Dr. Jana Rama Rao v. Kanna Phanindra

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Court. For the sake of convenience, the parties herein are referred to as they were arrayed in the suit before the trial Court.

4. The respondent/plaintiff filed a suit against the defendant for recovery of amount of Rs.20,58,00,000/- (Rupees Twenty Crore and Fifty Eight Lakhs Only) with future interest @ 12% per annum from the date of suit till its realization. Along with the suit, the plaintiff had filed an application under Order-XXXVIII Rule-5 of CPC, praying the Court to issue conditional attachment for receipt of the amount which is borrowed by the respondent-defendant by attaching the respondent-defendant property i.e., Ac.4.00 cents of land equivalent to 19,360 square yards out of Ac.8.00 guntas in Sy.Nos.28, 29 and 30, situated at Gopannapalli Village, Serilingampally Mandal, under GHMC Circle, Chevella Revenue Division, Ranga Reddy District.

5. The averments in the petition are that the plaintiff is a Businessman dealing with the Real Estate, Polo Horse Trading at Hyderabad, Guntur and Bangalore, whereas, the defendant is the proprietor of Sri Balaji Art Printers and also having textile retail outlets and one of the Director of CMR Hotels, Textiles, and

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Jewellers Pvt. Ltd., having outlets, Convention Centers, Hotels, Jewellery Shops in different places in Andhra Pradesh and Telangana States. The plaintiff, out of acquaintance, has advanced an amount of Rs. 14 Crores to the defendant during the months of May, 2015 to January, 2016 and the defendant promised to return the same within a short period. On receipt of the said amounts, a loan agreement was executed by the defendant in favour of the plaintiff and promised before the witnesses to repay the same with interest @ 12% per annum and also issued two cheques. As the defendant failed to keep up his promise to pay neither the interest nor principal amount as per his own agreement. As such, the plaintiff issued a prior intimation to the defendant that he is going to present the cheques and to keep sufficient funds in the Bank, but the said cheques were dishonored by the banker with an endorsement "Payment Stopped by the Drawer". Accordingly, the plaintiff got issued a statutory notice to the defendant under Section 138 of the NI Act, it appears that and there are other suits in O.S.NO.390 of 2016 was filed before the Chief Judge, City Civil Court, Hyderabad for recovery of Rs.25,50,000/- and also filed the cheque bounce case in C.C.No.537 of 2016.

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6. It is further averred that, while advancing amount of Rs.14.00 Crores to the defendant in four installments from May, 2015 to January, 2016, there were certain exchange of Whats'app messages and the plaintiff has also registered a criminal case vide Crime No.666 of 2016 in S.R Nagar Police Station and the defendant withdrawn the case as if he was complainant in the said case in Lok Adalat on 23.12.2018 for which for cheating the Court, there were criminal proceedings against defendant before III Additional CMM.

7. It is also further averred that as the defendant is liable to pay the borrowed amount of Rs.14.00 Crores with agreed interest @ 12% per annum from 15.04.2016 to till date of suit, which comes to Rs.20,58,00,000/-. The plaintiff is entitled to recover the suit amount from the defendant with interest @ 12% per annum with future interest from the date of suit and the defendant is liable to pay the same to the petitioner with costs. It is further contended that the defendant is having Ac.4-00 guntas of land, which is equivalent to 19,360 square yards out of Ac.8.00 guntas, in Survey Nos.28, 29 & 30, situated at Gopanpalli Village Serilingampally Mandal, under GHMC Circle, Chevella Revenue Division, R.R.

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District. The defendant acquired this property by virtue of registered Partition Deed vide document No.4379/2016, dated 23.04.2016, which is a worthy property which the respondent-defendant holds. Therefore, there is an urgency to protect the interest of petitioner- plaintiff and in order to protect the interest, the plaintiff prayed to issue conditional attachment to the amount of Rs.20,58,00,000/- by attaching the said property of the defendant.

