P L D 2013 Lahore 448
P L D 2013 Lahore 448
Before Umar Ata Bandial and Muhammad Farrukh Irfan Khan, JJ
SHEHZADA AKHTAR---Appellant
Versus
BANK AL-FLAH LTD. and others---Respondents
F.A.O. No.29 of 2012, decided on 23rd February, 2012.
Civil Procedure Code (V of 1908)---
----S. 12(2)---Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001), Ss. 2(c), 7 & 15---Suit for recovery---Necessary party to suit for recovery---Non-impleadment of owner of mortgaged property---Effect---Suit for recovery was decreed and during execution proceedings, the applicant moved application under S.12(2), C.P.C. for setting aside decree contending inter alia that she was the owner in possession of the mortgaged property and she was never impleaded in the suit and had neither mortgaged the said property nor had obtained any finance facility---Application was dismissed by Trial Court---Validity---Bank, at time of filing of suit, was aware that the applicant was the lawful owner of the mortgaged property and the mortgaged deed in favour of bank was executed on her behalf by her alleged attorney (her husband)---In terms of the definition of "customer" in S.2(c) of the Ordinance, applicant was the mortgagor of the security, and therefore, she fell within the said definition of "customer" and was a necessary party to the suit and her non-impleading as a defendant in the suit was a gross error---Effect of such non-impleadment was that there existed neither any decree against applicant nor could her personal property be sold in execution of a decree to which she was not a party to---Nothing on record showed that it could be inferred that the agent (husband) ever communicated to the principal (applicant) about the mortgage of her property and finance facility was only for the benefit of the husband---High Court observed that the plaintiff bank should have been more cautious about such fact before awarding the finance facility and should at least have impleaded the applicant as party to the suit---High Court set aside order of Trial Court and remanded the case to the said Court with the direction to provide the applicant an opportunity to file application for leave to contest---Appeal was allowed, accordingly.
Pakistan Water and Power Development Authority (WAPDA) through Authorized Signatory v. American Express Bank Limited 2005 CLD 1764; Vesu and another v. Thekkedath Veetil Kannama and others AIR 1926 Mad. 991; Fida Muhammad v. Pir Muhammad Khan and others PLD 1985 SC 341 and Malik Riaz Ahmad and others v. Mian Inayat Ullah and others 1992 SCMR 1488 rel.
Iftikhar Ullah Malik for Appellant.
Muhammad Farooq for Respondent No.1.
ORDER
Through this appeal the appellant calls in question validity of impugned order dated 16-9-2011 passed by the learned Banking Court-I Gujranwala whereby the application of the appellant under section 12(2) of the C.P.C. stands rejected by the said Court.
2. Facts of the case in brief are that the respondent/bank filed a suit against respondents Nos.2 to 4 for recovery of Rs.90,34,081.37/- under the Financial Institutions (Recovery of Finances) Ordinance, 2001). The learned Judge Banking Court-I Gujranwala decreed the said suit vide judgment and decree dated 29-10-2010 in the following terms:-
"Sequel of the above discussion is that the contents of the plaint and the claim of plaintiff bank as set forth in the plaint is getting due support from the documents placed on record by the plaintiff. As per law the presumption of truth and regularity is attached to the documents having been prepared in due course, hence, I pass the decree for the recovery of Rs.72,45,138.37/- in favour of the plaintiff as against the defendant with costs and cost of fund as provided by the provisions of section 3 of F.I.O. 2001."
3. When the execution proceedings pursuant to the decree were initiated, the present appellant filed an application under section 12(2) of C.P.C. before the learned Banking Court challenging the said decree, inter alia, on the grounds that it is a result of fraud and mis-representation; that the appellant is owner in possession of property Unit No.B-11/1011/RH as well as shops measuring 10M situated at Hassan Chowk, Kutchery Road, Gujrat (disputed property) but she was not impleaded as a party in the suit; that the appellant never mortgaged the disputed property against the finance facility; that the impugned judgment and decree is not binding on the appellant ; that the appellant never obtained the finance facility. As such the appellant cannot be held responsible for payment of the claimed finance facility through sale of her property. Consequently, the impugned judgment and decree is not executable to the extent of the appellant's property. In the end it was prayed that the judgment and decree dated 29-10-2010 be set aside and the suit be restored for impleading the appellant as respondent and due opportunity to file an application for leave to defend be granted to the appellant.
