LAHORE: The Lahore High Court has ruled that decrees passed under the Financial Institutions (Recovery of Finances) Ordinance, 2001 automatically convert into execution proceedings by operation of law, eliminating the need to file a fresh execution petition.
A division bench comprising Justice Jawad Hassan and Justice Abid Hussain Chattha issued the ruling allowing an appealfiledbyMCBBank Limited against Azam Traders and other respondents, setting aside an order of the banking court at Vehari that had refused to restore the bank’s execution proceedings.
The dispute traced back to 2011, when the banking court decreed a recovery suit in the bank’s favour. The bank then initiated execution proceedings, but onMarch 13, 2012 the banking court dismissed the execution petition as ‘not pressed,’ on the understanding that the bank intended to instead proceed directly against the mortgaged property by auction under Section 19(3) of the Ordinance, with liberty to file a fresh execution petition later, if needed.
Later, one of the respondents approached the bank with an offer to clear the decretal amount through post-dated cheques and made partial payments.
When a balance remained unpaid, the bank moved an application to restore the earlier execution proceedings.
However, the banking court dismissed that application, holding that more than six years had passed since the dismissal and that the bank should have filed a fresh execution petition within the limitation period.
The bank challenged the decisionbefore the high court.
Justice Jawad Hassan, the author of the judgment, held that the banking court had misread the scheme of Section 19 of the Ordinance.
He noted that the provision states that upon pronouncement of a judgment and decree, ‘the suit shall automatically stand converted into execution proceedings without the need to file a separate application.
The judge drew a distinction between Section 19(1), which governs the automatic existence of execution proceedings, and Section 19(2), which merely regulates how such decrees are to be executed, including by reference to the Code of Civil Procedure (CPC).
Thejudge held thatthe CPC operates only in a supplementary role and cannot override the automatic-conversion mandate ofSection19(1).
The judge also observed that theappellant/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.
Concluding that the banking court had taken an ‘unduly technical approach,’ the LHC bench allowed the bank’s appeal, set aside the impugned order and directed that the bank’s application for restoration of the execution proceedings be allowed.
The bench said 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.