Raj Pal Cloth House vs Fancy Textiles (India)
1996 Latest Caselaw 936 Del

JUDGMENT

S.N. Kapoor, J.

(1) This Revision Petition is directed against an order passed on the application under Order 38 Rule 5 and under Order 39 Rules 1 and 2 Civil Procedure Code . directing the petitioners to furnish bank guarantee for the amount claimed in the suit.

(2) Brief facts giving an occasion to the present revision petition, are as under :- According to the case of the plaintiff/respondent, the plaintiff supplied goods to the petitioners/defendant from time to time. The petitioners failed to clear the account despite the repeated requests. Moreover, the cheques issued by the defendants were also dishonoured on presentation for realisation. Whenever plaintiff visited the shop premises, it was found closed. Enquiries from neighbour further revealed that the defendants were planning to close down the premises. Through reliable sources, the plaintiff/respondent came to know that the defendants/petitioners were closing down their business by selling the cloth on a very low price. Apprehending that nothing would be left to recover from the petitioners, a suit was filed for recovery of Rs. 13,500.00 the price of the goods, and interest etc. An application under Order 38 Rule 5 and under Order 39 Rules 1 and 2 Civil Procedure Code ., was also filed.

(3) The petitioner/respondent are contesting this case inter alia on the ground that they are running the said business for the last two decades and never had any intention to close down the business. It is further contended by the defendant/petitioners that the goods worth Rs. 1462.00 were received from the plaintiff/respondent for which payment had already been made. But goods valued at Rs. 9775.00 and Rs. 883.00 were never received from the respondent.

(4) Thereafter, the learned trial Court firstly passed an order on 7th August, 1981 directing the petitioner to furnish bank guarantee for the suit amount. An application was moved under Section 151 Civil Procedure Code to set aside that order. That application was rejected on 17th November, 1981. A Civil Revision No. 238/82 was filed. That revision was allowed by Hon'ble Mr. Justice Sultan Singh on 17th July, 1982 and the petitioners were allowed to file the reply, if not already filed. Accordingly, a detailed reply was filed. The matter was again disposed on 4th August, 1982 by dismissing the application of the respondent and directing the defendant/petitioner to furnish Bank guarantee.

(5) Feeling aggrieved by the aforesaid order the present Revision Petition has been filed inter alia on the grounds: that there is no basis to form any opinion that the petitioners intended to close down their business, and that the learned Trial Judge even did not try to find out the names of the informer that the defendant had intended to close down the business. According to the revisionist/defendant, the plaintiff/respondent is not entitled to any amount from the petitioners as the goods of bills for Rs. 883.00 and Rs. 9925.00 were not received by the petitioners from the respondent and the payment of the goods received has already been made. The impugned order could not have been passed under Order 38 Rule 5 Civil Procedure Code . in absence of any definite and reliable information to the effect that the petitioners were closing down their business. The impugned order is just para-phrased of earlier order passed even without considering contents of the defendant's application. The suit itself was barred by Section 69(3) of Indian Partnership Act.

(6) Having gone through record and the impugned order there appear grave doubts that such an order can be sustained. Before arriving at any conclusion, it would be relevant to refer to Order 38 Rule 5 Civil Procedure Code . It reads as under:- 5.(l) 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 properly, 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 be 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 properly 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.)

(7) Seeing the extraordinary nature of jurisdiction of the court, while exercising powers under Order 38 Rule 5 and wholly adverse effect on the credibility of the respondent in the market, these powers should be exercised sparingly, strictly in accordance with the procedure prescribed by the Code, on the basis of definite evidence on the requisite points. Every Court while considering an application under Order 38 Rule 5, must satisfy itself the practical certainty of the plaintiffs success and this impliedly casts a duty on the Court to sec that the suit itself is not apparently or on the face of it, barred by any provision of law.

