Dinesh Kumar Goyal vs Nitin Kumar Yadav & Another
2023 Latest Caselaw 2084 Cal/2

                 IN THE HIGH COURT AT CALCUTTA
                 (Ordinary Original Civil Jurisdiction)
                          COMMERCIAL DIVISION


Present:

The Hon'ble Justice Krishna Rao



                            IA No: GA 3 of 2023

                             In CS 67 of 2019


                            Dinesh Kumar Goyal
                                  Versus
                    Nitin Kumar Yadav & Another




           Mr. Shashwat Nayak
           Mr. Hareram Singh
           Ms. Shilpa Das
                                      ... For the plaintiff/applicant.


           Mr. S.K. Mukherjee
           Mr. B.K. Dey
           Ms. Anjana Banerjee
                                       ... For the defendant no. 2.


Hearing Concluded On : 19.07.2023

Judgment on           : 17.08.2019
                                        2


Krishna Rao, J.:


1.

The plaintiff has filed the present application being G.A 3 of 2023 for a

direction upon the defendant no. 2 to furnish security by way of bank

guarantee for an amount of Rs. 8,56,26,173/-.

2. The plaintiff had filed a suit praying for decree against the defendants

for an amount of Rs. 8,56,26,173/-.

3. After filing of the suit, the plaintiff has filed an application being G.A

No. 1631 of 2019 for grant of injunction and for appointment of Special

Officer for taking physical possession of the goods lying in the custody

of the defendants.

4. By an order dated 21.11.2019, this Court has appointed a Special

Officer for the purpose of making inventory of the goods.

5. The Special Officer has visited the place of business of both the

defendants and submitted report before this Court.

6. Mr. Shashwat Nayak, Learned Advocate representing the plaintiff

submitted that as per report, the defendant no.1 was not available at

the place of his business and the defendant no. 2 has informed the

Special Officer that the defendant no.1 was the tenant of the defendant

no. 2 and without paying the rent and without any notice, the

defendant no.1 left the premises to an unknown place. The Special

Officer could not find any materials/ goods either at the place of

business of the defendant no.1 nor at the place of the defendant no. 2.

7. Mr. Nayak submitted that as per the report of the Special Officer, the

defendant no. 2 is the owner of the immovable property comprising

land and structure situated at Mughalpura, First Lal School,

Moradabad - 244401, Uttar Pradesh and the said land comprising of

four storied building occupied by the tenants and residential building

occupied by the family of the defendant no. 2. He also submitted that

as per report, the defendant no. 2 is also the owner of an immovable

property situated at Laxmipur Khatai, District of Moradabad.

8. Mr. Nayak submitted that the defendant no. 2 has admitted the claim

of the plaintiff on 12.12.2018 by way of communication through its

WhatsApp No. 9412493721 in the WhatsApp No. 9830083393 of the

plaintiff.

9. Mr. Nayak submitted that the plaintiff has made several attempts to

serve the writ of summons upon the defendant no.1 but the defendant

no.1 is avoiding to receive the notices and the whereabouts of the

defendant no.1 is not known to the plaintiff.

10. Mr. Nayak submitted that in the first week of December' 2022, the

plaintiff came to know from one Rajesh Mittal that the defendant no.2

is trying to dispose of his immovable property and is also trying to move

away from Moradabad along with his family. He Submits that if at this

stage, the defendant no. 2 is not directed to deposit the amount as

security or to attach his property and if in future any decree is passed,

the decree will remain in paper and the plaintiff would not be in a

position to execute the decree.

11. Mr. Nayak in support of his case relied upon the Judgement reported in

1951 SCC Online Cal 20 (Premraj Mundra -vs- Md. Maneck Gazi &

Ors.) and submitted that the case of the plaintiff is fully covered as per

the guidelines fixed by the Hon'ble Court in connection with Order 38,

Rule 5 and 6 of the Code of Civil Procedure, 1908.

12. Mr. S.K. Mukherjee, Learned Advocate representing the defendant no.2

submitted that there is no contract ever entered between the plaintiff

and the defendant no. 2 and he never agreed to carry on business on

behalf of the defendant no.1. He submits that the entire allegation of

verbal agreement is false and baseless.

13. Mr. Mukherjee submitted that there is no privity of contract between

the plaintiff and none of the invoices has been handed over to the

defendant no. 2 either physically or through any electronics mode.

14. Mr. Mukherjee submitted that there is no such agreement which was

executed between the plaintiff and the defendant no. 2 with regard to

any business.

15. Mr. Mukhrejee submitted that the defendant has neither sent any

WhatsApp massage by admitting the claim of the plaintiff nor the

defendant no. 2 had agreed to pay Rs. 2.00 Crore to the plaintiff.

16. Mr. Mukherjee submitted that the plaintiff has filed the present case

only on the basis of oral agreement and the alleged invoices but there

are no documents to show that there is any transaction between the

plaintiff and the defendant no. 2. The invoices which the plaintiff is

relied upon are in the name of the defendant no.1 and not in the name

of defendant no. 2.

17. Mr. Mukherjee submitted that the plaintiff has not made out any case

against the defendant no. 2 for furnishing security or attachment of the

property of the defendant no. 2 before judgment.

