Legal Case Summary

Case Details
Case ID d755b924-d433-48a4-b082-e09fb457d78a
Body View case body.
Case Number C.A. No. 73-P of 2010
Decision Date Jan 13, 2016
Hearing Date Dec 18, 2015
Decision The Supreme Court of Pakistan allowed the appeal, setting aside the judgment of the Peshawar High Court. It ruled that the sale proceeds from the auction of the mortgaged assets must first be applied to satisfy the decree held by the Industrial Development Bank of Pakistan (IDBP), the first charge holder. The Court emphasized that the second charge, held by United Bank Limited (UBL), would only be enforceable after the first charge was fully satisfied. The ruling clarified that where multiple mortgages exist on the same asset, the priority of claims must be respected unless otherwise agreed upon by the parties. This decision reinforced the legal principle that a first charge must be settled before any subsequent claims can be executed.
Summary The case revolves around the legal complexities of mortgage rights and the distribution of sale proceeds from mortgaged assets. The Supreme Court of Pakistan addressed the conflict between the Industrial Development Bank of Pakistan (IDBP) and United Bank Limited (UBL) regarding the distribution of funds from an auction of assets that were subject to multiple mortgages. The Court highlighted that while both banks had valid decrees against the debtor, the principle of 'first in time, first in right' applies. The ruling underscored the importance of satisfying the first charge before any distribution of proceeds could be made to subsequent charge holders. This case is significant for financial institutions, creditors, and legal practitioners as it clarifies the enforcement of mortgage rights and the hierarchy of claims in bankruptcy and financial recovery scenarios. The decision serves as a critical reference point for similar cases in the future, emphasizing the necessity for clear agreements and adherence to legal principles governing secured transactions.
Court Supreme Court of Pakistan
Entities Involved UNITED BANK LIMITED, INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN, M/s. Shah Industries (Pvt.) Limited
Judges AMIR HANI MUSLIM, JUSTICE, IQBAL HAMEED-UR-REHMAN, JUSTICE
Lawyers Abdul Rauf Rohaila, Advocate Supreme Court for Appellant, Muhammad Ajmal Khan, Advocate-on-Record/Advocate Supreme Court for Respondent No. 1
Petitioners INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN
Respondents UNITED BANK LIMITED, Respondent No. 2
Citations 2018 SLD 82, 2018 SCMR 24
Other Citations The State v. Rajah Ram Varu AIR 1966 Andhra Pradesh 233, Union Leasing Ltd. v. Pakistan Industrial Credit and Investment Corpn. Ltd. 2005 CLD 958, Industrial Development Bank of Pakistan v. Muhammad Ayub Stone Crushers 2009 SCMR 611
Laws Involved Financial Institutions (Recovery of Finances) Ordinance (XLVI of 2001), Civil Procedure Code (V of 1908)
Sections 15, 19, 73, O.XXXIV,R.13