1 IN THE HIGH COURT OF JUDICATURE AT MADRAS (ORDINARY ORIGINAL CIVIL JURISDICTION) WEDNESDAY, THE 9TH DAY OF NOVEMBER 2011 THE HON'BLE MR. JUSTICE VINOD K.SHARMA A.No.5215 OF 2011 IN C.S.No.716 of 2011 1. P.Varada Reddy Son of late P.Raghava Reddy, No.20, Rutland Gate, 4th Street, Nungambakkam, Chennai-600 034. 2. Mrs.Prashanthi Reddy No.20, Rutland Gate, 4th Street, Nungambakkam, Chennai - 600 034. 3. Shri Dodla Sesha Reddy, No.10, Wallace Garden 1st Street, Nungambakka, Chennai - 600 034. Rep. by his Power Agent, P.Varada Reddy, the 1st Plaintiff herein. 4. Shri Dodla Sunil Reddy, No.10, Wallace Garden 1st Street, Nungambakkam, Chennai - 600 034 Rep. by his Power Agent Mrs.Prashanthi Reddy, the 2nd Plaintiff herein. ..Applicants/Plaintiffs -Versus- 1. M/s. Accord Finance & Properties (Pvt.) Ltd., Old No.51, New No.111, G.N.Chetty Road, T.Nagar, Chennai - 600 017. 2. Mr.R.Ramakrishna, Flat No.B-8, Atandra, No.15, Thirumalai Pillai Road, T.Nagar, Chennai - 600 017. https://hcservices.ecourts.gov.in/hcservices/ 2 3. M/s.Besser Concrete Systems Ltd., No.1/208 Kaliamman Koil Street, Kelambakkam, Kancheepuram District, Pin Code: 603 103. 4. Mr.Mohideen Sheikh Uduman, Old No.58/2, No.63, 2nd cross Street, CIT Nagar East, Chennai - 600 035. 5. Mr.Sheikh Mohammed Old No.58/2, No.63, 2nd Cross Street, CIT Nagar East, Chennai - 600 035. 6. A.Suganthi W/o. R.S.Angamuthu Sayani Complex, F-12, 1st Floor, No.96, Konnur High Road, Ayanavaram, Chennai - 600 023. 7. M/s. ICICI Bank Ltd., Rep.by its Manager/Authorised Signatory, having office at ICICI Towers, East Wing, 9th Floor, Santhome High Road, Chennai - 600 028.. .. Respondents/Defendants Application praying that this Hon'ble Court be pleased to direct the Defendants 1 and 2 to furnish adequate security for the suit claim, failure to do so, attach the property of the First and Second Defendants more fully described in the Schedule B to the Judges Summons. This Application coming on this day before this court for hearing the court made the following order: The applicants / plaintiffs pray for a direction to the defendant nos. 1 and 2 to furnish security for the suit amount. 2. The applicants / plaintiffs have filed a suit in https://hcservices.ecourts.gov.in/hcservices/ 3 C.S.No.716 of 2011 for recovery of a sum of Rs.3,95,97,448/- (Rupees Three Crores Ninety Five Lakhs Ninety Seven Thousand and Four Hundred Forty Eight only), i.e. principal amount of Rs.1,83,32,328/- (Rupees One Crore Eighty Three Lakhs Thirty Two Thousand and Three Hundred Twenty Eight only) with interest and damages. 3. Though suit for recovery has been filed against defendant no.1, i.e. M/s.Accord Finance & Properties (Pvt) Ltd., which is a company registered under the Companies Act and Mr.R.Ramakrishna / defendant no.2, in his individual capacity, however, it is not understood how a decree is claimed against agents / servants, subordinates, or person working under them. Not only this, the plaintiffs have also impleaded respondent nos.3 to 7 as parties to the suit, even though no relief is claimed against, these defendants nor any malafide or other allegations have been alleged against them to treat them as proper parties. 4. That the plaintiffs in the suit have pleaded certain facts, concerning these defendants. Instead of calling them as witness to prove averments, plaintiffs have impleaded them as parties. 5.The suit, prima facie suffers from vice of misjoinder of parties. 6.The pleaded case of plaintiffs / applicants is that the property was purchased by plaintiffs from defendant https://hcservices.ecourts.gov.in/hcservices/ 4 no.1 in the year 1999. The property, though sold to the applicants / plaintiffs free from all encumbrance, was in fact mortgaged with ICICI Bank, i.e. defendant no.7. The defendant no.7, in exercise of its statutory powers, brought the property for sale to recover the loan advanced to defendant no.1. 7.The applicants / plaintiffs, in order to save the property sold them, got redeemed the property. The applicants / plaintiffs, therefore, claims that the amount paid for redemption of properties sold to them, by showing it to be free from all encumbrance, is to be recovered from defendant nos.1 & 2. 