M/S Horizone Paper Mills Vs SME Bank & others

Judgment Sheet

IN THE PESHAWAR HIGH COURT, ABBOTTABAD

BENCH

JUDICIAL DEPARTMENT

F.A.B.No. 05-A/2017

JUDGMENT

Date of hearing...................18.09.2025..............................

Appellant (M/S Horizone Paper Mills) By Mr. Javed Qureshi, Advocate.

Respondents (SME Bank & others) Respondents No.1 & 2 By Malik Mehmood Akhtar, Advocate and Respondent No.4 By Mr. Zahid Mehmood Qureshi, Advocate.

AURANGZEB, J.- This appeal has been directed against the order/judgment dated 15.07.2017, passed by the learned Judge Banking Court, Hazara Division Abbottabad, whereby the objection petition filed by the appellant was dismissed.

2.The facts of the case, in brief, are that the appellant filed an objection petition before the learned Judge Banking Court, Hazara Division Abbottabad, wherein he challenged the auction of Plot No.151/1 being lawful lease/possession to the extent of 0.75 acre (06 kanals). It has been requested that the

auction may be restricted to the extent of 02 kanals of Plot No.151 sparing 0.75 Acre (06 kanals) which is the sole property of the objector having no liability of respondents.

This objection petition was contested by the respondents No.1, 2 and 4 by filing their written replies, whereafter the learned trial court after hearing argument of learned counsel for parties dismissed the objection petition filed by the appellant, hence, the instant appeal.

3.We have heard the learned counsel for the parties at great length and scanned the record with their valuable assistance.

4.Learned counsel for the respondents raised an objection regarding the maintainability of the objection petition filed by the appellant. He argued that the said petition was filed by M/s Horizon Paper Mills (Pvt) Limited through an unauthorized representative, namely, Mr. Mudasser Hussain, General Manager. It was contended that although a Board Resolution was passed on 06.10.2016 authorizing Mr. Mudasser Hussain to represent the company before the Banking Court, Abbottabad, in respect of the

disputed Plot No. 152/1, measuring 0.5 acre, yet the Chief Executive Officer had further authorized one Mr. Akhtar Hussain, son of Madad Hussain, to attend the Banking Court proceedings on behalf of the company. Since the objection petition had been filed earlier on 21.06.2016 through Mr. Mudasser Hussain, General Manager, learned counsel argued that the same was without lawful authority and thus not maintainable.

5.In order to examine this contention, it is pertinent to first consider the scope and purpose of procedural law. It is well settled that procedural law neither creates nor extinguishes substantive rights; rather, it prescribes the framework and mechanism for their enforcement. Its primary object is to ensure orderly conduct of proceedings, regulate litigation, and facilitate the courts in administering justice. The Hon’ble Supreme Court of Pakistan, in a catena of judgments, has consistently held that litigants cannot be deprived of their lawful remedies on account of mere technical lapses that do not touch upon the merits of the controversy.

6.Jurisprudence has drawn a

fundamental distinction between a jurisdictional defect and a procedural irregularity. A jurisdictional defect strikes at the very root of the matter, where the forum lacks jurisdiction over the subject matter, person, or cause. Such a defect is incurable and cannot be waived by consent or cured by ratification. Conversely, procedural irregularities relate to matters of form, such as the mode of filing, signing, or production of resolutions. These irregularities neither divest the forum of jurisdiction nor vitiate the proceedings, unless they cause prejudice to the opposing party. This principle finds statutory expression in Section 99 of the Code of Civil Procedure, 1908, which provides:

“99. No decree to be reversed or modified for error or irregularity not affecting merits or jurisdiction. No decree shall be reversed or substantially varied, nor shall any case be remanded, in appeal on account of any error, defect or irregularity in any proceedings not affecting the merits of the case or the jurisdiction of the Court.”

7.The legislative intent embodied in Section 99 CPC is clear and unambiguous. It

directs courts not to reverse, vary, or remand a decree merely on account of technical lapses which do not affect either the merits or jurisdiction. The focus of the adjudication must remain on substantive justice, except where such lapses cause actual prejudice or encroach upon jurisdiction. This principle has repeatedly been reinforced by the Hon’ble Supreme Court in numerous

pronouncements, including in case titled S.D.O/A.M, Hasht Nagri Sub-Division, PESCO, Peshawar and others versus Khawazan Zad (PLD 2023 SC 174), the relevant observations of the same is reproduced below:-