4. The respondent/bank contested the said application by filing a written reply stating therein that the husband of the appellant contested the suit whilst the appellant is residing with her husband in the same residence. As such it is not possible that the appellant did not have knowledge of the judgment and decree; that the appellant herself executed General Power of Attorney duly registered by the Sub-Registrar in favour of her husband and she was fully aware that on the basis of said power of attorney her husband had executed the mortgage deed in favour of the respondent/bank; that there was no need to pass a decree against the appellant as the bank has to obtain a decree on the basis of the mortgage deed validly executed in its favour; that the husband of the appellant voluntarily offered the said property as security and therefore the appellant had intentionally and deliberately not disclosed the fact of the execution of her general power of attorney in favour of her husband; that the judgment and decree has attained finality and the appellant has filed the said application to avoid the auction of the disputed property.
5. The learned Judge Banking Court-I Gujranwala vide impugned order dated 16-9-2011 dismissed the application of the appellant under section 12(2) of C.P.C. after hearing the parties. Being aggrieved the appellant has filed the instant appeal.
6. Learned counsel for the appellant submits that the learned Judge Banking Court was in error because the appellant being the owner of the disputed property was a necessary party to the suit but the learned Banking Court overlooked this important aspect of the matter while deciding the matter; that the respondent No.1 obtained the judgment and decree through fraud and misrepresentation; that the learned Banking Court dismissed the application in a summary manner without framing of issues and providing opportunity to produce evidence; that the attorney of a person is competent to do the act in terms of authority given out only for the benefit of and not to cause loss to the principal; that the impugned order is not sustainable in the eyes of the law.
7. Conversely, learned counsel for the respondent/bank submits that the impugned order is well reasoned ; that the application of the appellant was badly barred by time; that the appellant herself executed the general power of attorney in favour of her husband and on the basis of said attorney the mortgage deed was executed in favour of the respondent/bank; that the contention of the appellant that she came to know about the judgment and decree when notices under Order XXI, Rule 66, C.P.C. were affixed on her property is beyond comprehension as the appellant is residing with her husband , who was defendant in the suit and he hotly contested the suit; that the appellant has filed the application in order merely to avoid auction of the property which was mortgaged as security for the finance facility by her husband in the capacity of her attorney.
8. We have heard the arguments advanced by the learned counsel for the parties and gone through the record.
9. The case in hand poses a very unique question. Admittedly, at the time of filing the suit, the plaintiff-bank was fully aware of the fact that Mst. Shehzada Akhtar was the lawful owner of the mortgaged property and that the mortgage deed in favour of the bank was executed on her behalf by her alleged attorney. Section 2(c) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 provides definition of "customer" which is reproduced as follows:--
"customer" means a person to whom finance has been extended by a financial institution and includes a person on whose behalf a guarantee or letter of credit has been issued by a financial institution; as well as surety or an indemnifier."
In view of the above, the appellant who is claimed to be the mortgagor of security in favour of the respondent/bank squarely falls within the definition of "customer" who is a necessary party to the suit. The non impleadment of the appellant as a party to the suit was, therefore, a gross error. Reliance is placed on Pakistan Water and Power Development Authority (WAPDA) through Authorized Signatory v. American Express Bank Limited 2005 CLD 1764.
10. The effect of non-impleadment of the appellant is that there is neither any decree against her nor could her personal property be sold in execution of a decree to which she is not a party. Reliance is placed on case reported as Vesu and another v. Thekkedath Veetil Kannama and others AIR 1926 Madras 991 wherein it was observed as under:--
"Now it goes without saying that no decree is binding on a party if he was a necessary party to the suit and he was not on record and if the result of the judgment in second appeal had been a decree against necessary parties not on the record undoubtedly the interest of those parties would have been affected without their having had an opportunity of meeting the case against them and in such circumstances the judgment against them would have been void and in certain circumstances when their interest were inseparable from those of other judgment debtors under the decree the decree as a whole would have been void."
