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Under what circumstances can local courts grant an attachment order to preserve assets pending judgment or final order? Are there any alternative remedies?
The parties to a suit can seek an attachment order from the court under Order 38 of the Code of Civil Procedure, 1908 (hereinafter referred to as ‘the Code’), if the plaintiff feels that the realisation of the decree passed against the defendant would be difficult apprehending the defendant would dispose of an impugned property, to prevent the execution of the decree passed against him. (See, Sardar Govindrao Mahadik V. Devi Sahai AIR 1982 SC 989).
Attachment orders are commonly issued by the courts in India. Under Order 38 Rule 13 of the Code, all courts of appropriate jurisdiction can issue orders of attachment other than courts of small causes. The question of fact must be proved to the satisfaction of the Court to issue an order of attachment.
The Court had deduced certain principles in regard to passing of an order of attachment in the case of Premraj Mundra V. Mohd. Maneck Gazi AIR 1951 Cal 156. The Hon’ble Court held that mere allegation of threat of disposal is not sufficient and that particulars of the information must be stated. In addition, it is to be proved beyond doubt to the Court the existence of circumstances of transfer or removal of property from court’s jurisdiction, and that the transfer is with the intention to delay or defeat the execution of the decree issued against the defendant.
An attachment before judgment cannot be obtained against third parties, as they are not parties to the suit as stated under Order 38 Rule 10 of the Code. However, there is an exception under Rule 46-A to Rule 46-I of Order 21 of the Code, where such an order can be obtained against third parties, if such third party is a garnishee.
The grounds on which the court can grant an attachment order are enlisted in Rule 5 of Order 38 of the Code. The said Rule provides that at any stage of a suit, the court may grant an attachment order against the defendant, if, the latter:
(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; and; the court may also order for furnishing security of such sum as may be specified under its discretion (See N. Pappammal V. L. Chidambaram AIR 1984 Mad.70).
Stage of the proceedings
It is not possible to obtain an attachment order before proceedings have started. However, it is such order can be obtained before the ‘final judgment’ or during the course of proceeding. Additionally, Order 38 Rule 5 of the Code provides for such an order to be obtained even after the final judgment/award has been given but before its enforcement, because the main purpose behind granting an attachment order is to prevent the defendant from disposing of the property in question.
There are other remedies available to preserve the assets apart from granting of attachment order under Order 38 of the Code. A party can avail the remedy of temporary injunction which is granted by the court under Order 39 of the Code, to preserve the assets in dispute till the legal rights and conflicting claim of the parties before the Court are adjudicated and disposed off. It is in the nature of protective relief granted in favour of a party to prevent future possible injury. The court may grant a temporary injunction for the purpose of staying and preventing the wasting, damaging, alienation, removal or disposition of property [See Nanda Roy & Other V. Gyanidhi Trust & Ors. (2015)4 CALLT 199(HC)].
What is the procedure for applying for an attachment order?
There is no fixed court fee. The court fee is levied according to the value of the property which is required to be attached for the execution of the decree previously issued.
What type of assets may be subject to an attachment order? Are there any kinds of assets that are considered exempt from the purview of an attachment order?
The Courts can issue an order to freeze intangible assets such as (goodwill) as well as tangible assets such as bank accounts, shares, bonds, stocks, machinery and equipment under their jurisdiction. Section 60 of the Code declares which properties are liable to be attached and sale in execution of a decree, and which are exempt therefrom. All saleable properties (movable or immovable) belonging to the judgment-debtor over which he has a right of disposal, which he may exercise for his own benefit may be sold and attached in execution of a degree. (See, Ramesh Himmatlal V. Harsukh Jadhavji AIR 1975 SC 1470)
Trustee or nominee interest
The asset over which the defendant has beneficial title (such as where he holds or appear to hold the asset on trust or as nominee for a third party) cannot be subject to an attachment order. A trustee or a nominee for a third party, for a property, has no such power to dispose such property. An attachment order can be issued for only those assets (movable or immovable) over which the defendant has the power to dispose in the exercise of his right. Debts of third parties to the defendant can be considered an asset. Rules 46-A to 46-I of Order 21 lay down procedure in garnishee case. Garnishee proceeding is a proceeding by which the decree-holder seeks to reach money or property of the judgment-debtor in the hands of a third party. The payment made by the garnishee (judgment-debtor’s debtor) pursuant to the order passed by the executing court is a valid discharge to him against his decree-holder.
Jointly owned assets
The question of whether the court can order attachment with respect to an asset over which the defendant has joint ownership with a third party depends upon the extent of the share of the defendant in the property in question and upon the valid discretion of the court. As it is provided under Sub-rule (1) of Rule 5 of Order 38, where, at any stage, the court is satisfied that the defendant is about to dispose whole or a part of his property or is about to remove whole or a part of his property from the local jurisdiction of the court, the court may direct the defendant to furnish security of such sum as of the value of such property or a portion of it. Thus, the court can order attachment with respect to the defendant’s share in the asset in question where the defendant has joint ownership of an asset with a third party.