“9. Having examined the scope of the above-cited rules of procedure contained in the C.P.C., we must reiterate the principle, which is by now well settled, that 'the proper place of procedure in any system of administration of justice is to help and not to thwart the grant to the people of their rights ... Any system, which by giving effect to the form and not to the substance defeats substantive rights, is defective to that extent. The courts, thus, always lean in favour of adjudicating the matters on merits rather than stifling the proceedings on procedural formalities. The rules of procedure are meant to facilitate the court proceedings for enforcing the rights of

litigants, not to trap them in procedural technicalities for frustrating their rights. They are the tools to advance the cause of justice and cannot be used to cause the miscarriage of justice. The ultimate object of securing the ends of justice, therefore, outweighs the insistence on strict adherence to such rules. The same is the purpose of the rules of procedure discussed above. Any defect or omission in signing and verifying, or presenting, a pleading (plaint or written statement) or a memorandum of appeal or revision petition does not affect the merits of the case or the jurisdiction of the court and is therefore taken to be such an irregularity which can be cured at any stage of the proceedings. Likewise, any defect in the authority of a person to sign and verify a pleading filed in a suit by or against a corporation, or to institute or defend such a suit by presenting that pleading to the court, or in signing or filing of a memorandum of appeal or revision petition by a corporation, can also be cured at any stage of the proceedings.

10.It is for this reason that section 99, C.P.C. provides inter alia that no decree is to be reversed nor is any case to be remanded in appeal on account of any error, defect or irregularity in any proceedings in the suit that has not affected the merits of the case or the jurisdiction of the court. Similarly, it is not every irregularity in the exercise of its jurisdiction by a lower court that calls for interference in revisional jurisdiction under

section 115(1)(c), C.P.C. but only the material irregularity, and the material irregularity is that which affects the merits of the case or the jurisdiction of the court.

11.In the present case, we have noted that the power of attorney (wakalat nama) filed in the present petition is only for petitioner No. 5, PESCO, and not for other petitioners, i.e., the employees of the PESCO, SDO/AM, XEN/DM, etc. The present case relates to the ownership and possession of the suit property on which petitioner No.5, PESCO has its Complaint Centre. The employees of PESCO have no claim as to any right, title or interest in the suit property. They are, thus, neither necessary nor proper party in the case and have wrongly been impleaded. The misjoinder of parties is, however, such an error that does not affect the merits of the case or the jurisdiction of the court as provided in section 99, C.P.C., and is a procedural error which can be cured by striking out the names of such parties under Rule 10 of Order I, C.P.C. at any stage of the proceedings of the case, including the appellate or revisional stage. We, therefore, strike out the names of petitioners Nos. 1 to 4 not only from the present petition but also in the proceedings throughout (suit, appeal and revision), for correction of the record of the case.

12.As regards the dismissal of the revision petition by the impugned judgment, we find that the High Court has knocked out the petitioner, PESCO, without touching upon

the merits of the case, on a procedural technicality of not filing the resolution of the Board of Directors of PESCO, authorizing any of its officers to file the revision petition and to appoint a pleader for this purpose, and that too without providing any opportunity to present such a resolution. It is pertinent to mention here that the petitioner, PESCO, has submitted in this Court a resolution of its Board of Directors, dated 10.12.2015, whereby the General Manager (Finance)/Finance Director and Addl. DG (Legal)/Director Legal have been authorized to institute and defend cases in courts on behalf of PESCO, and the present petition has been filed by a pleader (AOR) duly appointed by the Director Legal of PESCO. The High Court, if had any doubt about the authority of the pleader to file the revision petition, should have asked him to produce the resolution of the Board of Directors or Articles of Association, to show the authority of the officer appointing him as a pleader for PESCO to file the revision petition, and should have provided a reasonable opportunity for it. The impugned judgment passed without providing such an opportunity is not legally sustainable. The petition is, therefore, converted into an appeal and the same is allowed. The impugned judgment is set aside; the revision petition shall be deemed to be pending before the High Court, which shall be decided by the High Court on merits in accordance with law. The petitioner, PESCO, shall produce a copy of the said

resolution of its Board of Directors before the High Court also, for placing the same on record of the revision petition.”

