PURPOSE
The general rule is that a plaintiff must first obtain a decree and then execute the same. The question of arrest of the debtor or attachment of the property would arise at the stage of execution of the decree. However, under special circumstances which are specified in Rule 1 and Rule 5 of Order 38 Code of Civil Procedure (“Code”) the creditor can take out arrest or attachment against his debtor even before the judgement.
An attachment before judgement is to enable the plaintiff to realise the amount of the decree, supposing a decree eventually made, from the defendant property’. This is the object of the Order 38 Rule 5 of the Code. [1] The scope and object of Order 38 Rule 5 of the Code and the rules followed thereon are merely to protect a plaintiff against loss arising from the defendant making away with the defendant’s property pending suit. An attachment before judgement is in the nature of an interlocutory order.
WHEN ATTACHMENT BEFORE JUDGEMENT CAN BE ISSUED
The provisions relating to attachment before judgement are provided under Order 38 of the Code, from Rule 5 to Rule 13.
Rule 5 states that when the Court is satisfied (by affidavit or otherwise) at any stage of suit that defendant, with intent to obstruct or delay the execution of any decree, is about to dispose of property or about the remove the property from the local limits of jurisdiction of Court, then the Court can direct the defendant to either furnish security or to produce the said property or the value of the same, sufficient to satisfy the decree. Such attachment can be conditional attachment as well.
Further, Rule 6 states when the defendant fails to furnish security or fails to show why the defendant should not furnish security, then the Court can attach the property or portion of property sufficient to satisfy the decree.
However, while exercising its jurisdiction under Order 38 Rule 5 of the Code, to grant such an interlocutory relief, the Court is required to form a prima facie opinion at the stage when such a request is made by the plaintiff to the suit. Though, the Court need not go into the correctness or otherwise of all the contentions raised by the parties. [2]
Further, the Hon’ble Supreme Court, in the matter titled Raman Tech and Process Engg. Co. v. Solanki Traders [3], laid down certain rules regarding exercising jurisdiction of the Court under Order 38 Rule 5, and in pursuance of which, the Hon’ble Supreme Court held as follows:
The power Under Order 38, Rule 5 Code of Civil Procedure is a drastic and extraordinary power. Such power should not be exercised mechanically or merely for the asking. It should be used sparingly and strictly in accordance with the Rule. The purpose of Order 38, Rule 5 not to convert an unsecured debt into a secured debt. Any attempt by a Plaintiff to utilize the provisions of Order 38 Rule 5 as a leverage for coercing the Defendant to settle the suit claim should be discouraged. Instances are not wanting where bloated and doubtful claims are realized by unscrupulous Plaintiffs, by obtaining orders of attachment before judgement and forcing the Defendants for out of court settlements, under threat of attachment.
A Defendant is not debarred from dealing with his property merely because a suit is filed or about to be filed against him. Shifting of business from one premises to another premises or removal of machinery to another premises by itself is not a ground for granting attachment before judgement. A Plaintiff should show, prima facie, that his claim is bona fide and valid and also satisfy the court that the Defendant is about to remove or dispose of the whole or part of his property, with the intention of obstructing or delaying the execution of any decree that may be passed against him, before power is exercised Under Order 38, Rule 5 Code of Civil Procedure. Courts should also keep in view the principles relating to grant of attachment before judgement.
GUIDING PRINCIPLES
The fundamental principle that an application under Order 38 Rule 5 of CPC can be filed only against a defendant where it is apprehended that he is likely to remove his properties from jurisdiction of the trial Court was badly ignored. [4] Issue of notice to the defendant under Order 38 Rule 5(1) is absolutely necessary before any order under Order 38 Rule 5(3) is made. [5] An attachment before judgement cannot be ordered for mere asking. The Court should get satisfied about prima facie case first. [6]
Several High Courts of India have laid down the guiding principles for Courts of civil jurisdiction, to help in determining whether the interlocutory relief under Order 38 Rule 5 should be granted or not, and which are as follows: [7]
(i) That an order under Order 38 Rule 5 and Rule 6 can only be issued, if circumstances exist as are stated therein.
(ii) Whether such circumstances exist is a question of fact that must be proved to the satisfaction of the Court.
(iii) That the Court would not be justified in issuing an order for attachment before judgement, or for security, merely because it thinks that no harm would be done thereby or that the defendants. would not be prejudiced.
(iv) That the affidavits in support of the contentions of the applicant, must not be vague, and 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.
(v) That a mere allegation that the defendant was selling off his properties is not sufficient. Particulars must be stated.
(vi) There is no rule that transactions before suit cannot be taken into consideration, but the object of attachment before judgement must be to prevent future transfer or alienation.
(vii) Where only a small portion of the property belonging to the defendant, 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 plaintiff’s. Claim.
(viii) That the mere fact of transfer is not enough, since nobody can be prevented from dealing with his properties simply of cause a suit has been filed: There must be additional circumstances to show that the transfer is with an intention to delay or defeat the plaintiff’s claim. It is open to the Court to look at the conduct of the parties immediately before suit, and to examine the surrounding circumstances, to draw an inference as to whether the defendant. 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.