The assets which are exempted from the order of attachment have been listed in the proviso of sub-section (1) of Section 60 of Code of Civil Procedure, 1908. It has been provided that certain assets such as wearing apparels, cooking vessels, bedding, tools of artisans, implements of husbandry, houses of agriculturists, wages, salaries, pensions, gratuities, compulsory deposits, right to future maintenance, books of accounts, mere right to sue for damages, right of personal service, pays and allowances to public servants, right of survivorship and agricultural land are exempted from the order of attachment.
What types of attachments order are issued by the courts in your jurisdiction?
What actions can a party take to ascertain the location of the property or assets of the defendant for the purpose of an attachment order? Are there any supplementary orders that can be sought by the applicant in support of an attachment order (for example, an order requiring the respondent to disclose details of their asset)?
An affidavit of the assets of the Judgment-debtor can be obtained under Order 21 Rule 41 of the Code. A party who is making application for the attachment should mention the particulars of the property or the asset in respect of which he is seeking attachment. As required in sub-rule (2) of Rule 5 of Order 38, an applicant should specify the property required to be attached and the estimated value thereof. This requires a party to specify the locations of the assets in respect of which he seeks attachment. As provided under Rule 43 and Rule 54 of Order 21, the court may order for copy of order of attachment to be put in the conspicuous part of the property in whose respect the attachment order has been issued.
The applicant can seek supplementary orders and directions in support of an attachment order. As provided by Rule 41 of Order 21 of the CPC, where a decree for payment has been issued, the applicant may apply to the court for examination of judgment debtor or respondent as to whether any or what debts are owing to the respondent and whether he has any and/or other assets or means of satisfying the execution of decree and that the court may make an order for attendance and examination of such judgment-debtor and his assets and production of books of accounts.
Are there any measures which can protect the defendant from the risk of oppression and injustice which may be caused by the enforcement of an attachment order?
Where the order of attachment has been obtained on insufficient grounds by the plaintiff, or the grounds sought by the plaintiff for obtaining the attachment order seem to be improbable or unreasonable to the court, then the court may order the plaintiff to pay compensation for the expense or injury caused to the defendant as contemplated by Section 95. The question of giving an undertaking by the applicant depends upon the discretion of the court. If the court finds security being provided necessarily by the applicant to compensate the defendant or any third party (such as banks) in case of any irreparable harm being done to them, it may ask the applicant to provide the security. (See State Bank of Bikaner and Jaipur V. District & Session Judge AIR 2005 Raj. 246)
Form or amount of undertaking/security
There are no such prescribed rules in relation to the form or amount of undertaking or security, in relation to the amount claimed, that a court may require the applicant to give to the court. The court in its own discretion may determine the criteria forming basis of security to be given by the applicant. The court may ask the applicant to provide the principal amount, which is supposed to be paid by the defendant in money decree as the security amount and not the interests, litigating costs, etc.
Exceptions to the attachment order
The court has extraordinary powers under Order 38 of the Code to grant for conditional attachment instead of final attachment and may provide the opportunity of hearing to the defendant before passing of any final attachment order, as enacted under Rule 5, sub-rule (3) of Order 38. The court may direct the defendant to provide particulars of his assets in addition to asset sought to be attached, for execution of decree and may also direct the defendant to produce the books of accounts and file an affidavit stating the particulars of his assets, as provided under Rule 41 of Order 21 of the Code. While the proviso to sub-section (1) of Section 60 grants exemption to certain assets from the attachment order, such assets are exempted in order to enable the defendant on a figure to meet their daily living expenses or debts.
How long are attachment orders, including those obtained without notice to the defendant, typically valid for?
An attachment order remains in operation as long as the respondent does not furnish the security. As provided under Rule 9 of Order 38 of the CPC, an order of attachment will be withdrawn if the respondent furnishes security or the suit is dismissed. An order of attachment issued in pursuance to precept under Section 46 is limited to two months.
Does the attachment order create any rights (such as proprietary right or lien) over the attached asset(s) in favour of the applicant against the other creditors?
The attachment order creates rights such as proprietary right or lien over the attached asset(s) in favour of the applicant against other creditors. Section 64 enacts a private alienation of the asset after the attachment is void as against claims enforceable under the attachment. This means that though the applicant does not get any title over the asset but he gets a lien over the attached property in respects to claims enforceable under the attachment, and only to the extent necessary to meet those claims as against the other creditors. (See Rushi Mahakur V. Dibya Shankar, AIR 1988 Ori. 145)
What happens if the defendant has insufficient assets within the jurisdiction to meet the claim? Do courts in your jurisdiction issue attachment orders with respect to overseas assets?
The court may ask the defendant to file an affidavit stating the particulars of his properties for the execution of the money decree under Rule 41 of Order 21. But on account of insufficiency of such assets to meet the claim, the court may grant a decree to the courts of the reciprocating territory as contemplated under Section 45. Such reciprocating territory is to be declared in the official gazette by the authority of the Central government. The courts exercise their jurisdiction only when the assets of the defendant is insufficient to meet the claim and the court is satisfied that the defendant is about to dispose of his property to create the obstruction in execution of the decree, or is about to remove the whole or a portion of his property from the local jurisdiction of the court so that the court can be prevented from dealing with the assets for execution of decree. But such orders can be issued in the form of decree only.
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