8.The apex Court has observed that defects in signing or verifying pleadings, or in producing corporate resolutions, are merely procedural irregularities. Such omissions neither touch the merits of the case nor affect the jurisdiction of the forum and, as such, remain curable at any stage of the proceedings, even at appellate or revisional stages. In this regard, reliance is placed on the judgment of apex court rendered in case titled SDO, PESCO Daudzai Sub-Division Ring Road, Peshawar and others versus Wadan Sher (2023 SCMR 236), wherein it was categorically held that:- “Even otherwise, this Court in its pronouncements such as Rahat and Company v. Trading Corporation of Pakistan Statutory Corporation (2020 CLD 872 Supreme Court) has held that even in the absence of a Board Resolution, pleadings can, either expressly or impliedly, be subsequently ratified. The Court can, therefore, come to the conclusion that the Corporation had ratified the act of signing the pleadings by its Officer(s). As such, it is discernable from the said pronouncement of this Court that the absence of a Board Resolution is not an

incurable defect which would ipso facto render a plaint/suit defective. Rather, it is a curable defect and, in certain instances, is not even necessary if subsequently, the plaint/suit is ratified by a person competent and empowered to do so.”

9.The Hon’ble Supreme Court dealt with the objection that corporate pleadings had been filed without a valid Board Resolution.

The august Court held that the absence of such resolution at the time of filing is not fatal, since the defect can subsequently be rectified by the competent authority, thereby curing the defect ab initio. The apex Court reasoned that to dismiss a case on such a ground, without affording opportunity for rectification, would amount to an unduly rigid and unjust application of procedural law, contrary to the spirit of Section 99 CPC.

10.Earlier in case titled Muhammad Anwar Khan Versus Choudhry Riaz Ahmad (PLD 2002 SC 491) relying upon case titled Manager, J & K State Property versus Khuda Yar (1975 SC 678). The august Supreme Court observed that trivial technicalities cannot be allowed to defeat the cause of justice. Unless the defect presents an insurmountable obstacle, courts must permits

its rectification, the requirements of multiple signatures, or production of Board Resolution at the initial stage, falls precisely within this category of curable irregularities.

11.Applying the above principles to the present case, the Board Resolution dated 06.10.2016, when produced, served to validate the objection petition filed earlier on 21.06.2016 by way of subsequent ratification.

The respondents’ technical objection regarding “lack of specific authorization at the moment of filing” is, therefore, without merit and cannot be allowed to defeat adjudication on the merits of the controversy.

12.The learned trial Court, however, proceeded to dismiss the objection petition on the ground that it had been filed on behalf of M/S Horizon Paper Mills (Pvt) Limited through Mr. Mudasser Hussain, who is admittedly neither the Chief Executive, nor a Director, nor a Shareholder of the Company, but merely an employee. On this basis, the trial Court concluded that the petition was not maintainable. Such reasoning is legally flawed. The maintainability of an objection petition cannot be determined solely with

reference to the designation of the signatory, but rather on the question whether the Company, as a juristic person, intended to contest the proceedings and whether the representative acted under its authority. It is a settled principle that a private limited company, being an artificial legal entity, acts only through its officers and agents. An employee duly authorized by the Board of Directors, or under a resolution passed in accordance with the company’s articles of association, may competently represent the company before judicial or quasi-judicial forums. The absence of a Director’s signature does not, by itself, render proceedings incompetent if subsequent ratification confirms the authority. Moreover, the present proceedings are not inter se among Directors, nor are they in the nature of an internal corporate dispute; rather, they are proceedings between the company and private individuals (the respondents), wherein the company asserts its independent legal rights. In such circumstances, the Court ought to have considered whether the company itself stood behind the petition, instead of

restricting its focus to the personal designation of the representative.

13.Once the company, through its Board, ratifies or authorizes the act of its employee, the objection petition becomes perfectly maintainable. Dismissal of the same merely on the ground that the signatory was “not a Director or Shareholder” amounts to a hyper- technical approach, contrary to the mandate of Section 99 CPC. The finding of the learned trial Court, therefore, suffers from misapplication of law and cannot be sustained.

14.The available record reveals that on 09.05.2014, Plot No.151/1, measuring 0.75 acre situated in Phase-V, Industrial Estate, Hattar, was duly allotted to the appellant, and on 14.05.2014, physical possession thereof was formally delivered to him by the competent authority. It further appears that respondents No.1 and 2 instituted a civil suit for recovery of loan against respondent No.5, which ultimately culminated in a decree for recovery in their favour. During the pendency of the said proceedings, as well as up to the stage of execution culminating in the auction

proceedings of Plot No.151, the appellant had absolutely no knowledge or notice of the suit or its subsequent proceedings. It is, therefore, manifest that the appellant, being a bona fide purchaser for value without notice, cannot be saddled with the liabilities of respondent No.5, nor can his independent rights in the leased property be prejudiced on account of the decree passed against another party.