(8) Consequently, before passing an order either to attach properly or to issue direction to the defendant to furnish security under order 38 Rule 5 Civil Procedure Code . every Court is supposed to satisfy it self that there is practical certainty of the plaintiff's success; in other words, there must be very strong prima facie case and evidence in favour of the plaintiff; (a) in respect of claim of recovery of the amount and (b) in respect of claim of attachment before judgment or security.

(9) Consequently, before any order is passed under Order 38 Rule 5 Civil Procedure Code . it is essential that the Court must be satisfied that there is definite prima facie evidence to say that the defendant is about to dispose of the whole or part of his properly and that the disposal is with the intention of obstructing or delaying the execution of any decree that may be passed against the defendant.

(10) Closing of the business or leaving the local limits or mere apprehension of the plaintiff that recovery might be delayed individually by themselves are not sufficient (see The Berhampur Cotton Weavers' Cooperative Society Ltd. v. Jagannath , Bank of India v. M/s National Tile Work Industries & Ors. ). But conversely, if one or more of the aforesaid said circumstance is further coupled with distress sale at a grossly under valued price or transfer of property benam is on receipt of notice or summons, or defendant's insolvent circumstances, may provide sufficient ground to pass even an ex parte order under Order 38 Rule 5 Civil Procedure Code .

(11) Source of above said satisfaction of the Court could be strong prima facie evidence in the shape of documents coupled with affidavit (s) of the plaintiff or/and of any other person having knowledge about the disposal or intention to dispose of property with a design to delay or obstruct the fruits of the decree. The affidavit accompanying such an application for attachment before judgment under this rule, is not supposed to be simple reproduction of the language of this rule. It must disclose facts to justify inference of mala fide intention and conduct of the defendant in disposing of the property etc. (See G.Kuppathi Mudaliar Vs. V. Murugesan, Mr 1982 Madras 49). The affidavit must be properly verified under Rule 3 of Order 19 Civil Procedure Code . Every affidavit must clearly state how much deponent's averment is based on personal knowledge, and if it is not based on personal knowledge, it must clearly disclose the source of information and grounds of belief to enable the Court to assess whether belief is based on reasonable basis or just imaginary. Unless the affidavit discloses such information, the affidavit may be inadmissible for want of proper verification. On basis of a defective affidavit which does not disclose the source of information etc it may not be proper for the Court to pass an order under this rule (see Mamta Sen v. Life Insurance Corporation of India ) nor it would be legal to do so (See Har Krishan Khosla v. M/s. Alembic Chemical Works Company Ltd. ) (Sec also Shivaji-rao Nilanqekar Patil v. Dr. Mahesh Madhav Gosavi & ors. ). However, it may be clarified that short affidavit may not be a ground to reject the application if above requisite averments and information is made available in the application itself.

(12) No doubt in any appeal or revision, objection about defect in affidavit should not be allowed to be taken for the first time. Where the verification on a proper and liberal interpretation does contain averment to the effect that the statements made in the affidavit are true and correct to the knowledge of the deponent, then slight defect and irregularity an opportunity should be afforded to rectify it. (See Malhotra Steel Syndicate v. Punjab Chemi-Plants Ltd. 1993 Supp. (3) Scc 565).

(13) Now seeing the matter on the touchstone of the above guidelines, a perusal of documents on record filed by the plaintiff specially certificate of registration of Partnership firm, the post card dated 15th August, 1978, letter of discharge order, cheque dated 10th March, 1978, 5th October, 1978, 27th October, 1978 issued by the Defendant/ applicant, letter of transporter about delivery of goods on 13th March, 1978 indicate that plaintiff/respondent firm has certainly very strong prima facie case which indicates nearly practical success, so far as the main suit is concerned.

