Thursday, 17 October 2013

Court has power to direct defendant to disclose his property for attachment before judgment

Insofar as the objection of the learned Counsel regarding the orders sought by the plaintiff for direction to the defendants to disclose their assets is concerned, it is clear from the provisions of Sub-rule 2 of Rule 5 that the Court under that Rule is required to make, on being satisfied, an order against the defendants for furnishing securities, and in case the defendant fails to furnish the security within the period specified by the Court, then the Court can direct the defendant to place at the disposal of the suit the property that may be necessary or adequate for securing the claim of the plaintiff. Perusal of the provisions of Sub-rule (2) of Rule 5 of Order 38 also indicates that there is power vested in the Court to permit the plaintiffs to make an application for attachment before judgment without specifying the property in relation to which attachment is sought by the plaintiffs. Thus, provisions of Sub-rule (2) of Rule 5 of Order 38 envisage the case where the plaintiff does not know as to in relation to which property of the defendant, attachment is to be sought. In such a case, therefore, it is the Court, which will have to direct the defendant to disclose his property so that the Court can order its attachment. In my opinion, therefore, there is sufficient power in the Court to direct the defendants to disclose the assets.1
Civil Procedure Code, 1908 - Order 38, Rule 5(2) - Attachment before judgment - Application for attachment before judgment - Property sought to be attached not specified in the application - Court has power to direct defendant to disclose his property for attachment.1
Citation;2001(3)ALLMR699, 2002(104)BOMLR273, 2001(4)MhLj3531

Bombay High Court
Marine Container Services (I) ... vs Rajesh Dhirajlal Vora on 21 March, 2001
Equivalent citations: (2002) 104 BOMLR 273
Author: D Deshmukh
Bench: D Deshmukh



