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Premraj Mundra Vs. Md. Maneck Gazi and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKolkata High Court
Decided On
Case NumberSuit No. 3517 of 1950
Judge
Reported inAIR1951Cal156
ActsCode of Civil Procedure (CPC) , 1908 - Order 38, Rules 5 and 6
AppellantPremraj Mundra
RespondentMd. Maneck Gazi and ors.
Appellant AdvocateM. Horra, Adv.
Respondent AdvocateP. Burman, Adv.
DispositionApplication allowed
Cases ReferredAmritsar v. Karamchand Thapar
Excerpt:
- sinha, j.1.this is an application under the provisions of order 38, rules 5 & 6, civil p. c., for an order that the defts do furnish security for the pltf.'s claim, & in default, the properties set out in the schedule annexed to the petition, belonging to the defts., be attached before judgment. there is a further prayer for a receiver, but this is not pressed.2. the suit is for goods sold & delivered by the pltf. to the defts. the sale is evidenced by a document described as a 'chalan' in the petition, the actual document being headed as a 'credit memo.' a copy of this document has been annexed to the petition. this 'credit memo' states the name of the purchaser as muhammad maneck gazi. it then gives the description of the goods, together with its rate & prices. it contains an.....
Judgment:

Sinha, J.

1.This is an application under the provisions of Order 38, Rules 5 & 6, Civil P. C., for an order that the defts do furnish security for the pltf.'s claim, & in default, the properties set out in the schedule annexed to the petition, belonging to the defts., be attached before judgment. There is a further prayer for a Receiver, but this is not pressed.

2. The suit is for goods sold & delivered by the pltf. to the defts. The sale is evidenced by a document described as a 'Chalan' in the petition, the actual document being headed as a 'Credit Memo.' A copy of this document has been annexed to the petition. This 'Credit Memo' states the name of the purchaser as Muhammad Maneck Gazi. It then gives the description of the goods, together with its rate & prices. It contains an endorsement at the bottom as follows: 'We certify the above prices is/are correct & no overcharge has been made.' It is signed by the purchaser namely Maneck Gazi. The document also contains the salesman's signature. The petitioner states that the defts. made payments from time to time & returned a portion of the goods & there is now due a sum of Rs. 7,927-10-0 from the defts. which they have failed to pay. It is stated that the defts. are Muhammadan businessmen & they used to carry on a small business at their residence at village Raghbkati, Basirhat, in the district of 24 Parganas. The village is just on the border of Hindusthan & Pakisthan. It is stated that they have stopped their business at Raghabkati & have started a small business in Pakisthan. It is further alleged that the defts. approached one Shyamapada Upadhyay, a Zemindar & land-holder, residing at village Sarapool, in Basirhat, very near the village of Raghabkati, a few weeks ago, & requested him to purchase the immovable properties belonging to the defts., particulars whereof are set out in the petition, for a sum of Rs. 8000., I have before me an affidavit of Shyamapada, Upadhyay, & he not only confirms that the defts. wished to sell the properties, but he also says that they told him that they wished to sell away their properties, & go to Pakisthan, to settle down there. The petitioner alleges that the defts. are trying to dispose of their properties with the intention of obstructing & delaying the execution of any decree that may be passed against them.

3. Defendant 1 has filed an affidavit in which he has taken a very curious defence to the suit. He says that he lent his godown to the petitioner for storing his goods, & in view of that fact, the petitioner used to get credit vouchers signed by him. He says that he signed the vouchers as witnessing the quantity of articles stored. He concludes by saying that nothing is due from him; on the contrary he is to get commission for storing the articles.

4. In view of the 'Credit Memo' signed by him as mentioned hereinbefore, this story sounds incredible. It is true that at this stage I cannot come to a final decision as to the merits of the defence, but I am entitled to consider the evidence, as has been presented before me, to discover, whether the defence is a bona fide one, or whether the defts. have any reasonable chance of success at the trial. Further, as I will presently explain, I have to come to a decision as to the intention of the defts., & as to whether I should believe the case made by them, or that of the petitioner & his witnesses. The learned Advocate appearing on behalf of the defts. stresses the point that I cannot at this stage go into the question of ' the merits of the suit at all. He further states that no case is made out to show that the defts. were transferring their properties with an intention to delay or defeat the pltf.'s claim. It is, therefore, necessary for me to recapitulate the law on the subject.

