Independence of judiciary

This article is written by Tarini Kalra, a student of B.B.A. LL.B. from Fairfield Institute of Management and Technology, GGSIPU. The present article deals with Order 38, Rule 5 and the circumstances wherein the defendant must attach the property before a judgement on the court’s direction.

It has been published by Rachit Garg.

Introduction 

“Can a defendant obstruct a property in a suit?” Absolutely not.  A court has an extraordinary power to issue an interim order under Order 38 Rules 5 to 13 of the Code of Civil Procedure, 1908 (hereinafter referred to as ‘CPC’) for the attachment of a property before judgement. Attachment of a property before judgement is the legal concept of seizing property to ensure the satisfaction of a judgement. The goal is to protect the plaintiff’s interests if the court is convinced that even if a decree is obtained, the plaintiff may not be able to relish it due to the obstruction that the defendant may cause.

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Objective and scope of Order 38 Rule 5 CPC

The purpose and scope of Order 38 Rule 5 of the CPC and the regulations that follow it are only to safeguard the plaintiff from any damage caused by or likely to be caused by the defendant acquiring the suit property while the case is pending. ‘Attachment before judgement’ is a punitive remedy since it significantly interferes with the defendant’s property rights prior to the ultimate settlement of the dispute. A defendant is not forbidden from engaging with the suit property merely because a lawsuit has been filed against him. The burden of proof lies on the plaintiff. The plaintiff must establish prima facie that his claim is substantial and genuine, as well as satisfy the court that the defendant intends to impede the property by disposing of all or part of his property or delay the execution of any decision that may be made against him.

In the case of Raman Tech. & Process Engg. Co. & Anr. v. Solanki Traders (2007), the Hon’ble Supreme Court laid down the object, nature and scope of Order 38 Rule 5. The Hon’ble Court remarked that the objective of Order 38 Rule 5 CPC is to prohibit the defendant from resisting a prospective decree in favour of the plaintiff by seeking to dispose of or remove the suit property outside the jurisdiction of the court. The court must be satisfied that the case of the plaintiff must be prima facie and establishes that the defendant is seeking to remove or dispose of the suit property in order to resist any possible decree. The Court further pointed out that the defendant is not precluded from dealing with his property because a lawsuit has been or is likely to be brought against them. The transfer of a business from one location to another, or the transportation of machinery to another location, is not a sufficient ground for attachment before judgement.

In the case of Vandana Verma v. Roop Singh & Ors (2022), the Delhi High Court dismissed the application of the plaintiff under Order 38 Rule 5 on the ground that merely for the asking of the plaintiff, the application of attachment before judgement cannot be admitted. The plaintiff must prima facie prove the necessity of granting of temporary injunction where the defendant attempts to dispose of, transfer or create any interest to the third party in the suit property.

Concept of Order 38 Rule 5 CPC 

Order 38 Rule 5 deals with furnishing security for the production of property by the defendant. It states that if the court is satisfied at any stage of a suit that the defendant may dispose of all or part of the suit property, or transfer all or part of their property beyond the local limits of the court’s jurisdiction, it may pass a decree against defendant along with the production of an affidavit by the plaintiff or as the court directs. The court may direct a time limit to furnish security and a specific amount in the order or to produce and furnish the property or its value as ordered by the court, or any portion adequate to comply with the decree or substantiate the reason for not furnishing security. On the direction of the court, the plaintiff is required to determine the property that must be attached along with its approximate value. The court may order the conditional attachment of all or part of the suit property. An order of attachment shall be deemed void if it is made without complying with the provisions of Rule 5.

In the case of Premraj Mundra v. Md. Maneck Gazi (1951), the Calcutta High Court stated that the affidavit supporting the plaintiff’s accusations must be concise and thoroughly verified. If something is stated to be true based on knowledge, information, or belief, the affidavit must specify which portion is true based on knowledge, the source of the information, and the grounds for the belief.

In the case of  Huawei Technologies Co. Ltd. v. Sterlite Technologies Limited (2016), the Delhi High Court acknowledged that all of the prerequisites of Order 38 Rule 5, CPC must be met before the court may examine the plaintiff’s claim for securing the sum and that the court must exercise its discretion with extreme caution.

When the defendant fails to furnish security without any reasonable ground

Order 38 Rule 6 deals with the provision when the defendant fails to furnish security without any reasonable ground. If the defendant fails to provide any justifiable grounds for giving security or fails to furnish the security within the period prescribed by the court, the court may order that the suit property or any portion sufficient to comply with any decree, be attached. The court may order the attachment of the mentioned property or any portion of it, to be revoked or issue any other order it deems appropriate when the defendant presents sufficient justification and the required security.

