FIs (Recovery of Finances) Ordinance: Suit automatically turns into execution proceedings: LHC

LAHORE: The Lahore High Court has held that under the Financial Institutions (Recovery of Finances) Ordinance, a suit automatically turns into execution proceedings without the need to file a new application or send a fresh notice to the judgment debtors.

However, it 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.

The court passed this order in a petition of Bank of Punjab (BoP) which approached the court after the execution of the degree passed by the banking court against M/s Agri International etc. was not complied with even the banking court stipulated that in the event of non-payment of decretal amount from the date of the judgment, the decree shall automatically stand be converted into execution proceedings within 30 days.

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The court allowed the petition and permitted the bank to sell the charged properties through public auction without intervention of the court.

The court also recalled the impugned order to the extent of appointment, fee and expenses of court auctioneers along with ancillary directions to them qua filing of proposed terms and conditions of sale and evaluation of properties through appointed evaluator.

The court observed that the sale of charged properties by the bank through public auction without intervention of the court is likely to complete at a faster time track and would save precious time of the court.

The court said section 19(3) of the ordinance allows the bank to sell charged properties through public auction and there is no impediment to withhold or deny such permission.

The court observed that the ordinance empowered banking court to grant permission to the decree holder at any stage of execution proceedings to exercise the option to sell charged property by way of mortgage, pledge or hypothecation without intervention of the court either by sealed tenders or public auction.

The court said the discretion vested with the banking court to adopt an appropriate mode of execution at the request of the decree holder cannot be curtailed.

The court said that any other interpretation would defeat the express intention of the legislature and would attach redundancy to the scheme of execution enshrined under the ordinance.

However, once a banking court has adopted any permissible mode of execution under provisions of the ordinance, a conscious order is required to annul the proceedings being conducted under any specific mode of execution and resort to another based upon the facts and circumstances of the case, the court added.

The court said, “If the banking court intends to sell a property through public auction under its supervision in accordance with the provisions of the Code of Civil Procedure (CPC), then the procedure listed in the CPC shall be followed.”

Similarly, if the banking court intends to sell a property in accordance with any other law for the time being in force, the procedure envisaged therein shall be followed, the court added.

The court said, the banking court at any stage of execution proceedings can consider the request of the decree holder to execute a banking decree in such manner as it may consider appropriate through conscious application of mind.

This privilege has been subjected to the discretion of the court, to be exercised according to the facts of each case, the court concluded.

Copyright Business Recorder, 2025