1. Suit No. 3844 of 1999 is filed by Marine Container Services (I) Pvt. Ltd., M/s. Seagate Trading and Investment (Pvt.) Ltd. M/s. Seagold Finance and Investment (Services) Pvt. Ltd., and M/s. Omega International Container against one Dhirajlal Hakimchand Vora for a money decree in the amount of Rs. 4,73,00,000/- with interest.
Suit No. 3828 of 1999 is filed by the same plaintiffs against Rajesh Dhirajlal Vora for recovery of the identical amount and Suit No. 3845 of 1999 is filed by the same plaintiffs against Sunayana Rajesh Vora for a decree in the identical amount. According to the plaintiffs, the plaintiffs had advanced loans to the Companies and partnerships, which are controlled by the three defendants, who belongs to the same family and to secure those loans these three defendants had executed personal guarantee in favour of the plaintiffs.
2. These suits have been filed on the basis of those guarantees for recovery of the amount of loans. In these three suits, the plaintiff have taken out motions for attachment of the properties of the defendants as also for disclosure of the assets. One of the Companies controlled by the defendants namely M/s. Rushabh Precision Bearing Ltd. is presently before the B.I.F.R., loan in the amount of Rs. 2,65,00,000/- has been advanced by the plaintiffs. That sum is included in the sum in which the decree is sought in these suits. Therefore, firstly, objection was raised on behalf of the defendants that because part of the claim made in these suits relates to the loan advanced by the plaintiffs to a Company, which is before the B.I.F.R., in view of the provisions of Section 22 of the S.I.C.A. Act, present proceedings have to be stayed and cannot be proceeded further.
3. This position was disputed by the learned Counsel appearing for the plaintiffs. According to him, despite pendency of the proceedings before the B.I.F.R. against one of the Companies, this Court has the jurisdiction to consider this Notice of Motion and the pendency of the proceedings before the B.I.F.R. does not oust the jurisdiction of this Court to hear these Notices of Motion.
4. In my opinion, however, it is not necessary for this Court to go into the question whether because proceedings in relation to one of the Companies to which loan has been advanced are pending before the B.I.F.R., whether these proceedings in this suit can go on or not? Because, according to me, even if it is assumed that proceedings in these suits for recovery, insofar as, they relate to the recovery of the amount against the Company which is before the B.I.F.R. cannot be continued, still the amounts which have been advanced to the other Companies and the partnership firm excluding the amount of loan that has been advanced to the Company which is before the B.I.F.R. is substantial and there can be no dispute that those proceedings for securing the claim of the plaintiffs in relation to the loan advanced to the other Company and partnership firm can definitely go on before the Court. The plaintiffs, in these suits have claimed a decree in the amount of Rs. 4,73,00,000/-, which is the principal amount together with interest and the principal amount of loan against the Company, which is before the B.I.F.R. is to the tune of Rs. 2,65,00,000/-. Therefore, even the balance amount of loan, which has been advanced to the other Company and the partnership firm being substantial, in my opinion, these Notices of Motion can be considered by the Court to find out whether the plaintiffs are entitled to the order of attachment before judgment. Insofar as the financial position of the defendants is concerned, in the suits, which have been filed by the plaintiffs against the Companies and the partnership firm, which are controlled by the defendants for recovery of amounts of loan advanced to them, 1 have found that the financial position of these concerns is in doldrums, that during the pendency of the proceedings they have transferred the properties and therefore, I have already made an order for attachment before judgment in those proceedings. In my opinion, therefore, as out of the two Companies which are controlled by the plaintiffs, one is before the B.I.F.R., against the other Company a company petition has been admitted by this Court and that order has been maintained upto the Supreme Court, however, making of an order of attachment before judgment is opposed by the defendants on the ground that the guarantees from the defendants have been procured by the plaintiffs by coercion. In support of this submission, he relies on a declaration on affidavit made by Deerajlal dated 7.5.1996 and by Rajesh and Sunayana dated 26.11.1996, wherein they have declared on oath that the guarantees were obtained by the Director of the plaintiffs from them under coercion. It is pertinent to note here that though the guarantees are of the year 1996, and these declarations on affidavit are made in the year 1996, these declarations saw light of the day for the first time when in September, 1998 the plaintiffs filed in this Court Civil Suit No. 5008 of 1998. Before that no report was made to the police. No protest was made with the plaintiffs that bank guarantees have been obtained from these defendants by coercion. Therefore, prima facie, it appears that the stand that the guarantees were obtained by coercion is an afterthought and at least at this stage cannot be believed. The learned Counsel appearing for the defendants further submitted that one of the properties in relation to which an order of attachment before judgment is sought namely a tenanted premises at Edena building cannot be attached because they are merely tenancy rights and the tenancy rights cannot be transferred without the consent of the landlord. The learned Counsel, opposed the Notices of Motion taken out by the plaintiffs for directions to the defendants to disclose their assets. The learned Counsel submits that in Order 21, which relates to the execution, there is provision made empowering the Court to issue directions to the judgment debtor to disclose his assets. However, no provision is to be found in Order 38, which relates to attachment before judgment and therefore, according to the learned Counsel a direction for disclosure of the assets cannot be made against the defendants. Insofar as the motion for attachment before judgment is concerned, the learned Counsel for the defendants also submitted that as the documents of guarantee are not properly stamped, they are not admissible in evidence and therefore, that cannot be relied on by the plaintiffs even at this stage for seeking an order of attachment before judgment.
6. So far as the objection of the learned Counsel regarding admissibility of the document of guarantee in evidence is concerned, in my opinion at the interim stage the document of guarantee can be relied on by the plaintiffs for seeking interim reliefs from the Court. If the document is found to be insufficiently stamped, when the document is produced for being admitted in evidence, the Court can impound the document and recover the required stamp duty. At this stage, however, as the document is on stamp paper, it cannot be brushed aside on the ground that it is insufficiently stamped and the Court cannot decline interim relief or Court cannot at the stage of considering the application for interim relief be stopped in its track and unless it first considers the question whether the document is sufficiently stamped or not. It is pointed out by the Counsel for the plaintiff that the documents are properly stamped.
Insofar as the objection of the learned Counsel regarding the orders sought by the plaintiff for direction to the defendants to disclose their assets is concerned, it is clear from the provisions of Sub-rule 2 of Rule 5 that the Court under that Rule is required to make, on being satisfied, an order against the defendants for furnishing securities, and in case the defendant fails to furnish the security within the period specified by the Court, then the Court can direct the defendant to place at the disposal of the suit the property that may be necessary or adequate for securing the claim of the plaintiff. Perusal of the provisions of Sub-rule (2) of Rule 5 of Order 38 also indicates that there is power vested in the Court to permit the plaintiffs to make an application for attachment before judgment without specifying the property in relation to which attachment is sought by the plaintiffs. Thus, provisions of Sub-rule (2) of Rule 5 of Order 38 envisage the case where the plaintiff does not know as to in relation to which property of the defendant, attachment is to be sought. In such a case, therefore, it is the Court, which will have to direct the defendant to disclose his property so that the Court can order its attachment. In my opinion, therefore, there is sufficient power in the Court to direct the defendants to disclose the assets.
7. Taking over all view of the matter, in my opinion, following order would meet ends of justice.
ORDER
Defendants, Dheeraj Vora, Rajesh Vora and Sunayana Vora, may jointly or even independently furnish the security to the satisfaction of the Prothonotary and Senior Master in this Court in the amount of Rs. 2,08,00,000/- (Rupees two Crores Eight Lakh only) within a period of eight weeks from today. In case, the defendants comply with this order and furnish the security as directed above, the plaintiffs shall be at liberty to take out a Notice of Motion seeking attachment before judgment against the defendants in relation to their guarantees as against the loan advanced by the plaintiffs to Rushabh Precision Bearing Ltd. It is clarified that the question of maintainability of such proceedings against the defendants in relation to the loan advanced to Rushabh Precision Bearing Ltd. is not decided by this order and is left open.
In case, the plaintiffs do not furnish the securities as directed above, they are directed to disclose their assets on affidavit to this Court. On such assets being declared, the plaintiffs shall be at liberty to take out appropriate proceedings for attachment before judgment of all or any of such assets. In case, the defendants neither furnish securities within the aforesaid period nor disclose their assets as directed above within the aforesaid period, then the right, title and interest of the defendants in the residential flat situated at flat No. 151/B, Maker Towers, G.D. Somani Marg, Cuffe Parade, Mumbai-5 shall stand attached, as also the right, title and interest of the defendants in the office premises at Edena Building, 9 Queens Road, Mumbai-400020 shall also stand attached, as also the right, title and interest of Rajesh Vora in the office premises at 4, Bibijan Street, Fida Mansion, Mumbai-400003 and the right, title and interest of Rajesh Vora in the office premises at 51, Cutch Castle, Opera House, Mumbai-400004, shall also stand attached.
Notices of motion are disposed of.
Parties to act on simple copy of the order duly authenticated by the Associate/Personal Secretary of the Court.
Certified copy expedited.
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