In the case of M/S. Muthoot Leasing and Finance v. N.P.Asiya (2011), the Kerala High Court remarked that under Order 38 Rule 6, if the defendant fails to establish a reasonable cause for not furnishing security or fails to furnish security, the court may order an attachment. The court is obligated under Order 38 Rule 6(2) to revoke the previously imposed attachment if the defendant offers security or establishes reasonable justification.

Mode of attachment

The mode of attachment before judgement is outlined in Order 38 Rule 7. It specifies that the attachment must be made in accordance with the guidelines established for the attachment of property in the execution of a decree. 

The procedure for arresting or attaching property beyond the jurisdiction of a district court is outlined in Section 136. It states that when an application is made for arresting any person or attaching any property under Section 136, not relating to the execution of decrees, and such person or property resides outside the local limits of the jurisdiction of the court to which the application is made, then, at the discretion of the court, an arrest warrant or an order of attachment may be issued and sent to the district court within whose jurisdiction the subject of the application is located, along with a copy of the warrant or order and  the probable amount of the costs of the arrest or attachment.

In the case of Mohit Bhargava v. Bharat Bhushan Bhargava & Ors. (2007), the Hon’ble Supreme Court observed that Section 136 stipulates for an order of attachment of property outside the jurisdiction of the court and transferring the order of attachment to the district court within whose local limits the property is situated, and it excludes execution of decrees from within its ambit.

Adjudication of claim to property attached before judgement

The adjudication of a claim to property attached before judgement is outlined under Order 38, Rule 8. It states that the adjudication of a claim for property attached before judgement should be the same as claims to property attached in the execution of a decision for the payment of money.

In the case of M/S Value Advisory Services v. M/S Zte Corporation & Ors (2009), the Delhi High Court observed that Order 38 Rule 8 provides for adjudication of claims by the court for attachment qua properties or money in the possession of third parties. A third party can challenge the claim. While the party seeking attachment may claim ownership of the property on behalf of the party he is seeking a decree against, the third party may establish title to the property in himself or in yet another party, object to the attachment for other reasons, etc. It also stated that Order 38 Rules 7, 8, and 11A extend the attachment provisions in Order 21 Rules 46, 46A, and F to attachment before judgement as well. Order 21 Rule 46 C allows for the hearing of disputed matters where a third party disputes a suit.

Removal of attachment when security is furnished or a suit is dismissed 

The removal of attachment when security is furnished or a suit is dismissed is outlined under Order 38, Rule 9. It states that the court shall order the attachment before judgement to be revoked when the defendant provides the necessary security along with the attachment fee or when the claim is dismissed.

In the case of Vareed Jacob v. Sosamma Geevarghese & Ors. (2009), the Hon’ble Supreme Court observed that Order 38 Rule 9 is an independent and substantive statutory right on the part of a defendant to notify the court about the procurement of the required security to satisfy the plaintiff’s claim, and as a result, an order of attachment is not required to be maintained. The order of attachment expires when the suit is dismissed in accordance with Order 38 Rule 9. The Court also noted that dismissing a suit does not render an order of attachment void ab initio because a sale of property pursuant to an order of attachment would be invalid even after the date of the sale and the attachment are dismissed.

Attachment before judgement does not affect the rights of strangers, nor bar decree-holder from applying for sale

Order 38, Rule 10 stipulates that attachment before judgement does not affect the rights of strangers or decree-holders to apply for sale. It states that attachment before judgement shall not impair the rights of people who are not parties to the suit that existed before the attachment, nor shall any person holding a decree against the defendant be barred from applying for the sale of the property under attachment in execution of such a decree.

In the case of C.V. Anandan v. K.V. Easwaran (2021), the Madras High Court ruled that under Order 38 Rule 10 CPC, an attachment made before judgement does not affect the rights of any individual who is not a party to the suit and does not prevent any individual who holds a judgement against the defendant from applying for the sale of property under attachment in execution of a decree.

Property attached before the judgement may not be reattached in the execution of the decree

Order 38 Rule 11 discusses whether the property attached before the judgement may not be reattached in the execution of the decree. It states that if a decree is issued in favour of the plaintiff and the property is attached in accordance with the provisions of Order 38 then,  the property does not need to be reattached upon an application for execution of such a decree.

