Andhra HC (Pre-Telangana)
Ajay Agarwal And Ors. vs Nagarjuna Finance Limited on 5 April, 2002
Equivalent citations: 2002(3)ALD708, 2002(3)ALT564
Author: G. Rohini
Bench: G. Rohini
ORDER G. Rohini, J.
1. This civil revision petition is directed against the order dated 6-9-2000 in IA No. 1837 of 2000 in OP No. 1590 of 2000 on the file of the Court of the III Additional Chief Judge, City Civil Court, Hyderabad.
2. The revision petitioners who are the respondents in OP No. 1590 of 2000 as well as in IA No. 1837 of 2000 are assailing the order of the Court below made under Order 38, Rule 5 of CPC directing conditional attachment of their immovable properties.
3. The brief facts of the case are as follows:
OP No. 1590 of 2000 has been filed by the respondent herein under Section 9(2) of the Arbitration and Conciliation Act, 1986 against the revision petitioners seeking a direction to them to furnish security for a sum of Rs. 1,49,95,193.50 Ps, failing which to attach the schedule mentioned properties pending disposal of the arbitration proceedings to be initiated. Along with OP No. 1590 of 2000, IA No. 1837 of 2000 has been filed under Order 38, Rule 5 of CPC seeking attachment of the schedule mentioned properties belonging to the revision petitioners.
4. In the affidavit filed in support of the said petition, it has been stated by the petitioner-Company that the respondents having availed financial assistance, committed default in payment of instalments and a sum of Rs. 1,49,95,193-50 Ps is due to the petitioner-Company. It is also alleged that in the first week of May, 2000 when an officer of the petitioner-Company visited the office of the respondents, the respondent Nos.3, 5 and 6 were found negotiating with some third parties with an intention to dispose of their immovable property. In the circumstances the petitioner-Company contended that if the respondents succeed in their attempt, the petitioner-Company may not realise any amount in the event of granting a decree in its favour, and therefore, sought attachment before judgment under Order 38, Rule 5 of CPC. In support of its contention, the petitioner-Company has also filed a third party affidavit sworn to by the officer of the Company who was said to have visited the office of the respondents in the last week of May, 2000.
5. On the basis of the said material, the Court below made an order dated 6-9-2000, directing conditional attachment of the immovable properties of the respondents 3, 5 and 6. Aggrieved by the said order the present civil revision petition has been filed by the respondents 3, 5 and 6 in IA No. 1837 of 2000 as well as in the main OP No. 1590 of 2000.
6. Heard the learned Counsel for the revision petitioners who submits that the order of the Court below directing conditional attachment is erroneous and cannot be sustained since the impugned order was not preceded by a show-cause notice as mandated under Order 38, Rule 5(1) of CPC. The learned Counsel further submits that since the respondents 1 and 2 Companies, in the main OP No. 1590 of 2000, are declared as sick industries, the OP itself is not maintainable under Section 22 of the Sick Industrial Company (Special Provisions) Act, 1985.
7. On the other hand the learned Counsel for the respondent contends that the order under revision is in accordance with law and it does not warrant any interference by this Court.
8. The order under revision dated 6-9-2000 runs as follows:
"Heard. Perused the affidavit and the material available on record and the third party affidavit. In the circumstances stated in the affidavit, if attachment is not ordered, the petitioner is going to sustain great loss and hence it is a fit case to dispense with notice.
Issue interim conditional attachment and urgent notice. Time for furnishing security: 48 hours. Call on 21-9-2000"
9. The said order has been served on the revision petitioners through the bailiff in Form No. 5 of Appendix-F of the First Scheduled to CPC.
10. According to the revision petitioners the said Form No. 5 was affixed on the door of the house of the third petitioner on the evening of 18-9-2000. It reads as follows:
"Whereas the petitioner/petitioner has been proved to the satisfaction of the Court that the respondents 3, 5 and 6 were negotiating with some third parties with an intention to dispose off their movable properties to avoid and delay the execution of the decree that may be passed against them, these are to command you to call upon the respondents Nos.3, 5 and 6 to furnish security for the sum of Rs. 1,42,57,071.00 within 48 hours from the date of receipt of this order to produce and place at the disposal of the Court as and when required or the portion of the value as may be sufficient to satisfy and decree that may be passed against them, or to appear and show-cause why they shall not furnish such security within the time fixed by the Court, and on failure to do so; it is ordered that you the respondent Nos.3, 5 and 6 be, and you are hereby prohibited and restrained until further orders of this Court from transferring or charging the properties described in the schedule by sale, gift or otherwise and that all persons be, and that they are hereby prohibited and restrained from receiving the same by purchase, gift or otherwise.
IA stands posted to 21-9-2000.
11. It is the said order, which is questioned in the present revision petition. The learned Counsel for the petitioners vehemently contends that the conditional attachment ordered by the Court below, without issuing any prior notice, is not sustainable and is in violation of the provisions of Rule 5, Order 38 of CPC.