11. Furthermore, mortgage deed dated 26-5-2005 was executed in favour of the plaintiff/bank by respondent No.4 being general power of attorney of the appellant allegedly executed in his favour by the appellant on 9-11-1981. No doubt according to said general power of attorney the appellant authorizes the respondent No.4 inter alia to sell or mortgage the property but it does not mean that the respondent No.4 can do so without the knowledge of the principal. In case reported as Fida Muhammad v. Pir Muhammad Khan and others (PLD 1985 SC 341) it has been observed as follows:-
"It is wrong to assume that every 'general' Power of Attorney on account of the said description means and includes the Power to alienate/dispose of property of the principal. In order to achieve that object it must contain a clear separate clause devoted to the said object. The draftsman must pay particular attention to such a clause if intended to be included in the Power of Attorney with a view to avoid any uncertainty or vagueness. Implied authority to alienate property, would not be readily deducable from words spoken or written which do not clearly convey the principal's knowledge, intention and consent about the same. The Courts have to be vigilant particularly when the allegation by the principal is of fraud and or misrepresentation.
The second aspect which needs caution on question of validity of actions under a Power of Attorney is that notwithstanding an authority to alienate principal's property, the Attorney is not absolved from his two essential obligations amongst other:
Firstly in cases of difficulty (and it will be a case of difficulty if the Power of Attorney is susceptible to doubt about its interpretation) to use all reasonable diligence in communicating with the principal and seeking to obtain his instructions, and
Secondly, if the agent deals on his own account with the property under agency e.g. if he purchases it himself or for his own benefit, he in his own interest should obtain the consent of the principal in that behalf after acquainting him with all material circumstances on the subject, failing which the principal is at liberty to repudiate the transaction. The following two examples given under section 215 of the Contract Act are illustrative of the intention of the law:-
(a) A directs B to sell A's estate. B buys the estate for himself in the name of C. A, on discovering that B has sought the estate for himself, may repudiate the sale, if he can show that B has dishonestly concealed any material facts, or that the sale has been disadvantageous to him.
(b) A directs B to sell A's estate. B, on looking over the estate before selling it, finds a mine on the estate which is unknown to A. B informs A that he wishes to buy the estate for himself, but conceals the discovery of the mine. A allows B to buy, in ignorance of the existence of the mine. A, on discovering that B knew of the mine at the time he bought the estate, may either repudiate or adopt the sale at his option".
12. In case reported as Malik Riaz Ahmad and others v. Mian Inayat Ullah and others 1992 SCMR 1488 the Hon'ble apex Court has observed that "It is a well settled principle governing the relationship of Principal and agent that if the agent has any interest in the property or has any personal gain in the transaction he must disclose all facts to the principal." It was further laid down in the aforesaid judgment that "Section 214 of the Contract Act provides that it is the duty of an agent, in cases of difficulty, to use all reasonable methods in communicating with his principal and in seeking to obtain his instructions. It, therefore, makes it obligatory on an agent to communicate with his principal and obtain his instructions in cases of difficulty. The determination whether a particular case will be covered by the expression 'cases of difficulty' depends upon the facts and circumstances of each case."
13. In the present case there is nothing on the record from which it could be inferred that the husband agent ever communicated to the appellant-principal about the mortgage of the latter's property as security in lieu of certain finance facilities and whether such finance facility was for the benefit of the appellant or it was only in the interest of the agent. The plaintiff-bank should have been cautious of this fact before awarding the finance facility in lieu of the mortgage and should at least have impleaded the appellant mortgagor as party in the suit, so that she would be able to put across her stance as she is the lawful owner of the mortgage property and has valuable rights qua the property.
14. The learned Judge Banking Court was oblivious of the above said proposition of law. As such he committed material illegality and irregularity while passing the impugned judgment and decree. Resultantly, the instant appeal is allowed and impugned order of the learned Judge Banking Court dated 16-9-2011 is set aside. The appellant was necessary and proper party in the suit being lawful owner of the mortgaged property as such judgment and decree dated 29-10-2010 suffers from illegality and is not binding qua the property of the appellant. Appeal is allowed and impugned judgment and decree is set aside. Matter is, therefore, remanded back to the learned Banking Court with direction to afford the petitioner an opportunity to move application for grant of leave to defend the suit and then to decide the matter afresh on merit. Parties are directed to bear their own costs.
KMZ/S-35/L Appeal allowed.