8. After hearing, the learned trial Court passed the following docket order in I.A.No.2271 of 2019 in O.S.No.409 of 2019, dated 19.11.2019 which is extracted hereunder:-

"Heard. Perused the record. The suit is filed for recovery of money. The pleadings and documents and the averments in the petition prima-facie prove the suit claim of the petitioner/plaintiff.

The averments in the petition further prove the attempts of respondent in taking steps to alienate property to evade the payment of dues to the petitioner and to defeat the rights of petitioner/plaintiff in case of a decree being passed in favour of petitioner.

As such, there is urgency and necessary orders are to be given in favour of petitioner.

Hence, the respondent is directed to furnish security for the suit claim or to show cause why he should not be directed to furnish security for the suit claim, within three days of receipt of the notice, failing which attachment

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before Judgment of the petition schedule property is to be made. Call on 16.12.2019."

9. Being aggrieved by the same, the present Civil Revision Petition is filed contending that the said order passed by the trial Court is contrary to the sub-rules(1) and (4) of the Rule 5 of Order XXXVIII CPC. It is argued that the plaintiff did not place any material to show that the defendant was attempting to alienate the property with intent to defeat the decree that has been passed, which is a foundation of pleadings and the material on record and in the absence of the said foundation of pleading and the material on record, the order passed by the learned District Court is not justified in giving such observation and in allowing the said application. It is contended that the trial Court passed the said order in a routine manner, which is contrary to law and there is no finding given by the trial Court that the defendant, with an intention to obstruct or delay the execution of any decree, that may be passed, is about to dispose of the said property or remove the whole or any part thereof.

10. The trial Court passed for conditional order and it is further averred that the ordering of attachment is a drastic and

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extraordinary power which has to be used and should not be exercised mechanically or merely on seeking and it should be exercised strictly accordance with the rule and that the order of attachment has significant consequence to the defendant and it would be temporarily deprived of the right to enjoy the property and it would create encumbrance and cloud on the title of the property.

11. It is further averred that, it is not the case of the plaintiff that the defendant has no other property, wherein it is specifically pleaded in the plaint that the defendant is the proprietor and also having textile material outfits and the defendant is one of the owners of CMR Hotels, Textiles and Jewellery Pvt. Ltd., As such in view of the same, the order passed by the learned trial Court is not justified in ordering the conditional attachment and prayed to set aside the same.

12. The learned counsel for the petitioner relied upon Order XXXVIII Rule 5 CPC and contended that the mandatory requirements prescribed there under were not complied with.

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13. It was further contended that passing an order of conditional attachment, in the absence of any supporting material, is illegal and liable to be set aside.

14. In support of this contention, reliance is placed on the judgment in the case of Raman Tech. & Process Engg. Co. and Another Vs. Solanki Traders¹; wherein at paragraph Nos.4, 5 and 6 it was held as follows:- ^-

"4. The object of supplemental proceedings (applications for arrest or attachment before judgment, grant of temporary injunctions and appointment of receivers) is to prevent the ends of justice being defeated. The object of Order-38,Rule-5 CPC in particular, is to prevent any defendant from defeating the realization of the decree that my ultimately be passed in favour of the plaintiff, either by attempting to dispose of, or remove from the jurisdiction of the Court, his movables. The scheme of Order 38 and the use of the words "to obstruct or delay the execution of any decree that may be passed against him" in Rule 5 make it clear that before exercising the power under the said Rule, the Court should be satisfied that there is a reasonable chance of a decree being passed in the suit against the defendant. This would mean that the Court should be satisfied that the plaintiff has a prima-facie case. If the averments in the plaint and the documents produced in support o it, do not satisfy the Court about the existence of a prima-facie case, the Court will not go to the next stage of examining whether the interest of the plaintiff should be protected by exercising power under Order-38 Rule 5 CPC. It is well settled that merely having a just or valid claim or a prima facie case, will not entitle the plaintiff to an order of attachment before judgment, unless he also established that the defendant is attempting to remove or dispose of his assets with an intention of defeating the decree that may be passed. Equally well settled is the position that even where the

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defendant is removing or disposing his assets, an attachment before judgment will not be issued, if the plaintiff is not able to satisfy that he has a prima facie case.

