Mohammad Rafiuddin vs M/S. Pride India Avenues Pvt Ltd

Aggrieved by the order dated 26.03.2021 passed in I.A.No.731 of 2020 in O.S.No.231 of 2020 on the file of the learned X Additional Chief Judge, City Civil Court, Hyderabad, the petitioner-plaintiff preferred this revision.

The case of the petitioner herein, in a nutshell, is that he filed an application under Order 38 Rule 5 CPC before the trial Court seeking attachment of petition schedule property before judgment. In fact, he filed O.S.No.231 of 2020 for recovery of an amount of Rs.5,08,79,426/- along with interest at the rate of 24% per annum till the date of realization from M/s.Pride India Avenues Private Limited-first defendant, its Managing Director-Mr.Abdul Haleem Baig-second defendant and also against its Director-third defendant. During the pendency of the suit he also filed the present application for attachment of petition schedule properties of the third defendant before judgment. The petitioner would assert that he entered into an agreement with the first respondent herein on 20.12.2018 for purchase of Plot bearing Nos.C-10 and C-11 admeasuring 1043 square yards in a gated community viz., Golden Sands, Phase-II, Tolichowki, Shaikpet Village and Mandal, Hyderabad District, for a total sale consideration of Rs.6,98,81,000/-. He would further submit that he paid an amount of Rs.3,40,00,000/- on 19.12.2018 and Rs.10,00,000/- on 15.12.2018 for which the second respondent issued receipt on 15.12.2018 itself. Later he came to know that the first respondent company has no clear title and several people were complaining against it for selling plots and they are also questioning the conduct of second and third respondents. On verification, he came to know that the land in Sy.Nos.41, 174, 177 to 180, 181, 182 and 211 are under attachment by the Enforcement Directorate since they belong to Heera Gold Company and as such he demanded the respondents to return the amount paid by him and on such demand, the respondents issued four cheques in the name of one Hi End Infra Company claiming to be the sister company of the respondents and that when he presented those cheques, they were dishonoured. Thereafter, he gave complaint on 01.06.2020 in FIR No.63 of 2020. He would also assert that the third respondent is in active management of the first respondent company and she is hand in glove with her husband-second respondent and equally liable. The petitioner also gave complaint against the second respondent. Thereafter, the first and second respondents removed the third respondent as a Director of the Company to avoid coercive steps against her in person or against her property. It is also the case of the petitioner that when he entered into an agreement on 20.12.2018, the third respondent was also one of the Directors and hence she is liable for omissions and commissions as Director of the Company and also personally. He would also contend that the third respondent is trying to alienate the property to an extent of Ac.5.24.09 guntas situated at Moinabad Mandal to escape the liability. One Mr.Maqdoom, who is in real estate business, informed him that respondents are trying to alienate the property as first respondent is juristic person managed by the second and third respondents-wife and husband, he sought attachment of the above property of the third respondent before judgment.

In a counter filed by the third respondent, she admitted that she was the Director of the first respondent company and the second respondent was the Managing Director and they were doing remarkable business from the past ten to twelve years and that they never cheated the people in the name of residential and commercial plots. She would further state that the petitioner entered into an agreement with them for purchase of two plots in an extent of 1043 square yards and paid Rs.3,50,00,000/- and agreed to pay the balance sale consideration in four months to obtain the registered sale deeds, but he failed to pay the balance consideration within the time stipulation and as such the first respondent is entitled to deduct 30% of the total sale consideration towards cancellation charges. She would also assert that in the present transaction there were no disputes between them during the agreement period and that there was no title dispute in respect of the plots in question. It is only due for the delay in payment of the balance sale consideration by the petitioner, the registration could not take place. She would also assert that her personal property cannot be attached as the lis is between the petitioner and the first respondent, which is a company incorporated under the provisions of the Indian Companies Act. As per the provisions of the Act, the Director of the company is not personally liable for the deeds done by the company. She is not a Director of the first respondent company on this day and the property sought for attachment is exclusively belongs to her and it is nothing to do with the first respondent and that the petitioner failed to comply with the conditions of Order 38 Rule 5 CPC and thus the application filed by the petitioner is not maintainable and is liable to be dismissed.

