JUDGMENT G. Chandraiah, J.
1. Though notice is served none appeared for the respondents. Heard the counsel for the appellants.
2. Aggrieved by the conditional order of attachment before judgment under Order 38 Rule 5(3) of C.P.C. passed by the Court of Senior Civil Judge, Parchur in I.A. No. 255/2004 in O.S. No. 19/2004 dated 12-8-2004, the defendants in the suit filed this appeal.
3. For the sake of convenience the parties will be referred as per their array in the original suit.
4. The brief facts of the case are that the plaintiffs filed suit in O.S. No. 19/2004 for recovery of amounts under promissory notes executed by the 1st defendant. 1st defendant borrowed the amount and the defendants 2 to 4 are his two sons and a married daughter. As the amount was not paid in spite of demands, the suit for recovery of amount was filed. Alleging that the 1st defendant as a manager of the joint family comprising his two sons and one married daughter, incurred debts and in order to defeat and delay his valid and genuine debts, got filed suit in O.S. No. 13/2002 by his son and remained exparte and allowed the passing of the ex parte preliminary decree. Not being satisfied with the exparte decree, the 1st defendant also filed IP. No. 2/2003 by impleading some bogus creditors showing his only 1/4th share in the plaint schedule properties. Along with the present suit, the plaintiffs filed three I.As., i.e., the present IA No. 255/2004 for attachment before judgment, on the ground that the 1st defendant is attempting to alienate the property to defeat the suit claim; I.A. No. 256/2004 for stay of operation of preliminary decree in O.S. No. 13/2002 and; I.A. No. 257/2004 for permitting the plaintiffs to file suit in a representative capacity. The Court below in the present I.A. No. 255/2004 initially ordered exparte notice and conditional attachment. Subsequently the plaintiffs sought for making the interim ex parte conditional attachment absolute.
5. The defendants filed counter affidavit and contended that 1st defendant incurred debts and unable to discharge the debts filed IP. No. 2/2003 on the file of Senior Civil Judge, Chirala to declare him as insolvent and the official receiver was vested with his 1/4th share in the property. As the division of joint family properties took place, the 1st defendant is barred for contracting any debts and therefore questioning final decree and seeking attachment of property are outside the scope of law. In the counter affidavit the defendants also undertook not to alienate or charge the property to the extent of 1st defendant. It is contended that as the plaintiffs failed to obtain permission from the Insolvency Court under Section 28 of the Insolvency Act, the suit is not maintainable. It is also contended that in order to file suit under Order 1, Rule 8 of C.P.C., there shall be common interest and as there is no common interest in the present suit, the plaintiffs cannot file one suit for recovery of amounts executed under different promissory notes. With these averments, the I.A. was sought to be dismissed.
6. On behalf of the plaintiffs Exs.A-1 to A-13, which are promissory notes; part payment endorsements; legal notices and reply; and plaint copies in O.S. No. 13/2002 and IP. No. 2/2003 are filed. On behalf of the defendants Exs.B-1 and B-2 auction notices in IP. No. 2/2003 were marked.
7. The trial court after framing appropriate issue and after satisfying that as the 1st defendant remained ex parte and allowed passing of preliminary decree and that by virtue of the preliminary decree, the defendants are attempting to alienate the property and further in the preliminary decree, as there was no provision for discharging debts contracted by the 1st defendant and the court below also not believing that the division of the property took place earlier to execution of promissory notes, held that the plaintiffs are justified to be apprehensive of defendants alienating or disposing of the schedule property to defraud the plaintiffs. Accordingly, the trial Court made the interim conditional order of attachment absolute. Aggrieved by the same, the present appeal is filed.
