* THE HON’BLE SRI JUSTICE V.V.S. RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA CIVIL MISCELLANEOUS APPEAL No.997 of 2009 % 06.11.2009 Between: Mandala Suryanarayana @ Babji … Appellant AND Sri Barla Babu Rao, W/o. Sri Appa Rao …Respondent Counsel for the Appellant: Sri A.S.C. Bose for Sri A. Narasimha Rao Counsel for the Respondent: Sri Ch.Dhanamjaya < Gist: > Head Note: ? CITATIONS: 1. AIR 1980 AP 176 2. 2008(2) SCJ 381 3. AIR 2002 AP 66 : 2001 (4) ALT 780 4. (2008) 2 SCC 302: 2008(2) SCJ 381 THE HON’BLE SRI JUSTICE V.V.S. RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA CIVIL MISCELLANEOUS APPEAL No.997 of 2009 06.11.2009 Between: Mandala Suryanarayana @ Babji … Appellant AND Sri Barla Babu Rao, W/o. Sri Appa Rao …Respondent THE HON’BLE SRI JUSTICE V.V.S. RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA CIVIL MISCELLANEOUS APPEAL No.997 of 2009 ORDER: (Per Hon,ble VVSR,J) This civil miscellaneous appeal under Order XLIII Rule 1(q) of Code of Civil Procedure, 1908 (CPC) is by defendant in O.S.No.73 of 2008 against the order dated 04.2.2009 whereby and whereunder the Court of I Additional District Judge, Rajahmundry, directed to issue warrant of attachment before judgment in I.A.No.1757 of 2008. Respondent filed the suit for recovery of a sum of Rs.35,00,000/- from defendant, appellant herein. The suit was filed in September 2008 along with I.A.No.1757 of 2008 under Order XXXVIII Rules 5 and 6 of CPC for attachment of property of defendant before judgment. The trial Court ordered issue of notice on 22.1.2009 to appellant (hereafter, defendant). After receiving notice, he appeared through lawyer and sought time for filing counter. The counter was filed on 17.10.2008. Thereafter the matter was coming for enquiry. It was called on 22.10.2008, 30.10.2008, 05.11.2008, 21.11.2008, 05.12.2008 and on 31.12.2008. Every time, it appears that defendant appeared and sought time. Ultimately on 22.1.2009, trial Court ordered notice under Order XXXVIII Rule 5 of CPC directing defendant to furnish security by 5.30 pm on 04.2.2009. The defendant did not appear. On 04.2.2009, the trial Court directed to issue warrant of attachment, aggrieved by which the present appeal is filed. Learned Counsel for appellant/defendant relies on Division Bench judgment of this Court in Y.Vijayalakshmamma v M/s.Sakinala Lakshmaiah and sons[1] and a decision of apex Court in M/s.Raman Tech & Process Engg. Co., v M/s.Solanki Traders[2] and submits that the impugned order without applying mind and without giving reasons is unsustainable. He also submits that the appellant filed counter on 17.10.2008 itself giving undertaking not to alienate the property sought to be attached and, therefore, the trial Court ought not to have passed order under Order XXXVIII Rule 6 of CPC. Per contra, learned Counsel for respondent relies on another Division Bench decision of this Court in Bommanasaree Mandir v Manisha Sarees[3] in support of the submission that trial Court after providing adequate opportunity passed order and, therefore, it does not warrant interference. The question that requires consideration is whether a civil court is required to record reasons before ordering issue of warrant of attachment before judgment under Order XXXVIII Rule 6 of CPC, even in a case where defendant fails to comply with the order/notice issued by the Court under Order XXXVIII Rule 5 of CPC to furnish security within the time stipulated. The order to attach any property before judgment is an important supplemental proceeding before a civil court. An order of attachment has significant consequences to defendant and that if he happens to be the owner, he would be at least temporarily deprived of the right to enjoy such property in true sense. An order of attachment before judgment always creates an encumbrance and clouds the title of defendant. It is for this reason Section 95 of CPC confers a right on defendant to apply to Court seeking reasonable compensation in the case of attachment, which is illegal and unwarranted. Therefore, while ordering attachment in accordance with Rules 5 and 6 of Order XXXVIII of CPC, the Court must always be conscious of serious consequences and repercussions that would result therefrom to both the parties especially the defendant. The Rules 5 and 6 of Order XXXVIII of CPC are relevant for the purpose of this case, which read as under. ORDER XXXVIII–ARREST AND ATTACHMENT BEFORE JUDGMENT Rules 1 to 4 omitted. 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 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. 6. Attachment where cause not shown or security not furnished (1) Where the defendant 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. (2) Where the defendant shows such cause of furnishes the required security, and the property specified or any portion of it has been attached, the Court shall order the attachment to be withdrawn, or make such other order as it thinks fit. The power of the Court to order attachment before judgment is attracted only when plaintiff pleads and prima facie proves two conditions precedent. These are: that the defendant is about to dispose of whole or any part of his property and defendant is about to remove the property from local limits of jurisdiction of the Court. Even when such prima facie case is proved, an order of attachment cannot be straight away issued without following procedure contemplated in Rule 5 of Order XXXVIII of CPC. The said Rule requires the Court to direct defendant to furnish security in such a sum as may be specified within the time stipulated by the Court. At the stage of Order XXXVIII Rule 5 of CPC, the order shall be in Form No.5 of Appendix-F of CPC, which reads as under. No. 5 Attachment before Judgment, with Order to Call for Security for Fulfilment of Decree (O. 38, R. 5) (Title) To The Bailiff of the Court. Whereas ......... has proved to the satisfaction of the Court that the defendant in the above suit.........; .................. These are to command you to call upon the said defendant......... on or before the ............. day of......... 19 ......... either to furnish security for the sum of rupees ........ to produce and place at the disposal of this Court when required ......... for the value thereof, or such portion of the value as may be sufficient to satisfy any decree that may be passed against him; or to appear and show cause why he should not furnish security; and you are further ordered to attach the said......... and keep the same under safe and secure custody until the further order of the Court; and you are further commanded to return this warrant on or before the ......... day of......... 19..., with an endorsement certifying the date on which and the manner in which it has been executed, or the reason why it has not been executed. Given under my hand and the seal of the Court, this......... day of......... 19... Judge After issuing notice/order of attachment before judgment in Form No.5 calling for security from defendant for fulfillment of the decree that may be passed against him, the Court has to necessarily wait till the time fixed thereon is completed. If the defendant furnishes security, the Court has to pass an order withdrawing order/notice issued in Form No.5 earlier. In case of failure on the part of the defendant to show cause to the satisfaction of the Court as to why he should not furnish security or fails to furnish security, the Court may then under Order XXXVIII Rule 6 of CPC issue order of attachment before judgment in Form No.7 of Appendix-F of CPC, which reads as under. No. 7 Attachment before Judgment, on Proof of Failure to Furnish Security (O. 38, R. 6) (Title) To The Bailiff of the Court. Whereas .......... the plaintiff in this suit, has applied to the Court to call upon ........ the defendant, to furnish security to fulfil any decree that may be passed against him in the suit, and whereas the Court has called upon the said ......... to furnish such security, which he has failed to do; these are to command you to attach .......... the property of the said .......... and keep the same under safe and secure custody until the further order of the Court, and you are further commanded to return this warrant on or before the ........ day of......... 19 ......... with an endorsement certifying the date on which and the manner in which it has been executed, or the reason why it has not been executed. Given under my hand and the seal of the Court, this ......... day of........ 19.... Judge It is needless to mention that any order passed by the Court under Order XXXVIII Rule 6 of CPC is appealable under Order XLIII Rule 1(q) of CPC. From a reading of Order XXXVIII Rules 5 and 6 of CPC and Form Nos.5 and 7 to Appendix-F to CPC, and having regard to the provision for appeal, it becomes clear that the power to attach before judgment cannot be exercised in a routine manner. If the Court is satisfied prima facie with regard to conditions enumerated in Rule 5 of Order XXXVIII of CPC, those reasons should be found in the order at least at the stage of ordering warrant of attachment in Form No.7. That is to say, if defendant fails to furnish security or fails to satisfy the Court as to why security is not necessary, whether defendant appears or not, the Court has to pass order giving reasons keeping in view the conditions mentioned in Rule 5 of Order XXXVIII of CPC. The furnishing of reasons is also mandatory for yet another reason. As noticed supra, every order passed under Order XXXVIII Rule 6 of CPC is appealable order. Unless and until reasons are furnished, appellate Court would not be in a position to review the lower Court’s order with regard to satisfaction arrived at on prima facie considerations. The non-furnishing of reasons while issuing an order of attachment in Form No.7 would indeed render the remedy of appeal very ineffective as the appellate Court would not be in a position to know as to which are the grounds that weighed with the lower Court for arriving at satisfaction of order of attachment before judgment. In Raman Tech. & Process Engg. Co. v Solanki Traders[4] the position was explained by Supreme Court as below. The object of supplemental proceedings (applications for arrest 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 realisation 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 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 the suit against the defendant. This would mean that the court should be satisfied that 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 exercising power under Order 38 Rule 5 CPC. It is well settled that merely having a just or valid claim or a prima facie 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 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. 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 utilise 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 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. (emphasis supplied) From the above enunciation of apex Court, we are convinced that every Court ordering attachment before judgment under Rule 6 of Order XXXVIII of CPC after following necessary procedure under Rule 5 has to record reasons. Any order of attachment before judgment without giving reasons would be an illegal order. It must not be understood that the Court ordering attachment before judgment should give elaborate reasons but there should be at least primary reasons as to why lower Court prima facie satisfied that it is a fit case for ordering attachment before judgment. Such satisfaction must be arrived at with reference to necessary material placed before the Court and it is always open to defendant to appear and plead and prove contra. Whether or not the defendant appears pursuant to notice/order in Form No.5 of Appendix-F of CPC, the civil court has to order attachment before judgment in Form No.7 of Appendix-F only after recording reasons having regard to the conditionalities mentioned in Rule 5 of Order XXXVIII of CPC. In this case, the Court below ordered notice in Form No.5 on 31.12.2008 and on 04.2.2009 passed order without giving any reasons. Therefore, the order is liable to be set aside. In the result, the civil miscellaneous appeal is allowed. The order dated 04.2.2009 in I.A.No.1757 of 2008 is set aside and the matter is remitted for fresh consideration in accordance with the principles laid down herein above. Learned trial Judge is directed to dispose of I.A. within a period of two weeks from the date of receipt of a copy of this order. We make no order as to costs. _______________ (V.V.S.RAO,J) _____________________ (B.N.RAO NALLA,J) November 6, 2009 NOTE: L.R. Copy be marked. (By order) YS [1] AIR 1980 AP 176 [2] 2008(2) SCJ 381 [3] AIR 2002 AP 66 : 2001 (4) ALT 780 [4] (2008) 2 SCC 302: 2008(2) SCJ 381