5. The relevant portion of Order 38, Rules 5 & 6, Civil P. C. runs as follows :

5. (1) 'Where at any stage of a suit, the Court is satisfied by affidavit or otherwise, that the deft. 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 the deft., within a time to be fixed by it, either to furnish security, in such sum as may be specified by the order, to produce & place at the disposal of the Court, when required, the said property or the value of the same, or such portion thereof as may be sufficient to satisfy the decree, or to appear & show cause why he should not furnish security. . . .

6. (1) Where the deft. fails to show cause why he should not furnish security or fails to furnish the security required, within the time fixed by the Court, the Court may order that the property specified, or such portion thereof as appears sufficient to satisfy any decree which may be passed in the suit, be attached....'

The necessity for orders under the rule arises almost daily among litigants. As will be found from a plain reading of this rule, the mere disposal or removal by the deft. of any of his property is not sufficient, such disposal or removal must be with the intention to obstruct or delay the execution of any decree that may be passed against the deft. It is not always easy to establish the intention of the debtor, & the cases must necessarily depend on their own facts. No hard or fast rule has ever been found as to what facts would be sufficient to entitle the creditor to get an order under this rule. It has been rightly pointed out that the powers given under this rule are wide, & unless cautiously applied, might become oppressive to the defts. It has also been pointed out that a wealthy pltf. might abuse the provisions of this rule into paralysing a poor deft., by freezing all his assets. It has also been stated quite rightly that just because the pltf. has filed a suit, the deft. is under no obligation to stop all dealings with his properties. On the other hand, it has to be borne in mind that the creditor is seldom in a position, immediately on the filing of a suit, to establish by conclusive evidence that the deft. was about to dispose of his properties with the intention of delaying or obstructing his claim. The unfortunate creditor who cannot get Ma claim paid is entitled to as much protection as the debtor. Legal proceedings in this country are still expensive & protracted. The pltf. often finds that after a long & expensive litigation, he gets a decree which is worse than useless, as in the meantime the deft. has got rid of all his properties. In my opinion, therefore, although the provisions of this rule are to be applied with caution, if they are applied too strictly, the pltf. can only obtain an order under conditions which are theoretically possible, but which in practice will be impossible to demonstrate to the hilt. I think that the Court should follow the golden mean & come to a conclusion on the facts & circumstances of each case as to whether a reasonable man should apprehend that what the deft. was doing was with the intention of defeating the pltf's. claim. A certain amount of inference from the facts disclosed is inescapable.

6. I shall now proceed to deal with the authorities on the point. In the case of Shoshee Shekhoreswar Roy v. Haro Gobind Bose, 13 C. L. R. 356, the facts were as follows: The deft. acted as a Manager of the pltf. for some time. As security, he deposited in the Collectorate a sum of Rs. 15,000. He then got another appointment under the Court of Wards, & was desirous of depositing a part of this very sum as security, & the Collector had no objection. The pltf. applied for an order under Section 483 of the Code, which corresponds to Order 38 Rule 5 of the present Code. Garth C. J. stated as follows:

''We consider on the contrary that there was no ground whatever for the application. We quite agree with the Bombay High Court that the powers given to the Courts under this section should be exercised sparingly & with the utmost caution. A Civil Court should be thoroughly satisfied before it proceeds under that section, that the deft. is really disposing of his property with intent to obstruct or delay the execution of any decree that may be passed against him. We find here not the slightest; pretence for any such supposition .... what possible reason have we for supposing that the deft. is doing this for the purpose of obstructing or delaying the execution of any decree that may be passed against him?