Before Umar Ata Bandial and Muhammad Farrukh Irfan Khan, JJ
SHEHZADA AKHTAR---Appellant
Versus
BANK AL-FLAH LTD. and others---Respondents
F.A.O. No.29 of 2012, decided on 23rd February, 2012.
Civil Procedure Code (V of 1908)---
----S. 12(2)---Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001), Ss. 2(c), 7 & 15---Suit for recovery---Necessary party to suit for recovery---Non-impleadment of owner of mortgaged property---Effect---Suit for recovery was decreed and during execution proceedings, the applicant moved application under S.12(2), C.P.C. for setting aside decree contending inter alia that she was the owner in possession of the mortgaged property and she was never impleaded in the suit and had neither mortgaged the said property nor had obtained any finance facility---Application was dismissed by Trial Court---Validity---Bank, at time of filing of suit, was aware that the applicant was the lawful owner of the mortgaged property and the mortgaged deed in favour of bank was executed on her behalf by her alleged attorney (her husband)---In terms of the definition of "customer" in S.2(c) of the Ordinance, applicant was the mortgagor of the security, and therefore, she fell within the said definition of "customer" and was a necessary party to the suit and her non-impleading as a defendant in the suit was a gross error---Effect of such non-impleadment was that there existed neither any decree against applicant nor could her personal property be sold in execution of a decree to which she was not a party to---Nothing on record showed that it could be inferred that the agent (husband) ever communicated to the principal (applicant) about the mortgage of her property and finance facility was only for the benefit of the husband---High Court observed that the plaintiff bank should have been more cautious about such fact before awarding the finance facility and should at least have impleaded the applicant as party to the suit---High Court set aside order of Trial Court and remanded the case to the said Court with the direction to provide the applicant an opportunity to file application for leave to contest---Appeal was allowed, accordingly.
Pakistan Water and Power Development Authority (WAPDA) through Authorized Signatory v. American Express Bank Limited 2005 CLD 1764; Vesu and another v. Thekkedath Veetil Kannama and others AIR 1926 Mad. 991; Fida Muhammad v. Pir Muhammad Khan and others PLD 1985 SC 341 and Malik Riaz Ahmad and others v. Mian Inayat Ullah and others 1992 SCMR 1488 rel.
Iftikhar Ullah Malik for Appellant.
Muhammad Farooq for Respondent No.1.
ORDER
Through this appeal the appellant calls in question validity of impugned order dated 16-9-2011 passed by the learned Banking Court-I Gujranwala whereby the application of the appellant under section 12(2) of the C.P.C. stands rejected by the said Court.
2. Facts of the case in brief are that the respondent/bank filed a suit against respondents Nos.2 to 4 for recovery of Rs.90,34,081.37/- under the Financial Institutions (Recovery of Finances) Ordinance, 2001). The learned Judge Banking Court-I Gujranwala decreed the said suit vide judgment and decree dated 29-10-2010 in the following terms:-
"Sequel of the above discussion is that the contents of the plaint and the claim of plaintiff bank as set forth in the plaint is getting due support from the documents placed on record by the plaintiff. As per law the presumption of truth and regularity is attached to the documents having been prepared in due course, hence, I pass the decree for the recovery of Rs.72,45,138.37/- in favour of the plaintiff as against the defendant with costs and cost of fund as provided by the provisions of section 3 of F.I.O. 2001."
3. When the execution proceedings pursuant to the decree were initiated, the present appellant filed an application under section 12(2) of C.P.C. before the learned Banking Court challenging the said decree, inter alia, on the grounds that it is a result of fraud and mis-representation; that the appellant is owner in possession of property Unit No.B-11/1011/RH as well as shops measuring 10M situated at Hassan Chowk, Kutchery Road, Gujrat (disputed property) but she was not impleaded as a party in the suit; that the appellant never mortgaged the disputed property against the finance facility; that the impugned judgment and decree is not binding on the appellant ; that the appellant never obtained the finance facility. As such the appellant cannot be held responsible for payment of the claimed finance facility through sale of her property. Consequently, the impugned judgment and decree is not executable to the extent of the appellant's property. In the end it was prayed that the judgment and decree dated 29-10-2010 be set aside and the suit be restored for impleading the appellant as respondent and due opportunity to file an application for leave to defend be granted to the appellant.
