Sunil Kakrania and Ors v. M/s. Saltee Infrastructure Ltd. and Anr

Judgement

BHASKAR BHATTACHARYA, J. :- These two appeals were heard together as those are interlinked. F.M.A.T. No. 433 of 2009 is at the instance of the defendant in a suit for recovery of money and is directed against Order No. 14 dated 26th February, 2009, passed by the learned Civil Judge, Senior Division, Second Court, Barasat in Money Suit No. 122 of 2008 thereby disposing of an application under Order 39, Rules 1 and 2 of the Code of Civil Procedure filed by the plaintiff by restraining the defendant from transferring or alienating the suit property described in Schedule A to the plaint and from creating any third partys interest in respect of the said property till the disposal of the suit.

2. The other appeal being F.M.A.T. No. 692 of 2009 is, on the other hand, at the instance of the plaintiff of the said suit and is directed against the later part of the self-same order dated 26th February, 2009 by which the learned Trial Judge dismissed an application under Order 38, Rule 5 of the Code of Civil Procedure filed by the plaintiff by which the plaintiff prayed for direction upon the defendant to furnish security for the amount claimed in the suit and in default, for attachment of the property before the judgment.

3. The plaintiff filed a suit being Money Suit No. 122 of 2008 in the Court of Civil Judge, Senior Division, Second Court, Barasat thereby praying for recovery of Rs. 1,02,50,982/- being the cost of construction of a building constructed by the plaintiff on the allegation that the defendant entrusted the plaintiff to construct a multi-storied building on a land at 3, Pagladanga Road, Calcutta-46 allotted to the defendant by WBSIDC. According to the plaintiff the total cost of the construction was Rs. 1,57,15,982/- out of which the defendant paid a sum of Rs. 55,00,000/- and thus, the balance amount was still payable.

4. In the said suit, the plaintiff in the plaint described the premises being 64 and 65, Udayan Industrial Estate (WBSIDC), 3, Pagladanga Road over which he made the construction as A Schedule property.

5. After filing of the aforesaid suit the plaintiff came up with two different applications, one under Order 39, Rules 1 and 2 of the Code and the other under Order 38, Rule 5 of the Code as indicated earlier.

6. According to the plaintiff, the financial condition of the defendant was not good and if the defendant was able to transfer or alienate the A Schedule property to some third party, in such situation, it would not be possible for the plaintiff to realise the claimed amount from the defendant company even if a decree for recovery of money was passed against the principal defendant by the Court. In such circumstances, according to the plaintiff, the defendant company should be restrained from transferring or alienating the property to any third party.

7. In the application under Order 38, Rule 5 of the Code, the plaintiff made similar allegation that the defendant was in a ruinous condition and in such a situation, for the purpose of realisation of money as claimed by the plaintiff, the property of the defendant was required to be attached before passing of judgment otherwise the claim of the plaintiff would be frustrated. Consequently, the plaintiff prayed for an order of furnishing security at the end of the defendant and if no such security was granted, there should be an order of attachment.

8. Both the applications were contested by the defendant by filing written objection and the defence of the defendant was that it was agreed between the parties that the total construction should be completed on payment of Rs. 80,00,000/- out of which Rs. 55,00,000/- had already been paid. It was alleged that in a suit for recovery of money, the plaintiff was not entitled to get the injunction or the attachment as prayed for.

9. In the past, the learned Trial Judge refused to grant ad interim order of injunction on the application under Order 39, Rules 1 and 2 of the Code filed by the plaintiff and being dissatisfied with such order, the plaintiff preferred an appeal being F.M.A.T. 1522 of 2008 and the same came up for hearing before a Division Bench of this Court when the said Division Bench by order dated November 29, 2008 disposed of such appeal and the application by directing the learned Trial Judge to dispose of the application for injunction by March, 2009 with further direction that till the disposal of those applications, the defendant should be restrained from alienating or transferring the property as mentioned in Schedule A of the plaint or creating any third partys interest over of the constructed property mentioned in Schedule A to the plaint.

10. Pursuant to such direction, when the matter went back before the learned trial Judge, as mentioned earlier, the learned trial Judge has disposed of the application for injunction by maintaining the order passed by this Court in F.M.A.T. No. 1522 of 2008 till the disposal of the suit and rejected the application for attachment before judgment on the ground that in view of the order of injunction granted in the proceedings, there was no necessity of passing further order of attachment.