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 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 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. "

15. In the case of Y. Vijayalakshmamma and another Vs. M/s. Sakinala Lakshmaiah and Sons and another ² at paragraph Nos.10, 11 and 15, the Hon'ble Apex Court held as follows:-

10. Sub-rule (1) of Rule 5 has three distinct components : (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, is (a) about to dispose of

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the whole or any part of his property; (2) the court may direct the defendant, within a time to be fixed, 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; or (3) to appear and show cause why he should not furnish security.

11. Now, under sub-rule (4) of Rule 5, any order of attachment without compliance with the provision of sub- rule (1) shall be void. So, before any order of attachment is made the Court must satisfy itself that the defendant is about to dispose of or remove the whole or part of his property. See Nowroji (Sardar) Pudumji Vs. Deccan Bank Ltd., (1921) ILR 45 Bom 1256, Senaji Kapurchand Vs. Pannaji Devichand, (1922) ILR 46 Bom 431, and the Judgment dated 18.04.1972 in C.M.A.No.318 of 1971 by a Bench of this Court. Secondly, this satisfaction must be derived from some material on record either by way of affidavit or otherwise; it cannot be whimsical nor could it be illusory and it should also be based on clear and convincing proof on enquiry that the order is needed for the protection of the plaintiff. Not only that, the Court must insist upon the strict proof of the allegations made in the affidavit. See Bedanand Rai V. Nabokumar singh, AIR 1938 Pat 161, Premraj Vs. Maneck Gazi; AIR 1951 Cal 156, Natraja Vs. bangaru, AIR 1965 Mad 212, and the judgment dated 18.04.1972 in C.M.A.No.318 of 1971 by a Bench of this Court.

15. From the foregoing, it is manifest that the impugned order has been passed by the Court below on whims and fancies and has no nexus to the provisions enacted in Rules 6 and 6 of Order 38. It is now well settled that before any order of attachment before judgment is passed, the court has to satisfy itself on the basis of proof positive that the defendant is with intent to obstruct or delay the execution of any decree that may be passed against him, either about to dispose of the whole or any part of his property or is about to remove the whole or any part of his property. It is then, the Court will pass an order directing the defendant within certain time to be fixed, either to furnish security in such sum as may be specified, or to appear and show cause as to why he should not furnish security. What, therefore, becomes apparent is that

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before the Court gives a mandate calling upon the defendant to do one or the other thing, the condition precedent being the satisfaction to be arrived at with regard to one or the other, viz., either the defendant is about to dispose of the property or to remove the property."

16. In the case of Surender Singh Bajaj Vs. M/s. Kitty Steels Ltd., and Another³ wherein it was held in paragraph Nos.24 and 25, which is as follows:-

24:- Since we held that the application filed by the plaintiffs under Order 38, Rule 5 CPC in this case is maintainable, the next question to be considered is whether in allowing the application, the Court below acted legally or not? It is well settled that an order under Order 38, Rule 5 CPC, should not be passed merely for the sake of asking or merely because of the fact that the garnishee has huge sum of money payable to the defendant. The law in this regard were discussed by this Court in Sripathi Panditarajula Venkanna Babu v. Varalakhsmi Finance Corporation, Rajahmundry, 1996 (4) ALD 453 (DB), wherein the steps necessary to be taken before an order is passed were clearly discussed and laid down. Further a Division Bench of this Court in Chairman and Managing Director, R.P.N. Nigam Limited, New Delhi v. Rambachane Singh, , dealing with necessary conditions for ordering an application filed under Order 38, Rule 5, CPC was pleased to hold:

"....... Such an order is not to be passed in a routine manner merely for the asking for it but that the Court has to be satisfied on tangible materials placed before it that there are attempts at alienation and that the steps are taken so as to delay or obstruct the judgment that may be ultimately passed against the defendant. Before passing an order, the defendant is first of all to be called upon to furnish security in the shape of specific sum to

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produce and place at the disposal of the Court when required, the property specified by the plaintiff in his petition or such portion of it as may be sufficient to satisfy the decree or call upon him to show-cause as to why he shall not furnish security. But such an order can be passed only after the primary satisfaction of the obstructive conduct of the defendant. The ultimate attachment order can be passed only if the defendant either fails to show-cause why the security shall not be furnished or fails to furnish the security as required........" The only allegation made by the plaintiffs in the affidavit filed in support of the application is that the defendant No. 2 is "now trying to leave beyond the jurisdiction of the Court" and that "he is attempting to withdraw the money deposited with the defendant No. 2 and if the attachment before judgment is not granted it would be very difficult for the plaintiffs to recover their dues from the defendant No. 1." That is the only allegation in the affidavit. Therefore, the question to be considered is whether the above allegation of the plaintiffs could constitute necessary conditions precedent to order an application under Order 38, Rule 5, CPC. The above circumstance stated by the plaintiffs in the affidavit, even if true, in itself, in my considered opinion is not sufficient to pass an order under Order 38, Rule 5 CPC unless it is also pleaded that by the impugned conduct of the defendant No. 1, he was intending to delay the execution of the decree that may be passed by the Court against him. The satisfaction of the Court that the defendant with an intention to obstruct or delay the execution of the decree that may be passed by it, is about to dispose of the whole or any part of his property, or is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Court, is sine qua non for exercising the power under

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Order 38, Rule 5. This condition is totally absent in the instant case. In the impugned order, nowhere the Court below has recorded such satisfaction. In that view of the matter, the Court below ought not to have ordered the application filed by the plaintiffs under Order 38, Rule 5 CPC.

11. The application filed by the plaintiffs under Order 38, Rule 5 in the instant case, even otherwise, is liable to be dismissed. The question to be considered is whether the money deposited with the defendant No. 2 by the defendant No. 1 to stand as surety is a debt and whether that amount could be attached before judgment under Order 38, Rule 5 CPC. It is quite clear from the provisions of Sub-section (1) of Section 60 of the CPC, that a property of the judgment- debtor could be attached only if he has a disposing power which he may exercise for his own benefit, whether the same be held in the name of the judgment-debtor or by another person in trust for him or on his behalf. In my considered opinion, the 1st defendant does not have disposing power over the sum of Rs. 4 lakhs deposited by him with the defendant No. 2 while standing as a surety. I say this because, the amount deposited by the defendant No. 1 with the 2nd defendant cannot be withdrawn till the 2nd respondent passes an order cancelling the bond and discharging the surety and allows him to withdraw. The power of the defendant No. 1 to withdraw the money in deposit depends upon the contingency of what the defendant No. 2 would do hereinafter. Therefore, it cannot be said that as on the date of the application under Order 38, Rule 5 CPC, or on the date when the Court below made the order impugned in this appeal, the defendant No. 1 had a disposing power as regards the sum of Rs. 4 lakhs lying in deposit with the defendant No. 2 Court. It is also relevant to

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notice that the defendant No. 2 Court is not holding the sum of Rs. 4 lakhs in trust for the defendant No. 1. On the other hand, the defendant No. 2 Court is holding the said sum of money as security for the appearance of the accused in that case. Looking from that angle also, the application filed by the plaintiffs under Order 38, Rule 5 is liable to be dismissed in limine."