If Courts were to use this section in the manner contended by the pltf., they would become the instrument of the greatest oppression. ...'

In Jai Prakash Narain Singh v. Basanta Kumari Debi, 15 I. C. 604 Mookerji J. agreed with this decision of Garth J., & stated as follows:

'The Court should be fully satisfied before it proceeds under that section, that the deft. is really disposing of his properties with the intent to obstruct or delay the execution of any decree that may be passed against him.'

In this case, the pltf. was the mortgagee & his allegation was that the mortgaged property would not be sufficient, & that unless an order for attachment before judgment was granted, the deft. would dispose of the whole of their property. The affidavit in support was of the vaguest character, being verified true to information & belief, the source of information or the grounds for belief not being disclosed. The learned Subordinate Judge stated that there would be no 'Harm' in keeping the properties under attachment. Mookerjee J. pointed out that this view was manifestly wrong & could not be sustained. He proceeded to say as follows:

'An attachment practically takes away the power of alienation & such a restriction on the exercise of the undoubted rights of ownership ought not to be imposed upon an individual except upon clear & convincing proof that the order is needed for the protection of the pltf.'

In the case of Manmathanath v. Nagendranath, A. I. R. (13) 1926 Cal 855, the pltf. wanted to have an attachment before judgment on the ground that three or four years previously, the deft. & his father had borrowed a sum of Rs. 25,000 & mortgaged their property. Cuming J. stated as follows:

'It may be here pointed out that the mere fact that the deft. in the past mortgaged his property or otherwise disposed of it would not be in itself a sufficient ground for an order under Order 38, Rule 6. What we are concerned with is the present conduct of the deft. & the Court must be satisfied that he is now about to dispose of his property with the intention of delaying & obstructing any decree that the Court might pass against him.' In this case also, the relevant paras. of the affidavits were verified true according to information, enquiry & belief, but the sources or grounds thereof were not disclosed.

7. In the case of Sourendra Nath v. Sm. Tarubala Dasi, 81 C. W. N. 432, the deft. had admittedly vast properties. She had been running into debts, but the amount of debts compared to the amount of her properties did not amount to very much. Moorkerji J. stated as follows:

'The nett result of that then is that there are the aforesaid claims on the appellant's estate, an attachment in respect of Rs. 50,000 on one of the Calcutta properties, & that the appellants are about to mortgage their property for Rs. 50,000 which it is said is due to one of the creditors. These facts taken together & in view of the value of the appellant's properties in my opinion fall far short of establishing that the defts. are about to dispose of their properties with intent to obstruct or delay the execution of any decree that the pltf. may obtain. An attempt to secure debts already incurred by executing a mortgage in respect of them does not necessarily indicate an intention to obstruct or delay the execution of a decree which has not yet been passed & such a mortgage will not in a case when the value of the properties far exceeds the amount of the said debts as well as the claim in the suit, necessarily obstruct or delay the execution, for the pltf. will be able to put up the properties to sale subject to the mortgage that may be executed & realise the decretal dues.'

In the case of Sikharja Nath v. Janki Nath, 36 C. W. N. 746, an order for attachment was made by the Court below because the mortgagors were obstructing the mortgage sale, & properties subject to the mortgage were being allowed to get into arrears for Govt. revenue. It was alleged that there was gross neglect of the debtors themselves which would lead to great obstacle in the way of the pltfs. realising their dues, Rankin C.J. stated as follows :

'You cannot get an order under Order 38 for gross neglect ........ In the same way he (meaning the lower Court) illustrates as a typical instance in support of the applicant's allegation the case of a property sold in execution of a decree by the Khulna Loan Company, as if the fact that the man is suffering . an execution sale is the same thing as voluntarily disposing of his property with a fraudulent intention ..... .It seems to me almost difficult on the affidavits to pretend that there is any case under Order 38 ...... While one quite sympathises with the laudable desire of the mortgagee trying to realise their dues by attaching other properties of the judgment-debtor, that is certainly not the object of the provisions of Order 38.'

