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Judgment
S. Rajeswaran, J.—Application No. 2638/2006 has been filed by the plaintiffs to direct the respondent/defendant to furnish security to the
suit claim within a stipulated time, failing which, to pass an order of attachment of immovable properties more fully described in the schedule to the
Judge''s summons.
Application No. 2639/2006 has been filed by the plaintiffs to direct the defendant company to produce all the Original Account Books, Audited
balance Sheets of the defendant company pertaining to the year 1998-1999 to 2004-2005 and minute books pertaining to the defendant company
from 1998 to 2005.
The plaintiffs are the applicants. The suit has been filed by the plaintiffs against the defendant directing the defendant to pay a sum of Rs.
3,94,38,683.60 to the plaintiffs and further direct the defendant to pay subsequent interest at 18% per annum on Rs. 3,43,94,180/-from the date
of the plaint till the date of realisation.
According to the plaintiffs, plaintiffs 1 and 2 were directors of the defendant-company which was incorporated to run a hospital and allied
services. The 1st plaintiff was a Managing Director from 19.5.1997 till she was forcibly removed from the directorship by the present management.
Similarly the 2nd plaintiff, who is the daughter of the 1st plaintiff was also removed from the Board of Directors from the defendant-company.
According to the plaintiffs the following amounts are due and payable to them by the defendant-company:
Sl. No. Particulars of the claim Amount
1 Salary and House Rent Allowance claimed by the 1st 27,14,000.00
plaintiff
2 Salary of the 2nd plaintiff 5,00,000.00
3 Mortgage amount paid to Mansi Finance by the 1st plaintiff56,00,000.00
on behalf of the defendant
4 Sale proceeds paid by the 1st plaintiff to the Private 42,50,000.00
Financier on behalf of the defendant
5 Rental Arrears to be paid by the defendant to the plaintiffs 1,48,00,000.00
6 Amounts settled by the 1st plaintiff to the Private 34,50,298.00
Financiers as out of court settlement
7 Amounts settled by the 1st plaintiff to the Private 30,79,882.00
Financiers in court proceedings
8 Interest claimed by the plaintiffs at the rate of 18% p.a., on50,44,503.60
Rs. 1,60,14,298/- from 6.10.2004 (the date of suit notice)
to 6.7.2006
GRAND TOTAL (SUIT CLAIM) 3,9438,683.60
The court fee payable and paid on the suit claim Rs. 3,98,000.00 (Rounded
3,94,38,683.60 is off)
Pending suit, the plaintiffs filed Application No. 2638/2006 under Order 38 Rule 5 CPC directing the defendant-company to furnish security to
the suit claim failing which to pass an order of attachment of the immovable properties described in the schedule. In the affidavit filed in support of
this Application it was stated that the liabilities of the Company are mounting more than the assets and the Company could not pay back the loan
amounts to various banks and it is in a very difficult financial position.
Application No. 2639/2006 was filed by the plaintiffs to direct the defendant-company to produce all the original account books etc., pertaining
to the year 1998-99 to 2004-2005 and the minutes book from 1998 to 2005. The reason given for producing these books and minutes is that the
plaintiffs apprehend that these could be tampered and manipulated and they are also necessary to decide the matter in issue before this Court.
A common counter affidavit has been filed by the defendant in both the Applications. It was stated in the counter that the 1st applicant/plaintiff is
liable to pay a sum of Rs. 173 lakhs to the defendant and therefore a suit was already instituted against the 1st plaintiff in C.S.No. 227/2004
before this Court to recover the above said sum and after receiving the summons in C.S.No. 227/2004, the above suit has been filed. It is stated
by the defendant that the entire amount claimed in the suit is without any basis and an attempt is being made by the 1st plaintiff to hold the
Company liable for her omissions and commissions during her tenure in the office. It is denied that the defendant-company is in a bad financial
situation and the Company''s shares are listed and the assets are worth several crores. It also referred to C.P. No. 34/2003 filed under Sections
397 and 398 of the Companies Act for oppressions and mismanagement of the affairs of the Company by the 1st plaintiff and others. It was also
stated in the counter that in C.S. No. 562/2003, the 1st plaintiff took out an Application No. 2259/2004 and 564/2004 and this Court ordered to
take inventories of all books and records of the defendant-company which are under the control and custody of the 1st plaintiff, which are kept
under lock and key in a room allotted to 1st plaintiff while she was in the office and the inventories taken in the presence of the 1st plaintiff and the
defendant did not disclose the availability of the minutes book of the Board meetings, the attendance register and other licenses obtained by the
Company. It is alleged by the defendant that the 1st plaintiff stealthily removed all the above books and documents necessitating the defendant to
send a lawyer''s notice dated 5.8.2004 calling upon her (1st plaintiff) to surrender various records including the minutes book etc. No reply was
sent by the 1st plaintiff to this notice. A police complaint was also lodged in this regard. Therefore it is denied that the books would be tampered
and manipulated. Hence the defendant prayed for dismissal of both the above Applications.
