Mcb Bank Ltd vs M/S Azam Traders etc.

Stereo HCJ DA 38

JUDGMENT SHEET

IN THE LAHORE HIGH COURT,

MULTAN B E N C H , M U L T A N

JUDICIAL DEPARTMENT

F.A.O.No.29 of 2019

MCB Bank Limited V/S M/s Azam Traders etc.

JUDGMENT

Date of hearing 07.09.2026 Appellant(s) by Mr. Muhammad Sohail Iqbal Bhatti, Advocate.

Respondent(s) by Mr. Muhammad Riaz Kamlana, Advocate for Respondent No.5.

Respondents No.1 and 2 are ex parte.

JAWAD HASSAN, J. This appeal under Section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001 (the “Ordinance”) emanates from the order dated 23.01.2019 (the “impugned order”) whereby Judge Banking Court, Multan Camp at Vehari (the “Banking Court”) proceeded to dismiss the application for restoration of execution petition.

2.Learned counsel for the Appellant submits that the “Banking Court” fell in serious error in treating the matter as one involving institution of a fresh execution petition. Further submits that the judgment and decree was passed on 22.09.2011 under the provisions of the “Ordinance” which is a special law containing a self-contained mechanism for execution of decrees passed by the “Banking Court”. It is argued that by virtue of Section 19(1) of the “Ordinance”, the suit automatically stands converted into execution proceedings immediately upon pronouncement of the

judgment and decree and therefore, there is no statutory requirement of filing a separate or fresh execution petition.

3.Conversely, learned counsel for the respondents supports the “impugned order” and submits that once the earlier execution petition was dismissed having not pressed on 13.03.2012, the decree-holder was required to seek its restoration within the prescribed period or file a fresh execution petition within the period of limitation. It is contended that the appellant bank remained inactive for more than six years and subsequent execution petition was rightly held to be time-barred.

4.We have heard the learned counsel for the parties and examined the available record.

5.Pertinently, the appellant-Bank instituted a suit for recovery against the Respondents alongwith costs of the suit and costs of funds which was decreed in favour of the appellant-Bank vide judgment and decree dated 22.09.2011. Thereafter, the appellant- Bank initiated execution proceedings for enforcement of the said judgment and decree. However, vide order dated 13.03.2012, the learned “Banking Court” dismissed the execution petition as not pressed, observing that the appellant-Bank/decree-holder intended to proceed against and auction the mortgaged property in terms of Section 19(3) of the “Ordinance” and that the appellant- Bank/decree-holder could file a fresh execution petition for that purpose. Subsequently, Respondent No.2 approached the appellant-Bank/decree-holder with an offer to liquidate the decretal amount in instalments through post-dated cheques. Pursuant thereto, Respondent No.2 made certain payments towards satisfaction of the decretal amount; however, certain decretal amount remained unpaid. Consequently, the appellant- Bank/decree-holder moved an application before the learned “Banking Court” seeking restoration/revival of the execution proceedings which had been dismissed as not pressed and had, in

terms of the order dated 13.03.2012, been kept at liberty to be reinitiated. The said application, however, was dismissed by the learned “Banking Court” vide the “impugned order”, giving rise to the instant appeal.

6.The controversy, in our view, essentially revolves around the legal effect of Section 19 of the “Ordinance” which reads as under:

19.Execution of decree and sale with or without intervention of Banking Court ---

(1)Upon pronouncement of judgment and decree by a Banking Court, the suit shall automatically stand converted into execution proceedings without the need to file a separate application and no fresh notice need be issued to the judgment debtor in this regard. Particulars of the mortgaged, pledged or hypothecated property and other assets of the judgment debtor shall be filed by the decree holder for consideration of the Banking Court and the case will be heard by the Banking Court for execution of its decree on the expiry of 30 days from the date of pronouncement of judgment and decree: Provided that if the record of the suit is summoned at any stage by the High Court for purposes of hearing an appeal under section 22 or otherwise, copies of the decree and other property documents shall be retained by the Banking Court for purposes of continuing the execution proceedings.

(2)The decree of the Banking Court shall be executed in accordance with the provisions of the Code of Civil Procedure, 1908 (Act V of 1908) or any other law for the time being in force or in such manner as the Banking Court may at the request of the decree holder consider appropriate, including recovery as arrears of land revenue.

