required the consent of the Municipal Corporation. On the other hand, the position taken by the petitioner was that by virtue of the Sind Building Control Ordinance, 1979, the relevant authority for this purpose was the Karachi Development Authority and not the Karachi Municipal Corporation. Petitioner produced the necessary documents showing that the Karachi Building Control Authority had is6ued the necessary sanction order to commercialise the plot and directed the petitioner to deposit a sum of Rs.71,860 initially, which was duly paid by the petitioner and thereafter the petitioner paid a further sum of RN.10,79,900.00 as commercial charges to be paid to the Karachi Municipal Corporation through the Karachi Development Authority.

4. The learned Judges of the Division Bench who finally disposed of the objection of the respondent rejected the evaluation of the Nazar of the High Court and gave a finding that the plot in question was not yet commercialised and on this, basis came to the conclusion that the security already given by the petitioner is insufficient, vide order, dated 15th April, 1984. It is pointed out that after giving a finding that the security was insufficient, learned Judges did not indicate the short fall in the security as directed in the remand order of this Court. This matter was, therefore, put up again before the Court and time was granted to the petitioner to produce the order pursuant to which the amount was deposited as commercialisation charges. On 21st October, 1985, when the case was taken up, the petitioner produced certain documents but the learned Judges, without determining the short fall, passed an order calling upon the petitioner to furnish security in the sum of Rs.1,50,00,000.

5. The petitioner being aggrieved by this order seeks leave to appeal. We have heard Mr. A.A. Zari on behalf of the petitioner and Mr. Naimur Rehman on behalf of the caveator respondent. On perusal of the order passed by the Division Bench on 15th April, 1985, we find that the learned Judges came to the conclusion that the value of the plot at Rs.4,000 per square yard was excessive, without reference to any evidence and without determining the proper valuation, solely on the assumption that the plot was not a commercial plot. Learned counsel for the petitioner submitted that in arriving at this conclusion the learned Judges had not properly considered the evidence and their assumption that the plot was not a commercial one was wholly unjustified in view of the documentary evidence produced before them, to which no reference was made, that the necessary sanction had been given by the competent authority after receiving the huge sum of about Rs.12,00,000. It was further emphatically contended that in any case, no attempt was made by the learned Judges in the subsequent order, dated 21st October, 1985, impugned in this petition to determine the short fall in the value of the security as clearly directed in the remand order of this Court. Learned counsel for the caveator respondent argued that the authority competent to convert the plot from residential to commercial is the Karachi Municipal Corporation, which has not finally passed orders in that behalf.

6. After hearing the learned counsel we feel that their respective contentions mentioned above require examination. Leave is accordingly granted. Security for costs shall be furnished in the sum of Rs.2,500. The appeal shall be prepared on the present record but it will be open to the parties to file additional documents if any. With the request and consent of both parties, it is further directed that the appeal shall be set down for final disposal during the session of this Court in January, 1986.

7. The operation of the impugned order of the Court shall be suspended until the disposal of the appeal.

M. I. Leave granted.

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