Karnataka High Court
Krishnappa vs Smt K N Sridevi on 6 June, 2012
Equivalent citations: 2012 AIR CC 2642 (KAR), 2012 (3) AIR KAR R 727, (2013) 2 CIVLJ 434, (2013) 1 CURCC 400, (2012) 5 KANT LJ 707, (2013) 1 ICC 533, (2013) 1 ICC 250, (2012) 4 KCCR 2574
Author: S.Abdul Nazeer
Bench: S. Abdul Nazeer
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R
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 6TH DAY OF JUNE 2012
BEFORE
THE HON'BLE MR.JUSTICE S. ABDUL NAZEER
WRIT PETITION NO.31749/2011 (GM-CPC)
Between:
Krishnappa,
S/o late Rajappa,
Aged about 60 years,
R/o No.222/Y, III Main,
13th Cross, III Block,
Rajajinagar,
Bangalore - 560 010. .... Petitioner.
(By Sri Shanmukappa, Adv. For M/S Kesvy & Co., Advs.)
And:
Smt.K.N.Sridevi,
D/o K. Navaneetham,
Aged about 48 years,
R/o No.48/1, 8th Cross,
Pipeline, Malleshwaram,
Bangalore - 560 059. .... Respondent.
(By Sri M.K. Venkataramana, Adv.)
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This Writ Petition is filed under Articles 226 & 227 of the
Constitution of India, praying to set aside the impugned order dated
25.3.2011 in O.S.No.5986/2010 on the file of the 30 th Additional
City Civil Judge, Bangalore City, etc.
This Writ Petition having been heard and reserved for
Orders, this day the Court pronounced the following:
ORDER
This writ petition is directed against the order dated 25.3.2011 in O.S.No.5986/2010 on the file of the 30 th Additional City Civil Judge, Bangalore City, whereby the application filed by the petitioner under Order 38 Rule 5 of the CPC for an order of attachment before judgment attaching the suit schedule property has been dismissed.
2. The petitioner is the plaintiff in the suit and the respondent is the defendant. For the purpose of convenience, the parties are referred to by their respective ranking before the trial Court. The plaintiff filed the above suit against the defendant for 3 recovery of a sum of Rs.95,20,000/- together with future interest at 18% per annum from the date of the suit till the date of realisation. In the suit, the plaintiff has contended that the defendant being the absolute owner of the suit schedule property had executed an agreement of sale dated 25.6.2007 agreeing to sell the said property in his favour for a sale consideration of Rs.75 lakhs and as on the date of the execution of the sale agreement, he has paid a sum of Rs.47,70,000/- by way of cash and Rs.50,000/- by way of cheque and another cheque for Rs.1,80,000/-. Thus, in all, the plaintiff has paid Rs.50 lakhs to the defendant and the same has been duly acknowledged by the defendant. He has paid another sum of Rs.3 lakhs by way of cash on 26.9.2007. As part of the contract, the plaintiff was further required to pay loan amount of Rs.12 lakhs borrowed by the defendant from the Rajajinagar Co-operative Bank Limited, Rajajinagar. In pursuance to the same, the plaintiff has discharged the loan of the defendant taken from Rajajinagar Co- operative Bank Limited amounting to Rs.12 lakhs. Thus, in all, the 4 plaintiff has paid a sum of Rs.65 lakhs, out of which, Rs.53 lakhs as advance sale consideration and Rs.12 lakhs by clearing the loan amount of the defendant. It is further contended that the plaintiff was ready and willing to pay the balance of the sale consideration. However, the defendant showed her dissent towards performance of her part of the contract and failed to execute and register the sale deed in favour of the plaintiff by receiving the balance of sale consideration. On 21.7.2008, the defendant approached the plaintiff and expressed her unwillingness and inability to execute the sale deed in favour of the plaintiff. However, the defendant assured to return the advance sale consideration received along with the liquidated damages. On 21.7.2008, the defendant got executed a sale deed in favour of the plaintiff in respect of a flat bearing No.404 constructed on the property bearing No.343/2, new katha Nos.397 and 398 situated at Shanthi Layout, Kaudenahalli Village, K.R.Puram Hobli, Bangalore East Taluk. The defendant for the reasons best known to her, did not come forward to execute the sale 5 deed or pay back the advance payment paid by him towards the purchase of the suit schedule property. However, she has executed an agreement on 18.8.2008 wherein she has admitted to pay Rs.53 lakhs, which was taken as advance and Rs.17 lakhs as liquidated damages which includes a sum of Rs.12 lakhs paid by the plaintiff to clear the loan amount of the defendant and another sum of Rs.5 lakhs as agreed by the agreement dated 25.6.2007. Thus, in all, she has agreed to pay Rs.70 lakhs in favour of the plaintiff. It was further agreed under the said agreement that the defendant shall hand over the physical possession of the flat referred to above failing which defendant shall pay a sum of Rs.10,000/- as monthly rental charges till the delivery of handing over of possession of the said flat. But the defendant did not pay the said amount nor fulfilled the obligations created under the agreement dated 25.6.2007. On verification, the plaintiff found that the said flat was not yet completed and the property on which flats were constructed is under litigation and therefore, the plaintiff did not opt to have the 6 said flat. Hence, the plaintiff restricted his claim only towards refund of advance sale consideration of Rs.53 lakhs and liquidated damages of Rs.17,00,000/- pursuant to the agreement dated 18.8.2008.