8. The learned Counsel appearing for the appellants contended that before ordering attachment before judgment, the Court must prima facie satisfy that the defendants with an intention to defraud or delay the execution of decree, are about to dispose of the whole or any part of the property and only after such satisfaction, can pass the order of attachment. He stated that absolutely there are no grounds to record satisfaction that the defendants have any such intention to defraud or delay the execution of the decree and in the absence of same, the Court cannot order attachment before judgment mechanically. In support of his contention, he relied on the judgment of the Apex Court reported in Rajender Singh v. Ramdhar Singh and Ors. . He stated that under Sub-rule (1) of Rule 5 of Order 38 of C.P.C., the court has to direct the defendant to furnish security and only after failure to furnish security, can order for attachment. In support of his contention, he relied on the judgment of this Court reported in Avinash Constructions, Secunderabad v. P. Usha Rao . He stated that the son of the 1stdefendant filed suit for partition in O.S. No. 13/2002 and obtained preliminary decree and also filed LA. No. 13/2002 for appointment of Commissioner and for passing of final decree. Unable to discharge the debts, the 1st defendant filed I.P. No. 2/2003 on the file of Senior Civil Judge, Chirala and official receiver was vested with 1/4th share of the 1st defendant and in these circumstances, the 1st defendant has no power to dispose of the property. Therefore, when the 1st defendant has no power to dispose of the property the apprehension of the plaintiffs that he would dispose of the property is unwarranted and based on the apprehension no order of attachment before judgment can be passed and ingredients of Order 38 Rule 5 (1) of C.P.C. have to be satisfied. In support of this contention, he relied on the judgment of a Division Bench of this Court reported in Surender Singh Bajaj v. Kitty Steels Limited . The learned Counsel further submitted that the plaintiffs filed suit for recovery of the amount without obtaining leave from the Insolvency Court under Section 28 of the Insolvency Act and therefore, the suit is not maintainable. He submitted that the plaintiffs alleged that 1st defendant borrowed the amounts under different promissory notes and when this is the case, one suit for recovery of the amounts under different promissory notes cannot be filed, as there is no commonality of interest. In support of this contention, he relied on the judgment of a learned single Judge of this Court reported in Kota Sreevalli v. Chinna Seetharamaiah . He finally stated that under these circumstances, there is no possibility of the plaintiffs' success in the suit and further there are no grounds for the court below to satisfy that the defendants are attempting to alienate the property and under these circumstances, the Court below is not justified in making the interim conditional order of attachment, absolute. In support of this contention, he relied on the judgment of a Rajasthan High Court in M/s. Cosmopolitan Trading Corpn. v. M/s. Engg. Sales Corpn . With these averments, the counsel for the appellants sought for setting aside the impugned order.
9. Though notices are served on the defendants/respondents, there is no representation on their behalf.
10. The main case of the defendants is that the 1st defendant who is said to have borrowed the amount, filed I.P. No. 2/2003 for declaring him as insolvent and the property that fell to his share by virtue of the preliminary decree in O.S. No. 13/2002 was the subject matter in the I. P. and the official receiver was vested with the share of the 1st defendant and therefore there is no possibility of alienating or creating charge on the property. Their further case is that the Court below without asking the defendants to furnish any security under Sub-rule (1) of Rule 5 of Order 38 of C.P.C. ordered conditional attachment and made the same absolute and the same is not tenable. Their further case is that the defendants in the counter filed before the Court below have undertaken not to alienate the property that fell to the share of 1st defendant and the court below without considering this fact, ordered attachment and the same is illegal. It is stated that even this Court while granting interim order directed the appellants not to alienate or otherwise encumber the attached properties till further orders.
11. In view of the above circumstances, the question that falls for consideration is whether the Court below is justified in making the interim conditional order of attachment absolute?
12. To appreciate the above issue, it is necessary to look into the facts and circumstances of the case and the relevant provisions under C.P.C. As per the documents produced by the plaintiffs before the court below, it appears that the 1st defendant is alleged to have executed promissory notes in favour of the plaintiffs in the years 1999 and 2000 and made certain part payments on different dates. As the 1st defendant failed to repay the amounts, the present suit is filed for recovery of amounts. In the year 2002 i.e., in O.S. No. 13/2002 the son of the 1st defendant who is 1st appellant herein, filed suit for partition and in the said suit, admittedly the 1st defendant remained ex parte and a preliminary decree was passed, allotting 1/4th share to him. Subsequently, on the ground that the 1st defendant is unable to discharge debts, filed IP. No. 2/2003 for declaring him as insolvent and it appears that the 1/4th share of the 1st defendant was vested with the official receiver to deal with the property. The plaintiffs' case is that in the I.P., the 1st defendant showed the debt of 1st plaintiff and failed to show the debt of 2nd plaintiff. However, whether one suit is maintainable for recovery of amounts under different promissory notes in the light of provisions of Order 1, Rule 8 of C.P.C. and also in view of the judgment of this Court in Kota Sreevalli's case (4 supra) and also with regard to non-obtaining of leave from the insolvency court under Section 28 of the Insolvency Act and also with regard to 1st defendant being barred from contracting loans or whether the loans incurred were for joint family or not, have to be considered at the time of trial. However, I.A. No. 257/2004 for permitting the plaintiffs to file suit in representative capacity is pending. Further, a learned single Judge of this Court in Vasavi and Company v. Nampally Padma , while considering the provisions of Order 38, Rules 5 and 11 and the provisions of Insolvency Act, 1920 under Sections 2 (e) and 28 (6) held that if attachment before judgment is ordered and the defendant is declared as insolvent, those properties need not be reattached after obtaining decree and the decree holder becomes a secured creditor and such a secured debt can be executed independently against defendants even though they are declared as insolvents. In the light of these circumstances, at the cost of repetition, the grounds that are to be seen are whether there are any grounds to order for conditional attachment and the making the said order absolute.