The trial Court after hearing the arguments advanced by both the counsel, dismissed the application observing that the third respondent is not Director of the first respondent company and cannot be made liable personally for the wrong alleged to have been committed by the first respondent and that the petitioner failed to produce any evidence to show that the third respondent is going to dispose of the property. The trial Court further observed that there are several questions of fact which are to be decided in the main suit and Exs.P1 to P21 pertaining to lodging of complaint. As there is no proof to establish that the third respondent is going to alienate the property, the trial Court dismissed the application.

Learned counsel for the petitioner would argue that the order of the trial Court suffers from lack of application of mind and it ignored the vital documents filed by the petitioner which clearly demonstrates the fraud played by the respondents and sold the property but without considering the same the trial Court dismissed the application.

Heard the learned counsel for the petitioner and the learned counsel for the respondents.

Learned counsel for the petitioner would assert that the petitioner entered into an agreement with the first respondent on 20.12.2018 and that the first respondent filed a suit seeking specific performance of agreement of sale-cum-general power of attorney with possession in O.S.No.796 of 2018 on the file of the learned Chief Judge, City Civil Court, Hyderabad, on 13.11.2018 i.e. prior to the date of entering into an agreement of sale with it, which clearly shows that as on the date of agreement of sale the first respondent has no clear title. Knowing pretty well, it entered into an agreement and it is nothing but playing fraud upon his client.

Learned counsel for the respondents would submit that the suit O.S.No.796 of 2018 is filed for an extent of 32,406.20 square yards in Sy.Nos.41, 174, 177, 178, 179, 180/1, 182 and 211 situated at Tolichowki, Shaikpet Village and Mandal, and whereas in the case on hand the agreement of sale entered between the parties, the first respondent was shown owner and possessor of the land in an extent of Acs.22.32.06 guntas. Learned counsel also brought to the notice of this Court the Clauses in the agreement of sale. For the sake of convenience, it is apposite to extract the relevant Clauses.

‘2. That if any dispute arises subject to the said property or delay in the registration beyond 4 months there in the FIRST PARTY shall refund the amount which has been paid by the SECOND PARTY of the FIRST PARTY shall allot a similar commercial plots in any other venture with the apprehension of 10% value to the SECOND PARTY whichever second party agrees.

That the SECOND PARTY has already verified with the title of the FIRST PARTY and having verified the same and having satisfied himself the SECOND PARTY has entered into this agreement of sale to in respect of the schedule property.

That the time shall be the essence of this contract.

That in any eventuality if the SECOND PARTY fails to comply with the above said terms and conditions or/and if the SECOND PARTY fails to pay the balance sale consideration within the stipulated period this agreement shall stand cancelled without any further notice and the 30% of the total consideration amount shall stand forfeited towards cancellation charges and the FIRST PARTY shall be free to transact in respect of the schedule property with the third parties and the SECOND PARTY shall have no right to interfere into the same and in such eventualities any decision of the FIRST PARTY shall be final and binding on the SECOND PARTY.’

Learned counsel for the respondents would argue that as the petitioner failed to pay the balance sale consideration within a period of four months and as there was a delay in registration beyond four months, the petitioner is entitled for allotment of similar commercial plot in any other venture but not for refund of amount. He would also argue that as per Clause 8 of the agreement, the petitioner verified and satisfied about the title of the first party before entering into an agreement of sale, and therefore, it cannot be said that the respondents played fraud upon the petitioner and that those issues are to be decided in the suit filed by the petitioner after adducing evidence by both the parties.

Now it is for this Court to see whether attachment before judgment is to be ordered in respect of the property belonging to the third respondent during the pendency of the suit.