Heard the learned Counsel for the plaintiffs and the learned Counsel for the defendant. I have also perused the documents filed in support of
their submissions.
First let me consider the Application No. 2638/2006 filed under Order 38 Rule 5 CPC filed by the plaintiffs to direct the defendant to furnish
security to the suit claim failing which to pass an order of attachment of the properties prescribed in the schedule.
Under Order 38 Rule 5 CPC, if the plaintiffs satisfy the court that the defendant with intent to obstruct or delay the execution of any decree
that may be passed against him, is about to dispose of the property or is about to remove the property from the local limits of the jurisdiction of the
court, this Court may direct the defendant either to furnish security or to show cause why he should not furnish security. If the defendant fails to
furnish security or fails to show cause, the court may order that the property specified may be attached.
The remedy of Attachment Before Judgment of an immovable property is thus certainly an extraordinary one and more care should be taken
while granting in favour of any person and the court should cautiously exercise this power under this provision. Therefore there must be positive
and definite materials on the two points set out under Order 38 Rule 5 CPC namely, (1) that the defendant is about to dispose of the property and
(2) that this disposal with an intention of obstructing or delaying the execution of any decree that may be passed against him. The sine qua non for
an order of Attachment Before Judgment is the malafide intention of the defendant to defeat the decree that may be passed against the plaintiff and
these ingredients should be established by the plaintiff in the affidavit filed in support of the Application.
With the above settled principles if the facts of the present case are considered, I am of the view that the plaintiffs have failed to establish a
case to get this extraordinary relief.
First of all, the entire suit claim is disputed by the defendant and in fact the defendant filed a suit for recovery of Rs. 173 lakhs from the 1st
plaintiff in C.S.No. 227/2004 and the same is pending before this Court. Further, another suit was filed by the defendant in this Court in C.S.No.
562/2003 against the 1st plaintiff for a declaration to declare that she has violated Section 295 of the Companies Act and consequently sought an
injunction restraining her from exercising her power as director/Managing Director, and this Court on 29.4.2004 in A.No. 675/2003 passed an
order restraining her from functioning or exercising her right as a Director/Managing Director of the respondent-company. It is also seen that
Company Petitions have been filed and rent control petitions are also pending between the parties. In such circumstances, the case of the plaintiffs
are to be proved in an elaborate trial and pending such trial, the plaintiffs have not established in their affidavit that the defendant-company with
malafide intention to dispose of the properties to defeat the decree that may be passed against them. In fact the defendant themselves instituted a
suit for recovery of Rs. 173 lakhs from the 1st plaintiff in C.S. No. 227/2004. Therefore I do not find any merits in Application No. 2638/2006
filed under Order 38 Rule 5 CPC and the same is dismissed.
Insofar as, the Application No. 2639/2006 is concerned, in view of the inventory taken in the presence of 1st applicant/plaintiff and the
respondent/defendant and considering the notice sent by the defendant on 5.8.2004 it is not possible for this Court to direct the defendant to
produce the minutes book pertaining to the period 1999 to 2005. Insofar as the other books/records are concerned, it is admitted by the
defendant that they are available in the registered office and it is open to the plaintiffs to go and examine the same with the help of their counsel at
the registered office after giving prior notice to the defendant. If such notice is given, the defendant is directed to permit the plaintiffs/their counsel to
examine the same without giving any room for complaint.
With the above direction the Application No. 2639/2006 is disposed of. No costs.