13. The main case of the plaintiffs as believed by the court below is that the 1st defendant got filed suit in O.S. No. 13/2002 for partition and remained exparte and based on the said preliminary decree, the sons of the 1st defendant are attempting to alienate or dispose of the schedule property. The plaintiffs also filed affidavits of third parties through whom they came to know about the attempt of the defendants. Therefore, their case is that as the defendants in order to defeat or frustrate the cause of the plaintiffs are attempting to alienate the property, they sought for attachment before judgment and the court below initially ordered notice and made conditional attachment. At this stage it is necessary to look into the relevant provisions of Rule 5 of Order 38 of C.P.C. The same, to the extent relevant, are extracted as under for better appreciation:
5. Where defendant may be called upon to furnish security for production of property:
(1) Where, at any stage of the 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) ...
(3) The Court may also in the order direct the conditional attachment of the whole or any portion of the property so specified.
(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.
6. Attachment where cause not shown or security not furnished:
(1) 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 court, the Court may order that the property specified, or such portion thereof as appears sufficient to satisfy any decree which may be passed in the suit, be attached.
(2) Where he defendant shows such cause or furnish the required security, and the property specified or any portion of it has been attached, the Court shall order the attachment to be withdrawn, or make such other order as it thinks fit.
14. From the above provisions it is clear that as per Sub-rule (1) of Rule 5 of Order 38 if the Court is satisfied that defendant with intent to obstruct or delay the execution of any decree that may be passed against him is about to dispose of the whole or any part of his property or is about to remove the whole or any part of his property from local limits of the jurisdiction of the Court, may direct the defendant within the time to be fixed by the Court, 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 such security. In other words, the court may direct the defendant to produce security either in the form of property or the value of the same, to satisfy the decree and place at the disposal of the Court or direct the defendant to appear to show cause why he shall not furnish security. Under Sub-rule (3), the Court may also in the order direct the conditional attachment of the whole or any portion of the property so specified. Sub-rule (2), imposes duty on the plaintiff to specify the property to be attached and its estimated value. Therefore, a combined reading of Sub-rule (1) and Sub-rule (3) of Rule 5 of Order 38 makes it clear that the Court subject to satisfaction of Clauses (a) and (b) of sub-rule (1), in addition to directing the defendant to furnish security or show cause for not furnishing security, can simultaneously order conditional attachment of the property specified by the plaintiff under Sub-rule (2). Under Rule 6 of Order 38, the procedure that has to be followed by the Court on the failure of the defendant to furnish security or the procedure that has to be followed on the defendants furnishing security, is prescribed. Under Sub-rule (1) of Rule 6 if the defendant fails to furnish security or show cause for not furnishing security, the court may order for attachment of the property specified in the notice or such portion thereof as appears sufficient to satisfy the decree that may be passed in the suit. On the other hand, if the defendant furnishes security or shows cause for not furnishing security, the Court under Sub-rule (2) of Rule 6, if the property specified in the order or any portion of the property has been attached, shall order the attachment to be withdrawn or make such other order as it thinks fit. It is to be conspicuously noticed that if the court has no power to order conditional attachment without issuing notice to the defendant to furnish security, the provision under Sub-rule (2) of Rule 6 of Order 38 would become redundant, in as much as it provides withdrawal of attachment of property already attached. As already stated above, the court has power, subject to satisfaction, not only to issue notice under Sub-rule (1) (b) of Rule 5 to furnish security, but at the same time to order for conditional attachment under Sub-rule (3) of Rule 5. The said purport can also be gathered from Form No. 5 of Appendix-F of first schedule, which is meant for issuing notice for attachment before judgment. But Sub-rule (4) of Rule 5 contemplates that an order of attachment made without complying with the provisions of Sub-rule (1) of Rule 5 as void. As already discussed, Sub-rule (3) of Rule 5 contemplates for conditional attachment and Sub-rule (1) contemplates for issuing of notice calling the defendant to furnish security. Now the question that follows is whether the notice prescribed under Sub-rule (1) has to be issued before making conditional attachment under sub-rule (3) of Rule 5 of Order 38 of C.P.C.? As already discussed, a reading of Sub-rules (1) and (3) conjointly discloses that the Court has jurisdiction not only to issue notice under Sub-rule (1) to furnish