11. Being dissatisfied, both the parties have preferred those two appeals.

12. Mr. Dasgupta, the learned senior advocate appearing on behalf of the defendant in F.M.A.T. No. 433 of 2009, has vehemently contended before us that the suit being one for recovery of money, the building in question cannot be the property in dispute in the suit within the meaning of Order 39, Rules 1 and 2 of the Code and as such, the learned trial Judge erred in law in restraining his client or transferring or alienating the immovable property of the plaintiff till the disposal of a money suit. According to Mr. Dasgupta, in the absence of any averment made in terms of Order 39, Rule 1(b) of the Code, there was no scope for restraining the defendant in a money suit from transferring or alienating his own property.

13. In support of such contention, Mr. Dasgupta relies upon a Division Bench decision of our Court in the case of Fertiliser Corporation of India Ltd. v. Indian Explosive Ltd., reported in 2006 (1) CHN 659 : (AIR 2006 Cal 97). Mr. Dasgupta, therefore, prays for setting aside the order of injunction passed by the learned trial Judge.

14. Mr. Roy Chowdhury, the learned senior advocate appearing on behalf of the plaintiff/respondent, on the other hand, has opposed the aforesaid contention of Mr. Dasgupta and has contended that Order 39, Rules 1 and 2 of the Code of Civil Procedure are wide enough authorising a Court to restrain a defendant of any suit from transferring their property in case of existence of strong prima facie case of the plaintiff. Mr. Roychowdhury further submits that apart from the provision contained in Order 39, Rules 1 and 2 of the Code, a Court can under the provision of Section 151 of the Code also grant injunction for the purpose of protecting the interest of a plaintiff. He, therefore, prays for dismissal of the appeal filed by the defendant. In the other appeal filed by the defendant, Mr. Roychowdhury, submits that his client having made specific allegation that the defendant has defrauded the plaintiff by denying just due and that their financial condition is not good, it was a fit case for grant of an order of directing the defendant to give security and in default, for attachment before judgment. He, therefore, prays for passing such an order if the Court is not inclined to maintain the order of injunction which is the subject-matter of the other appeal.

15. Mr. Dasgupta, the learned senior advocate appearing on behalf of the defendant, on the other hand, has opposed the prayer for attachment before judgment by contending that there is no averment in terms of Order 38, Rule 5 of the Code of Civil Procedure in the application for attachment filed by the plaintiff and, therefore, the learned Trial Judge rightly dismissed the application for attachment before judgment. He, therefore, prays for dismissal of the appeal filed by the defendant.

16. Therefore, two questions arise for determination in these two appeals.

17. First, whether in a money suit merely because the plaintiff has a strong case on merit, a Court can restrain the defendant from transferring or alienating his movable or immovable property during the pendency of the suit.

18. Secondly, whether in the absence of averments made in terms of Order 38, Rule 5 of the Code, a Court can in a money suit grant an order of attachment before judgment or direct the defendant to furnish security.

19. In order to appreciate the first question mentioned above, it will be profitable to refer to the provision contained in Order 39, Rule 1 of the Code which is quoted below :

"1. Cases in which temporary injunction may be granted :- Where in any suit it is proved by affidavit or otherwise -

(a) that any property in dispute in a suit is in danger of being wasted, damaged or alienated by any party to the suit, or wrongfully sold in execution of a decree, or

(b) that the defendant threatens, or intends, to remove or dispose of his property with a view to defrauding his creditors,

(c) that the defendant threatens to dispossess the plaintiff or otherwise cause injury to the plaintiff in relation to any property in dispute in the suit,

the Court may by order grant a temporary injunction to restrain such act, or make such other order for the purpose of staying and preventing the wasting, damaging, alienation, sale, removal or disposition of the property or dispossession of the plaintiff, or otherwise causing injury to the plaintiff in relation to any property in dispute in the suit as the Court thinks fit, until the disposal of the suit or until further orders." 20. After hearing the learned counsel for the parties and after going through the materials on record, we find that the suit is one for recovery of money and in the plaint, the description of the building constructed by the plaintiff has been described in Schedule A with the averment in the plaint that the same was yet to be handed over to the defendants and was in possession of the plaintiff. The Schedule B reflects the calculation of the claim of the plaintiff. Thus, the Schedule A cannot be said to be "property in dispute in suit" within the meaning of Order 39, Rule 1 of the Code as subject-matter of the suit is really the recovery of Rs. 1 crore and odd claimed in the plaint. In a simple suit for recovery of money, an immovable property cannot be "the property in dispute in suit" simply because the money claimed in the suit is allegedly payable for construction of such immovable property.

21. Once we hold that in a simple money suit, an immovable property, for the construction of which the money is allegedly payable by the defendant, cannot be the "property in dispute in the suit", clauses (a) and (c) of Order 39, Rule 1 cannot have any application and clause (b) may be applicable provided the condition mentioned therein is present. In this case, there is no averment in the plaint or the application for injunction that the defendant intended or threatened to remove or dispose of his property with a view to defrauding his creditors and even no name of any creditor has been given. Therefore, Order 39, Rule 1 has no application to the facts of the present case.