In the case of Usha v. S.K. Sikkaiyan (2022), the Madras High Court held that where a property has been attached before judgement, it need not be re-attached in the execution proceedings.

Provision applicable to attachment under Order 38 Rule 11 CPC

The provisions of Order 38 Rule 11A apply to an attachment established in the execution of a decree for the purposes of applying to an attachment made before the judgement that continues after the judgement under the provisions of Rule 11. An attachment before judgement in a dismissed suit for default should not be reinstated because the order dismissing the cause for the default has been set aside and the suit has been reinstated.

Property which can be attached 

The properties that can be attached are outlined in Sections 60, 61, 62, 63, and 64 of the CPC.

  1. Section 60 deals with properties which can be attached and sold in the execution of a decree. The following properties can be attached or sold in execution of a decree: land, houses or other buildings, goods, money, bank notes, cheques, bills of exchange, hundis, promissory notes, government securities, bonds or other securities for money, debts, shares in a corporation and all other saleable property, movable or immovable possessed by the judgement-debtor, or the earnings of which they have disposal right for their benefit, whether held in the name of the judgement-debtor or by another person in trust for them or on their behalf. 

It excludes the following for attachment or sale:

  1. The necessary wearing-apparel, cooking vessels, beds and bedding of the judgement debtor, his wife and children, and personal ornaments that, according to religious custom, cannot be parted with by any woman; 
  2. Tools of artisans, and, if the judgement-debtor is an agriculturalist, his husbandry implements, any cattle and seed-grain that may, in the court’s opinion, be necessary to enable him to earn his living as such, as well as any portion of agricultural produce or of any class of agricultural produce that may have been declared to be exempt from liability under the provisions of Section 61;
  3. Houses and other buildings along with the materials, sites and land immediately pertinent and necessary for their comfort belonging to an agriculturist or a labourer of a domestic servant and occupied by him; 
  4. Books of account;
  5. A mere right to sue for damages;
  6. Any personal service rights;
  7. Stipends, gratuities or political pensions permitted for government pensioners, or payable from any service family pension fund that has been declared in the official gazette by the Central Government or the state government;
  8. The remuneration of labourers and domestic servants, payable in cash or in kind;
  9. Salary of one thousand rupees and two-thirds of the remaining in the execution of any decree other than a maintenance decree, which is applicable for one-third of the salary.  However, where any portion of such portion of the salary is liable to attachment has been under attachment, whether constantly or intermittently, for a total period of twenty-four months, such portion shall be exempted from attachment until the expiry of a further period of twelve months, and where such attachment has been made in execution of one and the same decree, shall be finally executed after the attachment has continued for a total period of twenty-four months;
  10. The salaries and benefits of individuals outlined under the Air Force Act, 1950, the Army Act, 1950, or the Navy Act, 1957;
  11. All compulsory deposits and other sums derived from any fund to which the Provident Funds Act, 1925, applies or funds that the Act specifies are exempt from attachment;
  12. All deposits and other sums in or derived from any fund to which the Public Provident Fund Act, 1968, applies or funds that the act specifies are exempt from attachment;
  13. The funds payable under a life insurance policy on the judgement debtor; 
  14. The interest of a lessee of a residential building to which the laws governing the management of rents and accommodations are presently in effect;
  15. Any allowance covered in the pay of any government employee, railway employee, or local government employee deemed free from attachment by the competent government through notification, or any subsistence grant or allowance paid to the employee while they are on suspension;
  16. An expectation of succession through survivorship or prospective or potential right or interest;
  17. A right to future maintenance;
  18. Any allowance recognised by Indian legislation to be exempt from attachment or sale in fulfilment of a decree;
  19. When a judgement debtor is a person liable for the payment of land revenue of any movable property that is exempt from sale for the recovery of an arrear of such revenue under any current statutory provisions.

In the case of O. Laxmireddy v. Vadla Veeraiah (1999), the Andhra Pradesh High Court concluded that the benefits granted under Section 60(1) might be availed of when the attachment before judgement is sought under Order 38 Rule 5 CPC.

