IN THE DEBT RECOVERY APPELLATE TRIBUNAL AT CHENNAI

 

DATED THE 6TH JUNE, 2002

 

PRESENT:  HON’BLE MRS. JUSTICE A. SUBBULAKSHMY

CHAIRPERSON

 

MA-73/2002

(IA-4 in OA-31/1999-DRT, Bangalore)

 

BETWEEN:

 

1.  Shri R.G. Mallikarjuniah,

     S/o. Late S.A. Gangappa,

     No.205, 25th Cross, 3rd Block,

     Jayanagar, Bangalore-560 011.

 

2.  Mrs. C. Lalithamma,

     W/o. Shri R.C. Mallikarjunaiah,

     Partner M/s. Akshaya Graphics,

     No.205, 25th Cross, 3rd Block,

     Jayanagar, Bangalore-560 011.

…  Appellants

            (Counsel:  Mr. Aravind Subramaniam)

 

AND

Bank of India,

Mysore Branch,

Mysore.

…  Respondent

            (Counsel:  Mr. F.B. Benjamin George)

 

:  O R D E R  :

 

1.         The respondent Bank filed IA-4 before the Presiding Officer, DRT, Bangalore, to direct the defendants to furnish security and upon their failure, to pass a conditional Order of attachment before judgement in respect of property mentioned therein.  The Tribunal allowed the petition.  The appeal is directed as against the Order passed by the PO, DRT.

 

2.         Counsel for the appellants submitted that the PO, DRT, has passed the Order ordering attachment before judgement of ‘D’ Schedule property preventing the 3rd defendant from alienating or otherwise dealing with the said property until further orders from the Tribunal and the Order passed by the PO, DRT, is not sustainable since the relevant conditions for passing order before judgement have not been complied with by the respondent Bank.  He pointed out that the respondent Bank has not set out reasons at all for effecting attachment before judgement of that property and as per Section 19(13) of the Act the Tribunal must be satisfied that if a defendant was 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 the local limits of the jurisdiction of the Tribunal, or is likely to cause any damage or mischief to the property or affect its value by misuse or creating third party interest and only if any of the conditions are satisfied the Tribunal may direct the defendant within the time to be fixed by it either to furnish security in such sum as may be specified in the order or such portion thereof as may be sufficient to satisfy the Recovery certificate and in case of failure to furnish such security, the Tribunal may pass order of attachment and none of the conditions as contemplated under Section 19(13) was satisfied and so the Order passed by the PO, DRT suffers from infirmity.  He further pointed out that in the affidavit the Bank has not set out none of the above said conditions as contemplated and the Bank has simply stated that the property given as security in Schedule ‘B’ is not likely to fetch the suit claim and the defendants are wilful defaulters and it is likely that the defendants with a view to obstruct or delay the execution of the Order for recovery of debt that may be eventually passed in this application may dispose of the said property and the property belongs to the 3rd defendant which is not charged to the Bank.  He further pointed out that mere allegation that the defendant is about to dispose of the property unsupported by particulars is not sufficient compliance with the rule and so everything ought to have been set out in the petition which are absent in the affidavit filed by the Bank and the petition filed by the Bank is liable to be dismissed in limine

 

3.         Counsel for the respondent Bank drew my attention to the Counter filed by the defendants for this petition and submitted that even in the counter, the appellant has stated that the property to be attached is the individual property of the 3rd defendant and it is not the asset or property of the 1st defendant and there are already secured properties that are described in the application filed by the Bank as Schedule A, B & C and unless and until the Bank has to bring it to the notice of the Tribunal that the property secured is insufficient to reap the fruits of the Recovery Certificate that may be passed by selling the secured properties in default of satisfying the Recovery Certificate, then only the property of the defendants 2 & 3 has to be attached before judgement.  He further submitted that even in the Written Statement the defendant has admitted that the Bank cannot enforce the hypothecation agreement and the property mortgaged is under first mortgage to KSFC when the Unit was being run by some other person before the purchase of the same by the 1st defendant and the property is under Lease-cum-Sale Agreement with K.I.A.D.B. for a period of five years commencing from 30.6.1996 and the KIADB has to give consent to the Bank for the loan to be advanced on the secured property and hence the Bank is not liable to bring the property mentioned in the application for sale.  Relying upon these contentions placed in the Written Statement, the Counsel for the respondent Bank submitted that even the defendant has admitted in his Written statement that the Bank cannot bring the mortgaged property to sale since it is under first charge to KSFC and under Lease-cum-Sale Agreement to KIADB and so it is a fit case for ordering attachment of property.  He further pointed out that in the counter filed in the attachment application, the appellant has stated that the Bank has to bring it to the notice of the Tribunal that the property secured is insufficient to reap the fruits of the Recovery certificate, but in the Written statement itself the defendant has stated that the Bank cannot bring the property to sale since it is under first mortgage to KSFC and the appellant is blowing hot and cold and the appellant wants to defraud the creditor the respondent Bank.