The expression employed by the legislature in Section 19(1) of the “Ordinance” that the suit “shall automatically stand converted into execution proceedings”, is neither directory nor conditional. The legislature has consciously dispensed with the requirement of filing a separate execution application. Thus, the moment a judgment and decree is pronounced by the “Banking Court”, the proceedings do not come to an end in the ordinary sense so as to leave the decree-holder with a requirement to institute independent execution proceedings. Rather, the proceedings acquire the character of execution proceedings by operation of law. This provision further contemplates that the Banking Court shall proceed with execution of its decree after expiry of the prescribed period. Section 19(2) of the “Ordinance” provides the manner in which the decree may be executed, refers to the provisions of the Code of Civil Procedure, 1908 or any other law for the time being in force. It is also evident that Section 19(2) of the “Ordinance” makes a reference to the Code of Civil Procedure (CPC) in relation to execution. However, this reference is confined to the mode, manner, and procedural mechanics of execution and does not dilute or override the mandate embodied in Section 19(1) of the “Ordinance”. Put differently, the CPC may operate in a supplementary capacity where the “Ordinance” is silent on the modalities of execution but it cannot supplant the statutory command of Section 19(1) of the “Ordinance” or render its imperative language nugatory. A clear distinction thus emerges: Section 19(1) governs the existence of execution proceedings, which arise automatically upon pronouncement of judgment and decree, whereas Section 19(2) regulates the process by which such decrees are carried into effect. The “Banking Court”, with respect, blurred this distinction by treating subsequent steps as if they constituted a fresh execution proceeding requiring a separate reckoning of limitation. Such reasoning also leads to an anomalous

consequence. If the dismissal of an execution application were invariably construed as extinguishing the execution proceedings that spring into existence under Section 19(1) of the “Ordinance”, the statutory directive that the suit automatically transforms into execution proceedings would become contingent upon the pendency of a particular application. This interpretation would allow a procedural order to override a substantive statutory mechanism thereby frustrating the very object of Section 19 of the “Ordinance”. The legislative intent was to ensure continuity and automaticity in execution, not to make it dependent upon the survival of individual applications. The statutory scheme of Section 19 of the “Ordinance” was considered by learned Division Bench of High Court of Sindh in the case of “FAYSAL BANK LIMITED through Authorized Attorneys versus MASOOD ASGHAR and another” (2024 CLD 744) wherein the Court specifically held that upon announcement of judgment and decree, the suit automatically converts into execution proceedings and the “Ordinance” does not provide a mechanism for filing a fresh execution application. Relevant portion reads as under: “Financial Institutions (Recovery of Finances) Ordinance, 2001 (“FIO, 2001”) is a special law and covers all proceedings upto execution. In the previous law that is Act of 1997, it enabled the Court to convert the proceedings into execution application on preferring an application whereas the frame of instant law is different as can be seen in terms of Section 19 of the FIO, 2001. It provides that upon announcement of Judgment and decree the suit shall automatically convert into execution application. Thus no sooner the Judgment and Decree is passed the proceedings stand converted into execution application and the act does not provide a way to file a fresh execution application, as inadvertently did by the appellant. At the most, since an appeal was pending before this Court and the

machinery of execution was not triggered, the application that was inadvertently moved as an execution application could at the most be considered for triggering machinery of the Banking Court where the suit was decreed and converted into execution application.

5.Surprisingly, the Banking Court did not discuss Section 19 of the FIO, 2001, which is described above. Section 24 of the FIO, 2001 thus cannot be conceived to have its application on the execution proceedings as the suit proceedings automatically stands converted into execution leaving no room for limitation. Since the FIO, 2001 does not recognize the scheme of filing fresh execution application, thus we deem it appropriate to allow this appeal and refer the matter to the Banking Court to club the execution application with suit which is deemed to be converted into execution. The appeal is allowed in the above terms”.