18. Mr. Mukherjee in support of his submissions relied upon the following

judgments :

"i. 1951 SCC OnLine Cal 20 (Premraj Mundra -vs- Md. Maneck Gazi & Ors.).

ii. (2008) 2 SCC 302 (Raman Tech. & Process Engg. Co. & Anr. -vs- Solanki Traders.).

iii. (2009) 17 SCC 657 (Vivek Automobiles Limited -vs- Indian INC.)."

19. Heard the learned Counsel for the respective parties, perused the

materials on record and the judgment relied by the parties.

20. As per the case of the plaintiff the parties have agreed with the

following terms and conditions:

"a) The plaintiff will sell and supply the goods of the aforesaid description as and when the orders would be placed by the first defendant through the second defendant.

b) The physical delivery of the goods shall be effected either from the plaintiff's aforesaid place of business or from outside as per specification and stipulation of first and second defendants.

c) The bills and requisite tax invoices shall be raised and/or issued from the place of business of the plaintiff, and to be delivered and/or dispatched by either through electronic mall to the first defendant at his place of business as aforesaid or to the second defendants' place of communication and/or contact as the case may be."

21. The plaintiff has filed the present application only against the

defendant no. 2. The plaintiff has filed the present application on the

basis of the report of the Special Officer, the invoices issued by the

plaintiff to the defendant no.1, WhatsApp messages and affidavit

executed by one Rajesh Mittal.

22. On perusal of the report of the Special Officer, this Court found that the

defendant no. 2 had categorically stated that he has been falsely

implicated in the instant case. The defendant no. 2 has shown all his

properties to the Special Officer for inspection and on inspection, no

cooper goods were found in any of the premises. The Special Officer has

further noted that one of the premises was taken by the defendant no.1

for his business from the defendant no. 2 but the defendant no.1 has

left the said premises without paying the rent to the defendant no.1.

23. The plaintiff has relied upon the invoices on the basis of which the

plaintiff is claiming the amount from the defendants. The plaintiff has

issued the said invoices in the name of the M/s Mahagun International.

As per the case of the plaintiff, the defendant no.1 is the proprietor of

the said firm. The invoices raised by the plaintiff are neither addressed

to the defendant no. 2 nor any copy of the said invoices were forwarded

to the defendant no. 2.

24. The plaintiff has further made out a case that to falsify the claim of the

plaintiff, the defendants have fabricated documents being debit notes

and e-way bills claiming that the plaintiff has purchased materials from

the defendants but the said debit notes and the e-way bills raised by

the firm of the defendant no.1 and in the said debit notes, there is no

whisper about the defendant no. 2.

25. The plaintiff claims that the defendant no. 2 by way of WhatsApp

messages accepted the amount of Rs. 2.00 crore. The said WhatsApp

messages does not prove that the said messages is in connection with

the same transactions and in the said message it is written that "Mai

aapko 2 Cr de dega" though the claim of the plaintiff is Rs.

8,56,26,173/-.

26. The plaintiff has submitted an affidavit of one Rajesh Mittal to prove

that the defendant no. 2 is trying to dispose of his property at

Moradabad.

27. In the case of Premraj Mundra (supra), the Coordinate Bench of this

Court has fixed the guiding principles to decide the application under

Order 38, Rule 5 of the Code of Civil Procedure, 1908 which reads as

follows :

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

(1) That an order under O. 38, Rr. 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 of cause 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 liability 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 O. 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 pltfs. claim. The Court must however be very cautious about the evidence on these points & not rely on vague allegations."

28. In the case of Raman Tech & Process Engg. Co. and Another

(Supra), the Hon'ble Supreme Court held that :

"4. 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.

5. 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.

29. The plaintiff has filed the present suit on the basis of the oral

agreement between the plaintiff and the defendants. As per the terms

and conditions of the agreement, the plaintiff will sell the goods to the

defendant no.1 through the defendant no. 2 but other than the said

terms there is no evidence that the goods were sent by the plaintiff to

the defendant no.1 through the defendant no. 2. Even the invoices

raised by the plaintiff are in the name of the defendant no.1 and no

copy of the said invoices were forwarded to the defendant no. 2. As per

clause (d) of the terms all payments shall be made by the defendant

no.1 at the first instance at the place of the business of the plaintiff.

30. The plaintiff has not made any prayer for security and attachment

against the defendant no.1 and the present application is filed only

against the defendant no. 2. As per the report of the Special Officer no

material was found in any place of the defendant no. 2.

31. The plaintiff has filed the present application only against the

defendant no. 2 but neither in the plaint nor in the present application,

there is any evidence that the defendant no. 2 at any point of time

assured that he will pay the said amount as a guarantor. In the terms

and conditions with the plaintiff, which he has relied upon does not

contain any such clause binding the defendant no. 2 as guarantor.

32. In the case of Premraj Mundra (Supra) in clause 13 it is categorically

mentioned that "The defendant, in a suit is under no liability to take

any special care in administering his affairs, simply because, there is a

claim pending against him. Mere neglect, or suffering execution by

other creditors, is not a sufficient reason for an order under Order 38 of

the Code".

33. Considering all the above facts, this Court finds that the plaintiff has

not made out any case for passing any order for directing the defendant

to furnish security deposit by way of bank guarantee of Rs.

8,56,26,173/- or for attachment of the property of the defendant no. 2.

34. In view of the above, G.A. No. 3 of 2023 is thus dismissed.

(Krishna Rao, J.)