In RAMAN TECH. & PROCESS ENGG. Co. V/s. SOLANKI TRADERS Appeal (Civil) No.6171 of 2001 decided on 20.11.2007 the Apex Court held that ‘It is well-settled that merely having a just or valid claim or a prima facie case, will not entitle the plaintiff to an order of attachment before judgment, unless he also establishes that the defendant is attempting to remove or dispose of his assets with the intention of defeating the decree that may be passed. Equally well settled is the position that even where the defendant is removing or disposing his assets, an attachment before judgment will not be issued, if the plaintiff is not able to satisfy that he has a prima facie case.’ Yet another decision of the Hon’ble Supreme Court reported in PREMRAJ MUNDRA V/s. Md. MANECK GAZI AIR 1951 Cal 156 the following guidelines were given while granting Order 38 Rules 5 and 6 CPC, which reads as under:

‘(1) That an order under Order 38 Rules 5 and 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 defts. 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 transaction 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 pltf’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 pltf’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 business, 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 pltf’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 interference could be legitimately drawn that the object of the deft. was to delay and defeat the pltf’s claim.’

No doubt, the power under Order 38 Rule 5 CPC is drastic and extraordinary and it should not be exercised mechanically. It should only be used sparingly and strictly in accordance with the Rules. The Court should be satisfied that there is reasonable chance of decree being passed against the defendant, that means, it is for the plaintiff to establish prima facie case in his favour. In the case on hand, the plaintiff filed suit for recovery of the amount, but as per Clause 2 of the agreement of sale, as he could not pay the balance sale consideration within the time stipulated, he is entitled for allotment of commercial plot in any other venture and there is no specific clause for refund of the amount, and thus, it can be held that there is no prima facie case in favour of the petitioner herein.

Another aspect to be considered by the Court is whether the petitioner established that the third respondent is trying to remove the property with an intention to defeat the decree that may be passed in his favour. The petitioner simply stated that he came to know through one Mr.Maqdoom who is in real estate business that the respondents are trying to alienate the property and he also stated that the first respondent company is a juristic person and it is managed by the second and third respondents who are husband and wife. He further stated that when he entered into an agreement of sale with the respondents, the third respondent was a Director of the company and he came to know that she is trying to alienate her property in an extent of Ac.5.24.09 guntas in Sy.No.158 situated at Kanchamanguda Village, h/o. Kethireddipalli, Moinabad Mandal, to escape from the liability. He has not even filed the affidavit of Mr.Maqdoom to substantiate his version.

Admittedly, after 01.06.2020 the third respondent was not working as a Director of the Company and she stated that the said property is her personal property. As the agreement was entered with the first respondent company alone, her personal property cannot be attached. It was not stated by the petitioner herein regarding the properties of the first respondent company. He directly asked for attachment of the personal property of the third respondent, who is now presently not working as a Director of the first respondent company as on the date of filing of the application.

The petitioner herein stated that when he made a request for return of the amount, the second and third respondents issued four cheques in the name of Hi End Infra Company, but to his utter dismay, they were dishonoured. The object of the attachment before judgment must be to prevent future transfer or alienation. The petitioner herein failed to prove that the third respondent is alienating the property only with an intention to delay or defeat his claim in the suit.

Apart from that, as per Order 38 Rule 5 CPC if the Court is satisfied that with intent to obstruct or delay the execution of any decree that may be passed if the defendant is trying to dispose of whole or any part of the property or about to remove the whole or any part of the property, 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. In the case on hand, the petitioner herein has not sought for furnishing of security. On mere filing of suit the petitioner cannot get the remedy sought for by him and it is for him to establish the case by duly adducing evidence, both oral and documentary. Therefore, the petitioner is not entitled for the remedy under Order 38 Rule 5 CPC i.e. attachment before judgment the properties of the third respondent.

For the foregoing discussion, I do not find any reason to interfere with the order of the trial Court. Accordingly, this Civil Revision Petition is dismissed confirming the order of the trial Court.

Miscellaneous Petitions, if any, pending in this appeal shall stand dismissed in the light of this final order.