4. The respondent/bank contested the said application by filing a written reply stating therein that the husband of the appellant contested the suit whilst the appellant is residing with her husband in the same residence. As such it is not possible that the appellant did not have knowledge of the judgment and decree; that the appellant herself executed General Power of Attorney duly registered by the Sub-Registrar in favour of her husband and she was fully aware that on the basis of said power of attorney her husband had executed the mortgage deed in favour of the respondent/bank; that there was no need to pass a decree against the appellant as the bank has to obtain a decree on the basis of the mortgage deed validly executed in its favour; that the husband of the appellant voluntarily offered the said property as security and therefore the appellant had intentionally and deliberately not disclosed the fact of the execution of her general power of attorney in favour of her husband; that the judgment and decree has attained finality and the appellant has filed the said application to avoid the auction of the disputed property.
5. The learned Judge Banking Court-I Gujranwala vide impugned order dated 16-9-2011 dismissed the application of the appellant under section 12(2) of C.P.C. after hearing the parties. Being aggrieved the appellant has filed the instant appeal.
6. Learned counsel for the appellant submits that the learned Judge Banking Court was in error because the appellant being the owner of the disputed property was a necessary party to the suit but the learned Banking Court overlooked this important aspect of the matter while deciding the matter; that the respondent No.1 obtained the judgment and decree through fraud and misrepresentation; that the learned Banking Court dismissed the application in a summary manner without framing of issues and providing opportunity to produce evidence; that the attorney of a person is competent to do the act in terms of authority given out only for the benefit of and not to cause loss to the principal; that the impugned order is not sustainable in the eyes of the law.
7. Conversely, learned counsel for the respondent/bank submits that the impugned order is well reasoned ; that the application of the appellant was badly barred by time; that the appellant herself executed the general power of attorney in favour of her husband and on the basis of said attorney the mortgage deed was executed in favour of the respondent/bank; that the contention of the appellant that she came to know about the judgment and decree when notices under Order XXI, Rule 66, C.P.C. were affixed on her property is beyond comprehension as the appellant is residing with her husband , who was defendant in the suit and he hotly contested the suit; that the appellant has filed the application in order merely to avoid auction of the property which was mortgaged as security for the finance facility by her husband in the capacity of her attorney.
8. We have heard the arguments advanced by the learned counsel for the parties and gone through the record.
9. The case in hand poses a very unique question. Admittedly, at the time of filing the suit, the plaintiff-bank was fully aware of the fact that Mst. Shehzada Akhtar was the lawful owner of the mortgaged property and that the mortgage deed in favour of the bank was executed on her behalf by her alleged attorney. Section 2(c) of the Financial Institutions (Recovery of Finances) Ordinance, 2001 provides definition of "customer" which is reproduced as follows:--
"customer" means a person to whom finance has been extended by a financial institution and includes a person on whose behalf a guarantee or letter of credit has been issued by a financial institution; as well as surety or an indemnifier."
In view of the above, the appellant who is claimed to be the mortgagor of security in favour of the respondent/bank squarely falls within the definition of "customer" who is a necessary party to the suit. The non impleadment of the appellant as a party to the suit was, therefore, a gross error. Reliance is placed on Pakistan Water and Power Development Authority (WAPDA) through Authorized Signatory v. American Express Bank Limited 2005 CLD 1764.
10. The effect of non-impleadment of the appellant is that there is neither any decree against her nor could her personal property be sold in execution of a decree to which she is not a party. Reliance is placed on case reported as Vesu and another v. Thekkedath Veetil Kannama and others AIR 1926 Madras 991 wherein it was observed as under:--
"Now it goes without saying that no decree is binding on a party if he was a necessary party to the suit and he was not on record and if the result of the judgment in second appeal had been a decree against necessary parties not on the record undoubtedly the interest of those parties would have been affected without their having had an opportunity of meeting the case against them and in such circumstances the judgment against them would have been void and in certain circumstances when their interest were inseparable from those of other judgment debtors under the decree the decree as a whole would have been void."