22. Order 39, Rule 2 refers to a

"suit for restraining the defendant from committing a breach of contract or other injury of any kind"

and thus, a simple suit for recovery of an ascertained amount of money for nonpayment of the dues for the construction-work already done, does not come within the purview of such provision.

23. In a suit for recovery of specific amount of money, the plaintiff is not remediless and the legislature has enacted the provisions of Order 38 and Rule 5 thereof prescribes the circumstances when the Court can order attachment before judgment by way of interim measure. Such provision is quoted below :

"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."

In the case of Raman Tech and Process Eng. Co. v. Solanki Traders reported in (2008) 2 SCC 302, the Supreme Court had occasion to consider the scope of Order 38, Rule 5 of the Code and in such circumstances made the following observations about its scope.

"5. The power under Order 38, Rule 5, CPC 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 is not to convert an unsecured debt into a secured debt. Any attempt by a plaintiff to utilise the provisions of Order 38, Rule 5 as leverage for coercing the defendant to settle the suit claim should be discouraged. Instances are not wanting where bloated and doubtful claims are realised by unscrupulous plaintiffs by obtaining orders of attachment before judgment and forcing the defendants for out-of-Court settlements under threat of attachment.

6. 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 judgment. 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, CPC. Courts should also keep in view the principles relating to grant of attachment before judgment. (See Premraj Mundra v. Md. Manech Gazi for a clear summary of the principles).

(Emphasis given by us)

24. In the case of Premraj Mundra v. Md. Manech Gazi reported in AIR 1951 Cal 156, approved by the Apex Court in the aforesaid decision, Sinha, J. (as His Lordship then was) laid down the following principles required to be followed by a Court before invoking the jurisdiction under Order 38, Rule 5 :

"(10) From a perusal of all the authorities, I think that the following guiding principles can be deduced :

(1) That an order under O. 38, Rr. 5 and 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 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.

(5) That a mere allegation that the deft, was selling off and his properties is not sufficient. Particulars must be stated.

(6) There is no rule that transactions before suit cannot be taken into consideration, but the object 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 pltfs. 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 transfer is with an intention to delay or defeat the pltfs. 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 has diminished, is not enough.

(11) Where however the deft. starts disposing of his properties one by one, immediately upon getting a notice of the pltf.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 pltfs. claim.

(12) Mere removal of properties outside jurisdiction, is not enough, but where the deft. with notice of the pltfs. 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. Mere neglect, or suffering execution by other creditors, is not a sufficient reason for an order under O.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 pltfs. calim. The Court must however be very cautious about the evidence on these points and not rely on vague allegations."

25. Applying the aforesaid principles to the facts of the present case, we find that the statement that has been made in the application for attachment before judgment was that the defendant is in ruinous condition and that if the decree was passed in the suit, the plaintiff would not be in a position to execute the decree if the defendant was able to transfer or alienate the property mentioned. On the basis of such vague allegation, in our view, no order or direction to give security or attachment can be passed as held above. There is even no allegation that the defendant is trying to remove or dispose of its properties in order to obstruct or delay the execution of the decree that may be passed against it.

26. The next question is whether by invoking section 151 of the code, the Court should pass an order of injunction or attachment.

27. Mr. Roy Chowdhury, in this connection, strongly relied upon the decision of the Supreme Court in the case of Manohar Lal Chopra v. Rai Bahadur Rao Raja Seth Hiralal. reported in AIR 1962 SC 527 in support of his contention that even if Order 39, or Order 38 in terms do not apply in a given circumstance, the Court in exercise of its power under Section 151 can grant such relief. In that case. A filed a suit against B at place X and B, relying on a contract between them to settle all their disputes in Courts at place Y, filed a counter suit against B at place Y and on an application by B, the Court at place Y made in its inherent powers passed an order restraining A from proceeding with his suit in Court at place X. In such circumstances, the Supreme Court held that the inherent powers are to be exercised by the Court in very exceptional circumstances, for which the Code lays down no procedure and that, in view of the facts of the case, the Courts below were in error in issuing a temporary injunction to the appellant (i.e. A) restraining him from proceeding with the suit in the Court at place X. The order could not said to be an order necessary in the interests of justice or to prevent the abuse of the process of the Court and was therefore set aside. While deciding such a case, the Apex Court made the following observations as regards the power of a Court to grant injunction in exercise of inherent power where Order 39 did not prescribe grant of such injunction :

"It is well settled that the provisions of the Code are not exhaustive, for the simple reason that the Legislature is incapable of contemplating all the possible circumstances which may arise in future litigation and consequently for providing the procedure for them. The effect of the expression if it so prescribed is only this that when the rule prescribe the circumstances in which the temporary injunction can be issued, ordinarily the Court is not to use its inherent powers to make the necessary orders in the interests of justice, but is merely to see whether the circumstances of the case bring it within the prescribed rule. If the provisions of S. 94 were not there in the Code, the Court could still issue temporary injunctions, but it could do that in the exercise of its inherent jurisdiction. No party has a right to insist on the Courts exercising that jurisdiction and the Court exercises its inherent jurisdiction only when it considers it absolutely necessary for the ends of justice to do so. It is in the incidence of the exercise of the power of the Court to issue temporary injunction that the provisions of S. 94 of the Code have their effect and not in taking away the right of the Court to exercise its inherent power."

