AI Structured Summary
Not yet generated for this judgment
Judgment
This order is being prepared while working from home for being signed and communicated to the parties because of the suspension of functioning of DRAT due to spread of Corona Virus (Covid-19) in the entire country. This procedure for the preparation of orders by quasi judicial tribunals and their communication to the concerned litigants in place of formal pronouncement in open Court has been recognised by the Hon'ble Supreme Court in one of its judgments reported as AIR 2008 SC 2594, "State Bank of India and Ors. Vs. S.N.Goyal"(para 19) wherein it was observed that:-
".............While some quasi judicial tribunals fix a day for pronouncement and pronounce their orders on the day fixed, many quasi judicial authorities do not pronounce their orders. Some publish or notify their orders. Some prepare and sign the orders and communicate the same to the party concerned... "
I now proceed with the disposal of this miscellaneous appeal filed against an order passed on 22.04.2009 for 'attachment before judgment' passed in respect of three properties allegedly owned by the appellants, who are mother and son, in an Original Application(O.A.) under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993('RDDBFI ACT' in short) filed way back in the year 2005 by respondent no.1 Indian Overseas Bank against the two appellants and respondent no.2 herein as guarantors and the borrower Company as the main parties- defendants for recovery of more than two crores of public money. The impugned order of 'attachment before judgment' in respect of the properties of the appellants was passed not at the instance of the O.A. applicant Bank but at the instance of appellants' co- defendant, respondent no.2 herein.
The impugned order though was passed in the year 2009 but this appeal was filed quite belatedly and this Tribunal finding good and sufficient reasons having been shown by the appellants for the delay in the filing of the appeal had condoned the delay and that decision does not appear to have been challenged either by the respondent bank or by the main contesting party, respondent no.2 herein.
The relevant portions of the impugned order dated 22.04.2009 of the DRT are re-produced below:-
"The above stated IA has been moved on behalf of defendant No.3 under Section 19(12)(25) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 read with Rules thereunder and principles of natural justice for the restraint and attachment of properties and goods/assets with the prayer to restrain the defendants No.2 and 4 from selling, alienating, transferring or assigning or any manner creating third party interest and possession of the properties bearing Apart No.01A056 in Oakwood Estate, DLF City, Gurgon, D-4A/7, DLF-Phase-I, Gurgaon and plot No.24, Sector 6, IMT Manesar, Gurgaon and also attach the above properties.
Briefly, it has been stated that the defendants No.2 and 4 one Shri Harinder Dhingra who happens to be the father of defendant No.2 and husband of defendant No.4 have played fraud and/or cheating with the answering defendant and are guilty of the same. It has been further stated that the bank officials have done grave dereliction of duties during the course of banking business activity and suppressed and concealed material acts and information from this Tribunal just to favour the defendants No.2 and 4. The above stated properties belong to the defendants No.2 and 4. It has been submitted that the bank did not take any steps for the protection of assets in respect of the property at 371, Udyog Vihar, Phase-II, Gurgaon and the said property appears to have been sold after filing present claim application to frustrate the recovery of alleged dues of the bank by the defendants No.2 and 4. It has been prayed that serious prejudice would be caused to the answering defendant in case the above properties as well as the hypothecated goods and machines are not attached and ex-parte ad interim order against the said properties are not passed by this Tribunal.
In reply filed on behalf of the defendants No.1, 2 and 4, it has been stated that the applicant has no locus to file the present application before this Tribunal and the same has been filed with the sole intention to cause prejudice to the interests of the answering defendants. It has been further stated that the applicant/defendant No.3 is himself a contesting defendant in the main matter and the liability for making payments to the bank has been alleged even against him. It has been averred that the present application is not maintainable in law as the properties enumerated and sought to be attached by the complainant through the present application are not encumbered and not under charge of the bank. It has been further averred that the defendant No.3 in connivance with the officials of the bank has played fraud upon the answering defendants and had forged the signatures of the defendants No.2 and 4 to avail credit facility from the bank. Other averments have been denied with the prayer to reject and instant application and exemplary cost be imposed on the defendant No.3 for interfering in the process of this Tribunal.
The application has been opposed by the defendants No.1, 2 and 4. A preliminary point has been raised on their behalf with regard to the maintainability of the application. It is contended that the defendant No.3, who has filed the above stated application, has sought relief against the other defendants but the co-defendants is not entitled to seek any relief against the co-defendants. Therefore, the application being not maintainable is liable to be dismissed.
