Order 38 Rule 5 CPC | Prima Facie Case & Intent to Defraud Must Be Proved for Pre-Judgment Attachment : Himachal Pradesh HC

The Himachal Pradesh High Court recently dismissed petitions challenging orders passed under Order 38 Rule 5 of the Civil Procedure Code (CPC), which directed the defendant to furnish security for arrears of rent. The Court reiterated that attachment before judgment requires a prima facie case and evidence of the defendant’s intent to obstruct or delay execution of a decree. The judgment underscores the necessity of establishing both elements before invoking this extraordinary remedy.

Background & Facts

The Dispute

The dispute arises from two civil suits filed by the respondents (plaintiffs) against the petitioner (defendant) for recovery of arrears of rent and interest. The plaintiffs, Pankaj Bansal (plaintiff No. 1) and Maya Bansal (plaintiff No. 2), alleged that the defendant was inducted as a tenant in a shop situated in Pooja Emporium, Solan, in the year 2000. The monthly rent was initially Rs. 12,000 and was statutorily increased over the years:

• Rs. 13,200 w.e.f. 28.06.2005
• Rs. 14,520 w.e.f. 28.06.2010
• Rs. 15,972 w.e.f. 28.06.2013
• Rs. 17,569 w.e.f. 28.06.2016

The plaintiffs averred that the defendant shifted his business to another shop in July 2012 and sub-let the suit premises to Raj Rani without their consent. Despite repeated demands, the defendant failed to pay rent for over six years, assuring the plaintiffs that he would settle the arrears and vacate the premises.

Key Facts

• Agreement dated 29.06.2000: The plaintiffs produced a rental agreement executed between the defendant (as tenant) and plaintiff No. 1 (as landlord), which specified the rent, possession, and prohibition on subletting.
• Arrears of Rent: The plaintiffs claimed Rs. 8,73,183 in Civil Suit No. 37/2018 (for arrears upto 28.02.2018) and Rs. 7,88,322 in Civil Suit No. 62/2021 (for arrears from 01.03.2018 to 28.02.2021), along with future interest at 12% per annum.
• Defendant’s Defence: The defendant denied the landlord-tenant relationship, claiming that the suit premises were in the possession of Raj Rani (his mother) since 1999 and that the plaintiffs had no right, title, or interest over the space.
• Mortgaged Properties: The defendant owned:
  • A flat mortgaged with Baghat Urban Cooperative Bank, Solan for Rs. 25,00,000
  • A 3/4th share in the same flat (inherited after his mother’s death on 06.02.2022)
  • A shop (ground floor, Shop No. 3, Mauja Jawahar Park, Solan), also mortgaged with the same bank
• Public Notice under SARFAESI Act: A notice was published in Punjab Kesari on 18.11.2022 regarding proceedings against the defendant’s property.
• Sale Deed dated 10.02.2023: During the pendency of the applications under Order 38 Rule 5 CPC, the defendant sold his share in Flat No. 102 for Rs. 24,00,000 (via cheque dated 27.12.2022) and Rs. 13,00,000 (via demand draft dated 10.02.2023).

Procedural History

• Civil Suit No. 37/2018 (Recovery of Rs. 8,73,183):

  • 22.11.2022: Plaintiffs filed an application under Order 38 Rule 5 CPC seeking attachment of the defendant’s properties.
  • 23.11.2022: Plaintiffs filed an application for early hearing, which was allowed.
  • 18.01.2023: Defendant filed a reply denying the averments.
  • 24.02.2023: Trial court allowed the application, directing the defendant to furnish security of Rs. 8,73,183 by 25.03.2023, failing which his shop would be attached.

• Civil Suit No. 62/2021 (Recovery of Rs. 7,88,322):

  • 22.11.2022: Plaintiffs filed an application under Order 38 Rule 5 CPC.
  • 02.12.2024: Trial court allowed the application, directing the defendant to furnish security of Rs. 8,00,000 by 20.02.2025, failing which his shop would be attached.

• 28.03.2023: Defendant filed CMPMO No. 173/2023 and CMPMO No. 238/2025 before the High Court, challenging the orders dated 24.02.2023 and 02.12.2024, respectively.

Relief Sought

The petitioner sought quashing of the impugned orders, contending that:

• The trial courts failed to appreciate the true import of Order 38 Rule 5 CPC.
• The orders were passed mechanically without establishing a prima facie case or the defendant’s intent to defeat the decree.
• The defendant’s properties were wrongly directed to be attached.

The Legal Issue

The central question was whether the trial courts rightly invoked Order 38 Rule 5 CPC to direct attachment of the defendant’s properties before judgment. Specifically, the Court had to determine:

1. Whether the plaintiffs established a prima facie case for recovery of arrears of rent.
2. Whether there was sufficient evidence to infer the defendant’s intent to obstruct or delay execution of a decree.

Arguments Presented

For the Petitioner

• The trial courts erred in passing the impugned orders without properly appreciating the provisions of Order 38 Rule 5 CPC.
• The defendant denied the landlord-tenant relationship, and the plaintiffs failed to establish a prima facie case.
• There was no evidence to show that the defendant was disposing of his assets with the intent to defeat the decree.
• The orders were passed in a routine manner, without application of mind.

For the Respondents

• The plaintiffs established a prima facie case through the rental agreement (Annexure R-1) and the averments in the plaint.
• The defendant’s conduct, including the sale of his property during pendency of the applications and the public notice under SARFAESI Act, demonstrated his intent to obstruct or delay execution of the decree.
• The trial courts rightly exercised discretion under Order 38 Rule 5 CPC to protect the plaintiffs’ interests.
• Reliance was placed on Raman Tech and Process Engg Co. vs. Solanki Traders and M/s Radha Krishan Industries vs. State of Himachal Pradesh to argue that the impugned orders were legally sound.