17. Learned counsel for the defendant has vehemently argued and contended that in the very affidavit, which is filed by the defendant, nowhere it is pleaded that the defendant is now trying to leave the very jurisdiction of the trial Court and that the trial Court should first get itself satisfied before passing the order that the defendant with an intention to observe or follow the execution of decree that may be passed by it that the defendant is about to dispose of the whole or any of the part of his property or is about to remove the whole or any of the part of his property, from the local limits of the jurisdiction of this Court. He contended that as in the absence of any pleadings to that effect the impugned order passed by the trial Court is not justified and that without considering any material, the trial Court has mechanically passed the impugned order and that the said order deserves to be set aside.

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18. The learned counsel for the respondent/plaintiff contended that the defendant is liable to pay an amount of Rs.20 Crores, and if the said attachment is set aside, the plaintiff may not be able to recover the same and hence, he supported the order passed by the learned trial Court. He further contended that the order passed and the supported order passed by the learned trial Court.

19. Having considered the contentions and rival contentions of both the parties and on a perusal of the docket order passed by the trial Court, the point that arise for consideration is, whether the order passed by the trial Court is just and reasonable?

20. For better appreciation of the law, the said provision is under Order-38, Rule-5 C.P.C., is extracted hereunder:-

"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

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the defendant, within a time to be fixed by it, either to furnish security in such sum as may be specified in the order, 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 direct conditional attachment of the property specified.

(4) If an order of attachment is made without complying with sub-rule (1), such attachment shall be void

21. On perusal of the said provision, as the decision cited by the learned counsel for the defendant, the very provision itself speaks that whenever an application under Order-XXXVIII, Rule-5 is filed, the following aspect which are sin-qua-non has to be observed by the trial Court. The very provision says that before passing any such order, calling upon the defendant to furnish the security for protection of property or where the defendant was called upon to furnish security, it is necessary that the Court initially must get satisfied by affidavit or otherwise and the three conditions are that:-

a) that the defendant with an intend to one (a) obstruct or delay the execution of any decree that may be passed against him and is about to dispose of whole or any part of the property or about to

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remove the whole or any part of his property from the local limits of the jurisdiction of the Court. Unless these three aspects are being pleaded or averred and proved by way of such affidavit or any such documentary evidence, such as a third party affidavit, where a third party affidavit or any other material available. Without there being any such material and without expressing the satisfaction on the part of the Court that there is a element of intention on the part of the defendant to obstruct to delay the execution of any decree passed or trying to dispossess the property ore remove the property, in such circumstances, the Court can order for attachment by following the provisions under Order-XXXVIII, Rule-5 of CPC.

22. In the present case, on a perusal of the pleadings in the affidavit, except saying that there is a property, the defendant is having certain properties and that he is having various business and also that he earlier issued the dishonor of cheques and registering of a case against the defendant, nothing has been pleaded or averred in the pleadings about the apprehension on the part of the plaintiff that the defendant is trying to remove or dispose of the property or remove the property from the jurisdiction of the

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Court to avoid the payment of the decreetal amount, if any decree is passed.

23. In such a case, the trial Court, without there being any averment in the petition, appears to have mechanically passed the order without recording any reason that there is a truth in the apprehension on the part of the plaintiff and held that the averments' in the petition further proved that the respondent is taking steps to alienate the property to evade the payment of dues to the petitioner and to defeat the rights of the petitioner-plaintiff and on a single line has held that there is a urgency and necessary orders have to be given and thereby, passed the order, directing the defendant to furnish the security and passed the said order. Prima- facie on the face of it, the order passed by the trial Court appears to be wholly mechanical without there being any material placed by the plaintiff and without there being any grounds to come to such a conclusion and passed the said orders and hence, on the face of it, there is a clear error committed by the trial Court in passing the said order and the same deserves to be interfered with and liable to be set aside.

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24. Accordingly, the Civil Revision Petition is allowed, setting aside the Order in I.A.No.2271 of 2019 in O.S.No.409 of 2019, dated 19.11.2019 passed by the XV Additional District and Sessions Judge, Kukatpally, Ranga Reddy District.

As a sequel, miscellaneous applications if any, stands closed.

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NARSING RAO NANDIKONDA, J

Date: 17.04.2026 ds