14. Perusal of the law relevant for the purpose as contained in Rule 5 of Order 38 of the Code, is felt relevant. Therefore, the said provision is quoted hereinabove:--
"Attachment before Judgment
R. 5. Where defendant may be called upon to furnish security for production of property.-- (1) Where, at any stage of a suit, the Court is satisfied, by affidavit, or otherwise, that the defendant, with intent to obstruct or delay the execution of any decree that may be passed against him,--
(a) is about to dispose of the whole or any part of his property; or
(b) is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Court,
the Court may direct the defendant, within a time to be fixed by it, either to furnish security, in such sum as may be specified in the order, to produce and place at the disposal of the Court, when required, the said property or the value of the same, or such portion thereof as may be sufficient to satisfy the decree, or to appear and show cause why he should not furnish security.
(2) The plaintiff shall, unless the Court otherwise directs, specify the property required to be attached and the estimated value thereof.
(3) The Court may also in the order direct the conditional attachment of the whole or any portion of the property so specified.
(4) If an order of attachment is made without complying with the provisions of Sub-rule (1) of this rule, such attachment shall be void." {Para 14}
15. The said Rule 5 is under the heading Attachment before judgment. It appears from the said provision that Court was entitled to exercise the power for attachment before judgment only when the defendant with intent to obstruct or delay the execution of any decree that may be passed against him, is about to dispose of the whole or any part of his property from the local limits of the jurisdiction of the Court. It appears from the impugned order that the said aspects were not at all taken into consideration and no satisfaction in that respect was recorded by the trial Court as appears from the impugned order. Law in this regard as settled in the case of Premraj Mundra (supra) is relevant and in paragraph 10 of the said judgment, guiding principles have been noted as follows :--
"10. From a perusal of all the authorities, I think that the following guiding principles to be deduced :
(1) That an order under Order 38 Rules 5 & 6, can only be issued, if circumstances, exist as are stated therein.
(2) Whether such circumstances exist is a question of fact that must be proved to the satisfaction of the Court.
(3) That the Court would not be justified in issuing an order for attachment before judgment, or for security, merely because it thinks that no harm would be done thereby or that the defts. would not be prejudiced.
(4) That the affidavits in support of the contention of the applicant, must not be vague, & must be properly verified. Where it is affirmed true to knowledge or information or belief, it must be stated as to which portion is true to knowledge the source of information should be disclosed, and the grounds for belief should be stated.
(5) That a mere allegation that the deft. was selling off his properties is not sufficient. Particulars must be stated.
(6) There is no rule that transaction before suit cannot be taken into consideration, but the subject of attachment before judgment must be to prevent future transfer or alienation.
(7) Where only a small portion of the property belonging to the deft, is being disposed of, no inference can be drawn in the absence of other circumstances that the alienation is necessarily to defraud or delay the pltf.'s claim.
(8) That the mere fact of transfer is not enough, since nobody can be prevented from dealing with his properties simply because a suit has been filed; There must be additional circumstances to show that the transferrer is with an intention to delay or defeat the plft.'s claim. It is open to the Court to look to the conduct of the parties immediately before suit, and to examine the surrounding circumstances, and to draw an inference as to whether the deft, is about to dispose of the property, and if so, with what intention. The Court is entitled to consider the nature of the claim and the defence put forward.
(9) The fact that the deft, is in insolvent circumstances or in acute financial embarrassment is a relevant circumstance, but not by itself sufficient.
(10) That in the case of running businesses, the strictest caution is necessary and the mere fact that a business has been closed, or that its turnover had diminished, is not enough.
(11) Where however the deft, starts disposing of his properties one by one, immediately upon getting a notice of the plft.'s claim, and/or where he had transferred the major portion of his properties shortly prior to the institution of the suit, and was in an embarrassed financial condition, these were grounds from which an inference could be legitimately drawn that the object of the deft. was to delay and defeat the plft.'s claim.
(12) Mere removal of properties outside jurisdiction, is not enough, but where the deft. with notice of the plft.'s. claim, suddenly begins removal of his properties outside the Jurisdiction of the appropriate Court, and without any other satisfactory reason, an adverse inference may be drawn against the deft. where the removal is to a foreign country, the Inference is greatly strengthened.
(13) The deft. in a suit is under no liability to take any special care in administering his affairs, simply because there is a claim pending against him. Here neglect, or suffering execution by other creditors, is not a sufficient reason for an order under Order 38 of the Code.
(14) The sale of properties at a gross undervalue, or benami transfers, are always good indications of an intention to defeat the plft.'s claim. The Court must however be very cautious about, the evidence on these points and not rely on vague allegations."
IN THE HIGH COURT OF CALCUTTA
R.M.A.T. No. 1388 of 2003
Decided On: 16.07.2003
R.B.M. Pati Joint Venture Vs. Bengal Builders
Hon'ble Judges/Coram:
A. Chakrabarti and Sadhan Kumar Gupta, JJ.
Citation: AIR 2004 Calcutta 58,(2003) CALHN 569, MANU/WB/0220/2003.
