PANGRIO SUGAR MILLS LTD Versus BANKERS EQUITY LIMITED

KAUSAR SULTANA HUSSAIN, J.--- Through instant Special High Court Appeal, the Appellant/judgment Debtor has assailed the order dated 20.02.2017, passed by the learned Single Judge of this Court in Execution No. 23 of 2008 {Re: Bankers Equity Limited (BEL) and others (D.H) v. M/s. Pangrio Sugar Mills (J.D)) and others}, whereby in response to Reference No. 07 of 2016 submitted by the learned Official Assignee the bid offered by the Respondent No. 6/Auction Purchaser in auction conducted by the Official Assignee was confirmed at Rs.188.00 Millions in addition of Rs.5,00,000/- on account of utility charges for the purchase of assets of the Appellant/J/D (M/s. Pangrio Sugar Mills Limited) (PSML).

2. The Appellant/J.D has fired present appeal with the following prayers:

(i) Allow this appeal and set aside the impugned order;

(ii) Suspend further actions of-the learned Single judge for finalizing the sale proclamation in respect of the attached properties till final disposal of the above numbered appeal;

(iii) Put the assets of PSML for re-auction at its fair market value and direct that the same shall not be sold under the Forced Sale Value under any circumstances;

(iv) Grant cost of the appeal; and

(v) Grant any other order.

3. Briefly the facts of the instant appeal are that the Respondent No. 1/Plaintiff (D.H/BEL) (now in liquidation) had filed a Suit No. B-68 of 2000 before a learned Single bench under its Banking jurisdiction for the recovery of a loan against Appellant/J.D (PSML), which was decreed vide judgment dated 26.01.2006, whereby the entire liability of Appellant/J.D (PSML), outstanding in favor of various creditor, was settled at a Forced Sale Value of Rs.215,770,000/-, wherein the share of D.H/BEL was fixed at Rs.114,099,176/against its claimed amount of Rs.199,336,373/-; that the Appellant/J.D (PSML) could not make regular payments of the amount due under the consent decree, hence the Official Assignee through filing Reference No.362 of 2006 in J.M No 15 of 2000, sought cancellation of the settlement of Appellant/J.D (PSM) with permission to file execution proceedings; that consequently Execution No. 23 of 2008 was filed by the Respondent No.1/D.H, which was allowed, vide order dated 22.11.2011 and the outstanding liability of Respondent No. 1/J.D (PSML) was restored to Rs.199, 336,373/- as Per their original claim; that the Official Assignee after getting the assets of the Appellant/J.D evaluated through M/s. Joseph Lobo with the permission of Executing Court through filing References Nos.01 of 2014 and 02 of 2015, put the said assets to auction through public Notice for 11.06.2015 having Forced Sale Value/reserved price of Rs.325 Millions; that Official Assignee had also sought possession of the subject property along with entire plant, fixtures, fittings, structure and land, however, on 11.06.2015, the Official Assignee refused to accept the bid of Respondent No. 6 OMNI, on the ground of late submission of the bid; that subsequently the executing Court passed an order whereby the Official Assignee was directed to auction the Mill de novo after issuing fresh public notices, which order was complied with by the Official Assignee, who put the assets of the Appellant/J.D again for auction through public notice for 25.10.2016 by mentioning therein Reserve Price of the assets at Rs. 325 Millions; that on 25.10.2016 a bid of Rs.185 Millions was received from Respondent No.6/0MNI in that auction, which offer was subsequently improved to Rs.187.926 Millions by them in order to match the decretal amount in the Banking Suit; that the Official Assignee through filing Reference No.07 of 2016 on 09.11.2016 obtained acceptance of the said bid from the learned single bench, who passed the impugned order dated 20.02.2017, whereby the Reference No.07 of 2016 was accepted, sale was confirmed and auction purchaser (Respondent No.6) was directed to deposit balance sale consideration within 15 days.

