TaxTMI 
TaxTMI 
2010 (7) TMI 1220
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....iginal order of injunction passed in terms of prayer (b) of the application should continue till six weeks. It may not be out of place to mention here that by the initial order dated 5th March, 2010 the learned Single Judge passed an ad interim order restraining the Defendant from creating any third party's interest over and in respect of the plant and machineries supplied by the Plaintiff in terms of contract dated 10th November, 2006 and 21st November, 2006 and also restraining the Defendant from withdrawing any money from the bank account mentioned in paragraph 42 of the application without leaving a balance of Rs. 1.5 Crore. 3. On the other hand, the Plaintiff has come up with the other appeal being APO 309 of 2010 against the selfsame order dated March 29, 2010 by which the learned single Judge varied the interim order dated 5th March, 2010 in favour of the Defendant. In other words, the grievance of the Plaintiff in his appeal is that the learned Trial Judge should have refused to vary the interim order dated March 5, 2010 on the prayer of the Defendant. 4. The facts giving rise to filing of these two appeals may be summed up this: The Plaintiff filed a sui....
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....n support of the claim of attachment before judgment were pleaded in paragraph 35 to 43 of the application which are quoted below: 35. The Respondent is using and utilizing the said machines thereby causing depreciation of the value of the same without paying the price of such machines to your Petitioner. The Respondent has no right to use and utilize the said machines without paying for the same to your Petitioner. 36. By using the said machine the Respondent the value of the said machines are depreciated owing to wear and tear. The Respondent taking advantage of the fact that your Petitioner has effected delivery of the said machines is using the said machines at its optimum level resulting in general order and terms and depreciation in value of the said machines. In the circumstances, it is necessary that appropriate production is given to the Petitioner in so far as the said machines are concerned and to ensure that the Respondent does not use the said machines at all, until the Petitioner is paid for the same. It is just and convenient that a fit and proper person be appointed as Receiver over the said machines, particulars whereof are set out in Annexure "N"....
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....ated 5th March, 2010 passed an ad interim order of injunction restraining the Defendant from creating any third party's interest over and in respect of the plant and machinery supplied by the Plaintiff and also an injunction restraining the Defendant from withdrawing any money from bank account mentioned in paragraph 42 without leaving balance of Rs. 1.5 Crore from such accounts. 8. The Defendants entered appearance and filed an application for vacating the interim order of injunction thereby denying the allegations made in the application for injunction and contending that no case was made out for injunction in the nature of attachment before judgment. 9. As mentioned earlier, the learned single Judge, by the order impugned in these appeals, modified the initial interim order by limiting the interim order of injunction restraining the Defendant from withdrawing the amount from its bank accounts on condition that a minimum of Rs. 74,40,962/- should be maintained in the accounts with further condition that in the event such amount was not available in the bank accounts of the Defendant, there should be order of injunction in terms of prayer (b) till six weeks from the date....
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....s arise for determination in these two appeals. 14. First, whether in a simple money suit, merely because the Plaintiff has a strong prima facie case on merit, a Court can restrain the Defendant from transferring or alienating his movable or immovable property during the pendency of the suit. 15. Secondly, whether in the absence of averments made in terms of Order 38 Rule 5 of the Code, a Court can in a money suit grant an order in the form of attachment before judgment or direct the Defendant to furnish security. 16. In order to appreciate the first question mentioned above, it will be profitable to refer to the provision contained in Order 39 Rule 1 of the Code, which is quoted below: 1. Cases in which temporary injunction may be granted.-- Where in any suit it is proved by affidavit or otherwise: (a) that any property in dispute in a suit in danger of being wasted, damaged or alienated by any party to the suit, or wrongfully sold in execution of a decree, or (b) that the Defendant threatens, or intends, to remove or dispose of his property with a view to defrauding his creditors, (c) that the Defendant threatens to dispossess....
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.... of such provision. 20. In a suit for recovery of specific amount of money, the Plaintiff is not remediless and the legislature has enacted the provisions of Order 38 of the Code and Rule 5 thereof, prescribes the circumstances when the Court can order attachment before judgment by way of interim measure. Such provision is quoted below: 5. Where Defendant may be called upon to furnish security for production of property.: (1) Where at any stage of a 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 ....
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....i AIR 1951 Cal 156, approved by the Apex Court in the aforesaid decision, Sinha, J. (as His Lordship then was) laid down the following principles which are required to be followed by a Court before invoking the jurisdiction under Order 38, Rule 5 of the Code: (10) From a perusal of all the authorities, I think that the following guiding principles cart be deduced: (1) That an order under Order 38, Rules 5 & 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)....
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.... The deft, in a suit is under no liability to take any special care in administering his affairs, simply because there is a claim pending against him. Mere neglect, or suffering execution by other creditors, is not a sufficient reason for an order under Order 38 of the Code. (14) The sale of properties at a gross undervalue, or benami transfers, are always good indications of an intention to defeat the pltf.'s claim. The Court must however be very cautions about the evidence on these points and not rely on vague allegations. 23. Applying the aforesaid principles to the facts of the present case, we find that the sum and substance of the allegation that has been made in the application for temporary injunction was that the Defendant is in a penurious condition; that it is unable to pay back its debts to the creditors and that if the decree was passed in the suit, the Plaintiff would not be in a position to execute the decree if the Defendant was able to transfer or alienate the property mentioned in the application. On the basis of such vague allegation, in our view, no order or direction to give security or injunction in the form of attachment can be passed as held ....