KHURRAM NAEEM and 3 others vs NATIONAL BANK OF PAKISTAN and others
This matter arises from execution proceedings initiated by the National Bank of Pakistan against mortgaged properties to satisfy a decretal amount owed by a company. The petitioners, subsequent purchasers of a property from a guarantor who had mortgaged the same without disclosure, challenged the auction of their property while other mortgaged properties belonging to the principal debtor company and its directors remained available. The core legal question was whether the decree-holder could proceed to auction the property purchased by the third-party petitioners before exhausting the properties owned by the principal debtor company and its directors. The Supreme Court held that the decree must first be satisfied by selling the properties owned by the company and its directors situated at Lahore, and only if a liability remains outstanding may the petitioners' property be proceeded against in accordance with law. The key principle laid down is that in execution proceedings involving multiple mortgaged securities, properties belonging to the principal debtor and direct guarantors should primarily be exhausted before reaching assets held by innocent third-party purchasers, subject to the outstanding liability.
- Whether a decree-holder can auction property purchased by a third party before exhausting the primary mortgaged properties of the judgment debtor company and its directors?
- Can a subsequent purchaser of a mortgaged property challenge the order of execution when other securities are available to satisfy the decree?
- What remedy is available to a purchaser who discovers that the purchased property was previously mortgaged by the vendor without disclosure?
ORDER
IFTIKHAR MUHAMMAD CHAUDHRY, J.--- We have heard the learned counsel for the parties. In the instant case principal question involved for consideration is as to whether the decree-holder i,e, respondent No,1 can put to auction the property owned by the petitioners which they have purchased from respondent No,7 who was guarantor on behalf of respondent No,2 Company.
Learned counsel for petitioners stated that respondent No,7 did not disclose to them that the property being sold by him situated in Jheeka Gali was not free from all encumbrances because he had mortgaged the same as guarantor on behalf of the Directors of respondent No,2 but subsequently when respondent No,1 initiated execution proceedings instead of satisfying the decree against the property owned by the Company as well as its Directors situated at Lahore took steps for the disposal of the property of petitioners then for the first time this fact came to their notice that the properties the subject of mortgage deed. On our query learned counsel for petitioners as well as decree-holder pointed out that besides the property owned by the petitioners there are other mortgaged properties situated at Lahore owned by the Company i,e, respondent No,l. Itself as well as its Directors i,e, respondent Nos. 3 to 6 who have also furnished guarantees to the bank on behalf of the Company. Therefore, in such view of the matter we are of the opinion on the analogy of principle laid down by this Court in the case of Ghulam Mustafa Jatoi v. Additional District and Sessions Judge/Returning Officer N.A. 158, Naushero Feroze and others 1994 SCM R 1299 that let first of all the decree be satisfied after selling/disposing of/auctioning the properties of the Directors situated at Lahore which they have mortgaged for satisfying the decree and if thereafter the decree is not satisfied and liability is still outstanding against the company and its Directors i,e, respondents Nos.3 to 6 then the property owned by the petitioners will be auctioned save in accordance with law.
2. Learned counsel contended that respondent No,7 had devised the petitioners because he did not inform them that the property, which he is selling to them, had already been mortgaged at Lahore.
But as far as this respect of the case is concerned no order can be passed in this behalf except making observations that if the petitioner have any grievance they can initiate proceedings against him before the forums/Courts having jurisdiction in the matter and if such action is initiated the authorities seized with the matter shall dispose of the same expeditiously in accordance with law.
3. With above observations the petition is disposed of.