3. The plaintiff has filed an application under Order 38 Rule 5 of the CPC for attachment before judgment of the plaint schedule properties. He has reiterated the plaint averments in the affidavit filed in support of the application. He has further contended that the defendant is contemplating to sell the suit property in favour of the third parties so as to defeat his right created under the agreement. She has already negotiated with the third party for sale of the suit schedule property. She has disposed of the ground floor portion to one Anoop Kumar by executing a registered sale deed dated 2.4.2009. The execution of the sale deed during the subsistence of the sale agreement clearly shows the intention of the defendant to defeat the right of the plaintiff. If the suit property is 7 not attached before judgment, the plaintiff would be put to irreparable loss and hardship.
4. The defendant has filed her written statement denying the plaint averments. It is contended that she is running the ladies hostel at Malleshwaram. The plaintiff is a Financier. On 27.6.2007, when the defendant had approached the plaintiff for financial assistance of Rs.2,50,000/- in order to purchase hostel cooking equipments articles, the plaintiff has lent a sum of Rs.2,30,000/- by way of two cheques subject to payment of interest at 2% per annum. The defendant used to pay interest of Rs.4,600/- per month by way of cash. The plaintiff was not issuing any receipts for having received the interest. On 22.11.2007, when the defendant approached the plaintiff for further financial assistance of Rs.9 lakhs to discharge her loan obtained from Rajajinagar Co-operative Bank Limited, the plaintiff paid a sum of Rs.9 lakhs to the defendant by way of three cheques. He took the title deeds of the 8 property bearing No.48/1, 8th Cross, Maramma Temple Street, Malleshwaram, Bangalore. He also obtained signature on old blank stamp papers and on certain demand promissory note and consideration receipt and blank cheques as security for the said purpose. The defendant has paid a sum of Rs.6,50,000/- to the plaintiff on 20.4.2009 by way of transfer of the amount from her Savings Bank Account. She was due in a sum of Rs.4 lakhs to the plaintiff towards balance of the loan amount. On 5.5.2010, the plaintiff visited the defendant's house with an agreement of sale for sale of the property in question for Rs.75 lakhs. The defendant refused to sign on the said document and requested for grant of more time to pay the entire outstanding dues for which the plaintiff refused. On 13.5.2010, the plaintiff visited the defendant's house and forcibly took the signature on the sale agreement. In this connection, the defendant filed a private complaint before the 7 th Additional Chief Metropolitan Magistrate, Bangalore on 24.5.2010. Thereafter, the plaintiff stopped visiting the defendant's house. The 9 defendant is not due any amount as stated in the plaint. She is only due in a sum of Rs.4 lakhs to the plaintiff. She is ready to pay the said amount subject to the plaintiff returning the original title deeds of the property.