 

4.         Counsel for the appellant submits that whatever may be case, there must be specific averment in the Affidavit with regard to the conditions to be satisfied before ordering attachment and those conditions are absent in this case and so the Order passed is not sustainable.  The appellant was conscious of the fact that there was already a first mortgage in respect of the secured property and further it was also under Lease-cum-Sale Agreement.  Counsel for the appellant submitted that the Bank was satisfied that even though there was first mortgage in respect of that property, since the property secured is sufficient for satisfaction of the decree amount, the Bank granted the loan and now the attachment of property cannot be sought for.  The Bank has averred in the petition that the appellant is likely to dispose of the property with a view to obstruct or delay the execution of the Recovery certificate and if the properties are disposed of the Bank will be left with no other remedy to recover the outstandings.  He strenuously argued that the conditions stated in Section 19(13) are not stated in the Affidavit and without any averment with regard to these conditions in the petition, the Order of attachment cannot be made merely on the bare statement that the defendant is disposing of his property and particulars must be stated. 

 

5.         Of course, an Order of attachment before judgement is a drastic remedy and the power has to be exercised with utmost care and caution as it may likely ruin the reputation of the party against whom the power is exercised.  The Court must act with utmost circumspection before issuing the Order of attachment.  The Affidavit filed by the applicant bank should clearly establish that the defendant with the 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 and it must be supported by particulars.  Counsel for the appellant strenuously argued that these particulars are wanting in his case and the attachment of the property cannot be effected.  The specific non-mention of these conditions would amount to only technical.  In the affidavit the applicant bank has clearly stated that it is likely that the defendants with a view to obstruct or delay the execution of the Order for recovery of debt that may be eventually passed, dispose of the property.  Non-furnishing of the particulars in the affidavit is purely a technical one.  Of course, Section 19(13) states that the Tribunal must be satisfied with regard to the conditions stated therein.

 

6.         Counsel for the respondent Bank submitted that under Section 19(12), the Tribunal may make an interim order (whether by way of injunction or stay or 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 and the Tribunal can as well pass the Order under Section 19(12) for attachment debarring the defendant from alienating or disposing of the property and the Order passed by the PO, DRT, eventually amounts to an Order passed under Section 19(12) and for that there is no need to furnish any security and only if an Order is passed under Section 19(13) conditional attachment Order has to be passed directing the defendant to furnish security failing which only attachment Order can be passed and as this Order amounts to an Order under Section 19(12) there is no necessity to direct the defendants to furnish security also.

 

7.         Counsel for the appellant submitted that while ordering attachment, the provisions under Section 19(13) have to be followed and then only the defendant must be directed to furnish security and failing on which only attachment Order can be passed.  He further submitted that since none of the conditions contemplated in Section 19(13) are stated in the affidavit the attachment petition is devoid of any merit and it has to be dismissed in limine.  He relies upon the decisions of the Allahabad High Court in AIR 1986 Allahabad Page 87 and the Madras High Court in AIR 1992 Madras Page 293.  In the decision cited supra, the Allahabad High Court has held that -

 

            “Where the plaintiff had filed an application for attachment before judgement and in support of that application an affidavit to the effect that the defendant was about to dispose of the property in order to delay or obstruct execution of a decree was sworn on the basis of information but the source of information was not disclosed in the affidavit, it was held that the affidavit could not be read in evidence and the application could not be allowed on such affidavit.  Deponent had to state name and address and sufficiently describe the identity of the person or persons from whom he received such an information.”

 

8.         In the decision cited supra the Madras High Court has held that :

            “The remedy of attachment before judgement of an immovable property is certainly an extraordinary one and that to grant the same casts an obligation on the party against whom it is made even before he is heard in defence to the suit and that, therefore, the Court has to act with utmost circumspection and with maximum care and caution in order to avoid the said remedy being a weapon of oppression in the hands of unscrupulous applicants claiming the relief under O.38, R.5 of Civil P.C. and as such it is incumbent upon the applicants to state the grounds to prove the same on the basis of its contents by giving the material particulars and sources of information, belief and so on.  A mere verbatim copy of the O.38, R.5 of Civil P.C. or a mechanical repetition of the language of the Code without an iota or substratum of truth, underlying the allegation, amounts to merely a colourable imitation and constitute an abuse of process of Court.  In the instant case the applicant had already the equitable mortgage and hypothecation created by the respondents in his favour.  It is not known whether they are entitled to recover the suit claim or not, but the applicant is seeking the relief of attachment before judgment of the property which does not belong to the respondents on the basis of the mere alleged oral claim.  Therefore the said averments would not be tenable for any purpose, especially when the applicant had not even inclined to get anything in writing evidencing the alleged production of the Partition Deed, but the applicant wants the relief of extraordinary remedy provided under the Code of Civil Procedure, on the basis of the mere conjectures and imaginations which no Court of Law would be inclined to accept the same.”

