M/S. Vk Bajaj And Company vs Nayati Healthcare And Research ...
2021 Latest Caselaw 3509 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI
%                                     Reserved on:       06.12.2021
                                      Pronounced on:     17.12.2021
+     CS(COMM) 469/2020
      M/S. VK BAJAJ AND COMPANY                   ..... Plaintiff
                     Through: Mr.Y.P. Narula, Senior Advocate
                              with Mr.Abhey Narula, Advocate

                         Versus

      NAYATI HEALTHCARE AND
      RESEARCH NCR PVT. LTD & ANR.             ..... Defendants
                   Through: Mr.Giriraj Subramanium &
                             Mr.Simarpal Singh Sawhney,
                             Advocates for defendant No.1.
                             Ms.Shruti Garg & Mr.Niranjan
                             S. Rao, Advocates for defendant
                             No.2.

      CORAM:
      HON'BLE MR. JUSTICE SURESH KUMAR KAIT

                         ORDER

IA No. 9782/2020 in CS(COMM) 469/2020

1. Applicant/plaintiff is a firm of professional Chartered Accountants

duly registered under the Chartered Accountants Act, 1949, who has filed

the present suit against the defendants, defendant No.1- being a private

limited company and defendant No.2- Managing Director of defendant

No.1, seeking recovery of Rs.2,71,59,605/- for providing financial

assistance such like drafting the MIS system, preparing monthly

accounts, handling Income tax matters etc. from September, 2014 to

April, 2018.

2. The plaintiff has filed the present application under the provisions

of Order XXXVIII Rule 5 r/w Section 151 CPC seeking attachment of

property being Plot No. 352, DLF City, Phase-I, Sector 28 Gurgaon,

Haryana, which is valued at approximately Rs.300,00,00,000/- for

recovery of amount of Rs.2,71,59,605/-, i.e. the principal amount claimed

in the present petition.

3. At the hearing, learned senior counsel appearing on behalf of

applicant/ plaintiff submitted that the services of the plaintiff- Firm were

engaged by defendant No.1- company in September, 2014 and besides

furnishing financial assistance such like drafting the MIS system,

preparing monthly accounts, handling Income tax matters etc. and

representing defendant No.1 before the Income Tax Authorities with

regard to income tax scrutiny assessments and other tax related issues.

Further, on instructions of defendant No2, plaintiff /firm also participated

in the consortium meetings of the bankers for obtaining loan of Rs.160

crores, finalisation of balance sheet of the company, preparation of tax

audit information, which were provided to the statutory auditors of the

company at the request of the defendants. It was next submitted by

learned senior counsel that the plaintiff also attended issues related to the

company law matters, bonus issue of shares, meeting the advocates and

legal consultants of defendant No.1-company and for all the professional

services rendered from September, 2014 till April, 2018, plaintiff is

entitled to receive Rs.2,71,59,605/- from defendants.

4. To submit that keeping a prima facie view of the matter, defendant

No.1 is liable to furnish a security for the suit amount, reliance was

placed upon Hon'ble Supreme Court's decision in Rahul S. Shah Vs.

Jinendra Kumar Gandhi (2021) SCC OnLine 341. To submit that

provisions of Order XXXVIII Rule 10 CPC, an attachment before

judgment will not in any way affect the rights of the persons in respect of

disputed persons, reliance was placed upon a decision of High Court of

Gujrat in Syndicate Bank Vs. National Wire Products & Ors. AIR 1994

Guj 2.

5. Lastly, learned senior counsel for plaintiff submitted that

defendants have even failed to file reply to the present application and

therefore, they have no right to object to this application and to secure the

interest of plaintiff, the present application deserves to be allowed.

6. On the contrary, learned counsel appearing on behalf of defendant

No.1 drew attention of this Court to judgment dated 24.08.2021 passed

by the Division Bench of this Court in FAO (OS) COMM 107/2021,

wherein it has been observed that by filing application under Order

XXXVIII Rule 5 and Order XXXIX CPC, plaintiff cannot convert its

unsecured debt into a secured debt. Learned counsel submitted that

plaintiff is not only required to show a prima facie case but is also

required to demonstrate that defendant is trying to dispose of the assets

with the intention of defeating the decree. In support of this submission,

learned counsel placed reliance upon Hon'ble Supreme Court's decision

in Raman Tech. & Process Engg. Co. and Anr. Vs. Solanki Traders

(2008) 2 SCC 302.

7. It was submitted that the claims raised by the plaintiff are not

based upon any fee schedule / agreement executed between the parties

and no cogent reasons have been provided for raising invoices at such a

belated stage. It was further submitted on behalf of defendant that

plaintiff had infact raised claims of the alleged amount on the basis of a

Engagement Letter purportedly executed by defendant No.1 with Empire

Services Private Limited, which is not a party to the present suit and the

said fact has been concealed from this Court. It was vehemently

submitted that in the written statement filed on behalf of defendants, the

claims raised by the plaintiff have been disputed and plaintiff is not

entitled to recover the alleged dues of Empire Services Private Limited

from the defendants.