15.The record further shows that respondent No.3 issued a notice and proclamation of auction in respect of Plot No.151, measuring 08 kanals, together with all appurtenances, machinery and appliances installed thereon. However, such proclamation was factually and legally misconceived inasmuch as the original Plot No.151 had already been bifurcated by respondent No.4 (the competent authority) into two separate parcels, one comprising 02 kanals, which continued to remain in the ownership and possession of respondent No.5, and the other comprising 06 kanals (0.75 acre), i.e., Plot No.151/1, which stood lawfully leased out to the appellant. The competent authority, while effecting such

bifurcation, could only transfer that portion of land which was free from any encumbrance, and once such lease had been perfected and possession delivered, no subsequent liability or burden arising from the debts of respondent No.5 could be imposed upon the appellant.

16.It is significant to observe that the appellant was not impleaded as a party in the civil suit, nor was he afforded an opportunity of hearing at any stage. Yet, the execution court’s order, by directing auction of the entire plot No.151 (including Plot No.151/1 already leased to the appellant), adversely affected his vested rights and lawful possession. Such proceedings, to the extent of the appellant’s portion, are not only contrary to record but also offend the fundamental principles of natural justice. A bona fide lessee, who has acquired title from the competent authority, cannot be deprived of his rights merely because another co-portion of the original property was encumbered in the liabilities of a third party.

17.The appellant, therefore, asserts that while he has no objection to auction

proceedings being conducted in respect of the remaining two kanals forming part of Plot No.151, which indisputably belong to respondent No.5 and may be made available towards satisfaction of the decree, yet the 06 kanals (0.75 acre) comprising Plot No.151/1 cannot be lawfully subjected to such auction.

That portion is the exclusive property of the appellant, and it bears no connection whatsoever with the loan, default, or liabilities of respondent No.5. To hold otherwise would amount to unjust enrichment of the decree- holders at the expense of an innocent third party and would be tantamount to depriving the appellant of his lawful possession, together with the appurtenances, machinery, and fixtures lying on the leased plot.

18.Furthermore, the maintainability of the execution proceedings against a person who was neither a judgment-debtor nor impleaded as a party in the original suit. For ready reference Under Order 21 Rules 90 to 94 of the Civil Procedure Code, 1908 is reproduced below:-

“90. Application to set aside on ground of irregularity or fraud:- Where any immoveable property has been sold in execution of a

decree, the decree-holder, or any person entitled to share in a rateable distribution of assets, or whose interests are affected by the sale, may apply to the Court to set aside the sale on the ground of a material irregularity or fraud in publishing or conducting it:

Provided that no sale shall be set aside on the ground of irregularity or fraud unless upon the facts proved the court is satisfied that the applicant has sustained substantial injury by reasons of such irregularity or fraud:

[Provided further that no such application shall be entertained unless the applicant deposits such amount not exceeding twenty per cent of the sum realized at the sale, or furnishes such security, as the court may direct.]

91.Application by purchaser to set aside sale on ground of judgmentdebtor having no saleable interest.– The purchaser at any such sale in execution of a decree may apply to the Court to set aside the sale, on the ground that the judgment-debtor had no saleable interest in the property sold.

92.Sale when to become absolute or be set aside.– (1) Where no application is made under rule 89, rule 90 or rule 91, or where such application is made and disallowed, the Court shall make an order confirming the sale, and thereupon the sale shall become absolute.

(2)Where such application is made and allowed, and where, in the case of an application under rule 89, the deposit required by that rule is made within thirty days from the date of sale, the Court shall make an order setting aside the sale:

Provided that no order shall be made unless notice of the application has been given to all persons affected thereby.

(3)No suit to set aside an order made under this rule shall be brought by any person against whom such order is made.

93.Return of purchase-money in certain cases.– Where a sale of immoveable property is set aside under rule 92, the purchaser shall be entitled to an order for repayment of his purchase- money, with or without interest as the Court may direct, against any person to whom it has been paid.

94.Certificate to purchaser.– Where a sale of immoveable property has become absolute, the Court shall grant a certificate specifying the property sold and the name of the person who at the time of sale is declared to be the purchaser. Such certificate shall bear date the day on which the sale became absolute.

19.According to the above provision, the execution of a decree by sale of immoveable property is strict procedural safeguards.

These safeguards are not mere formalities.

They are substantive protection against arbitrary deprivation of property. Under Order XXI Rule 66 CPC mandates that prior to the auction, the court must issue a sale proclamation detailing the property, value, any encumbrances, and issue notice to all persons having an interest in the property.