security, but it has also got simultaneous power to order conditional attachment. In this regard it is necessary to look into the Division Bench judgment of this Court reported in V. Chandra Reddy v. N. Chandramouli Naidu , wherein Jagannadha Rao, J., as he then was, speaking for the Bench in a reference, while distinguishing between 'order of attachment' and 'order of conditional attachment under Order 38 Rules 5 (1) (b), (3) and also considering sub-rule (4) and 6 (2) of Order 38, and also Form No. 5 (parts 1 and 2) of Appendix-F of first schedule held that conditional attachment can also be ordered by court under Sub-rule (3) of Order 38 Rule 5 without issuing notice, along with the show cause notice to be issued under Order 38 Rule 5(1). It was further held that no order of conditional attachment can be declared as void on account of Court not following the procedure under Order 38 Rule 5 (1) and that Sub-rule (4) of Order 38 Rule 5 does not come into play at the stage of ordering conditional attachment. While laying the above said position, His Lordship has taken into consideration the recommendations of Law Commission in its fifty-fourth report for introduction of Sub-rule (4) to Rule 5 of Order 38 by Amending Act of 1976 and the objects and reasons for introduction of said Sub-rule. The relevant portion of the judgment at paragraph No. 24 is extracted as under for better appreciation:
For the aforesaid reasons, we hold that the Court by reason of its power under Order XXXVIII, Rule 5 (3) can order conditional attachment 'also' along with a show cause notice to be issued under Order XXXVIII, Rule 5(1) of CPC. The Court can adopt the first part of Form No. 5, and in such an event, it may be necessary for the court to hear the defendant before issuing such a notice. It is also open to the court to adopt both the first and the second parts of Form No. 5, without issuing notice and direct the Bailiff to attach the property straightaway, if the defendant fails to comply with the first part of the form. In the latter case, the order will be one of 'conditional attachment'. However, if the defendant comes to court and satisfied the Court, it will be open to the Court to withdraw such conditional attachment under Order XXXVIII, Rule 6 (2). The above interpretation of the provisions seems to us to be in harmony with the intention of the Legislature. In any event, Sub-rule (4) of Order XXXVIII Rule 5 does not come into play at the stage of ordering conditional attachment. No order of conditional attachment can be declared as void on account of the Court not following the procedure under Order XXXVIII, Rule 5 (1) C.P.C.
(Emphasis added)
15. The judgments relied on by the counsel for the appellants to demonstrate that the order of attachment passed without affording the defendant an opportunity to furnish security is void, are no doubt unexceptionable, but cannot be made applicable to the facts of the present case, since in the present case, conditional order of attachment was passed. In the said cases, order of attachment was passed straightaway without the court being satisfied of the ingredients of Clasues (a) and (b) of Sub-rule (1) of Rule 5. In the present case, the court below passed conditional order of attachment, which is distinct from order of attachment and which also affords the defendants an opportunity to furnish security and as the defendants failed to furnish security or could show any sufficient cause, as contemplated under Sub-rule (1) of Rule 6 of Order 38, the conditional attachment order was made absolute.
16. Now at the cost of repetition it is to be noted that the defendant No. 1 executed promissory notes in favour of the plaintiffs in the year 1999 and 2000 and as he did not pay in spite of demands, the plaintiffs filed the present suit in O.S. No. 19/2004. Prior to the filing of the present suit by plaintiffs, the son of the 1st defendant filed suit in O.S. No. 13/2002 for partition of the joint family properties and in the said suit, the 1st defendant herein remained exparte and a preliminary decree was passed. The 1st defendant also filed IP. No. 2/2003 for declaring him as insolvent as he is unable to discharge debts. The case of the plaintiffs before the court below is that the defendants by virtue of the preliminary decree are attempting to alienate or dispose of the schedule properties. The plaintiffs also filed third party affidavits through whom they came to know about the attempts of the defendants. On being satisfied with the said grounds, the trial court initially passed ex parte conditional attachment and notice and subsequently made the said order absolute by passing the impugned order. At this stage, I feel it appropriate to note the observations made a learned single Judge of this Court in Hamali Co-op. Labour Contract Socy. v. K. Venkatiah AIR 1981 A.P. 391 at paragraph Nos. 4 and 7 of the judgment as under:
4... The sine qua non for an order of attachment before judgment or for an order demanding security before judgment is that the defendant is disposing of or about to dispose of his property with the dishonest intention of defeating or delaying the possible decree in the suit. The merits of the claims of the contending parties are merely ancillary factors for consideration by the Court in arriving at a conclusion with regard to the essential requirements of Order 38, Rule 5, C.P.C.