4. The learned counsel for the Appellant/J.D Mr. Agha Zafar, Advocate and Jazib Ali Shaikh, Advocate have submitted that the impugned order is liable to be set aside being contrary to law and facts of the case as the learned Single Judge completely ignored the established principle of law that Forced Sale Value (FSV) or Reserve Price (RP) is the rock bottom price below which no bid is to be accepted, otherwise the entire purpose of fixing a FSV/RP will be defeated. In the event of seeking an improved offer from the bidder, the Official Assignee ought to have raised the bar upto the FSV/RP and not merely the decretal amount of BEL. The Learned Single Judge has not appreciated the true import of case law relied upon by him viz. 2016 CLD 480 (Zakaria Ghani v. Muhammad Ikhlaq Memon) as the said case deals with the review of the order of the Hon'ble Supreme Court of Pakistan passed in year, 2005 in which Reserved Price was not mentioned in the sale proclamation and no objection was raised at the lower stages. Even otherwise, whilst dismissing the review petition the Hon'ble Supreme Court still deemed it just and equitable to award to the judgment debtor, a further sum of Rs.12.5 Million over and above the purchase price already deposited by the auction purchaser; that the learned Single Judge erred in law to say that it is not materially important that the bid was substantially low as compared to the Reserved Price or Forced Sale Price, when it is settled law that once Reserved Price or Forced Sale Price is mentioned in the sale proclamation, the sale/bid cannot be confirmed less than such Reserved Price or Forced Sale Price; that the learned Single Judge erred in law in confirming the bid of Respondent No. 6 (OMNI) at a price less than the Reserve Price against the well-established Principles governing confirmation of sale. In every case, it is the duty of the court to satisfy itself that no irregularity has been committed in the conduct of sale; that impugned order has altogether ignored that Respondent No.1/D.H (BEL) is not the only creditor of Appellant/J.D (PSML), and that there are other secured and unsecured creditors and share-holders of the Appellant/J.D being a listed company, who have substantial interests in the asset that are being sold through the impugned auction.

5. On the other hand, the learned counsel for Respondent No. 6/auction purchaser Dr. Fiaz H. Shah, Advocate and representative of Official Assignee have supported the impugned order, which according to learned counsel, does not suffer from any factual error or illegality. It has been further submitted that the Appellant./J.D did not come to this Court with clean hands as the Appellant committed default towards payment of admitted liability, and repeatedly failed to fulfill its legal obligations inspite of commitment and undertaking given before the Court, including Hon'ble Supreme Court. Per learned counsel, the purpose of filing present appeal is just to prolong and obstruct the sale conducted pursuant to The judgment and decree passed by a Court of competent jurisdiction which otherwise has attained finality. According to learned counsel for Respondent No. 6, the Appellant has failed to point out any fraud, illegality or misconduct by the Official Assignee in the auction proceedings, whereas, a flimsy ground of reserved price, which has been dealt with and repelled by the learned Single Judge while placing reliance on the Judgment by the Hon'ble Supreme Court 2011 CLD 486, which is fully attracted to the facts of the instant case.

6. While concluding his arguments, learned counsel for Respondent No.6 submitted that the learned Court has rightly accepted the bid and also confirmed the sale, whereafter, vested right has accrued in favour of the Respondent No.6, which cannot be taken away on flimsy grounds. It has been prayed that the present appeal having no merits is liable to be dismissed.

7. We have heard the learned counsel for the Appellant/J.D, Respondent No.6/auction purchaser and representative of the Official Assignee and also have perused the record and case laws cited at bar, with their assistance. The only point of determination, which needs to be decided in this appeal is 'as to whether the learned Single Judge erred in law in confirming the bid offered by the Respondent No. 6 at a price less than the Reserve Price mentioned in the sale proclamation'.