The Court's Analysis

The Court examined the provisions of Order 38 Rule 5 CPC, which empowers a court to direct a defendant to furnish security if it is satisfied that the defendant, with intent to obstruct or delay execution of a decree, is about to dispose of or remove his property from the court’s jurisdiction. The Court emphasized that this power is drastic and extraordinary and must be exercised sparingly.

"The power under Order 38, Rule 5 Civil Procedure Code is a drastic and extraordinary power. Such power should not be exercised mechanically or merely for the asking. It should be used sparingly and strictly in accordance with the Rule. The purpose of Order 38, Rule 5 is not to convert an unsecured debt into a secured debt."

The Court relied on the Supreme Court’s decision in Raman Tech and Process Engg Co. vs. Solanki Traders, which held that two conditions must be satisfied for invoking Order 38 Rule 5 CPC:

1. The plaintiff must establish a prima facie case.
2. The plaintiff must show that the defendant is attempting to dispose of or remove his assets with the intent to defeat the decree.

The Court observed that the plaintiffs had established a prima facie case through:

• The rental agreement dated 29.06.2000, which clearly established the landlord-tenant relationship.
• The averments in the plaint, which detailed the defendant’s failure to pay rent despite repeated demands.
• The defendant’s conduct, including his assurances to pay rent and vacate the premises, which were not honored.

Regarding the defendant’s intent to defeat the decree, the Court noted:

• The public notice under SARFAESI Act published on 18.11.2022, indicating proceedings against the defendant’s mortgaged properties.
• The sale deed dated 10.02.2023, executed during the pendency of the applications under Order 38 Rule 5 CPC, wherein the defendant sold his share in Flat No. 102 for Rs. 37,00,000.
• The timing of the sale, which coincided with the filing of the applications, clearly demonstrated the defendant’s intent to obstruct or delay execution of the decree.

The Court held that the trial courts had rightly appreciated the evidence and applied the legal principles. The impugned orders were not mechanical but based on a prima facie case and evidence of the defendant’s intent to defeat the decree.

The Court also addressed the scope of Article 227 of the Constitution of India, under which the petitions were filed. It relied on Garment Craft vs. Prakash Chand Goel, wherein the Supreme Court held that the High Court’s power under Article 227 is supervisory and not appellate. The High Court cannot re-appreciate evidence or substitute its own findings unless the lower court’s order is perverse or based on no evidence.

"The High Court exercising supervisory jurisdiction does not act as a court of first appeal to re-appreciate, reweigh the evidence or facts upon which the determination under challenge is based. Supervisory jurisdiction is not to correct every error of fact or even a legal flaw when the final finding is justified or can be supported."

The Verdict

The High Court dismissed both petitions (CMPMO No. 173/2023 and CMPMO No. 238/2025), upholding the trial courts’ orders dated 24.02.2023 and 02.12.2024. The Court directed the defendant to furnish security as follows:

• Rs. 8,73,183 in Civil Suit No. 37/2018 (by 25.03.2023)
• Rs. 8,00,000 in Civil Suit No. 62/2021 (by 20.02.2025)

Failure to comply would result in the attachment of the defendant’s shop (ground floor, Shop No. 3, Mauja Jawahar Park, Solan). The Court left the parties to bear their own costs and clarified that its observations were limited to the instant petitions and would not influence the merits of the main suits.

What This Means For Similar Cases

Prima Facie Case Is Non-Negotiable

• Order 38 Rule 5 CPC cannot be invoked unless the plaintiff establishes a prima facie case. Mere allegations or uncorroborated claims are insufficient.
• Practitioners must ensure that the plaint contains specific averments and is supported by documentary evidence (e.g., agreements, notices, demand letters).
• In landlord-tenant disputes, a rental agreement or receipts of rent payment can serve as critical evidence to establish the jural relationship.

Intent to Defeat Decree Must Be Proved

• The plaintiff must demonstrate the defendant’s intent to obstruct or delay execution of the decree. This requires tangible evidence, such as:
  • Disposal of assets during pendency of litigation (e.g., sale deeds, transfers).
  • Public notices under statutes like the SARFAESI Act, indicating financial distress.
  • Statements or conduct showing an unwillingness to comply with the decree (e.g., assurances not honored, subletting without consent).
• Courts will scrutinize the timing of such actions - disposal of assets immediately after filing of an application under Order 38 Rule 5 CPC is a red flag.

Supervisory Jurisdiction Under Article 227 Is Limited

• High Courts will not interfere under Article 227 unless the lower court’s order is perverse, based on no evidence, or suffers from a fundamental legal flaw.
• Practitioners challenging orders under Order 38 Rule 5 CPC must demonstrate that the trial court failed to apply the correct legal test or ignored material evidence.
• Mere disagreement with the trial court’s findings is insufficient to invoke Article 227.

Practical Takeaways for Litigants

• Plaintiffs seeking attachment before judgment must:

  • File detailed applications under Order 38 Rule 5 CPC, supported by affidavits and documents.
  • Highlight specific instances of the defendant’s intent to defeat the decree (e.g., sale of property, mortgaging assets).
  • Request early hearing if there is urgency, as delays may frustrate the purpose of the remedy.

• Defendants facing such applications must:

  • Deny specific averments in the plaint and application, rather than making general denials.
  • Provide explanations for disposal of assets (e.g., financial hardship, settlement with creditors).
  • Challenge the prima facie case and intent to defeat decree on factual and legal grounds.