Supreme Court of India
G.L. Vijain vs K. Shankar on 24 November, 2006
There cannot be any dispute with regard to the proposition of law that the High Court having plenary jurisdiction has incidental or ancillary power. There cannot further be any dispute that the court in appropriate cases can exercise its inherent jurisdiction to pass an interim order.
It is, however, one thing to say that the court has an incidental, ancillary or inherent power, but, it is another thing to say that its revisional jurisdiction can be curtailed by imposing condition while admitting a revisional application. Incidental or ancillary powers are provided for in the Code of Civil Procedure. They otherwise inhere in the jurisdiction of the court exercising plenary jurisdiction in certain situations but it must be stated that an appellate court can exercise the incidental or ancillary power only after the appeal has been entertained and not as a condition precedent for entertaining the same.
It must be borne in mind that incidental power is to be exercised in aid to the final proceedings. In other words an order passed in the incidental proceedings will have a direct bearing on the result of the suit. Such proceedings which are in aid of the final proceedings cannot, thus, be held to be at par with supplemental proceedings which may not have anything to do with the ultimate result of the suit.
Such a supplemental proceeding is initiated with a view to prevent the ends of justice from being defeated. Supplemental proceedings may not be taken recourse to in a routine manner but only when an exigency of situation arises therefor. The orders passed in the supplemental proceedings may some time cause hardships to the other side and, thus, are required to be taken recourse to when it is necessary in the interest of justice and not otherwise. There are well-defined parameters laid down by the Court from time to time as regards the applicability of the supplemental proceedings.
Incidental proceedings are, however, taken recourse to in aid of the ultimate decision of the suit which would mean that any order passed in terms thereof, subject to the rules prescribed therefor, may have a bearing on the merit of the matter. Any order passed in aid of the suit is ancillary power.
The expression 'ancillary' means aiding, auxiliary; subordinate; attendant upon; that which aids or promotes a proceeding regarded as the principal.
The expression 'incidental' may mean differently in different contexts. While dealing with a procedural law, it may mean proceedings which are procedural in nature but when it is used in relation to an agreement or the delegated legislation, it may mean something more; but the distinction between an incidental proceeding and a supplemental proceeding is evident.
Supreme Court of India
Vareed Jacob vs Sosamma Geevarghese & Ors on 21 April, 2004
Is there any difference between the two types of proceedings?
A distinction is to be borne in mind keeping in view the fact that the incidental proceedings are in aid to the final proceedings. In other words an order passed in the incidental proceedings will have a direct bearing on the result of the suit. Such proceedings which are in aid of the final proceedings cannot, thus, be held to be at par with supplemental proceedings which may not have anything to do with the ultimate result of the suit.
Such a supplemental proceeding is initiated with a view to prevent the ends of justice from being defeated. The supplemental proceedings may not be taken recourse to as a routine matter but only when an exigency arises therefor. The orders passed in the supplemental proceedings may some time cause hardships to the other side and, thus, are required to be taken recourse to when a situation arises therefor and not otherwise. There are well-defined parameters laid down by the Court from time to time as regards the applicability of the supplemental proceedings.
Incidental proceedings are, however, taken recourse to in aid of the ultimate decision of the suit which would mean that any order passed in terms thereof, subject to the rules prescribed therefor, would have a bearing on the merit of the matter. Any order passed in aid of the suit are ancillary powers. Whenever an order is passed by the Court in exercise of its ancillary power or in the incidental proceedings, the same may revive on revival of the suit. But so far as supplemental proceedings are concerned, the Court may have to pass a fresh order.
An order to furnish security to produce any property belonging to a defendant and to place the same at the disposal of the Court or order the attachment of any property as also grant of a temporary injunction or appointment of a receiver are supplemental in nature. The effect of such order may be felt even after decree is passed. An order of attachment passed under Order 38 of the Code of Civil Procedure would be operative even after the decree is passed. Such an order of attachment passed under Order 38 can be taken benefit of by the decree holder even after a decree is passed. An order of temporary injunction passed in a suit either may merge with a decree of permanent injunction or may have an effect even if a decree is passed, as, for example, for the purpose of determination as regard the status of the parties violating the order of injunction or the right of a transferee whom have purchased the property in disobedience of the order of injunction. The orders passed in supplemental proceedings may have to be treated distinctly as opposed to an order which is ancillary in nature or which has been passed in the incidental proceedings.
The Parliament consciously used two different expressions 'incidental proceedings' and 'supplemental proceedings' which obviously would carry two different meanings.
The expression 'ancillary' means aiding, auxiliary; subordinate; attendant upon; that which aids or promotes a proceeding regarded as the principal.
The expression 'supplementary proceeding' on the other hand, would mean a separate proceeding in an original action, in which the court where the action is pending is called upon to exercise its jurisdiction in the interest of justice.
The expression 'incidental' may mean differently in different contexts. While dealing with a procedural law, it may mean proceedings which are procedural in nature but when it is used in relation to an agreement or the delegated legislation, it may mean something more; but the distinction between an incidental proceeding and a supplemental proceeding being obvious cannot be ignored.