8. It has also been brought to the notice of this Court by learned

counsel for the defendants that the property in question is in possession

of M/s Yes Bank by virtue of mortgage deed, who has a registered charge

over the said property under Sections 77/78/79 of the Companies Act,

2013 read with Rule 3(1) of the Companies (Registration of Charge)

Rules, 2014, which has now further been registered with the Central

Registry of The Securitization and Reconstruction of Financial Assets

and Enforcement of Security Interest Act, 2002 ("SARFAESI Act"). The

possession of the said property/assets of defendant No.1 has been taken

by M/s Yes Bank on 10.09.2021, which is now pursuing its remedies

under the SARFAESI Act and therefore, under Section 34 of the said

Act, the present application is not maintainable. In support of abovesaid

submission, reliance was placed upon Hon'ble Supreme Court's decision

in Mardia Chemicals Ltd. and Ors. Vs. Union of India & Ors. (2004) 4

SCC 311. Lastly, it was submitted that the present application deserves to

be dismissed.

9. At the first and foremost, this Court makes it clear that this Court

has not heard arguments in IA No. 9962/2021 despite today matter

having been fixed for the same, as learned counsel for plaintiff has

insisted upon hearing on the instant application [IA No. 9782/2020] for

urgent relief under the provisions of Order XXXVIII Rule 5 r/w Section

151 CPC.

10. Pertinently, in the present application plaintiff has raised an

apprehension that defendants have large loan liabilities and they may

encumber their existing assets to defeat the claim of plaintiff, which are

to the tune of Rs.2,71,69,605/- and therefore, has prayed to attach the

property at Plot No.352, DLF City Phase-1, Sector 28, Gurgaon Haryana

of the defendant No.1 Company, which is valued at approximately

Rs.300,00,00,000/-. However, on what premise the aforesaid

apprehension is based, has not been mentioned in the application and,

therefore, the submission advanced by both the sides were heard at length

and the decisions relied upon by them have also been perused by this

Court to satisfy whether the relief claimed is made out or not.

11. Pertinently, the provisions of Order XXXVIII Rule 5 CPC read as

follows:-

"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.

1 [(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..]"

12. Testing the applicability of provisions of

Order XXXVIII Rule 5 CPC to the case in hand, this Court finds that by

seeking attachment of property of defendants, plaintiff is in fact trying to

secure the amount over and above the amount of which decree is sought

against the defendants in the main suit.

13. To satisfy the conscious of this Court so that by refusing to grant

any relief, no prejudice is caused to plaintiff, this Court has gone through

the Hon'ble Supreme Court's decision in Rahul S. Shah (Supra). The

submission of plaintiff that defendant No.1 is liable to furnish a security

for the suit amount in view of decision in Rahul S. Shah (Supra) is

misplaced, as in the said case the Hon'ble Supreme Court had dealt with

the appeals arising due to dismissal of writ petitions by the High Court of

Karnataka, culminating from execution proceedings of a decree in

respect of the property which had two sets of sale deeds and a part

thereof was also subject matter of land acquisition proceedings and

disbursal of claims etc. However, in the present case the property in

question is said to have been mortgaged with M/S Yes Bank, who is

pursuing remedies under the SARFAESI Act.

14. Further, the submission of plaintiff's counsel that decision of

Hon'ble Supreme Court in Raman Tech. (Supra) is not applicable to the

present case, does not appeal this Court, as in the said case proceedings

had been instituted for recovery of money due towards supply of material

to the appellant and a direction was sought to furnish security of the suit

claim and in case of failure, attachment before judgment was prayed. The

Hon'ble Supreme Court had made the observations:-

"5. The power under Order 38 Rule 5 of the Civil Procedure Code 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.

6. A defendant is not debarred from 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 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 bona fide and valid 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 judgment."

15. Moreover, the Division Bench of this Court vide its order dated

24.08.2021 has already reiterated the ratio of law laid down by the

Hon'ble Supreme Court in Rahul S. Shah (Supra) and Raman Tech.

(Supra) while observing as under:-

"10. Further, the Appellant by filing applications under Order XXXVIII Rule 5 and Order XXXIX CPC cannot convert its unsecured debt into a secured debt [See Raman Tech. & Process Engg. Co. & Anr. Vs. Solanki Traders, (2008) 2 SCC 302].

11. Also, the Supreme Court in Rahul S Shah (supra) has nowhere stipulated that it is mandatory for the Courts in each and every suit to demand security from the defendant in accordance with the prayer clause. The said judgement vests discretion with the trial court to direct the defendant to disclose its assets and/or furnish security, if the fact so warrant and that too before settlement of issues.

12. The judgment in Rahul S Shah (supra) does not overrule the earlier judgement of the Supreme Court in Raman Tech. & Process Engg. Co. & Anr. (supra)."

16. Besides afore-noted observations, the Division Bench has also

observed that appellant therein (plaintiff) is using the present court

proceedings to force the respondent to settle its claim on priority basis by

repeatedly filing fresh applications and not allowing the court to decide

the previous applications filed by it. This Court is also in consensus with

the view expressed by the Division Bench.

17. In the considered opinion of this Court, plaintiff has not been able

to prima facie persuade this Court that its case stands on such strong

footing that it shall have a decree in its favour or that intervention of this

Court is required in contravention of ratio of law laid down by the

Hon'ble Supreme Court in Mardia Chemicals (Supra).

18. In the light of aforesaid, without commenting on the merits of the

case, the present application is dismissed.

(SURESH KUMAR KAIT) JUDGE DECEMBER 17, 2021 r