The Delhi High Court has set aside a trial court order directing a defendant to furnish security of ₹15,00,000 under Order XXXVIII Rule 5 CPC, holding that the plaintiff failed to place material demonstrating the defendant's intent to dispose of assets to obstruct execution of a decree. The Court reiterated that the power to direct pre-judgment security is drastic and extraordinary, requiring strict proof of both an imminent attempt to alienate property and the specific intent to defeat execution, neither of which can be inferred from a prima facie case or the defendant's residence outside the court's territorial jurisdiction.
Background & Facts
The Dispute
The respondent, Kailash Soni, instituted a commercial suit (CS (COMM) 348/2025) before the District Judge (Commercial Court-01), Saket Courts, New Delhi, seeking recovery of ₹17,47,110 along with interest at 18% per annum towards outstanding charges for the petitioner's stay at a guest house operated under the name M/s Private Affairs. The petitioner, Anand Saraswat, disputed the claim in his written statement, asserting that approximately ₹28,00,000 had already been paid to the respondent and the firm owned by the respondent's son. The respondent filed a replication thereafter.
Key Facts
- The underlying suit was filed for recovery of ₹17,47,110 with 18% interest per annum for guest house charges at M/s Private Affairs
- The petitioner claimed payments aggregating approximately ₹28,00,000, including ₹15,00,000 paid to the respondent's son's firm
- The petitioner alleged numerous bills with identical numbers issued for the same dates, suggesting fraudulent documentation
- The respondent's claim was supported by room bills and WhatsApp conversations exchanged between the parties
- The petitioner is a resident of Palghar, Maharashtra, outside the territorial jurisdiction of the Saket Courts
- The petitioner proactively participated in proceedings despite residing in Maharashtra
Procedural History
- 18.10.2025: Respondent filed application under Order XXXVIII Rule 5 CPC seeking security for the claimed amount
- 29.10.2025: Petitioner filed reply opposing the application, disputing apprehension of asset disposal
- 18.04.2026: Trial Court directed petitioner to file complete address affidavit within one week
- 23.04.2026: Petitioner filed address affidavit
- 11.08.2026: Trial Court allowed respondent's application, directing petitioner to furnish security of ₹15,00,000 by way of FDR in the name of the Court within two weeks
- 28.10.2026: Delhi High Court delivered judgment in CM(M) 1850/2026, setting aside the impugned order
Relief Sought
The petitioner sought quashing of the order dated 11.08.2026 directing furnishing of security of ₹15,00,000, contending the statutory requirements of Order XXXVIII Rule 5 CPC were not satisfied.
The Legal Issue
The central question was whether the respondent, while seeking security under Order XXXVIII Rule 5 CPC, placed material before the trial court demonstrating that the petitioner was about to dispose of or remove his property with the intent to obstruct or delay execution of a decree that may be passed against him.
Arguments Presented
For the Petitioner
Counsel submitted that the power under Order XXXVIII Rule 5 CPC is exceptional and can be exercised only where material shows the defendant intends to dispose of assets to obstruct execution. Reliance was placed on Raman Tech. & Process Engg. Co. v. Solanki Traders ((2008) 2 SCC 302), where the Supreme Court cautioned against mechanical invocation. The application rested on general apprehension without identifying specific assets or conduct indicative of intent to defeat execution. The supporting affidavit lacked independent factual basis, and the application failed to provide particulars and estimated value of property sought to be attached as required under Order XXXVIII Rule 5(2) CPC. Citing Premraj Mundra v. Md. Maneck Gazi (AIR 1951 Cal 156), counsel argued mere possibility of obstruction cannot substitute for material establishing requisite intention. The petitioner's proactive participation despite residing in Maharashtra contradicted any inference of evasion.