(ix) The fact that the defendant is in insolvent circumstances or in acute financial embarrassment, is a relevant circumstance, but not by itself Sufficient.
(x) 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 has diminished, is not enough.
(xi) Where however the defendant, starts disposing of his properties one by one, immediately upon getting a notice of the plaintiff’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 defendant. was to delay and defeat the plaintiffs’ claim.
(xii) Mere removal of properties outside jurisdiction, is not enough, but where the defendant, with notice of the plaintiff’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 defendant. Where the removal is to a foreign country, the inference is greatly strengthened.
(xiii) The defendant, 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. Mere neglect, or suffering execution by other creditors, is not a sufficient reason for an order under Order 38 of the Code.
(xiv) The sale of properties at a gross undervalue, or benami transfers, are always good indications of an intention to defeat the plaintiffs. claim. The Court must however be very cautious about the evidence on these points and not rely on vague allegations.
Order 38 Rule 5 of CPC is an extraordinary remedy and if the ingredients for invoking it are lacking in the application and the affidavit filed in support thereto, attachment before judgement order cannot be ordered, claim for attachment before judgement on the averment has been mainly set out in questions and a bare reading thereof reveals that it was not pleaded therein that appellants with intent to obstruct or delay the execution of decree that may be passed against them (a) are about to dispose of the whole or any part of property, or (b) are about to remove the whole or any part of the property from the local limits of jurisdiction of this Court. [8]
WHEN ATTACHMENT BEFORE JUDGEMENT IS WITHDRAWN
Rule 6 states if after attachment, the defendant furnishes security or shows why he should not furnish security, then attachment shall be withdrawn.
Rule 9 states that the attachment shall be withdrawn, when the defendant furnishes the security together with security for cost of attachment or when suit is dismissed.
An attachment before judgement comes to an end when the suit is dismissed. In order to avoid all possible doubt and difficulty, the Court should when dismissing a suit make an order under Order 38, Rule 9 withdrawing the attachment before judgement. But even if an order directing withdrawal of attachment is not made, on the dismissal of the suit, the attachment before judgement ceases to exist, and it does not revive when an appeal is lodged. [9]
The attachment before judgement which terminates on the dismissal of the suit by the trial Court, is not automatically revived by the fact that the appellate Court reversing the dismissal of the suit passes a decree in favour of the attaching plaintiff. [10]
WHAT CANNOT BE ATTACHED BEFORE JUDGEMENT
Rule 12 states that agricultural produce in possession of agriculturist cannot be attached by the court neither plaintiff can apply for attachment of such agricultural produce. The word “agriculturist” in Order 38 Rule 12 of the Code has the same meaning as the word “agriculturist” occurring in Section 60 of the same Code, and means a tiller of the soil who is unable to maintain himself otherwise. [11]
EFFECT OF ATTACHMENT BEFORE JUDGEMENT
Rule 10 states that attachment before judgement does not affect the rights existing prior to attachment, of person not parties to the suit (strangers) and doesn’t bar such person (stranger) holding the decree against the defendant from applying for the sale of the property for execution of such decree. Such attachment confers no right in the property on the plaintiff who obtains the order. Everything remains as before the attachment, save that it has been taken out of the power of the defendant to dispose of the property attached or remove it out of the jurisdiction. [12]
MODE OF ATTACHMENT BEFORE JUDGEMENT
Rule 7 states about the mode of attachment, which is the same as attachment of property in execution of a decree.
References
[1]Ganu Singh v. Jangi Lal [26 C 531]; S.P.V. Babu v. Varalaxmi Finance Corporation [1996 (4) ALD 453]
[2] Rajendran v. Shankar Sundaram [(2008) 2 SCC 724]; M.S.A. Construction Private Ltd. v. Bharat Kumar Joshi [2016 SCC OnLine Cal 4067]
[3] Raman Tech and Process Engg. Co. v. Solanki Traders [(2008) 2 SCC 302]
[4] LAO (SDC), Somasila Project Officer, Rajampet v. Vijaykumar [AIR 2009 NOC 646 (AP)]
[5] Mahindra & Mahindra Financial Services Ltd. v. Thalamadla Durga Goud [2006 (5) ALT 645]
[6] Vantaru Chinasubbarayudu v. Smt. Y. Lalitha Vani [AIR 2009 NOC 325 (AP)]
[7] Premraj Mundra v. Md. Maneck Gazi [1951 SCC OnLine Cal 20]; Ranjit Arjan Hira v. Kavita Vijay Mehta [2018 SCC OnLine Bom 16214]; UCO Bank, Madras v. Sukra Shoe Fabric & Ors. [AIR 192 Mad. 293]
[8] KCV Airways Ltd. & Anr. v. WG. Cor. R. K. Blaggana [AIR 1998 Delhi 70]
[9] Abdul Rahman v. Amir Sharif [AIR 1918 Cal 39]
[10] Madanlal Chhotelal v. Ramprakash Ghasiram [AIR 1963 MP 329]
[11] Pellur Venkatasubbamma v. Devvur Narayana Reddi [1938 SCC OnLine Mad 209]
[12] Bisheshar Das v. Ambika Prasad [1915 SCC OnLine All 352]