1. This appeal was filed against order No. 8, dated May 3, 2003 and No. 11, dated May 26, 2003 passed by trial Court in the suit itself.
2. Heard Mr. Dasgupta, learned counsel for the appellant and Mr. Bhaskar Gupta, learned counsel for the respondent.
3. Relevant facts are that opposite petitioner is a company formed under the laws of Malaysia and is basically a foreign company which obtained all requisites licenses and acquired a registered office in India at New Delhi and obtained necessary permissions for marketing of work in India. The petitioner company obtained the work of construction of a portion of National Highway No. 6 for widening of the existing road to 4/6 lanes and strengthening of existing two lanes carriage way thereof. Necessary agreement for the said purpose was signed between the appellant company and National Highway Authority of India on 20th April, 2001.
4. On being approached by the plaintiff respondent submitting a quotation, some work was entrusted to the respondent. According to the appellant after the work of the plaintiff respondent was completed, joint measurement was taken and bill was ultimately finalised whereafter the plaintiff respondent signed the said final bill on March 20, 2002 recording that they did not have any further claim against appellant company under the said sub contract. Full and final payment was made against the said final bill and necessary payment certificate was also issued by the plaintiff respondent in March. 2002.
5. After one year of such payment, the plaintiff-respondent filed the present suit against the appellant company, inter-alia, praying for adjudging the final accounts statement/no claim certificate as void or voidable, payment voucher to be adjudged void or voidable and perpetual injunction as also a decree for Rs. 1,63,68,027.00 with other necessary prayers.
6. In the said application, an application was filed for attachment before judgment under Order 38, Rule 5 of the Code of Civil Procedure. The orders impugned in the present appeal were passed on the said application allowing the ad-interim prayer in the application for attachment before judgment in respect of bill claim amounting to Rs. 1,63,68,027.00.
7. It is the contention of the learned counsel for the appellant that a perusal of the order sheet including order No. 1 to order No. 10, shows that requirements of the said Rule 6 under Order 38 of the Code have not at all been satisfied and therefore, the impugned orders cannot stand.
8. Mr. Dasgupta, appearing for the appellant contended that the final statement of the bill was accepted as final in March, 2002 and in a suit filed one year thereafter, on the application, merely as the defendant did not appear, order was passed by the trial Court granting attachment before judgment without satisfying the prescribed requirements under Rule 5 of Order 38. It is further contended ad Interim order was refused by the same learned Judge on March 28, 2003 on the ground that the proceeding was initiated at a delayed stage but ad interim order was passed thereafter on May 3, 2003 without considering whether the requirements at all were (complied) as provided in Rule 5. The notice of the Court was drawn to the provisions of Sub-rule (4) of Rule 5 for contending that the impugned orders are void orders. Reliance was placed on the judgment in the case of Premraj Mundra v. Md. Maneck Gazi, reported in MANU/WB/0033/1951 : AIR1951Cal156 and Smt. Swaran Lata Ghosh v. Harendra Kumar Banerjee, reported in MANU/SC/0023/1969 : [1969]3SCR976 , for contending that order was passed without any reason is held to be void.
9. Mr. Bhaskar Gupta, appearing for the respondent contended that the impugned order is only being an ad interim order and therefore scope of challenge in the present appeal is very limited. It is strongly contended that appellant being a foreign company attachment was vitally required as once they realise the bill from the National Highway Authority and leave the country, plaintiff-respondent will be left with no relief whatsoever in the suit even if they obtain a decree. It is contended that discretion has been exercised by the trial Court and therefore, in respect of such discretion in passing ad Interim order, is no interference should be made. Reliance was placed on the judgment in the case of Sardar Govindrao Mahadik v. Devi Sahai, reported in MANU/SC/0253/1982 : [1982]2SCR186 .
10. Further contention has been made on behalf of the respondents that satisfaction of the Court is to be considered from the materials on record and actual meaning of the said word 'satisfaction' was indicated relying on the judgment in the case of K. Ramachandra Rao v. Union of India, reported in .
11. Considering the aforesaid contentions, I find that the question raised by the appellant as regards delay in filing the suit and the consequence thereof, does not require consideration here in the appeal as the learned Judge in the trial Court himself noticed the said fact in his order No. 2 dated March 28, 2003 and refused, to grant of ad interim order considering that grounds for urgency have not been made out.
12. But by the said order, notice was issued upon the defendant asking the defendant to file show cause before the Court and by the subsequent order No. 8 dated May 3, 2003 ad interim prayer of the plaintiff was allowed for attachment before judgment in respect of bill/claim indicated in the order itself.
13. Apparently the order was passed under Order 38, Rule 5 of the Code only taking into consideration that after the notice was served upon the defendant company and the service was satisfactory, the defendant has not appeared in the suit and accordingly prayer of ad interim order was allowed.