In the case of Durgadas v. Nalinchandra, 38 C. W. N. 771 the pltf. alleged that the defts, were trying to dispose of their properties set out in a schedule to the plaint. This statement was based partly on information & partly on belief, but the source of information as well as the grounds of belief were not stated. No overt act towards the alienation of the properties was even suggested, such for example, negotiations or offers for sale, & there was no proof that the properties were in danger of alienation. Most of the title deeds of the properties were in the possession of the pltfs. Lort-Williams J. stated as follows :

'But the Court must be thoroughly satisfied & there is nothing in these documents to show that the defts. ever had any intention of obstructing or delaying the execution of any decree which might be passed against them or with such intent were about to dispose of their properties. Mere vague allegations are not sufficient ..... & the mere fact that a deft. has in the past mortgaged or disposed of his properties is not a sufficient ground for levying an attachment. There must be a present intention ...... Moreover, the Court must be satisfied that interference is necessary to prevent injury which is irreparable, & that the mischief or inconvenience which is likely to arise in consequence of withholding the relief, will be greater than that from granting it ....... Finally, neither injunction nor attachment ought to be lightly granted. It would be a serious thing if persons in possession were restrained from making use of the property merely because a suit has been instituted about it. It is only where it is essential that property should be kept in its existing condition, that the Court should interfere.'

8. In the case of Nowroji Pudumjee v. Deccan Bank Ltd., A. I. R. (8) 1921 Bom. 69, the pltfs., were voluntary liquidators of the Deccan Bank, & filed the suit against the defts. to recover losses incurred by the Bank owing to the alleged misconduct & negligence of the deft. McLeod C. J. said as follows :

'Before an order of attachment before judgment can be made, the Court must be satisfied by affidavit or otherwise that the deft., 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 his property. It is not disputed that deft. 1 had agreed to sell two items of his immoveable properties, in the Poona district, but merely because he had attempted to sell some of his immovable properties, while proceedings against him are pending, it does not follow that he is disposing of the property with intent to obstruct or delay the execution of any decree that may be passed in the suit ....... It may be quite possible that the deft. had an intention to defraud the pltf. But there is nothing in the mere agreement to sell this portion of the first deft.'s property from which it can be presumed that he actually had that intention. A man is not debarred from dealing with his property because a suit has been filed against him. Otherwise in every case in which a suit is brought against a man if during the pendency of the proceedings he sells some of his properties that would be at once a sufficient ground to satisfy the Court that he is disposing of his property with intent to defraud the pltf. Clearly there must be additional circumstances before the Court can be satisfied that such an intention exists.'

The learned Judge held that the evidence of certain sales effected by the first deft. in previous years, in order to pay off certain defts, which had been incurred previous to the transaction in suit, were not sufficient evidence to warrant an attachment before judgment. The learned Judge further stated that there had been a considerable rise in the value of immoveable property in and around Poona, & it was more reasonable to infer that deft. 1 was taking advantage of the same to dispose of two items of his immoveable properties which admittedly formed a small proportion of his whole property. In the case of Senaji Kapurchand v. Pannaji Devichand, A. I. R. (9) 1922 Bom. 276, it was alleged that deft. 1 was about to recover the dues of his shop as soon as possible & to remove the articles therefrom. As regards defendant 2 it was alleged that he had closed one of the shops, having disposed of all the articles therein & the other shop was almost closed, as its business had dwindled from about two or three lakhs to a very petty sum. The deft. produced ample evidence before the Court that they were substantial merchants, & were not about to dispose of their property with intent to obstruct or delay the execution of any decree that the pltf. might obtain. The pltf. produced no evidence in answer to this, to prove the allegations which he had made & upon which he had obtained an interim order. It was held that an attachment before judgment should not issue. In the case of Chandrika Prasad v. Hiralal, A. I. R. (11) 1924 Pat. :812, an order for attachment was made by the Subordinate Judge upon an affidavit affirmed by the Am-Muktear of one of the pltfs. which was at the vaguest description, without disclosing as to how much was true to knowledge & how much was true to information & belief, nor the sources of informations nor the grounds of belief. Dawson-Miller C. J. stated as follows :

