Mcb Bank Ltd. vs Bashir Ahmad etc.

H C J D A 38.

JUDGMENT SHEET

LAHORE HIGH COURT, BAHAWALPUR

BENCH BAHAWALPUR

(JUDICIAL DEPARTMENT)

R.F.A No.77 of 2025

MCB Bank v. Bashir Ahmad,etc.

JUDGMENT

Date of hearing 07.10.2026

Appellant by: Sardar Riaz Kareem, Advocate.

Respondents: Mr. Muhammad Mujahid, Advocate for respondent No.1(iii) & Hafiz Zahid ur Rehman, Advocates for respondent No.6.

Ch. Sultan Mahmood, J.- Through this Regular First Appeal under Section 22 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, the appellant-bank has assailed the judgment and decree dated 17.02.2025 passed by the learned Judge, Banking Court- I, Bahawalpur, whereby its claim was dismissed to the extent of the legal heirs of deceased Bashir Ahmad, while the suit against the remaining defendants was decreed in the sum of Rs.1,728,539.43, along with costs of suit and cost of funds up to 30.06.2009. The claim for future markup and liquidated damages was declined.

2.Brief facts of the case are that the appellant-bank had instituted a recovery suit in respect of finance facilities availed by M/s S.N. Enterprises and its proprietor, Suhail Nazar. Its case was that deceased Bashir Ahmad had created a registered mortgage over Plot No.16-D, Model Town-A, Bahawalpur, through Mortgage Deed No.1343/1 registered on 31.03.2004, as security for the financial facilities. The legal heirs contested the claim, inter alia, on the ground that the subsequent/renewal documents had been executed after the death of Bashir Ahmad and, therefore, could not create or extend any liability against him or his legal heirs. The learned Banking Court accepted the above contention and dismissed the claim against the legal heirs.

R.F.A.No.77 of 2025 (MCB Bank v. Bashir Ahmad)

3.Learned counsel for the appellant contended that the impugned judgment and decree, to the extent of the respondents/legal heirs of deceased Bashir Ahmad, was contrary to the record and law. He submitted that the original mortgage created by Bashir Ahmad during his lifetime continued as security for the outstanding liability notwithstanding the subsequent renewal of the debit balance. It was further contended that the bank was not seeking to fasten any personal liability upon the legal heirs, but only sought enforcement of the subsisting mortgage against the mortgaged property inherited by them. He, therefore, prayed that the impugned judgment and decree, to the extent of the respondents, be set aside/modified and the bank's right to proceed against the mortgaged property be upheld.

4.Arguments heard. Record perused.

5.The record establishes that deceased Bashir Ahmad, during his lifetime, executed Mortgage Deed No.1343/1 dated 31.03.2004, whereby the property, was validly mortgaged in favour of the appellant- bank. The existence and validity of the said mortgage have also been acknowledged. It is further evident that the transaction dated 15.07.2008 was in the nature of renewal of the existing debit balance and that no fresh finance was disbursed thereunder.

6.It is not disputed that Bashir Ahmad had died before execution of the subsequent renewal documents. Consequently, such documents, not having been executed by him or by any duly authorized person on his behalf, could not create or fasten any fresh personal liability upon him or his legal heirs. However, personal liability and liability attached to the mortgaged property are distinct legal concepts. The unenforceability of the subsequent documents against the legal heirs in their personal capacity does not, by itself, operate to discharge or extinguish the mortgage validly created by the deceased during his lifetime.

7.Once a mortgage is validly created and registered, it constitutes a security interest in the specific immovable property for repayment of the secured liability. The subsequent death of the

R.F.A.No.77 of 2025 (MCB Bank v. Bashir Ahmad)

mortgagor, by itself, does not amount to redemption, release or discharge of the mortgage. There is neither any finding nor any material on record showing that the mortgage in question was ever redeemed, released or discharged. The property inherited by the legal heirs, therefore, remains subject to the subsisting mortgage, to the extent and in accordance with the terms of the original security.

8.The above principle is supported by Meezan Bank Ltd. v. Messrs Facus Apparels (Pvt.) Ltd. and 6 others (2015 YLR 241), wherein the Hon’ble Mr. Justice Muhammad Ali Mazhar observed distinction between a guarantor and a mortgagor was recognized and the enforceability of a mortgage created by the deceased against the mortgaged estate was considered. The relevant portion whereof is reproduced hereunder:- “There is a vast difference between a guarantor and a mortgagor. Had the defendant No.3 in his lifetime mortgaged the property against some finance facility availed by him, position could have been different and recovery could have been made through the disposal of his assets by impleading his legal heirs in the suit and the liability of deceased defendant could have been discharged from selling his estate which is not the case in hand. Mere mentioning a word in the guarantee that this interest will have no significance and the legal heirs could not be held responsible unless they agreed to the covenant made in the guarantee by their predecessor-in-interest in their absence. The condition mentioned under section 131 that "in the absence of any contract to the contrary" does not mean to hold responsible the legal heirs of the deceased guarantor as there is no contract with the legal heirs. So the condition mentioned under section 131 of the Contract Act is not applicable. It is not the case of the plaintiff that if legal heirs of defendant No.3 are not impleaded the bank shall suffer irreparable loss or injury as besides one personal guarantee of defendant No.3 there are many other guarantors available. The plaintiff has itself shown that the charge has been created on all the moveable and immovable assets of the defendant No.1 and various letters of hypothecation have been signed on behalf of defendant No.1 and in favour of plaintiff including the personal guarantees of directors.”

The principle is also consistent with the law laid down by the Hon'ble Supreme Court in Industrial Development Bank of Pakistan through Deputy Chief Manager v. Saadi Asmatullah and others (1999 SCMR 2874) and National Bank of Pakistan through Attorney and another v. Paradise Trading Company and others (2015 SCMR 319) regarding the nature and enforceability of a subsisting mortgage as security for the underlying liability.

R.F.A.No.77 of 2025 (MCB Bank v. Bashir Ahmad)

9.The learned Banking Court, therefore, correctly appreciated that the legal heirs could not be saddled with personal liability on the basis of documents executed after the death of Bashir Ahmad. However, it fell in error in treating such finding as sufficient to extinguish or render unenforceable the original mortgage created during his lifetime. The absence of personal liability on the part of the legal heirs does not, by itself, operate to discharge or extinguish the subsisting mortgage created by their predecessor during his lifetime.

10.Consequently, the legal heirs of Bashir Ahmad cannot be held personally liable for the outstanding amount merely on the basis of the subsequent renewal documents. Nevertheless, the mortgaged property inherited by them remains subject to the original and subsisting mortgage and may be proceeded against, to the extent of the security created by the original Mortgage Deed, strictly in accordance with its terms and applicable law.

11.Resultantly, the appellant-bank retains its right to enforce the original and subsisting mortgage against the mortgaged property, strictly to the extent and in accordance with the terms of the original Mortgage Deed and applicable law. The legal heirs of deceased Bashir Ahmad, however, cannot be saddled with any personal liability on the basis of the subsequent renewal documents. The impugned judgment and decree dated 17.02.2025 is, therefore, modified to the aforesaid extent, while preserving the appellant-bank's right to enforce the original mortgage against the mortgaged property. The RFA is accordingly allowed to the above extent and stands disposed of in these terms.

(Tanveer Ahmad Sheikh) (Ch. Sultan Mahmood) Judge Judge

Approved for Reporting

Judge Judge

M.Shahzad/*