(14) Now, it may be seen whether there is equally strong prima facie case to move an application under Order 38 Rule 5 Civil Procedure Code . or not. In this case, the aforesaid discussion has become essential for the entire matter now hinges on this point and the objection was taken at the very initial stage. In reply to the application itself objection taken is "the plaintiff has not come out with definite information as to which person told the plaintiff that the defendants are closing up their business," in preliminary objection. In this case application under Order 38 Rule 5 Civil Procedure Code . is supported with a short affidavit and contents of this affidavit has been verified by solemnly affirming and declaring that "the contents of my above affidavit are correct to my knowledge." And para 2 of the affidavit reads as under: "THATI have gone through the accompanying application under Order 38 Rule 4, order 39 Rule 1 and 2 and Section 151 Civil Procedure Code . and state that the facts stated in the said application are true and correct."

(15) It has not been disclosed at all that averments made in the entire application arc correct to his knowledge. Bhupinder Singh deponent did not claim that he himself had gone to Phagwara. Despite the aforesaid objection the plaintiff-respondent neither filed detailed affidavit nor disclosed the names of the neighbour, who gave this information about distress sale and intention of closing down the business. If the plaintiff failed to cure the defect despite pointing out the defect, it could mean that the plaintiff firm were either not serious or just took a chance to recover the amount by putting at least psychological pressure or the plaintiff firm probably realised that they were unable to cure the defect. And, the basic defect in the application could not be cured, except by amending the application.

(16) Plaintiff is a partnership firm and each and every partner could be termed as a plaintiff. Particulars of visits are not mentioned. Names and other particulars of the neighbours are not given. Affidavit of neighbour is not expected to be filed when names etc. are not known. Apprehension about distress sale and threat to close down business appear to be based on hearsay or no evidence. Moreover, on the basis of affidavit no inference could be drawn that there was any intention on the part of the defendant to obstruct or defeat any decree which may be passed against the defendant. In such circumstances passing an order under Order 38 Rule 5 Civil Procedure Code . does not appear to be justified.

(17) Now a very material question arises whether it is simple difference of perception, or such a material irregularity or illegality in exercise of its jurisdiction which had led to miscarriage of justice. It is material and important for deciding whether this Court should interfere or not.

(18) In John Singh Vs. Sukhpal Singh & ors. , the Supreme Court has taken the view that under Section 115 the High Court had jurisdiction to interfere with the impugned order (i) if the said Judge (lower Court) has no jurisdiction to make the order it had made, and (ii) had acted in breach of any provision of law or committed any error of procedure which was material and might have affected the ultimate decision. If neither of these conditions was met the High Court had no power to interfere, however, profoundly, it may have differed from the conclusion of the Senior Sub-ordinate Judge on questions of fact on law. (see also. Terene Traders V. Ramesh Chandra Jamnadas & Co. & Anr., Masjid Kacha Tank, Nahan V. Tuffail Mohammed .

(19) Thus in this case the application did neither disclose the name of the person who visited Phagwara, nor dates and other particulars of visits nor names of the neighbours nor the name of the reliable informer. Case of the plaintiff/respondent is based on inadmissible affidavit under order 19 Rule 3 CPC. A bare reading of the affidavit and application would make the shortcomings of the affidavit, and discrepant averments in the application apparent. These discrepant averments coupled with shortcomings do not justify directions to furnish Bank guarantee for the counsel claimed under Order 38 Rule 5 CPC. One need not remind that it is the duty of a Judge to decide according to facts alleged and proved. When the facts alleged arc insufficient to make out a case, it is irregularity when the facts alleged are based on surmises alone and not on any evidence, it amounts to material irregularity. In the case in hand it is not only material irregularity but illegality also for neither the requirements of order 38 Rule 5 were satisfied nor impugned order is based on admissible affidavit evidence. The order being based on virtually no evidence, cannot be sustained.

(20) Accordingly, the impugned order to furnish bank guarantee is hereby set aside.

(21) Revision petition is accordingly allowed and the order to furnish bank guarantee is set aside.

(22) A copy of this order be sent to the Learned Trial Court through learned District Judge for information and to take necessary steps in accordance with law.