7.The Court in the above said judgment went a step further and held that Section 24 of the “Ordinance” could not be conceived to apply to execution proceedings in the manner suggested because the suit itself automatically stands converted into execution proceedings, leaving no occasion for a fresh execution application against which limitation could be computed. It is pertinent to note that the controversy before the Court in above said case arose in a situation where the decree-holder had subsequently instituted a separate execution application after a considerable lapse of time. Despite such delay, the Court declined to treat the subsequent application as a fresh execution proceeding barred by limitation. Rather, while interpreting the scheme of the “Ordinance” the Court held that the “Ordinance” does not envisage or require the filing of a fresh execution application, as the suit itself stands automatically converted into execution proceedings upon pronouncement of the judgment and decree. The principle emerging from the aforesaid judgment is that the decree-

holder's right to have the decree executed cannot be defeated merely because the matter has been presented before the “Banking Court” in the form of a fresh execution application after an earlier procedural order. The Court must examine the matter with reference to the statutory execution proceedings which came into existence automatically under Section 19(1) of the “Ordinance”. In the present case, admittedly, the decree-holder bank obtained a decree from the “Banking Court”. Consequently, by operation of Section 19(1) of the “Ordinance” the suit automatically stood converted into execution proceedings. The subsequent dismissal of the execution petition on 13.03.2012 could not have the legal effect of requiring the appellant/decree-holder to institute an entirely new execution proceeding as though the statutory conversion under Section 19(1) had never taken place. The finding of the “Banking Court” that the decree-holder was required to file a fresh execution petition by 12.03.2018 is, therefore, legally unsustainable. The computation of a six-year period from 13.03.2012 proceeds upon the assumption that a fresh execution petition was legally necessary. This assumption is inconsistent with Section 19(1) of the “Ordinance” and interpretation thereof in the case of “Faysal Bank Limited” supra. Furthermore, the Division Bench of this Court in the case of “MCB BANK LIMITED versus Messrs MUSHTAQ AND COMPANY and 2 others” (2022 CLD 261) has set aside an order whereby the Banking Court had dismissed the Bank's application for revival of execution on limitation grounds. It has further been held that the application seeking revival could not be treated as a fresh execution petition and that the execution machinery under the “Ordinance” was already in operation. The Court observed that the application merely sought to trigger/revive the execution machinery and was not hit by limitation or Section 48 CPC. Moreover, in the case of “The BANK OF PUNJAB versus Messrs

AGRI INTERNATIONAL and others” (2026 CLD 432), the Court held that Section 19 of the “Ordinance” is a complete code offering multiple execution modes and the Banking Court retains the discretion under Section 19(2) of the “Ordinance” to switch modes via a conscious order that recalls prior CPC-based execution directions. The Court further held as under: “The analysis of above provisions of law makes it abundantly clear that the Ordinance has endeavored to provide for multiple options regarding execution of a banking Decree so that the same is satisfied within a reasonable time. Section 19 of the Ordinance is a complete code for execution of a banking Decree and grants certain definite and substantive rights to a financial institution, subject to the conditions prescribed under Section 19 read with relevant and applicable provisions of Section 15 of the Ordinance. Section 19(1) of the Ordinance provides for automatic conversion of suit into execution proceedings without the need to file a separate application and issue fresh notice to the Judgment Debtors. However, it importantly provides that process of execution of a banking Decree shall commence at the Banking Court upon automatic conversion of Decree into execution proceedings where the Decree Holder is obliged to submit particulars of the mortgaged, pledged or hypothecated property and other assets of the Judgment Debtor for consideration of the Banking Court and the case is heard by the Banking Court. Section 19(2) of the Ordinance provides three explicit modes to the Banking Court to execute a banking Decree (a) in accordance with the provisions of the CPC; or (b) in accordance with any other law for the time being in force; or (c) in such manner as the Banking Court may at the request of the Decree Holder consider appropriate, including recovery as arrears of land revenue. Section 19(3) of

the Ordinance confers a special privilege to a financial institution with respect to mortgaged, pledged or hypothecated property which is not available to a financial institution regarding other personal properties of the Judgment Debtor. As such, a financial institution can sell or cause to be sold, the charged properties of the Judgment Debtor subject of Decree either with or without the intervention of the Banking Court either by public auction or by inviting sealed tenders and appropriate the proceeds towards total or partial satisfaction of the Decree”

8.Likewise, in the case of “SAEED ULLAH PARACHA versus HABIB BANK LIMITED etc.” (2014 CLD 582) held that Article 181 of the Limitation Act and Section 48 CPC do not apply to such execution proceedings, as the special procedure contained in Section 19 of the “Ordinance” excludes the general law. The application subsequently filed by the bank merely served to trigger the execution machinery of the Banking Court and could not be treated as a fresh execution petition subject to limitation.