14. Perusal of the law relevant for the purpose as contained in Rule 5 of Order 38 of the Code, is felt relevant. Therefore, the said provision is quoted hereinabove:--
"Attachment before Judgment
R. 5. Where defendant may be called upon to furnish security for production of property.-- (1) Where, at any stage of a suit, the Court is satisfied, by affidavit, or otherwise, that the defendant, with intent to obstruct or delay the execution of any decree that may be passed against him,--
(a) is about to dispose of the whole or any part of his property; or
(b) is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Court,
the Court may direct the defendant, within a time to be fixed by it, either to furnish security, in such sum as may be specified in the order, to produce and place at the disposal of the Court, when required, the said property or the value of the same, or such portion thereof as may be sufficient to satisfy the decree, or to appear and show cause why he should not furnish security.
(2) The plaintiff shall, unless the Court otherwise directs, specify the property required to be attached and the estimated value thereof.
(3) The Court may also in the order direct the conditional attachment of the whole or any portion of the property so specified.
(4) If an order of attachment is made without complying with the provisions of Sub-rule (1) of this rule, such attachment shall be void."
15. The said Rule 5 is under the heading Attachment before judgment. It appears from the said provision that Court was entitled to exercise the power for attachment before judgment only when the defendant with intent to obstruct or delay the execution of any decree that may be passed against him, is about to dispose of the whole or any part of his property from the local limits of the jurisdiction of the Court. It appears from the impugned order that the said aspects were not at all taken into consideration and no satisfaction in that respect was recorded by the trial Court as appears from the impugned order. Law in this regard as settled in the case of Premraj Mundra (supra) is relevant and in paragraph 10 of the said judgment, guiding principles have been noted as follows :--
"10. From a perusal of all the authorities, I think that the following guiding principles to be deduced :
(1) That an order under Order 38 Rules 5 & 6, can only be issued, if circumstances, exist as are stated therein.
(2) Whether such circumstances exist is a question of fact that must be proved to the satisfaction of the Court.
(3) That the Court would not be justified in issuing an order for attachment before judgment, or for security, merely because it thinks that no harm would be done thereby or that the defts. would not be prejudiced.
(4) That the affidavits in support of the contention of the applicant, must not be vague, & must be properly verified. Where it is affirmed true to knowledge or information or belief, it must be stated as to which portion is true to knowledge the source of information should be disclosed, and the grounds for belief should be stated.
(5) That a mere allegation that the deft. was selling off his properties is not sufficient. Particulars must be stated.
(6) There is no rule that transaction before suit cannot be taken into consideration, but the subject of attachment before judgment must be to prevent future transfer or alienation.
(7) Where only a small portion of the property belonging to the deft, is being disposed of, no inference can be drawn in the absence of other circumstances that the alienation is necessarily to defraud or delay the pltf.'s claim.
(8) That the mere fact of transfer is not enough, since nobody can be prevented from dealing with his properties simply because a suit has been filed; There must be additional circumstances to show that the transferrer is with an intention to delay or defeat the plft.'s claim. It is open to the Court to look to the conduct of the parties immediately before suit, and to examine the surrounding circumstances, and to draw an inference as to whether the deft, is about to dispose of the property, and if so, with what intention. The Court is entitled to consider the nature of the claim and the defence put forward.
(9) The fact that the deft, is in insolvent circumstances or in acute financial embarrassment is a relevant circumstance, but not by itself sufficient.
(10) That in the case of running businesses, the strictest caution is necessary and the mere fact that a business has been closed, or that its turnover had diminished, is not enough.
(11) Where however the deft, starts disposing of his properties one by one, immediately upon getting a notice of the plft.'s claim, and/or where he had transferred the major portion of his properties shortly prior to the institution of the suit, and was in an embarrassed financial condition, these were grounds from which an inference could be legitimately drawn that the object of the deft. was to delay and defeat the plft.'s claim.
(12) Mere removal of properties outside jurisdiction, is not enough, but where the deft. with notice of the plft.'s. claim, suddenly begins removal of his properties outside the Jurisdiction of the appropriate Court, and without any other satisfactory reason, an adverse inference may be drawn against the deft. where the removal is to a foreign country, the Inference is greatly strengthened.
(13) The deft. in a suit is under no liability to take any special care in administering his affairs, simply because there is a claim pending against him. Here neglect, or suffering execution by other creditors, is not a sufficient reason for an order under Order 38 of the Code.
(14) The sale of properties at a gross undervalue, or benami transfers, are always good indications of an intention to defeat the plft.'s claim. The Court must however be very cautious about, the evidence on these points and not rely on vague allegations."
16. It is apparent that the impugned order was passed without following the said guidelines nor considering any of the said factors.
17. The fact which was taken into consideration in the impugned order that the defendant in spite of notice did not appear in the Court, is not sufficient for passing any order of attachment before judgment. The contention of the learned counsel for the respondent that materials being available on record, it is not important that necessary reasons have not been stated in the impugned order, does not appear to be correct as the satisfaction of the Court has to be Indicated in the order itself.
18. In above view of the matter, I am of the opinion that the impugned ad interim order of attachment before judgment cannot stand and the same is hereby quashed and the appeal is allowed to the aforesaid extent. As the application under Order 38, Rule 5 requires an oral consideration, the Trial Court is directed to decide the same in accordance with law expeditiously preferably on the next date fixed.
Sadhan Kumar Gupta, J.
19. I agree.
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