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Fraud vitiates all Transactions and no Plea of Finality or Past Closed Transactions could protect a Fraudulent Sale --- Lahore High Court

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Fraud vitiates all Transactions and no Plea of Finality or Past Closed Transactions could protect a Fraudulent Sale --- Lahore High Court

Islamabad 24-09-2024: In a significant judgment, the Lahore High Court has upheld the decision of the Punjab Cooperative Board for Liquidation (PCBL) to annul a 14-year-old land sale involving over 20 Kanals of property in Faisalabad, citing serious irregularities and fraud. The case involved multiple petitions by Niagara Mills (Pvt) Limited and other companies challenging the PCBL’s decision to cancel the sale and void three related sale deeds.

The dispute centered around land formerly owned by the National Industrial Cooperative Finance Corporation (NICFC), which was liquidated, and its assets vested in the PCBL. Following failed public auctions, the PCBL approved the sale of the property through private negotiation in 2004 to Niagara Mills for Rs. 275.1 million. However, irregularities soon emerged, including incomplete payments and the non-transfer of a portion of the land.

In 2018, the PCBL sought to cancel the sale, alleging that the transaction was riddled with fraud and collusion involving the ex-management of the cooperative board. This prompted legal action by Niagara Mills, which argued that the transaction was closed and could not be revisited after such a long period.

Mr. Justice Asim Hafeez, presiding over the case, ruled in favor of the PCBL, confirming that the board had the authority to revisit the transaction under Section 11 of the Punjab Undesirable Cooperative Societies Act, 1993. The Court emphasized that fraud vitiates all transactions, and no plea of finality or past closed transactions could protect a fraudulent sale.

The judgment reiterated that the Judicial Officer, acting as a delegate of the PCBL, had quasi-judicial authority to investigate and cancel the sale. The Court found substantial evidence of fraud, including the abandonment of public auction procedures, delayed payments, and favorable treatment towards the highest bidder.

The Court addressed several critical legal issues in its ruling:

The judgment reaffirmed the principle that fraud nullifies even long-concluded transactions and that the PCBL was within its rights to revisit the sale despite the passage of time.

The Court confirmed that the Judicial Officer, acting under the delegated powers of the PCBL, had full authority to annul the sale and cancel the related sale deeds.

The Court rejected the petitioners’ argument that the doctrine of res judicata applied, emphasizing that fraud is an exception to this doctrine and that decisions tainted by fraud can be revisited.

The Court also clarified that the petitioners’ acquittal in a related criminal case in 2018 did not absolve them of responsibility in the civil or quasi-judicial domain, where the standards of proof differ.

The Court dismissed the petitions, endorsing the PCBL’s decision to annul the sale as legally sound and well-supported by evidence of fraud. This ruling marks a significant victory for transparency and fairness in the management of cooperative societies’ assets in Punjab.

Case Laws:

Punjab Cooperative Board of Liquidation Vs. Muhammad Ilyas (PLD 2014 SC 471)
Nawab Syed Raunaq Ali Vs. Chief Settlement Commissioner (PLD 1973 SC 236)

This decision reaffirms the principle that fraudulent transactions can be revisited and voided, no matter how much time has passed, ensuring that public assets are managed with integrity.