Holding

Without a prima facie case and proof of intent to defeat a future decree, the court cannot exercise the extraordinary power under Order 38 Rule 5, so the High Court’s order is set aside and the trial court’s dismissal restored.

Summary

Raman Tech & Process Engineering Co. sued Solanki Traders for Rs.99,200 for supplied material and sought security and attachment before judgment under Order 38 Rule 5 of the CPC, alleging dishonoured cheques and that the defendants were moving machinery to evade a decree. The trial court dismissed the application, finding the plaintiff had not made out a prima facie case because the plaint lacked specific details of the cheques. On revision, the High Court set aside that order, directing the defendants to furnish security, relying mainly on the fact that the defendants were shifting assets. The Supreme Court held that Order 38 Rule 5 is an extraordinary power that can be exercised only when the plaintiff establishes a prima facie case and shows the defendant intends to dispose of property to defeat a future decree; mere shifting of business premises is insufficient. Consequently, the Court set aside the High Court’s order and restored the trial court’s dismissal.

Issues considered

Whether the plaintiff established a prima facie case sufficient to invoke Order 38 Rule 5 CPC.
Whether the mere shifting of machinery or business premises constitutes grounds for attachment before judgment under Order 38 Rule 5.
Whether the High Court was justified in overturning the trial court’s dismissal of the application in a revision proceeding.

Legislation cited

Code of Civil Procedure, 1908s. Order 38 Rule 5

Subjects

attachment before judgmentOrder 38 Rule 5prima facie casesecurity for suitcivil procedureextraordinary powersrevision jurisdictiondebt recovery

Judgment

>.r--
RAMAN TECH. & PROCESS ENGG. CO. & ANR. A
v.
SOLANKI TRADERS

NOVEMBER 20, 2007

...
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[R.V. RA VEENDRAN AND P. SATHASIV AM, JJ.]
B

Code a/Civil Procedure, 1908:
Or. 38 r.5-Direction to defendant to furnish security for suit c
claim-HELD: Power under Or.38 r.5 is a drastic and extraordinary
power-Such power should not be exercised mechanically-It should
be used sparingly and strictly in accordance with Rule-Purpose of
Or. 38 r.5 is not to convert an unsecured debt into a secured debt-
~
~ . Any attempt by a plaintiffto utilize provisions ofOr. 38 r. 5 as a leverage D
for coercing defendant to settle the suit claim should be discouraged-
-<{
Before power is exercised under Or. 38 r. 5, plaintiffshould show, prima
facie, that his claim is bonafide and valid and also satisfy the court
that defendant is about to remove or dispose of whole or part of his
property, with intention of obstructing or delaying execution of any E
decree that may be passed against him-Courts should also keep in
view the principles relating to grant ofattachment before judgment*-
A defendant is not debarred.fi'om dealing with his property merely
./
because a suit is filed or about to be filed against him-Shifting of
business from one premises to another or removal of machinery to F
~
another premises by itself is not a ground for granting attachment
before judgment-On facts, particulars ofclaim in the plaint were not
specific-Trial court had rejected application on ground that plaintiff
had failed to make out a prime facie case-It did not, therefore,
examine the question whether defendant. by shifting his machinery, G
was attempting to defeat any decree that may be passed-High Court
·~ ignored absence ofa prima facie case and ought not to have interfered
with order rejecting application-Order ofHigh Court is set aside and
that oftrial court restored.
409 H
410 SUPREME COURT REPORTS [2007] 12 S.C.R.

A *Prem Raj Mundra v. Afd. Maneck Gazi, AIR 1951 Cal 156, referred
to.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6171 of
2001.
From the final Judgment and Order dated 30.10.2000 of the High
B
Court of Judicature, Andhra Pradesh at Hyderabad in C.R.P. No. 3377/ ..
2000. '"