'The power given to the Court to attach a deft.'s property before judgment, is never meant to be exercised lightly or without clear proof of the existence of the mischief aimed at in the rule. To attach a deft.'s property before a deft.'s liability has been established by a decree, may have the effect of seriously embarrassing him in the conduct of the defence, as the properties could not be alienated even for the purpose of putting him in funds for defending the suit, which may eventually prove to have been entirely devoid of merit. Such a power is only given when the Court is satisfied not only that the deft. is about to dispose of his properties or to remove it from the jurisdiction of the Court, but also that his object in so doing is to obstruct or delay the execution of any decree that may be passed against him, and so deprive the pltf., if successful, of the fruits of victory. In the present case, the learned Subordinate Judge has not stated that she does not believe the defts. when they say that they have no intention of alienating any portion of the property under attachment, All he says is that this explanation is not sufficient. It seems to me that once you accept the view that the defts, have no intention of alienating their property, there is no longer any power in the Court to grant an order for attachment before judgment ..... But the learned Judge goes on & gives as reason for passing the order in question, that it is not made out by the defts. how the decree can be realised if steps are not taken to keep the deft.'s property under attachment & therefore, that no attempts have boon made to show low the defts. would be prejudiced if their properties remained under attachment when as they say, there was no intention of parting with it ..... It is perfectly clear that the reason given by the learned Subordinate Judge for ordering an attachment cannot stand.'

9. In the case of Ram Khelawan Singh v. Singheswar Prasad Singh, A. I. R (15) 1928 Pat. 172, the defts. at one stage stated that he was willing to give an undertaking not to transfer the property before the decision of the suit, but ultimately they did not give this undertaking, whereupon the learned Subordinate Judge made an order for attachment before judgment. It was held that the order could not stand because an attachment before judgment could only be made if the conditions laid down under Order 38, Rule 5 had been satisfied. In the case of Bedanand Rai v. Nabakumar Singh, 17 Pat. 89, the pltf. alleged that the deft. had alienated certain items of the properties before the suit, & further stated that the defts. had stated to one Bam Pershad Singh that they were prepared to alienate through collusive & benami sales, the remaining properties. There was no evidence as to what properties the defts. were going to alienate. According to Varma J., an alienation previous to the suit was not enough. The Court had to be satisfied that transfers were going to be made after the suit had been filed. The learned Judge referred to the case of Macgregor v. Cawnpore Sugar Works Ltd., 11 C. L. J. 19, where it was held that it was open to the Court to look to the conduct of the parties immediately before the suit & to examine the surrounding circumstances. This statement of the law was accepted, but it was held that there must be transactions subsequent to the filing of the suit or an apprehension of such transactions taking place. In the Calcutta case just mentioned, -the deft. had been selling his immoveable properties shortly after notice had been given by the pltf. of his claim to enforce the contract. The learned Subordinate Judge drew the inference that the deft. was about to dispose of his properties with an intention to obstruct or delay the execution of the decree which might be passed against him. Mookerji J., stated as follows :

'The facts as they appeared in the proceedings of the Court below, have not been challenged, & we are not prepared to say that the Subordinate Judge has erroneously estimated their bearing. But it has been suggested by the learned Vakil for the appellant that in order to bring the case under Section 483, Civil P. C., it must be proved that the attempt at alienation was made after the commencement of the action. This contention is in our opinion based upon a narrow construction of Section 483. It is open to the Court to look to the conduct of the parties immediately before the suit & to examine also the surrounding circumstances & from these to draw an inference as to whether the deft. is about to dispose of his property & if so with what intention.'

In the case of Ram Sarup v. Chiranjilal (1941) A.M.L.J. 30, the deft. had transferred 80% of his properties & also changed the name of the firm. It was held that an attachment before judgment should issue. In the case of General Coal Supply Co. Ltd., Amritsar v. Karamchand Thapar & Bros. Ltd., Calcutta, A I. R. (21) 1934 Lah. 594, it was proved that the deft. company was in insolvent condition & was rapidly disposing of its assets. An order for attachment was made.

