Attachment of property by the Court Should Confine to the Proportionate Extent

The purpose of attachment before judgement

The precise purpose of attachment before judgement is to prevent any attempt by the defendant to defeat the realisation of the decree that may be passed against him, by disposing of his immovable property in some way.

But the preventive remedy of attachment must be exercised sparingly with utmost care, caution, and circumspection. By order of attachment the court takes defendant’s property in to the legal custody so that it may be acted upon when the defendant’s debt is established at the conclusion of the case.

Provisions governing attachment

The Sections 60 to 64, Order XXXVIII Rules 5 to 13, and the Order XXI, of the Code of Civil Procedure, 1908 (CPC) are the provisions that deal with attachment before judgement.

The Section 60 & 61 speaks about the property that shall not be liable to attachment. Section 64 of the CPC deals with illegality of alienating property under attachment.

The Order XXI is about execution of a decree and it provides for the attachment as part of the execution of property but its rules are applicable to attachment before judgement as well. The Order XXXVIII Rule 7 says the attachment must be made in the manner provided for attachment of property in execution of a decree.

The court must attach the portion sufficient to satisfy the claim

The court must bring only such portion of the property, the proceeds of which would be sufficient to satisfy the claim of the decree holder, for attachment to be sold, if the property is large and the decree to be satisfied is small. This is not a discretion, but an obligation imposed on the court, says the Supreme Court (SC), in Ambati Narasayya v M. Subba Rao & Another [1990 AIR 119].

Attachment should be proportionate to satisfy the decree

In other words, the attachment of property by the court should be proportionate to the amount owed to satisfy a decree and the court should only attach property that is sufficient to cover the decree amount, and not more.

The Order 21 Rule 64 of the CPC states that any court executing a decree may order that any property attached by it and liable to sale, or such portion thereof as may see necessary to satisfy the decree, shall be sold, and that the proceeds of such sale, or a sufficient portion thereof, shall be paid to the party entitled under the decree to receive the same.

The phrase necessary to satisfy the decree is meaningful

In Takkaseela Pedda Subba Reddy v Pujari Padmavathamma & Others [1977 AIR 1789], the SC states that, under Order 21 Rule 64 of the CPC, the executing court derives jurisdiction to sell properties attached only to the point at which the decree is fully satisfied. The words ‘necessary to satisfy the decree‘ clearly indicate that no sale can be allowed beyond the decretal amount mentioned in the sale proclamation. In other words, where the sale fetches a price equal to or higher than the amount mentioned in the sale proclamation and is sufficient to satisfy the decree, no further sale should be held and the court should stop at that stage.

The Andra Pradesh High Court order in the Civil Revision Petition in Mandati Tirupathi Reddy v Immadisetti Venkata Narasimha Rao (2022) also deals with the same issue.

Calcutta HC Guidelines on attachment before judgement

In a landmark case Premraj Mundra v Md. Maneck Gazi & Ors [AIR 1951 CAL 156], the Calcutta High Court laid down 14 guidelines/principles after referring to a number of authorities, for the exercise of jurisdiction under Order XXXVIII Rule 5 & 6 of the  CPC.

The Guidelines are as follows: –

1. That an order under Order 38, Rules 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 defendant. 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 plaintiff’s claim.
8. That the mere fact of transfer is not enough, since nobody can be prevented from dealing with his properties simply because a suit has been filed: There must be additional circumstances to show that the transfer is with an intention to delay or defeat the plaintiff’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 plaintiff’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 plaintiff’s claim.
12. Mere removal of properties outside jurisdiction, is not enough, but where the deft. with notice of the plaintiff’s 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 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.
14. The sale of properties at a gross undervalue, or benami transfers, are always good indications of an intention to defeat the plaintiff’s claim.

The SC says that the court must however be very cautious of the evidence on these points & should not rely on vague claims or allegations.

In conclusion

That means, care must be taken to put only such portion of the property to sale the consideration of which is sufficient to meet the claim in the execution petition.

The sale held without examining the above aspect and not in conformity with that requirement would be illegal and without jurisdiction.

References

1. Ambati Narasayya v M. Subba Rao & Another [1990 AIR 119]
2. Takkaseela Pedda Subba Reddy v Pujari Padmavathamma & Others [1977 AIR 1789]
3. Mandati Tirupathi Reddy v Immadisetti Venkata Narasimha Rao (2022)