8.Along with the suit, the applicants / plaintiffs have filed the present application, for directing defendant nos. 1 & 2 to furnish security. The relevant averments, in support of application, reads as under: "14. I submit that the suit instituted by the 3 rd Defendant against the 1 st and 2 nd Defendants and others is a collusive suit and their intention is to stall the proceedings in order to obtain the property. Already, there is suppression of facts i.e. (1) non-disclosure of mortgage over the property, (2) suppression of registered lease deeds in favour of the third Defendant and (3) alleged agreement by the 3 rd Defendant over the property by the 1 st and 2 nd Defendants. The Defendants did not take any steps to get back the property from the 3 rd Defendant and the 3 rd Defendant sitting over the property without payment of rents and enriching at the cost of others. The Defendants 1 and 2 are planning to alienate their property measuring about 5 Acres in favour of third Defendant or third parties in order to defeat the claim made by the Applicants in the above suit. If they are allowed to do so, https://hcservices.ecourts.gov.in/hcservices/ 5 the Applicants would be put to irreparable loss and damage as the Defendants 1 and 2 do not have any other property other than the property measuring 5 Acres more fully described in the Schedule to Judges Summons. Hence, it is just and essential that an order of attachment over the above said property may be passed. I have made out a prima facie case. The balance of convenience lies in favour of the Applicants for grant of an order of attachment of the property of the 1 st and 2 nd Defendants." 9. The averments made in paragraph No.14 of the affidavit, even if taken on its face value, do not make out a case for directing defendant nos. 1 & 2 to furnish security, for the reasons, that Order 38, Rule 5 of the Code of Civil Procedure, 1908, reads as under: "5. Where defendant may be called upon to furnish security for production of property (1) Where, at any stage of a suit, the Court is satisfied, by affidavit or otherwise, that the defendant, 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 defendant, within a time to be fixed by it, either to furnish security, in such sum as may be specified in the order, to produce and 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 and show cause why he should not furnish security. (2) The plaintiff shall, unless the court otherwise directs, specify the property required https://hcservices.ecourts.gov.in/hcservices/ 6 to be attached and the estimated value thereof. (3) The Court may also in the order direct the conditional attachment of the whole or any portion of the property so specified. (4) If an order of attachment is made without complying with the provisions of sub-rule (1) of this rule such attachment shall be void." 10. A perusal of the above provision would show that the Court has been cloaked with the power to call upon the defendant to furnish security for production of property, even before the judgment, in case the Court is satisfied that the defendant, with an intent to obstruct to 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 or is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Court. 11. Further still, Hon'ble Supreme Court of India in the case of M/s. Raman Tech & Process Engg. Co. v. M/s.Solanki Trader, 2008 (2) SCC 302, has observed as under: "The power under Order 38, Rule 5 CPC is a drastic and extraordinary power. Such power should not be exercised mechanically or merely for the asking. It should be used sparingly and strictly in accordance with the Rule. 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 Rule 5 as a leverage for coercing the defendant to settle the suit claim should be discouraged. Instances are not wanting where https://hcservices.ecourts.gov.in/hcservices/ 7 bloated and doubtful claims are realised by unscrupulous plaintiffs, by obtaining orders of attachment before judgment and forcing the defendants for out of court settlements, under threat of attachment." 