7. The only question therefore for consideration in this revision is whether the lower court gave the finding in regard to the intention and conduct of the petitioner before passing the impugned order. Sri Parabrahma Sastry's contention is that there is no such finding. On an examination of the impugned order, it does not appear that there is any express finding in regard to the intention or the conduct of the defendant so as to render him liable to a direction for furnishing security. But what 0.38, R.5, C.P.C. contemplates is not an express finding, but a satisfaction on the part of the Court by affidavit or otherwise. No doubt, whenever the law enjoins upon the Court to pass an order after being fully satisfied, it is necessary for the Court to express its satisfaction in the form of a finding but the fact that the Court does not express a specific finding cannot detract from the substantial value of the order if the order shows that it has been passed after the satisfaction required under the law. As pointed out by Sri Satyanarayana Prasad, the learned Counsel for the respondent, on a reading of the affidavit filed by the parties and the order of the learned Subordinate Judge, there can be little doubt that the learned Judge was satisfied with the allegation of the plaintiff that the defendant was disposing of the property with intent to defeat the decree. May be, the Subordinate Judge did not express these facts in so many words. But even a cursory reading of the order of the learned Subordinate Judge makes his satisfaction too patent to be ignored. The learned Subordinate Judge has clearly observed in paragraph 8 as follows:
...
These observations of the learned Subordinate Judge make it more than clear that in passing the impugned order, he was satisfied with the allegation of the plaintiff to the effect that the defendant was disposing of his property with the intention of defeating the decree that may be passed in the suit. Under the circumstances, therefore, I do not find any merit in this revision petition which is accordingly dismissed with costs.
17. In the present case also, based on the allegations of the plaintiffs and considering the facts and circumstances of case, the Court below satisfied with regard to the apprehension of the plaintiffs that the defendants are alienating or disposing of the schedule property to defraud the plaintiffs and, therefore made the interim conditional order of attachment absolute. Hence, I do not find any reason to interfere with the impugned order.
18. Though the defendants have given undertaking before the Court below and this Court also while granting interim stay directed that defendants shall not alienate orotherwise encumber the attached property, in view of the above facts and circumstances of the case and as the defendants have not furnished any security pursuant to the exparte conditional attachment, I feel it appropriate not to consider the undertaking given by the defendants.
19. With regard to the contention of the counsel for the defendant that the 1st defendant has no disposing power of the suit schedule property is concerned it is to be seen that the case of the plaintiffs is that the 1st defendant borrowed the amount for the joint family purpose and the suit for recovery of amount is filed against all the defendants i.e., the sons and married daughter. However, whether the borrowed amount is for joint family purpose or not is to be decided in the trial. The property that fallen to share of the 1st defendant may not be sold, as it is in the custody of the official receiver appointed in the insolvency petition. But no undertaking is given by other defendants. In view of this reasoning, the judgment of the Division Bench of this Court in Surender Singh Bajaj's case (3 supra) that if the defendant has no disposing power, no order of attachment before judgment, can be passed, cannot be made applicable to the facts of the present case, since the facts of the said case disclose that the money is deposited in the court as a surety. Therefore, without the order of the Court, the amount cannot be withdrawn and hence, the defendant No. 1 therein has no disposing capacity. But in the present case, as already noted above, there are four defendants and only 1/4th share of the 1st defendant is in the custody of official receiver and the suit claim is against all the four defendants. The other judgments relied on by the counsel for the appellants relate to the general procedure that is to be followed while ordering attachment before judgment and they do not deal with conditional attachment. Division Bench of this Court in the decision cited 7 supra, has clearly distinguished the 'order of attachment' and 'conditional order of attachment and laid down the law. In view of the same, the judgments relied on by the counsel for the appellants cannot be made applicable to the facts of the present case.
20. For the foregoing reasons, I do not find any merit in the appeal and the same is accordingly dismissed at the stage of admission.