For the Respondent
Counsel submitted the respondent established a bona fide claim for ₹17,47,110 and circumstances gave rise to reasonable apprehension that decree execution may be frustrated. The petitioner's residence in Palghar, Maharashtra, beyond the trial court's jurisdiction, coupled with his conduct in leaving the guest house without settling dues, warranted security. The claim was supported by room bills and WhatsApp conversations. The petitioner's written statement contained evasive denials contrary to Order VIII Rules 3-5 CPC, not specifically traversing assertions regarding stay duration or premises. Counsel relied on Rahul S. Shah v. Jinendra Kumar Gandhi & Ors. ((2021) 6 SCC 418) to submit that in money suits, the trial court may direct asset disclosure and security.
The Court's Analysis
The Court framed the issue as whether the respondent placed material showing the petitioner's intent to obstruct or delay execution. It reiterated that Order XXXVIII Rule 5 CPC confers a drastic and extraordinary power that must be exercised sparingly in strict conformity with statutory conditions.
"A prima facie case in favour of the plaintiff, howsoever bona fide, does not by itself warrant an order directing the defendant to furnish security. The plaintiff must place material demonstrating that the defendant is about to dispose of or remove his property with the intent to obstruct or delay the execution of a decree that may be passed."
The Court examined the respondent's application dated 18.10.2025 and found it bereft of material particulars demonstrating any attempt by the petitioner to dispose of or remove property with the requisite intent. The application proceeded on a presumption that the petitioner's Maharashtra residence would vitiate the decree, but did not set out specific acts of alienation, proposed transfer, or removal of assets from which such intention could be inferred.
The impugned order relied on the petitioner's allegedly evasive denials and his residence outside the trial court's jurisdiction. The Court held neither circumstance, absent further material, establishes intent to defeat execution. The adequacy of pleadings may be examined for the claim's merits but cannot by itself establish intention to defeat a decree. Furthermore, ordinary residence outside territorial jurisdiction cannot be an independent ground for directing security, as it does not indicate intent to evade execution or dispose of assets.
The petitioner's proactive participation in proceedings contradicted the trial court's assumption that he would frustrate proceedings. The Court emphasized that the legislative intent behind Order XXXVIII Rule 5 is to prevent a defendant from disposing of property to vitiate a decree, making the defendant's intent and overt acts paramount. The Court must examine whether material establishes: (1) an attempt or imminent attempt to dispose of or remove property, and (2) the specific intent to obstruct or delay execution. These are distinct but connected requirements.
The petitioner's departure from the guest house without settling dues cannot be construed as indicative of mala fide intent to obstruct execution. The reliance on Rahul S. Shah was held inapplicable as no demonstrable circumstances warranted such direction.
The Verdict
The petition was allowed. The impugned order dated 11.08.2026 directing the petitioner to furnish security of ₹15,00,000 by way of FDR in the name of the Court within two weeks was set aside. The Court clarified that its observations are confined to the respondent's application under Order XXXVIII Rule 5 CPC and shall not prejudice adjudication of the parties' respective claims and defences in the pending suit CS (COMM) 348/2025.
What This Means For Similar Cases
Intent to Defeat Execution Must Be Proved, Not Presumed
Practitioners must ensure applications under Order XXXVIII Rule 5 CPC are supported by specific material demonstrating both an overt act of asset disposal and the accompanying intent to obstruct decree execution. General apprehensions, the defendant's residence outside jurisdiction, or the prima facie strength of the plaintiff's case are insufficient substitutes for the statutory threshold.
Proactive Participation Negates Inference of Evasion
- A defendant's active participation in proceedings, including filing written statements, replies, and affidavits, directly contradicts any assumption of intent to evade court process
- Courts must consider the defendant's conduct in the litigation itself when evaluating apprehension of execution frustration
Evasive Denials Do Not Establish Statutory Intent
- The adequacy of a defendant's pleadings under Order VIII CPC is a matter for trial, not a basis for pre-judgment security
- Alleged evasive denials go to the merits of the claim, not to the defendant's intention to dispose of assets to defeat a decree
Territorial Jurisdiction Is Not a Proxy for Intent
- A defendant's ordinary residence outside the court's territorial jurisdiction cannot independently ground a security order
- The statutory focus remains on the defendant's conduct concerning property and the intent accompanying such conduct, not on geographical location