5. The defendant has also filed objections to the application seeking attachment before judgment.
6. On consideration of the rival contentions of the parties, the court below has rejected the application.
7. Learned Counsel for the petitioner/plaintiff submits that the defendant is due in a sum of Rs.95,20,000/- together with interest at 18% per annum from the date of the suit till the date of realisation. The defendant with an intent to obstruct or delay the execution of the decree, which may be passed by the Court is attempting to dispose of the property in question. In order to 10 safeguard his interest and facilitate recovery of the decretal amount in the event of passing of the decree, the plaintiff has filed the application seeking attachment before judgment of the said property. It is further argued that the plaintiff has produced sufficient materials to show that the defendant is trying to alienate the property and disappear from the jurisdiction of the Court. The defendant has sold a flat belonging to her to one Anoop Kumar before the filing of the suit. The sale of the said property would amply suggest the conduct of the defendant that she may dispose of the suit schedule property as well in order to frustrate the decree that may be passed against her. In the circumstances, the court below is not justified in rejecting the application seeking order of attachment before judgment.
8. On the other hand, learned Counsel appearing for the respondent/defendant submits that the defendant is not due any amount to the plaintiff except a sum of Rs.4 lakhs, which she is 11 ready to pay provided the plaintiff returns the title deeds of the suit schedule property. The plaintiff has filed a speculative suit. He is doing the business in finance without obtaining licence from the competent authority. The loan amount has been refunded to the plaintiff by way of cheques and bank transfer, the particulars of which are furnished in the written statement. The defendant is running a ladies hostel at Malleshwaram in the suit schedule property. She has no intention to sell the property in favour of the third parties. The plaintiff has not fulfilled the conditions enumerated in Order 38 Rule 5 of the CPC for grant of an order of attachment before judgment. He prays for dismissal of the writ petition.
9. Having regard to the contentions urged, the question for consideration is whether the court below is right in rejecting the application seeking grant of an order of attachment before judgment of the suit schedule property?
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10. The object of Order 38 Rule 5 of CPC is to prevent a decree that may be passed from being rendered infructuous. In PREMRAJ MUNDRA VS. MD. MANECK GAZI & OTHERS -
AIR 1951 CALCUTTA 156, the Calcutta High Court after referring to number of authorities has deduced 14 guiding principles governing the issue of an order under Order 38 Rule 5, which are as under:
"(1) That an order under Order 38 Rule 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 13 thereby or that the defendants 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 defendant 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 defendant is being disposed of, no inference can be drawn in the absence of other 14 circumstances that the alienation is necessarily to defraud or delay the plaintiff'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 transfer is with an intention to delay or defeat the plaintiff'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 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.
(9) The fact that the defendant 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 business, the strictest caution is necessary and the mere fact that a business 15 has been closed, or that its turnover has diminished, is not enough.
(11) 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 plaintiff's claim.
(12) 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.
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(13) 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.
(14) The sale of properties at a gross undervalue, or benami transfers, are always good indications of an intention to defeat the plaintiff's claim. The Court must however be very cautious about the evidence on these points and not rely on vague allegations."
11. In PALGHAR ROLLING MILLS (P) LTD. VS.
VISVESWARAYYA IRON AND STEEL LTD. - ILR 1985 KAR 3989, this Court has enumerated the requirements of Order 38 Rule 5 of the CPC as under:
"(ii) The mandatory essentials of Order 38, Rule 5 are:
(i) the Court must be satisfied by affidavit or otherwise 17 that the defendant with intent to obstruct or delay the execution of any decree that may be passed against him, (ii) is about to dispose of the whole or any part of his property, or (iii) is about to remove the whole or any part of the property from the local limits of the jurisdiction of the Court. Therefore, the most essential requirement of Order 38, Rule 5 is the subjective satisfaction of the Court regarding the requirements mentioned above. Order 38, Rule 5, is a mandatory provision demanding of the Court to satisfy itself first that the defendant is intending to obstruct or delay the execution of the decree that may be passed against him. If the order passed by the Court does not speak or show that the Court has applied its mind to the requirements of Order 38 Rule 5 CPC or if the order passed by the Court below does not show clearly that it has considered the material on record, or if the order does not show that the Court is satisfied that 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 the property, the order would be in violation of Order 38, Rule 5 CPC.18
Order 38, Rule 5 as it stood before the amendment in 1976 would have at the most rendered such order irregular. But, now sub-rule (4) inserted by Section 85(1) of the Act 104 of 1976 reads that if an order of attachment is made without complying with the provisions of sub-rule (1) of Rule 5 of Order 38, such attachment shall be void. Sub-rule (4) has been inserted with a view to see that the Courts do not pass such an extra-ordinary order in a cavalier manner and without satisfying themselves about the requirements of Order 38, Rule 5.