8. The points raised by the Appellant/J.D against the validity of acceptance and confirmation of the bid offered by the Respondent No. 6 during auction proceedings initiated by the Official Assignee in compliance of order passed by the learned executing Court have been discussed by the learned Single Judge in the impugned order while deciding the Reference No. 7 of 2016 of Official Assignee in detail, wherein, the learned Single Judge has discussed the sequence of events of prolonged auction proceedings, which reveals that consent Judgment and Decree in this matter was passed against the Appellant/J.D in the year 2006, and its execution application was filed on 14.04.2008. On 20.08.2008 the Appellant/J.D was directed by the executing Court to deposit the decretal amount within one month with the Nazir of this Court and in the meanwhile to submit objections, if any. The Appellant/J.D after passing of more than three years, instead of depositing decretal amount, made request through its counsel for granting three more years for payment of the decretal amount in 12 quarterly installments. The Appellant/J.D was not allowed by the learned Single Judge for payment of decretal amount in installments as it was a compromise decree, and without consent of the Decree Holder, delayed payment in installments is not warranted in law. The Executing Court on 22.11.2011 issued directions to the Official Assignee to auction the property belonging to the Appellant/J.D by issuing sale proclamation within 15 days and pay a sum of Rs.187,926,455/- out of sale proceeds to the Respondent No. 1/D.H. The Official Assignee had filed Reference No. 01 of 2014 dated 30.10.2014 before the learned Executing Court for seeking its permission for determining the valuation of the subject property through Joseph Lobo, so that reserve price may be mentioned in the sale proclamation. The said Reference No. 1 of 2014 was allowed, vide order dated 22.11.2011. However, the Appellant/J.D assailed the said order dated 22.11.2011 before Divisional Court through filing HCA No. 10 of 2012 and after dismissal of the High Court Appeal approached to Hon'ble Supreme Court through filing Civil Petition No. 368-K of 2014, to assail the order of learned Divisional Bench, where, while hearing of the petition, the Appellant/J.D shown its willingness through filing a statement dated 22.01.2015 to pay the 50% of decretal amount i.e. Rs. 51,000,000.00 against total out-standing amount of Rs. 102,000,000.00 within one week, and the remaining balance to be paid within three months from the date of such payment of 50%. The Hon'ble Supreme Court, therefore, adjourned the matter for three months and one week as requested, and in the meanwhile, impugned judgment was suspended however, subject to payment of first installment of Rs. 51,000,000/- to the Respondent No.1/D.H. The Appellant/J.D did not deposit 50% of decretal amount i.e. 51,000,000.00 within stipulated period of one week as undertook, resultantly the Official Assignee filed Reference No. 02 of 2015 dated 13.05.2015 for taking over possession of the assets of the Appellant/J.D and for appointment/deployment of Security Guards over there till disposal of the mortgaged property. He also provided copy of valuation report to the Appellant/J.D vide letter dated 05.05.2015 and directed them to attend office of the Official Assignee on 08.05.2015 at 10.30 a.m. for publication of proclamation in the widely circulated Newspapers, but no one from Appellant's side attended or sent any response nor any objection were raised. The Official Assignee filed Reference No.03 of 2015 dated 22.06.2015 before the Executive Court and preyed for obtaining order to re-auction of the Mill through Nazir of this Court on account of considerable lapse of time as no bid was received in pursuance of earlier Sale Proclamation of May, 2015. The Official Assignee then submitted Reference No. 06 of 2016 in respect of release of pay order of earlier auction proceedings of May, 2015, than finally he moved subject Reference No. 07 of 2017 in respect of acceptence of an offer of bidder/Respondent No. 6 in pursuance of Sale Proclamation dated 05.10.20:6. It is pertinent to mention here that the offer by the auction purchaser was enhanced from Rs. 185 Million to 188 Million to cover the decretal amount of Rs.187,926,455 plus Rs.5,00,000/- (Rupees Five Lac) for utility bills. The Appellant/J.D, however, filed objections against auction Price, wherein he has submitted that a notice before issuance of sale proclamation was not issued to the J.D, whereas the precise objection in relation to terms of sale proclamation was only to the extent that the evaluation of the property was not in accordance with law, hence reserved price mentioned therein is incorrect. The learned Single Judge in the impugned order while deciding of above mentioned objections of the Appellant/J.D. has observed that a number of notices were issued by the Official Assignee to the Appellant/J.D, which remain un-replied, whereas, for another objection the learned Single Jude has been pleased to observe that in the sale proclamation of each auction, reserved price and forced sale value of the property in dispute was mentioned. It has been further observed by the earned Single Judge that the Appellant/J.D did not bring their own buyer during all these years since 2006 till the date of impugned order, nor matched with the bid offered by Respondent No.6/auction purchaser, therefore, the Banking Court after having adopted due and proper procedure one keeping in view the fact that subject property could not receive any bid higher than the bid amount offered by Respondent No.6 inspite of repeated auctions, accepted the bid and confirmed the sale in favour of auction purchaser/Respondent No.6 after compliance of legal requirements and all codal formalities. The question of the low bid as compared to the reserved price or forced sale price under the facts and circumstances of instant case, where the J.D miserably failed to make payment of the admitted liability pursuant to compromise judgment and decree nor could bring any bidder of higher amount inspite of repeated auction attempts during all the years, has no substantial and material bearing in the auction proceedings and sale confirmation by the Executing Court. Moreover, the learned Single Judge has also considered the legal position as established by the Hon'ble Supreme Court in reported decision 2011 CLD 486, wherein, while dealing with similar situation relating to auction, it has been held as under:

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.

9. The execution proceedings are initiated by the executing Courts under Section 51 read with Order XXI, C.P.C., which provide the procedure and various stages of execution proceedings. In decrees involving payment of money backed by mortgage, the judgment-debtor has to satisfy his/her liability by payment in Court or to the decree-holder in terms of Order XXI Rule 1, C.P.C. However, if the judgment-debtor fails to satisfy the decree in such manner, the decree-holder may inter cilia apply to the Court for attachment of, the immovable property of the judgment-debtor under Order XXI Rule 54, C.P.C. After adjudicating upon any and all objections raised against such attachment under Order XXI Rule 58, C.P.C., the Court may order the attached property to be sold through public auction under Order XXI Rule 64, C.P.C. Once such an order is made, the Court causes a proclamation of intended sale, containing material details such as description of the property, its reserve price, the terms and conditions of the auction, and its time, date and venue, to be published in terms of Order XXI Rule 66 and Rule 67, C.P.C. This auction-sale can however be stopped or adjourned under Order XXI Rule 69, C.P.C. if, inter alia, the requisite debt and costs are tendered to the officer conducting the sale or to the Court. Similarly, the sale can be postponed as well under Order XXI Rule 83, C.P.C. However, in case no such eventuality arises, the Court Auctioneer conducts the auction in accordance with the terms and conditions mentioned in the proclamation of sale. Upon completion of the auction proceedings, the Court Auctioneer declares the highest bidder to apprise him of his obligation to deposit the sale price in terms of the proclamation of sale and then sends a report to the Court describing various particulars of the proceedings including the detail of participants, the bids offered by them, the information about the highest bidder, and the notification of earnest money as deposited by the latter under Order XXI Rule 84, C.P.C. The Court then applies its judicial mind on the report in order to choose the most appropriate bid, preferably the highest, for the realization of the decree and attendant costs. Once a bid is accepted by the Court as adequate and thereafter the full purchase money is deposited in terms of Order XXI Rule 85, C.P.C., a qualified sale of the auctioned property comes into being which can only be defeated through an application made under Order XXI Rule 89, 90, or 91, C.P.C., however, if no such application is made within the time limit prescribed by law, the Court mandatorily confirms the qualified sale under Order XXI Rule 92, C.P.C., thereby, making it absolute and transferring the title of the auctioned property in the name of the successful bidder/purchaser, unless a delayed application is entertained in the circumstances. Once, the sale is confirmed and made absolute, the Court grants a sale certificate to the successful bidder/purchaser under Order XXI Rule 93, C.P.C. and gives the sale proceeds necessary for the satisfactions of the decree to the decree-holder under Order XXI Rule 64, C.P.C., thereby bringing the execution proceedings to an end. It is in the context of these different stages of execution proceedings that we now proceed to discuss the legal issues involved in this case.