11. Furthermore, mortgage deed dated 26-5-2005 was executed in favour of the plaintiff/bank by respondent No.4 being general power of attorney of the appellant allegedly executed in his favour by the appellant on 9-11-1981. No doubt according to said general power of attorney the appellant authorizes the respondent No.4 inter alia to sell or mortgage the property but it does not mean that the respondent No.4 can do so without the knowledge of the principal. In case reported as Fida Muhammad v. Pir Muhammad Khan and others (PLD 1985 SC 341) it has been observed as follows:-
"It is wrong to assume that every 'general' Power of Attorney on account of the said description means and includes the Power to alienate/dispose of property of the principal. In order to achieve that object it must contain a clear separate clause devoted to the said object. The draftsman must pay particular attention to such a clause if intended to be included in the Power of Attorney with a view to avoid any uncertainty or vagueness. Implied authority to alienate property, would not be readily deducable from words spoken or written which do not clearly convey the principal's knowledge, intention and consent about the same. The Courts have to be vigilant particularly when the allegation by the principal is of fraud and or misrepresentation.
The second aspect which needs caution on question of validity of actions under a Power of Attorney is that notwithstanding an authority to alienate principal's property, the Attorney is not absolved from his two essential obligations amongst other:
Firstly in cases of difficulty (and it will be a case of difficulty if the Power of Attorney is susceptible to doubt about its interpretation) to use all reasonable diligence in communicating with the principal and seeking to obtain his instructions, and
Secondly, if the agent deals on his own account with the property under agency e.g. if he purchases it himself or for his own benefit, he in his own interest should obtain the consent of the principal in that behalf after acquainting him with all material circumstances on the subject, failing which the principal is at liberty to repudiate the transaction. The following two examples given under section 215 of the Contract Act are illustrative of the intention of the law:-
(a) A directs B to sell A's estate. B buys the estate for himself in the name of C. A, on discovering that B has sought the estate for himself, may repudiate the sale, if he can show that B has dishonestly concealed any material facts, or that the sale has been disadvantageous to him.
(b) A directs B to sell A's estate. B, on looking over the estate before selling it, finds a mine on the estate which is unknown to A. B informs A that he wishes to buy the estate for himself, but conceals the discovery of the mine. A allows B to buy, in ignorance of the existence of the mine. A, on discovering that B knew of the mine at the time he bought the estate, may either repudiate or adopt the sale at his option".
12. In case reported as Malik Riaz Ahmad and others v. Mian Inayat Ullah and others 1992 SCMR 1488 the Hon'ble apex Court has observed that "It is a well settled principle governing the relationship of Principal and agent that if the agent has any interest in the property or has any personal gain in the transaction he must disclose all facts to the principal." It was further laid down in the aforesaid judgment that "Section 214 of the Contract Act provides that it is the duty of an agent, in cases of difficulty, to use all reasonable methods in communicating with his principal and in seeking to obtain his instructions. It, therefore, makes it obligatory on an agent to communicate with his principal and obtain his instructions in cases of difficulty. The determination whether a particular case will be covered by the expression 'cases of difficulty' depends upon the facts and circumstances of each case."
13. In the present case there is nothing on the record from which it could be inferred that the husband agent ever communicated to the appellant-principal about the mortgage of the latter's property as security in lieu of certain finance facilities and whether such finance facility was for the benefit of the appellant or it was only in the interest of the agent. The plaintiff-bank should have been cautious of this fact before awarding the finance facility in lieu of the mortgage and should at least have impleaded the appellant mortgagor as party in the suit, so that she would be able to put across her stance as she is the lawful owner of the mortgage property and has valuable rights qua the property.
14. The learned Judge Banking Court was oblivious of the above said proposition of law. As such he committed material illegality and irregularity while passing the impugned judgment and decree. Resultantly, the instant appeal is allowed and impugned order of the learned Judge Banking Court dated 16-9-2011 is set aside. The appellant was necessary and proper party in the suit being lawful owner of the mortgaged property as such judgment and decree dated 29-10-2010 suffers from illegality and is not binding qua the property of the appellant. Appeal is allowed and impugned judgment and decree is set aside. Matter is, therefore, remanded back to the learned Banking Court with direction to afford the petitioner an opportunity to move application for grant of leave to defend the suit and then to decide the matter afresh on merit. Parties are directed to bear their own costs.
KMZ/S-35/L Appeal allowed.
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