(iii) Simple mention of the apprehension is not sufficient to show that the defendant No.1 was intending to dispose of the properties with a view to obstruct or delay the execution of a decree that may be passed against him. Simple production of the language used in Order 38 Rule 5 will not meet the requirements of Order 38, Rule 5 CPC. The affidavit must state the source of the information or apprehension. Unless the source is disclosed, the Court should not hasten to pass an order under Order 38, Rule 5 CPC."
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12. Taking note of the amendment made to Order 38 Rule 5 by insertion of sub-rule (4) by Act No.104/1976 (w.e.f. 1.3.1977), this Court has further held that while passing the order of attachment before judgment, the Court should bear in mind that any attachment order passed without complying with sub-rule (1) shall be void. Therefore, the Courts, which are armed with vast powers, should acquaint themselves with the amendments and should scrupulously follow the mandatory requirements of law. If the Court, inspite of sub-rule (4) passes an order in a cavalier manner, such an order must be struck down in the interest of administration of justice.
13. In SELVAN M. & ANOTHER VS. VIVEK FINANCE CORPORATION & ANOTHER - 1988 (2) KLJ 215, this Court has held that absence of allegation or assertion in affidavit about removal of property outside jurisdiction of Court or that defendants are likely to do any act which would frustrate plaintiff from 20 realising fruits of decree that may be passed by Court in suit , the plaintiff is not entitled for a prohibitory order.
14. In RAMAN TECH. & PROCESS ENGG. CO. & ANOTHER VS. SOLANKI TRADERS - 2007 (13) SCALE 419, the Apex Court has held that 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 may 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 21 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 of 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 has been further held 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 establishes that the defendant is attempting to remove or dispose of his assets with the intention of defeating the decree that may be passed. It has been further held that even where the 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. 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 22 Rule 5 as a leverage for coercing the defendant to settle the suit claim should be discouraged.
15. This Court in SRI M.R. LAKSHMANAPPA VS. SRI RAMACHANDRA BHAT - ILR 2008 KAR 1158, has held that the object of Order 38 Rule 5 is to prevent the defendant in the suit from defeating realisation of the decree that may ultimately be passed in favour of the plaintiff, either by attempting to dispose or remove from the jurisdiction of the Court, his property. The jurisdiction under Order 38 Rule 5 of CPC is an extraordinary jurisdiction. The power conferred on the Court under the said provision is a drastic and extraordinary power, which should not be exercised mechanically or merely for the asking.
16. In RAJENDRAN & OTHERS VS. SHANKAR SUNDARAM & OTHERS - AIR 2008 SC 1170, the Apex Court has held that the Court while exercising its jurisdiction under Order 23 38 Rule 5 is required to form a prima facie opinion at that stage. It need not go into the correctness or otherwise of all the contentions raised by the parties.
17. From the aforesaid decisions, it is clear that the object of Order 38 Rule 5 is to prevent the decree that may be passed from being rendered infructuous. The power under Order 38 Rule 5 should be exercised sparingly and with utmost caution otherwise it would become the instrument of oppression. It is a drastic power, which may not be granted on a mere assertion by the plaintiff that defendant is attempting to dispose of whole or part of his property or remove whole or any part of his property from the jurisdiction of the Court. Simple production of the language used in Order 38 Rule 5 will not meet the requirements for grant of an order of attachment before judgment. The affidavit must state the source of the information or apprehension. Before exercising the power under this Rule, the Court should be satisfied that there 24 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 made in the plaint and the documents produced in support of 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. 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 said provisions as a leverage for coercing the defendant to settle the suit claim should be discouraged. Where 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 alienation is necessarily to defraud or delay the plaintiff's claim. The Court would not be justified in issuing an order of attachment before judgment merely because it thinks that no harm would be done thereby or the defendant would not be 25 prejudiced. The Court should also bear in mind that any attachment order passed without complying with sub-rule (1) is void. If the Court inspite of sub-rule (4) passes an order in a cavalier manner, such an order must be struck down.