 

9.         The provisions under the RDDB&FI Act with regard to attachment before judgement have to be followed.  It is evident from the provisions that in the attachment before judgement proceedings, reference has to be made to Order 38, Rule 5 of CPC empowering the Court to attach the property of the opposite party.  Section 19(13) of the RDDB&FI Act is similar to Order 38, Rule 5 and similar conditions have to be complied with and the Court must satisfy with regard to the compliance of those conditions.  Even though there is a specific mention in the affidavit that the defendant is likely to dispose of the property with a view to delay and defraud the creditor but no particulars as to whom the defendant is going to sell the property is not given.  For want of those particulars in the affidavit it cannot be stated that the attachment petition filed by the Bank is not a valid one when there are ample materials available as borne out by defendants’ own reply statement that the property mortgaged to the Bank was already under first mortgage to KSFC and the Lease-cum-Sale Agreement to KIADB and the Bank cannot enforce the hypothecation agreement. 

 

10.       As rightly pointed out by the Counsel for the respondent Bank, the property secured is not sufficient to satisfy the decree and the defendant also specifically states in his written statement that the Bank cannot bring the property to sale since it was already under first mortgage to KSFC.  When there is such an obstruction for the respondent Bank to bring the property to sale, by no stretch of imagination it can be construed that without any material and without complying with the conditions as stated in Section 19(13) the respondent Bank has come forward with the petition to attachment before judgement.  Because of the fact that Bank was satisfied that the security offered was not sufficient security to satisfy the decree since it was under first mortgage to KSFC and the property which belongs to the 3rd defendant which is sought to be attached is a valuable property and 3rd defendant is also one of the partners of the 1st defendant Firm, the Bank has come forward with this petition for attachment before judgement of the property.  The mere non-mention of the particulars in the affidavit as to whom the 3rd defendant intended to sell the property is only a technical flaw and on this technical aspect the Bank should not suffer for realization of the amount due to it.  Section 22 of the Act states that the Tribunal and the Appellate Tribunal shall not be bound by the procedure laid down the C.P.C. but shall be guided by the principles of natural justice and subject to the other provisions of the Act.  The Bank has lent the money to the defendants. 

 

11.       Counsel for the respondent Bank submits that the security offered is not sufficient security since there is already a first mortgage over that property.  So, under such circumstances only the Bank has come forward with the petition for attachment of the property before judgement.  The Bank was right in coming forward with the petition for conditional attachment of the property before judgement.  The prayer in the application itself is for asking the defendants to furnish security and upon their failure, to pass a conditional order of attachment before judgement in respect of the property therein.  The respondent Bank itself has sought only for furnishing security and for conditional order of attachment.  But the PO, DRT, while passing the Order has not passed order directing the defendants to furnish security and for conditional order of attachment.  The PO, DRT, has passed Order attaching the Schedule ‘D’ property preventing defendant No.3 from alienating or otherwise dealing with the said property until further orders.  Section 19(13)(A) contemplates directing the defendant to furnish security in such sum as may be specified in the Order and in case of failure to furnish such security may order attachment of the property.  Without passing conditional order of attachment as contemplated under Sec.19(13), the PO, DRT, has passed Order ordering attachment. 

 

12.       Hence, I feel that the Order passed by the PO, DRT, Bangalore, has to be modified and the defendant must be directed to furnish security failing which only, attachment can be ordered.  Accordingly, the defendant is directed to furnish security for a sum of Rs.30,00,000/- (Rupees Thirty lakhs only) before the DRT, Bangalore, within a period of six weeks from today failing which attachment of the D-Schedule property is ordered.

 

13.       Appeal allowed in part and the Order of the PO, DRT, Bangalore, is modified to the extent indicated above.

(Dictated to PA, the transcription corrected and the order pronounced & signed by me in the open court today the 6th June, 2002).

[ MRS. JUSTICE  A. SUBBULAKSHMY ]

CHAIRPERSON