I have considered the submission advanced by the learned counsel for the defendants No.1, 2 and 4, but I am not inclined to accept the contention mentioned above. In my opinion, the Tribunal is competent to pass an injunction order in respect of the properties belonging to the co-defendants provided the application is within the period of limitation and the necessary court fee has been paid thereon. This application is undisputedly, not barred by limitation. The defendant No.4 has also paid a sum of Rs.250/- as court fee payable under rules on this application. I therefore, hold that the application seeking relief filed by the defendant No.3 against defendants No.1, 2 and 4 is maintainable.
I have also considered the submission advanced by the learned counsel for the defendants No.1, 2 and 4 but I do not find any force in it. Sub Section 12 read with Sub Section 13(A) and (B) of Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (hereinafter referred to as RDDBFI Act) gives ample power to this Tribunal to pass an order restraining the borrower/guarantor/defendant from transferring, alienating or disposing of or otherwise dealing with the property in question. I would like to produce the provisions of Sub Sections 12 and 13(A) and (B) of Section 19 of the RDDBFI Act, 1993 as follows:-
"(12) The Tribunal may make an interim order (weather by way of injunction or stay of attachment) against the defendant to debar him from transferring alienating or otherwise dealing with, or disposing of, any property and assets belonging to him without the prior permission of the Tribunal.
(13)(A) Where, at any stage of the proceedings, the Tribunal is satisfied, by affidavit or otherwise, that the defendant, with intent to obstruct or delay or frustrate the execution of any order for the recovery of debt that may be passed against him -
(i) is about to dispose of the whole or any part of his property; or
(ii) is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Tribunal; or
(iii) is likely to cause any damage or mischief to the property or affect its value by misuse or creating third party interest,
the Tribunal 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 Tribunal, when required, the said property or the value of the same, or such portion thereof as may be sufficient to satisfy the certificate for the recovery of debt, or to appear and show cause why he should not furnish security.
(B) Where the defendant fails to show cause why he should not furnish security, or fails to furnish the security required, within the time fixed by the Tribunal, the Tribunal may order the attachment or the whole or such portion of the properties claimed by the applicant as the properties secured in his favour or otherwise owned by the defendant as appears sufficient to satisfy any certificate for the recovery of debt."
From the perusal of the above provisions contained in sub section (12) it is evident that any party may file such application and it does not restrict that only bank is entitled to file such application. The contention raised by defendants 2 to 4 is, therefore, dismissed being devoid of merits. ..................................
The learned counsel for the defendants No.1, 2 and 4 has further submitted that they have not availed any loan and the fraud has been committed by defendant No.3 by making forged signatures of the defendants No.1, 2 and 4. He has submitted that admittedly, the properties are not mortgaged. Therefore, the relief sought for by the co-defendant No.3 is liable to be declined. In support of his contention, he has placed reliance on the judgment of the High Court of Madras in the case of Renox Commercials Ltd. Vs. Inventa Technologies Pvt. Ltd. in C.S. No.518/99 wherein it has been held that an order of attachment before judgment is a drastic remedy and the power has to be exercised with utmost care and caution, as it may be likely to ruin the reputation of the party against whom the power is exercised. As the Court must act with the utmost circumspection before issuing an order of attachment, the affidavit filed by the applicant should clearly establish that the defendant, with intent with intent to obstruct or delay the execution of the decree that may be passed against him is about to dispose of the whole or any part of his property. A mere mechanical repetition of the provisions in the Code or the language therein without any basic strata of truth underlying the allegation or vague and general allegations that the defendant is about to dispose of the property or to remove it beyond the jurisdiction of the Court, totally unsupported by particulars, would not be sufficient compliance with order 38, Rule 5 of CPC.