12. In light of the express provisions of Order 38, Rule 5 CPC and the observations of the Hon'ble Supreme Court in the matter of M/s. Raman Tech & Process Engg. Co. v. M/s.Solanki Trader, supra, the position of law that emerges is as under: (i)The Court, before calling upon the defendant to furnish security for production of property, has to be satisfied that the defendants, with an intent to obstruct or delay the execution of any decree that may be passed against them, are about to dispose of the whole or any part of theis property or are about to remove the whole or any part of theis property from the local limits of the jurisdiction of the Court. This satisfaction of the Court has to be objective and not subjective in as much as there has to be a positive and definite material before the Court to enable the Court to come to a prima facie conclusion that the defendants are about to dispose of the whole of part of their property with an intention to obstruct or delay the execution of any decree that may be passed against them. Merely because a suit is filed or about to be filed against them, the defendants are not debarred from dealing with their property. Accordingly, mere fact that some material is placed before the Court showing that defendants have https://hcservices.ecourts.gov.in/hcservices/ 8 disposed of some of his properties would by itself not be sufficient for the Court to exercise the powers conferred upon it under Order 38, Rule 5 CPC without their being further material on record to show that the property is being disposed off by the defendants with an intention to frustrate the probable decree that may be passed against them The intention of the defendants to remove or dispose of the whole or part of their property, with a view of obstructing or delaying the execution of any decree that may be passed against them is sine qua non before the power under Order 38, Rule 5 can be exercised by the Court. However, it may also be observed here that the question of ascertaining the intention of the defendants is a vexed question having no easy solution and precise mathematical tests. The true intention of the defendants in disposing of the whole or part of their property would thus, have to be determined by the Court having regard to the particular facts and circumstances of each case. (ii).The Plaintiffs - Applicants are required to satisfy the Court that all the ingredients specified in Order 38, Rule 5(1) CPC exist before the application filed by the Plaintiffs-Applicants can be allowed. The same is evident from the reading of Clause 4 of the Order 38, Rule5. Merely because the defendants will not be prejudiced cannot be a ground in itself for the Plaintiffs- Applicants to argue that the power under Order 38, https://hcservices.ecourts.gov.in/hcservices/ 9 Rule 5 CPC should be exercised by the Court. Accordingly, the Plaintiffs-Applicants is required to place sufficient material before the Court so as to enable the Court to form a prima facie opinion that the defendants, with an intent to obstruct or delay the execution of any decree that may be passed against them, are about to dispose of the whole or any part of his property. In order to do so, the Plaintiffs-Applicants may be required to swear an affidavit in support of their application detailing the name, address and sufficiently describing the identity of the person or persons from whom he has received the information about the attempts of the defendants to dispose of the whole or any part of his property with an intent to obstruct or delay the execution of any decree that may be passed against them. (iii).As the matter with regard to the power of the Court to call upon the defendants to furnish security for production of property, even before the judgment, has been detailed and expressly provided in Order 38, Rule 5 CPC, the Court cannot resort to its inherent powers under Section 151 CPC and call upon the defendants to furnish security for production of property in case the ingredients of Order 38, Rule 5(1) CPC are not fulfilled. Reference in this regard can be made to the judgment of the Hon'ble Supreme Court in the matter of Nahar Industrial Enterprises Ltd v. Hong Kong & Shanghal Banking Corporation, 2009 (8) SCC 646, wherein it https://hcservices.ecourts.gov.in/hcservices/ 10 has been held that where a matter has expressly been provided for in the CPC, inherent power cannot be resorted to. 13. Consequently, this application, being without any merit, is ordered to be dismissed. 14. No costs. Sd/-V.K.S.J 09.11.2011 //Certified to be a true copy// Dated this the day of 2012. R.s/02.02.2012 COURT OFFICER From 25.09.2008 the Registry is issuing certified copies of the Order/Judgment Decree in this format. https://hcservices.ecourts.gov.in/hcservices/