12. I do not find any merit in the contentions raised by the learned Counsel for the petitioners. Under Sub-rule (3) of Rule 5 of Order 38 of CPC the Court is empowered to order conditional attachment by calling upon the defendant to furnish security or to show-cause why he should not furnish security within the time prescribed thereunder failing which the schedule property will be attached by the bailiff. Thus in appropriate cases the Court while issuing a show-cause notice as prescribed under Rule 5(1) of Order 38 CPC can also direct the bailiff to attach the schedule property in the event of the failure of the defendant either to furnish security as ordered or to show-cause why he should not furnish security within the time prescribed. No prior notice is necessary to the defendant while making such an order of conditional attachment under Rule 5(3) of Order 38 of CPC. However it is always open to the defendant to seek withdrawal of such conditional attachment as prescribed under Rule 6 of Order 38 CPC.
13. A Division Bench of this Court in Y. Chandra Reddy v. N. Chandramouli Naidu, , clarified the scope of the order of conditional attachment under Order 38, Rule 5(3) of CPC. This Court held that, the Court by reason of its power under Order XXXVIII, Rule 5(3) can order conditional attachment 'also' along with a show-cause notice to be issued under Order XXXVIII, Rule 5(1) of CPC. The Court can adopt the first part of Form No. 5, and in such a event, it may be necessary for the Court to hear the defendant before issuing such a notice. It is also open the Court to adopt both the first and the second parts of Form No. 5, without issuing notice and direct the Bailiff to attach the property straight-away, if the defendant fails to comply with the first part of the Form. In the latter case, the order will not be one of 'conditional attachment'. However, if the defendant conies to Court and satisfies the Court, it will be open to the Court to withdraw such conditional attachment under Order XXXVIII, Rule 6(2). The above interpretation of the provisions seems to us to be in harmony with the intention of the Legislature. In any event, Sub-rule (4) of Order XXXVIII, Rule 5 does not come into play at the stage of ordering conditional attachment. No order of conditional attachment can be declared as valid on account of the Court not following the procedure under Order XXXVIIII Rule 5(1) CPC.
14. The Division Bench also observed: "the withdrawal of attachment under Order XXXVIII, Rule 6 (2) can only be of an order of conditional attachment granted under Order XXXVIII, Rule 5 (3). In fact, if there could be no conditional order of attachment without notice to the defendant-there would be no occasion for the defendant to invoke Order XXXVIII, Rule 6(2) for withdrawal of the attachment. In our view, Order XXXVIII, Rule 6(2) deals with withdrawal of conditional orders' of attachment. The circumstances under which Sub-rule (2) of Order XXXVIII, Rule 6 would come into play would be, where the Court had previously exercised the power under Sub-rule (3) of Order XXXVIII, Rule 5 to order conditional attachment, either of movable or immovable property, in addition to directing the defendant to furnish security or show-cause why he should not furnish security."
15. Thus is clear that under Order 38, Rule 5(3) of CPC the Court has got ample power to direct conditional attachment before the judgment. No prior notice is necessary at that stage and Rule 5(4) is not attracted to a conditional attachment made under Rule 5(3).
16. From a reading of the order under revision, it can be seen that the Court below on the basis of the material on record, recorded its satisfaction that the respondents therein are making attempts to dispose of the schedule mentioned property in favour of third parties and it is necessary to order conditional attachment. The Court below while calling upon the respondents to furnish security within 48 hours from the date of receipt of the order also provided an opportunity to them to appear and show-cause why they shall not furnish any security within the time so fixed by the Court. In the event of their failure the Court directed that the respondents be prohibited from transferring or charging the schedule mentioned immovable properties.
17. The said order directing conditional attachment is in compliance with the provisions of Order 38, Rule 5 (3) of CPC and does not suffer from any illegality or material irregularity in exercise of jurisdiction conferred under law.
18. According to the revision petitioners the impugned order was served on them on 18-9-2000. The proper course would be to approach the Court below within the time prescribed thereunder and bring to the notice of the Court the circumstances under which they cannot be made liable to furnish security and also their objections as to the maintainability of the main OP., in which event the Court below would have passed an order on merits. Instead they approached this Court on 20-9-2000, whereas the IA itself was posted to 21-9-2000 in the lower Court.
19. As expressed above the order under revision is in accordance with law and does not warrant any interference in this revision petition.
20. In the circumstances, without expressing any opinion on the merits of the case, the civil revision petition is disposed of permitting the revision petitioners to appear before the Court below and to file necessary counter in IA No. 1837 of 2000 within two weeks from today and thereupon the Court below shall pass appropriate orders after hearing both the parties. The status quo, with regard to schedule mentioned immovable properties, shall be maintained for a period of three weeks from today.
21. The civil revision petition is accordingly disposed of. No costs.