Annulment of Fraudulent Sale by PCBL's Judicial Officer

In Niagara Mills (Pvt) Ltd. and others vs. Punjab Cooperative Board for Liquidation (2024 LHC 3953), the Lahore High Court addressed multiple petitions challenging the decision of the Judicial Officer of the Punjab Cooperative Board for Liquidation (PCBL) to annul the sale of land located in Faisalabad. The case primarily involved the cancellation of sale deeds executed in favor of Niagara Mills and other petitioners on the grounds of fraud and irregularities in the sale process.

Background:

The PCBL, acting as the statutory liquidator, sold land through a negotiated sale to Niagara Mills and other petitioners. The petitioners claimed that the sale was finalized through competitive bidding, and sale deeds were executed in their favor. However, the PCBL later sought to annul the sale, alleging that it was fraudulent and that the bidding process lacked transparency. The Judicial Officer of the PCBL annulled the sale in 2021, leading the petitioners to file these cooperative petitions challenging that decision.

Key Issues:

Jurisdiction of the Judicial Officer to Annul the Sale: Whether the Judicial Officer had the authority to annul the sale and cancel the sale deeds executed in favor of the petitioners.

Doctrine of Past and Closed Transactions: Whether the doctrine of finality applies, given that the sale deeds were executed 14 years prior to the PCBL's decision to annul the sale.

Fraud in the Sale Process: Whether the sale was conducted fraudulently and whether the petitioners benefitted from the irregularities.

Court’s Analysis:

Jurisdiction of the Judicial Officer: The Court held that the Judicial Officer, acting as a delegate of the PCBL, had the quasi-judicial authority to annul the sale if the process was found to be fraudulent. The Court rejected the petitioners' argument that only a Civil Court had the authority to cancel the sale deeds, stating that the Judicial Officer's powers under the Punjab Undesirable Cooperative Societies Act, 1993, included the power to review and annul fraudulent sales.

Doctrine of Past and Closed Transactions: The Court ruled that the doctrine of finality did not apply in this case because the transaction remained incomplete. The PCBL had not transferred the full extent of the land, and 6 Kanals and 10 Marlas of the property were still pending transfer. Moreover, the sale process itself was marred by fraudulent and collusive conduct by the ex-management of the PCBL, justifying the annulment.

Fraud in the Sale Process: The Court found that the sale was conducted through a private treaty without a public auction, violating established legal principles for public sales by liquidators. The petitioners had benefitted from a non-competitive process, and the terms of the sale, particularly the delay in payment of the bid price, indicated serious irregularities. The Court emphasized that fraud vitiates all transactions and that the fraudulent nature of the sale justified its annulment.

Court’s Conclusion: The Lahore High Court dismissed the petitions, upholding the decision of the Judicial Officer to annul the sale. The Court confirmed that the petitioners had benefitted from a fraudulent sale process, and the sale deeds executed in their favor were canceled. The PCBL was justified in revisiting the sale, even after 14 years, due to the irregularities and fraud involved in the transaction.

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