D. Mahesh Babu for the Appellant.

c The following Order of the Court was delivered by
ORDER
1. The appellants are the defendants in O.S. No. 143/2000 on the
file of the Civil Judge Junior Division, Medchal, filed by the respondent
D for recovery ofRs.99200/- towards supply of material. .
.,. "'
2. The plaintiff moved an application under Order 38 Rule 5 CPC
praying for a direction to defendants to furnish security for the suit claim
and if they failed to do so, for attachment before judgment. The Trial Court
by its order dated 4.8.2000 dismissed the said application. It noted that
E
though the plaintiff alleged that two post dated cheques given by the
defendants towards payment of the bill amounts were dishonoured, it had
neither disclosed the particulars of the said cheques, nor the dates of
dishonour. It was of the view that merely making a bald statement that
Rs. 99 ,200/- was due from the defendants was not sufficient to make out '
F
primafacie case, when defendants had denied the suit claim. i..

3. The said order was challenged in revision by the plaintiff. Before
the High Court, the plaintiff pointed out that the trial court had ignored its
averment that defendants had removed their name board and were
G removing their machinery from the jurisdiction of the court. The plaintiff
also produced a copy of the writ petition (WP No. 11855/2000) filed \..
by the defendants to restrain the police from interfering with the shifting
of their assets from their business premises to another premises. The High
Court allowed the revision petition by order dated 13 .10.2000, being of
H
_,_

RAMAN TECH. & PROCESS ENGG. CO. v. SOLANKI 411
~-
TRADERS
the view that the trial court ought to have taken note of the fact that A
defendants were trying to remove the machinery. It directed defendants
to furnish security for the suit amount to the satisfaction of the court within
four weeks. The said order is challenged in this appeal by special leave.
4. The object of supplemental proceedings (applications for arrest
B
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
c
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 of a decree being passed in
D
the suit against the defendant. This would mean that the court should be
--< satisfied 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
E
exercising power under Order 38 Rule 5CPC. It is well-settleq that merely
having a just or valid claim or a prima fade 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. Equally well settled
F
-1 is the position 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.
5. The power under Order 38 Rule 5 CPC is drastic and
extraordinary power. Such power should not be exercised mechanically G
-,___/ or merely fpr the asking. It Should be used sparingly and strictly in
accordance with the Rule. The purpose of Order 38 Rule 5 is not to
conve11 an unsecure:g:debt into a secured debt. Any attempt by a plaintiff
to utilize the prova·~ions of Order 38 Rule 5 as a leverage for coercing the
H
412 SUPREME COURT REPORTS [2007) 12 S.C.R.

A defendant to settle the suit claim should be discouraged. Instances are
not wanting where bloated and doubtful claims are realised by unscrupulous
plaintiffs by obtaining orders of attachment before judgment and forcing
the defendants for out of court settlement, under threat of attachment.
6. A defendant is not debarred from dealing with his property merely
B
because a suit is filed or about to be filed against him. Shifting of business
~
from one premises to another premises or removal of machinery to another
premises by itself is not a ground for granting attachment before judgment.
A plaintiff should show, prima facie, that his claim is bonafide and valid
c and also satisfy the court that the defendant is about to remove or dispose
of the whole or part of his property, with the intention of obstructing or
delaying the execution of any decree that may be passed against him,
before power is exercised under Order 38 Rule 5 CPC. Courts should
also keep in view the principles relating to grant of attachment before
D
judgment (See - Prem Raj Mundra v. Md. Maneck Gazi, AIR (1951) ..
Cal 156, for a clear summary of the principles.)
)..

7. In this case, the suit claim was Rs. 99200/- The notice issued
before filing the suit related to dishonour of two cheques for Rs.
22487/-. The particulars of the claim in the plaint were not specific. The
E trial court had rejected the application on the ground that plaintiff had failed
to make out a prima facie case. It did not, therefore, examine the question
whether defendant was attempting to defeat any decree that many be
passed by shifting his machinery. On the other hand, the High Court
ignored the absence of prima facie case. It granted relief under Order
F 38 rule 5, in exercise of revisional jurisdiction, swayed by the fact that
•
the defendants had shifted their assets to another premises.
8. On the facts and circumstances, the High Court ought not to have
interfered with the order rejecting the application. We, therefore, allow
this appeal and set aside the order of the High Court and restore the order
G
of the trial court.
\-c
RP. Appeal allowed.