18. Now let us consider as to whether the plaintiff is entitled for an order of attachment before judgment by applying the above principles? As has been noticed above, the contention of the plaintiff is that the defendant had executed an agreement dated 25.6.2007 to sell the suit schedule property in his favour for a sale consideration of Rs.75 lakhs and that as on the date of the execution of the sale agreement, the plaintiff has paid a sum of Rs.47,70,000/- by way of cash and Rs.50,000/- by way of cheque dated 27.6.2007 and another cheque for Rs.1,80,000/- dated 5.7.2007. He has discharged the amount of Rs.12 lakhs borrowed by the defendant from Rajajinagar Co-operative Bank Limited, Rajajinagar. Thus, in all, he has paid a sum of Rs.65 lakhs towards 26 sale consideration. It is further contended that the defendant did not come forward to execute the sale deed or to pay back the advance amount paid by the plaintiff towards purchase of the schedule property. In this behalf, she executed an agreement dated 18.8.2008 wherein she has admitted to pay Rs.53 lakhs, which was taken as advance and Rs.17 lakhs as liquidated damages, which includes a sum of Rs.12 lakhs paid by the plaintiff to clear her loan amount and another sum of Rs.5 lakhs as agreed by the agreement dated 25.6.2007. According to the plaintiff, the defendant in all is liable to pay a sum of Rs.1,08,61,900/- inclusive of interest when he claimed by issuing a legal notice dated 10.6.2010. However, he filed a suit for recovery of Rs.70 lakhs along with interest at 18% per annum from 18.8.2008. It is surprising to note that when the defendant is due in a sum of Rs.1,08,61,900/- as on 10.6.2010, the suit has been filed for recovery of Rs.70 lakhs with interest at 18% per annum from 18.8.2008. The plaint allegations have been refuted by the defendant. It is her case that the defendant is running 27 a finance business without obtaining a licence from the competent authority. She is running a ladies hostel at Malleshwaram in the suit schedule property. She had availed financial assistance of Rs.2,50,000/- for purchasing certain equipments to the hostel. The plaintiff has lent a sum of Rs.2,30,000/- by way of two cheques (i.e. Rs.50,000/- by way of cheque dated 27.6.2007 and Rs.1,80,000/- by way of cheque dated 5.7.2007) on the condition that she has to pay interest at 2% per annum. She has peen paying interest at the rate of Rs.4,600/- per month by way of cash. On 22.11.2007, she again availed financial assistance of Rs.9 lakhs from the plaintiff. The plaintiff has paid the said sum by way of three cheques dated 24.11.2007 for Rs.3 lakhs each. The plaintiff has taken the title deeds of the property in question as security for discharge of the debt. She has paid Rs.6,50,000/- to the plaintiff by way of transfer of money from her Savings Bank Account on 20.4.2009. She is only liable to pay a sum of Rs.4 lakhs to the plaintiff. It is further contended that on 3.3.2010, the plaintiff 28 demanded payment of balance of Rs.4 lakhs. Because of the financial difficulties, she could not repay the said amount. That is why on 5.5.2010, the plaintiff came to the house of the defendant with a typed stamp paper of Rs.100/-. However, he could not get her signature on the said document. On 13.5.2010, he forcibly took her signature on the agreement. She has filed a private complaint against the plaintiff on 24.5.2010 before the 7 th Additional Chief Metropolitan Magistrate, Bangalore in this regard and that FIR has been registered against him under Sections 323, 324, 325, 418, 420 and 506(B) of the IPC. In her counter, she has stated that she has no intention of selling the suit schedule property in favour of the third parties as she is running a ladies hostel in the said property. The defendant has given the particulars of the payments made by her to the plaintiff towards the discharge of the debt. It is clear that prima facie, the plaintiff has not made out a case for grant of an order of attachment before judgment. Merely because the defendant has sold a portion of the property in the ground floor, by itself is not a 29 ground for grant of an order of attachment before judgment. It is no doubt true that in the affidavit filed in support of the application, the plaintiff has stated that the defendant is attempting to dispose of the property in question. That by itself is not sufficient for grant of an order of injunction. He has not stated in the affidavit the source of information or apprehension. The plaintiff has not established that the defendant is attempting to remove or dispose of the suit schedule property with an intention to defeat the decree that may be passed. I am of the view that the trial Court on consideration of the facts and circumstances of the case has rightly rejected the application. I do not find any error in the order. Writ petition is accordingly dismissed. The trial Court is directed to dispose of the suit in accordance with law without being influenced by the observations made in the course of this order. No costs.
Sd/-
JUDGE.
BMM/-