  1. Section 61 exempts partial agricultural production by the state government. It states that any portion of agricultural produce or any class of agricultural produce that the state government deems appropriate for the purpose of providing until the next harvest, for the proper cultivation of the land, or the support of the judgement debtor and his family will be exempted from attachment or sale in execution of a decree by publication in the official gazette by general or special order and declaration in the case of all agriculturalists or of any class of agriculturalists.
  2. Section 62 addresses the seizure of property in a dwelling. It specifies that no one who is carrying out any action ordering or sanctioning the seizure of moveable goods may enter any dwelling-house after sunset and before sunrise. No outside door of a dwelling house shall be broken open unless the judgement-debtor occupies the dwelling house and refuses or prevents access. However, once the person carrying out any such action has obtained entrance to any dwelling-house, they may break open the door to any room in which they believe the property is located. When a room in a dwelling-house is occupied by a woman who, according to country customs, does not appear in public, the person carrying out the process shall give such woman notice that she is at liberty to withdraw and after allowing a reasonable time for her to withdraw and giving her reasonable facility for withdrawing, they may enter such room to seize the property, employing all precautions consistent with these provisions.
  3. Property that has been attached to carry out judgements from several courts is covered under Section 63. Any property that is not in the custody of any court but is subject to attachment in execution of decrees of more than one court shall be adjudicated by the highest grade court, or, if there is no difference in grade between the courts, it must be adjudicated by the court under whose decree the property was first attached, for determining any claim to such property and objection to its attachment. No action will be taken by a court implementing one of these proceedings and any such proceedings will be deemed to be invalid within the ambit of Section 63. The proceedings exclude an order permitting the purchase price payable by a decree-holder who acquired property during a sale performed in the execution of a decree to be set off. 
  4. Section 64 addresses private alienation of property once the attachment is declared invalid. Any private delivery or transfer of the attached property or any interest, any payment of a debt, dividend, or other funds to the judgement-debtor in violation of the attachment, will be unlawful against all claims actionable under the attachment after it has been made. Any private transfer or delivery of the attached property or any interest made in accordance with any contract for such transfer or delivery entered into and registered before an attachment will be exempt from the ambit of Section 64.

Exceptions to Order 38 Rule 5 CPC

The exceptions to Order 38 Rule 5 are as follows:

  1. Agricultural production is not attachable before the judgement 

Order 38 Rule 12 outlines that agricultural production is not attachable before judgement. It stipulates that nothing in Order 38 shall be construed as authorising the plaintiff to file for the attachment of any agricultural products in the possession of an agriculturist or as granting the court the authority to order the attachment or production of such produce. 

In the case of Vasu v. Narayanan Nambooripad (1961), the Kerala High Court observed that the provisions of Order 38 Rule 12 do not empower the plaintiff to claim the attachment of any agricultural products in the agriculturist’s possession or provide the court with the authority to do so.

  1. Small cause court cannot attach immovable property 

Order 38 Rule 13 states that small cause courts have no authority to issue an order for the attachment of immovable property.

  1. Conversion of unsecured debt into a secured debt

The purpose of Order 38 Rule 5  is to safeguard the plaintiff from any damage caused by or likely to be caused by the defendant acquiring the suit property while the case is pending. A plaintiff should not use the provisions of Order 38 Rule 5 to coerce the defendant into settling the suit claim.

In the case of Y.Kesavulu v. T.Kalavathi (2016), the Andhra Pradesh High Court remarked that the purpose of Order 38 Rule 5 is not to convert an unsecured debt into a secured debt. A plaintiff should avoid using requisites of Order 38 Rule 5 as leverage to compel the respondent to settle the suit claim. Before exercising authority under Order 38 Rule 5 CPC, a plaintiff must establish prima facie that his claim is genuine and valid and that the defendant is about to remove or dispose of all or part of his property with the intention of preventing or delaying the execution of any judgement.

Conclusion

Order 38 Rule 5 is an extraordinary and discretionary power of the court. The court can order attachment before judgement only when the plaintiff must establish prima facie that his claim is genuine and valid and that the defendant is about to remove or dispose of all or part of his property with the intention of preventing or delaying the execution of any judgement. Therefore, it is only up to the courts to examine any such prayer or request brought before them and harmonise the divergent claims of parties in order to aid in the administration of justice.

Frequently Asked Questions (FAQs)

What is the procedure for attachment before judgement?

An application is filed by or on behalf of the plaintiff to persuade the court that the defendant intends to delay or impede the execution of any order or is likely to give away the whole or any part of the suit property outside the court’s local jurisdiction. The primary reason for such an order of attachment before judgement is to satisfy the plaintiff that the decree, if made, would be satisfied.

What is Appendix F No 5?

Appendix F deals with supplemental proceedings. The number 5 under it has a format of attachment before judgement with the order to call for security for the fulfilment of the decree under Order 38 Rule 5.

References

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