10. Record reflects that the Appellant/J.D challenged the order of learned Single Judge on the ground of confirming the bid of Respondent No.6/auction purchaser at a price less than the Reserved Price and auction proceedings have not been conducted transparently rather it was conducted in a fraudulent and collusive manner. At this point of time, we have gone through the entire record by keeping in view the conduct of the Appellant/J.D in the instant matter from the beginning. In the instant matter, after filing execution application by the Respondent No.1/D.H, the Appellant/J.D. although served with notice and availed ample opportunities neither bothered to file objections to the execution application nor deposited the decretal amount within one month time with the Nazir of this Court in compliance of direction of the executing Court. The Appellant/J.D after availing more than three years once again tried to get more time of three years for depositing decretal amount in terms of 12 quarterly installment which request was turned down by the Court being baseless and in consequence thereof, the Official Assignee was directed to initiate auction proceedings. The Appellant/J.D challenged the order of executing Court in HCA No.10 of 2012 and after dismissal of said H.C.A., challenged that impugned order before the Hon'ble Supreme Court, where the Appellant/J.D shown its willingness to pay 50% of the outstanding decretal amount within one weeks time, but again the Appellant/J.D had deposited/pay nothing in favour of the D.H and after re-auction of the property in question by the executing Court, acceptance of sale proclamation and confirmation of bid raised objection on the auction price which according to the Appellant/J.D is less than the Forced Sale Value or Reserved Price. It is important to note here that the Appellant/J.D who had a warranted legal right to challenge the auction order in relation to the sale of subject property by means of two alternative methods i.e. either to file an application under Order XXI Rule 89, C.P.C. or an application under Order XXI Rule 90 of C.P.C., but the Appellant/J.D did not avail the said provided legal remedy within 30 days' time. Admittedly, the Appellant/J.D failed to deposit the decretal amount in Court plus 5% to the auction purchaser, accordingly, it follows, by necessary implication of law that a vested right accrued in favour of the auction purchaser (Respondent No.6). The conduct of the Appellant/J.D discussed above shows that they only wanted to delay the execution of the subject decree and nothing else.

11. The plea raised by the Appellant/J.D with regard to inadequance of the sale price is neither supported by any independent evaluation or any offer of any prospective buyer during all these years since year 2006, whereas, inspite of repeated attempts none come forward to offer any bid whatsoever for the subject Mill. It may be observed that the Court sale is a forced Sale and, therefore, contain certain elements of risk with a chance of litigation and for this very reason, properties auctioned by the Courts do not usually fetch reasonable price as per market value, which it would otherwise could fetch between two private persons, therefore, in respect of sale by Court auction, there is no straight Jacket formula for determination of sale price.

12. The relevant laws of execution of decree provide maximum opportunities to the mortgagor to redeem the property and discourages any clog against the equity of redemption, but doe5 not provide undue favour to prolonging the execution or auction proceedings on flimsy ground to a chronic defaulter who fails to make payment of admitted liability pursuant to compromise decree inspite of long period of time provided by Court. The auction once conducted successfully then the auctioneer's report must be taken up in Court for orders at the earliest, if not on the next day accepting or rejecting the sale. In instant matter sale has been confirmed after adopting all required legal formalities as provided under Order XXI and relevant Rules of C.P.C. and we do not find any illegality, infirmity, misreading or non-reading of the facts of the case, hence the present Special High Court Appeal is hereby dismissed on merits with no order as to cost.

13. These are the reasons of our short order dated 22.12.2022.

MH/P-3/Sindh Appeal dismissed.