The proclamation must be settled after hearing both the decree holder and the judgment debtor, and any other party claiming interest. In this case, no such notice was issued to the appellant. There was also no finding nor verification that the judgment debtor had any interest in the subject property. The failure to comply with Rule 66 is not curable post sale. It constitutes a material irregularity that vitiates the entire sale process.

20.Provision of Order XXI Rule 89 CPC allows a judgment debtor or an interested person to have the sale set aside by depositing the sale price plus 5 % of the purchase money as compensation within 30 days of sale. However, this presupposes knowledge of the sale. The appellant, having received no notice or proclamation, the appellant, however, depositing the above mentioned sale price before the executing court.

21.Order XXI Rule 90 CPC is the cornerstone of this case, it enables any person whose interest is effected by the sale to move an application to set aside the

auction on the grounds of material irregularity or fraud in publishing or conducting the sale.

Provided substantial injury has occurred. The appellant’s property was sold without notice;

without establishing the judgment debtor’s ownership; without verifying saleable interest;

and without hearing the real owner.

22.These irregularities are not technical lapses but grave procedural violation amounting to fraud on the court, the Honourable Supreme Court of Pakistan in PLD 2020 SC 227, PLD 2021 SC 581 and 2013 SCMR 1419 has unequivocally held that execution proceedings conducted without notice to a third party are voidable, and even a confirmed sale can be satisfied where the court proceeded without jurisdiction or without complying with mandatory provisions.

23.Order XXI Rule 91 CPC protect auction purchasers when it turns out post sale that the judgment debtor had no saleable interest. However, this does not protect the sale itself, it merely entitles such as refund or damage from the decree holder who misrepresented facts. The sale remains null and void as against the true owner.

24.Order XXI Rule 92 CPC states that a sale must not be confirmed if there is an application pending under Rule 90 CPC in the present case, no such application was filed prior to confirmation only because the appellant was never notified or aware of the proceedings this procedural failure renders the confirmation itself contrary of law.

25.Once a sale is set aside and Order XXI Rule 93 CPC mandates refund to the auction purchaser. Order XXI Rule 94 CPC clarifies that title only passes upon confirmation and issuance of sale. Where confirmation is invalid due to jurisdictional error or procedural fraud, no title every validly passes to the purchaser. The wrongful sale of the appellant’s property without notice, without trial, and without lawful authority constitutes a violation of Article 10-A (Right to Fair Trial) and Article 24 (Right to Property) of the Constitution of the Islamic Republic of Pakistan, 1973. A person cannot be deprived of property except in accordance with law and after due process. The conduct of the executing court falls for short of this constitutional minimum.

26.According to Order XXI Rule 90 of the Code of Civil Procedure, 1908, any person whose interests are affected by the execution sale is legally entitled to file objections challenging the validity of such sale. In the present case, the appellant rightly invoked this provision by filing an objection petition before the learned Judge, Banking Court, Hazara Division Abbottabad, primarily on the ground that he was neither a party to the original suit filed by respondents No.1 & 2 nor to the execution or auction proceedings initiated in pursuance of the decree.

Furthermore, the plot in question had already been allotted to the appellant, and thus, he had a vested interest and legal entitlement in the said property. Despite the existence of these substantial legal and factual grounds, the learned trial court failed to take into account the crucial aspect that the appellant’s rights were being adversely affected without due notice or hearing. The court, without properly appreciating the legal implications of the appellant’s non-involvement in the original proceedings, erroneously dismissed the objection petition. This dismissal reflects a

miscarriage of justice and a deviation from the settled principles of law regarding fair hearing and protection of property rights.

27.In view of the discussion made hereinabove and for the reasons stated, the instant appeal is hereby accepted.

Consequently, the auction proceedings conducted by the learned Executing Court in respect of Plot No.151/1, Phase V, Industrial Estate, Hattar to the extent of sparing 0.75 acre (06 kanals), which had already been allotted to the appellant, are set aside being illegal and without lawful authority. However, in order to safeguard the interests of the respondents bank, fully entitled under the law to initiate execution proceedings against respondents No.5, as the decree has been lawfully obtained by them for the satisfaction of their lawful claim. The execution of the decree is a legal right vested in the decree- holder, and it is incumbent upon the judgment-debtor, i.e., respondents No.5, to comply with the terms of the decree.

Therefore, respondents bank may proceed with the execution against the respondent No.5/judgment debtor to ensure enforcement

and realization of the relief granted in their favour by the competent court.

Announced

18.09.2025 JUDGE

JUDGE

Aftab PS*/ Hon’ble Mr. Justice Syed Mudassir Ameer Hon’ble Mr. Justice Aurangzeb