I have gone through the judgment. I have seen the material available on record. Admittedly, the OA is pending for recovery of a sum of Rs.2,61,46,022/- since 22.12.2005. It appear that no security is available with the bank, the defendants No.1, 2 and 4 have not denied that they have disposed of some properties during the course of the trial and therefore, the Tribunal is satisfied on the basis of material available on record that the defendants No.1, 2 and 4 with intent to obstruct or delay or frustrate the execution of an order for the recovery of debt that may be passed against them, may dispose of the properties in question. Therefore, the application hereby deserves to be allowed. I, therefore, allow this application with the direction to defendants No.1, 2 and 4 shall furnish a security for a sum of Rs.4 crores within a period of 15 days, failing which the application for attachment of all the properties mentioned in the application shall stand allowed. The defendants No.1, 2 and 4 are further restrained from transferring, alienating, or disposing of or otherwise dealing with or creating any third party interest over the properties in question. The IA is thus disposed of." (highlighting is by me)
The appellants felt deeply hurt by the impugned direction given to them by the DRT to furnish security for a sum of Rs. four crores and the further direction that the properties of which their co- defendant no.3 wanted attachment before judgment will stand attached in case said security was not furnished by them within the given time. The appellants' main grievance expressedthrough their learned counsel Ms. Neha Kapur is that an order for attachment before judgment can be passed against a defendant only at the instance of a plaintiff, O.A. applicant bank in the present case and not at the instance of a co-defendant. So, respondent no.2 Mr. H.N. Singh could not have prayed for an order for attachment before judgment against the appellants-defendants. It was also argued that when subsequently the appellants had sought a similar direction against respondent no.2, the applicant of attachment application, the same DRT rejected the prayer of the appellants on the ground that one defendant cannot seek an order of attachment before judgment against another defendant. On this legal objection raised by the appellants-defendants against the maintainability of such an attachment application at the instance of a defendant there was no response from the side of the respondent no.2 either in the very detailed reply to the appeal or during the course of arguments . His learned counsel Mr. Sanjiv Bhandari kept on arguing that the bank officials have been favouring the appellants right from day one by not seeking any security from them to secure the payment of bank's dues and by allowing the appellants to sell off their assets. Learned counsel for the bank seriously argued that this is a unique and rare case where the appellants and respondent no.2 after availing of financial facilitites of crores of rupees for their joint business have been successful in dragging this recovery case for more than a decade. One application is moved by one set of defendants, mother and son duo, appellants, and then their business associate Respondent no.2 has also been moving one application or the other and in that process they have been successful in ensuring that the bank's O.A. does not get disposed of even though the pleadings and evidence had been completed long time back and in fact the O.A. had at one stage been reserved for judgment also but the proceedings were revived again by the DRT as these parties came out with separate set of applications.
In my view this appeal has to be allowed on the short ground that a defendant in a suit cannot invoke provision of attachment before judgment against a co-defendant. For this view I find full support from one judgment of a judgment of the Hon'ble Supreme Court rendered while considering the scope pf Order XXXVIII Rule 5 CPC, which provision is pari materia with Section 19(13A) of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and which provision has been invoked in the present case. The relevant two paragraphs from that judgment in "Sardar Govindrao Mahadik & Anr vs Devi Sahai & "Ors." reported as 1982 AIR 989 SC are extracted below:-
"Order XXXVIII, rule 5, enables the Court to levy attachment before judgment at the instance of a plaintiff........................................................................................
What is the effect of attachment before judgment ? Attachment before judgment is levied where the court on an application of the plaintiff is satisfied 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 sole object behind the order levying attachment before judgment is to give an assurance to the plaintiff that his decree if made would be satisfied. It is a sort of a guarantee against decree becoming infructuous for want of property available from which the plaintiff can satisfy the decree " (highlighting is mine)
This judgment of the Hon'ble Supreme Court makes it abundantly clear that an application before judgment can be maintained only by a 'plaintiff' and not by a defendant. Therefore, on this short ground alone this appeal deserves to be allowed and accordingly is allowed. Impugned order of attachment before judgment dated 22.04.2009 passed by the DRT is set aside and consequently Misc. Application No.898/2008 which was allowed by the DRT will now stand rejected. It is however made clear that dismissal of the application for attachment before judgment is not an expression of any opinion on the merits of the case any of the parties which have in any case not been gone into.
The delay in the disposal of the O.A. is not at all for good and strong reasons as could be gathered from the record of the DRT which is already in tatters. So, considering the fact that the bank's O.A. involving crores of public money is pending since the year 2005 and also considering the fact the trial was already over at one stage, the learned DRT shall now at least dispose of the O.A. within a period of two months after functioning of DRTs, which presently is lying suspended due to the spread of Covid 19, is resumed.