28. While making such observations, the Apex Court took note of an earlier decision of that Court in the case of Padam Sen v. State of Uttar Pradesh (AIR 1961 SC 218) where the question was whether a Court in exercise of power under section 151 of the code can seize the account book of a party to litigation and approved the earlier view that the inherent powers saved by section 151 of the code are with respect to the procedure to be followed by the Court in deciding the cause before it. The following observations are relevant.

"The inherent powers saved by S. 151 of the Code are with respect to the procedure to be followed by the Court in deciding the cause before it. These powers are not powers over the substantive rights which any litigant possesses. Specific powers have to be conferred on the Courts for passing such orders which would affect such rights of a party. Such powers cannot come within the scope of inherent powers of the Court in the matters of procedure, which powers have their source in the Court possessing all the essential powers to regulate its practice and procedure. A party has full rights over its books of account. The Court has no inherent powers forcibly to seize its property. If it does so, it invades the private rights of the party."

(Emphasis supplied by us)

29. In the case of Padam Sen (supra), the Supreme Court made following further comments.

"The defendants had no rights to these account books. They could not lay any claim to them. They applied for the seizure of these books because they apprehended that the plaintiff might make such entries in those account books which could go against the case they were setting up in Court. The defendants request really amounted to the Courts collecting documentary evidence which the defendants considered to be in their favour at that point of time. It is no business of the Court to collect evidence for a party or even to protect the rival party from the evil consequences of making forged entries in those account books. If the plaintiff does forge entries and uses forged entries and evidence in the case, the defendants would have ample opportunity to dispute those entries and to prove them forgeries.

We are therefore of opinion that the Additional Munsif had no inherent power to pass the order appointing a Commissioner to seize the plaintiffs account books. The order appointing Sri Raghubir Pershad as Commissioner for this purpose was therefore an order passed without jurisdiction and was therefore a null and void order."

30. The sum and substance of those two decisions of the Supreme Court is that in exercise of power under section 151 of the code, a Court can pass such order which is not in conflict with substantive right of a party and that such order is necessary for ends of justice provided further that there is no bar in the Code for passing such order which must be procedural in nature.

31. In the case of Manohar Lal (AIR 1962 SC 527) (supra), the Court was considering whether a party should be restrained from proceeding with his suit which was earlier in point of time till the disposal of a later suit filed by the other party in exercise of inherent power when Section 10 of the Code was not attracted. The Court answered the question in negative but made the observations quoted earlier regarding power of the Court to grant injunction under inherent power.

32. In the case before us, the plaintiff wants an injunction restraining the defendant from transferring or alienating his own property over which the plaintiff has no right or for attaching the said property. An owner of a property has unrestricted right of alienation and such power cannot be curtailed unless law provides for putting any such restriction. section 94 of the code which is in the substantive part of the Code (as opposed to the procedural part) gives power to the Court to restrict such substantive right of an owner in the circumstances mentioned in the Schedule of the Code (the procedural part of the Code) of which Order 38 and Order 39 are inter alia part. If those circumstances under O. 38, 39 do not exist, the Court in exercise of inherent power cannot pass any order the effect of which would be to interfere with the substantive right of a litigant as was the case in the case of Padam Sen (supra). Therefore, the prayer of the plaintiff in these appeals cannot be granted in exercise of inherent power of a Court because it will have overriding effect over the substantive right of the defendant over its property. We, thus, find that the decision in the case of Manohar Lal (supra) does not help the plaintiff in any way in view of the nature of relief claimed in this suit.

33. On consideration of the entire materials on record, we are of the opinion that the two applications filed by the plaintiff one under Order 39 and the other under Order 38 should have been dismissed on the ground that in the facts of the present case, the ingredients of those provisions have not been attracted and at the same time, there is no scope of grant of the relief under section 151 of the code.

34. The appeal filed by the defendants is allowed and the one filed by the plaintiffs is dismissed. In the facts and circumstances, there will be however, no order as to costs.

35. PRASENJIT MANDAL, J. :- I agree.

Order accordingly.