9.We may also observe that the appellant/decree-holder should not be deprived of the fruits of a decree merely on the basis of a procedural technicality where the special statute itself provides that execution is a continuation of the proceedings which automatically came into existence upon pronouncement of the decree. It is necessary to note that the Supreme Court of Pakistan, while dealing with similar question, in the case of “PROVINCE OF PUNJAB through THE DISTRICT COLLECTOR, BHAKKAR versus MUHAMMAD CHIRAGH etc” (PLD 2026 SC 53) has deprecated an approach whereby a litigant was deprived of adjudication of his substantive rights merely because of a procedural deficiency. The Supreme Court of Pakistan has observed that mistakes committed by legal practitioners may occur

inadvertently and that not every procedural lapse warrants a strict or punitive consequence. The fundamental object of judicial proceedings is the administration of justice and courts are required to prefer substantial justice over mere technical compliance, unless the conduct in question is shown to be contumacious, malicious or otherwise disentitling. The Supreme Court has emphasized that Courts should ordinarily exercise procedural discretion in favour of the litigant so that the judicial process does not become a mere technicality-driven exercise. The controversy in hand stands squarely covered by the pronouncement of the Hon’ble Supreme Court of Pakistan, wherein it has been held that: The phrase "off on a technicality" aptly encapsulates the situation before us and underscores its complexity and implications. In our assessment, we believe that the order issued by the District Judge was flawed and ought to have been revised by the High Court. Before delving into the specific reasons for this conclusion, it is important to acknowledge that legal practitioners sometimes make unintentional mistakes when drafting pleadings or filing cases. Such errors, while regrettable, often result in outcomes that can attract sanctions or penalties. However, in the administration of justice, it is crucial to recognise that not all mistakes warrant strict punitive measures. To give life to the principle that wrong must not go unpunished, and that right must not go unenforced, a degree of leniency must be accorded to errors that do not stem from contumacy or intentional misconduct. By adopting a more forgiving approach towards certain minor mistakes, the judiciary can prevent the rigid application of rules from hindering the broader mission of justice delivery. This perspective is vital because the judiciary is respected not because it has the technical ability to legitimise unfairness. Instead, its respect is rooted in its fundamental role as an arbiter of fairness capable of identifying and rectifying injustices. The expectation that the judiciary

must act to eliminate any form of injustice serves as a cornerstone of trust in the legal system. It is this ability to prioritise substantial justice over mere technical compliance that fortifies the integrity and efficacy of our legal processes”.

10.The purpose of execution law is to facilitate enforcement of adjudicated rights and not to provide an artificial means for frustrating a lawful decree, particularly where the legislature has enacted a special and expeditious mechanism for recovery of finances. At the same time, this does not mean that the judgment- debtor is deprived of all lawful objections in execution. The judgment-debtor remains entitled to raise objections which are otherwise available under the “Ordinance”, the CPC or any other applicable law, subject to their maintainability and the statutory scheme. What cannot be permitted, however, is to treat the decree as incapable of execution merely because the appellant/decree- holder did not institute another execution petition within a period computed from the dismissal of an earlier petition, when Section 19(1) itself does not require such fresh institution. We are of the considered view that the “Banking Court” committed an error of law in dismissing the application on the premise that the appellant was required to file a fresh execution petition within six years from 13.03.2012. The “impugned order” fails to give effect to the mandatory language of Section 19(1) of the “Ordinance” and is also contrary to the ratio laid down in “Faysal Bank Limited” supra.

11.For the foregoing reasons, and in view of the principles enunciated in the aforementioned judgments of this Court as well as the authoritative pronouncement of the Hon’ble Supreme Court of Pakistan in “PROVINCE OF PUNJAB through THE DISTRICT COLLECTOR, BHAKKAR versus MUHAMMAD CHIRAGH etc” (PLD 2026 SC 53), the “Banking Court” while declining to

restore the execution petition, appears to have adopted an unduly technical approach without examining the matter in the light of the principles enunciated in aforesaid judgments. In view thereof, appeal is allowed. The “impugned order” passed by the “Banking Court” is set aside. The application filed by the appellant/decree- holder for restoration/revival of the execution proceedings is allowed. The “Banking Court” shall treat the decree as forming part of the execution proceedings contemplated under Section 19(1) of “Ordinance” and shall proceed with execution of the decree in accordance with law.

(ABID HUSSAIN CHATTHA) (JAWAD HASSAN)

JUDGE JUDGE

Approved for Reporting

JUDGE JUDGE

Usman*