10. From a perusal of all the authorities, I think that the following guiding principles can be deduced :

(1) That an order under Order 38, Rules 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 thereby or that the defts. would not be prejudiced.

(4) That the affidavits in support of the contentions of the applicant, must not be vague, & 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, & the grounds for belief should be stated. (5) That a mere allegation that the deft. was selling off & 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 deft. is being disposed of, no inference can be drawn in the absence of other circumstances that the alienation is necessarily to defraud or delay the pltf'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 pltf.'s claim. It is open to the Court to look to the conduct of the parties immediately before suit, & to examine the surrounding circumstances, & to draw an inference as to whether the deft. is about to dispose of the property, & if so, with what intention. The Court is entitled to consider the nature of the claim & the defence put forward.

(9) The fact that the deft. 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 businesses, the strictest caution is necessary & the mere fact that a business has been closed, or that its turnover has diminished, is not enough.

(11) Where however the deft. starts disposing of his properties one by one, immediately upon getting a notice of the pltf.'s claim, &/or where he had transferred the major portion of his properties shortly prior to the institution of the suit & was in an embarrassed financial condition, these were grounds from which an inference could be legitimately drawn that the object of the deft. was to delay and defeat the pltfs'. claim.

(12) Mere removal of properties outside jurisdiction, is not enough, but where the deft. with notice of the pltfs'. claim, suddenly begins removal of his properties outside the jurisdiction of the appropriate Court, & without any other satisfactory reason, an adverse inference may be drawn against the deft. Where the removal is to a foreign country, the inference is greatly strengthened.

(13) The deft. in a suit is under no liabilty to take any special care in administering his affairs, simply because there is a claim pending against him. Mere negect, 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 pltf's. claim. The Court must however be very cautious about the evidence on these points & not rely on vague allegations.

11. Applying these principles to the facts of this case what do I find The defts. are business men in a small way at Raghabkati, a village on the borders of Hindusthan & Pakisthan. They have closed their business in India. They have started a business in Pakisthan. They approached a prospective purchaser, for sale of their entire property. On this point I have the affidavit of the actual person to whom the proposal was made. As against this, deft. 1 makes a mere denial. I have to make up my mind whether to believe the evidence placed before me on behalf of the petitioner, or that of the deft. 1. I have already stated that the defence taken by the defts. sounds to me incredible. It may be that at the trial, evidence would be placed before me, which will convince me that the defence is true; but on the face of the admitted document dated 6-5-1949, I cannot at this stage, believe the story put forward by the deft. 1, & in any event, I am inclined to believe the evidence of Shyamapada Upadhyay, rather than that of the deft. 1. It has been stated in the petition that save & except the properties mentioned in the schedule, the defts. have no other properties in India & this is not denied. Deft. 1 says that they have no intention of selling the properties or going away to Pakisthan. But regard being had to the defence disclosed, & also the fact that the border line between India & Pakistan is so tantalisingly near, I am not at all sure that the apprehensions of the pltf. are not well founded. The evidence placed before me on behalf of the petitioner is not vague, as was in some of the authorities cited above. The best possible evidence has been placed before me, & I see no reason to disbelieve it. The pltf. has a bona fide claim supported by written documents. Shortly before the institution of the suit, the defts. have been trying to dispose of the entirety of their immoveable properties at a price which according to their own case is highly inadequate. They have stopped their business & have started doing business in a foreign country & have expressed their wish to migrate there. Under the circumstances I am of the opinion that the pltfs, have made out a case for the orders asked for & there will be an order that the defts. do furnish security to the amount of the pltf's. claim within a fortnight from the date of this order & that in default, the right, title & interest of the defts. in the properties mentioned in Schedule B to the petition be attached before judgment. The ad interim injunction will continue until the attachment is made effective. The costs of this application will be costs in the cause.


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