Indisputably, the effect of an order passed under different provisions of Section 94 of the Code of Civil Procedure would be different. They have been so legislated keeping in view different exigencies of circumstances but it must not be forgotten that the power thereunder is to be exercised in the interest of justice. The statutory scheme therefor is that supplemental proceeding should be taken recourse to only when the interest of justice is required to be sub-served, although the interlocutory order may not have anything to do with the ultimate decision of the court.
The consequences of an order of attachment before judgment as also, an order of injunction can be grave. By reason of such an order, a right of a party to the lis may be affected or remained under animated suspension. By reason of an interlocutory order whether in terms of Order 38, Order 39 or Order 40, a person's right to transfer a property may remain suspended as a result whereof he may suffer grave injury. When the suit is dismissed for default, he may exercise his right. If it is to be held that on restoration of the suit the order of attachment before judgment or an order, an injunction is automatically revived, as a result whereof the status of the parties would be in the same position as on the date of passing of the initial interlocutory order, they may be proceeded with for violation of the order of injunction or an order of attachment before judgment. The right of subsequent purchaser may also be affected. By reason of taking recourse to a supplemental proceedings, the rights of the parties and in some cases the right of even a third party cannot be allowed to be taken away.
Calcutta High Court
Premraj Mundra vs Md. Maneck Gazi And Ors. on 29 January, 1951
From a perusal of all the authorities, I think that the following guiding principles can 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 defendant. 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) That a mere allegation that the defendant was selling off & his properties is not sufficient. Particulars must be stated.
(6) There is no rule that transactions before suit cannot be taken into consideration, but the object of attachment before judgment must be to prevent future transfer or alienation.
(7) Where only a small portion of the property belonging to the defendant is being disposed of, no inference can be drawn in the absence of other circumstances that the alienation is necessarily to defraud or delay the plaintiffs claim.
(8) That the mere fact of transfer is not enough, since nobody can be prevented from dealing with his properties simply because a suit has been filed: There must be additional circumstances to show that the transfer is with an intention to delay or defeat the pltf.'s claim. It is open to the Court to look to the conduct of the parties immediately before suit, & to examine the surrounding circumstances, & to draw an inference as to whether the deft. is about to dispose of the property, & if so, with what intention. The Court is entitled to consider the nature of the claim & the defence put forward.
(9) The fact that the deft. is in insolvent circumstances or in acute financial embarrassment, is a relevant circumstance, but not by itself sufficient.
(10) That in the case of running businesses, the strictest caution is necessary & the mere fact that a business has been closed, or that its turnover has diminished, is not enough.
(11) Where however the deft. starts disposing of his properties one by one, immediately upon getting a notice of the pltf.'s claim, &/or where he had transferred the major portion of his properties shortly prior to the institution of the suit & was in an embarrassed financial condition, these were grounds from which an inference could be legitimately drawn that the object of the deft. was to delay and defeat the pltfs'. claim.
(12) Mere removal of properties outside jurisdiction, is not enough, but where the deft. with notice of the pltfs'. claim, suddenly begins removal of his properties outside the jurisdiction of the appropriate Court, & without any other satisfactory reason, an adverse inference may be drawn against the deft. Where the removal is to a foreign country, the inference is greatly strengthened.
(13) The deft. in a suit is under no liabilty to take any special care in administering his affairs, simply because there is a claim pending against him. Mere negect, 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 cautious about the evidence on these points & not rely on vague allegations.
Supreme Court of India
Raman Tech. & Process Engg. Co. & ... vs Solanki Traders on 20 November, 2007
4. The object of supplemental proceedings (applications for arrest or attachment before judgment, grant of temporary injunctions and appointment of receivers) is to prevent the ends of justice being defeated. The object of order 38 rule 5 CPC in particular, is to prevent any defendant from defeating the realization of the decree that may ultimately be passed in favour of the plaintiff, either by attempting to dispose of, or remove from the jurisdiction of the court, his movables. The Scheme of Order 38 and the use of the words `to obstruct or delay the execution of any decree that may be passed against him' in Rule 5 make it clear that before exercising the power under the said Rule, the court should be satisfied that there is a reasonable chance of a decree being passed in the suit against the defendant. This would mean that the court should be satisfied the plaintiff has a prima facie case. If the averments in the plaint and the documents produced in support of it, do not satisfy the court about the existence of a prima facie case, the court will not go to the next stage of examining whether the interest of the plaintiff should be protected by exercising power under Order 38 Rule 5CPC. It is well-settled that merely having a just or valid claim or a prima facie case, will not entitle the plaintiff to an order of attachment before judgment, unless he also establishes that the defendant is attempting to remove or dispose of his assets with the intention of defeating the decree that may be passed. Equally well settled is the position that even where the defendant is removing or disposing his assets, an attachment before judgment will not be issued, if the plaintiff is not able to satisfy that he has a prima facie case.
5. The power under Order 38 Rule 5 CPC is 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. Any attempt by a plaintiff to utilize the provisions of Order 38 Rule 5 as a leverage for coercing the defendant to settle the suit claim should be discouraged. Instances are not wanting where bloated and doubtful claims are realised by unscrupulous plaintiffs by obtaining orders of attachment before judgment and forcing the defendants for out of court settlement, under threat of attachment.
6. A defendant is not debarred from dealing with his property merely because a suit is filed or about to be filed against him. Shifting of business from one premises to another premises or removal of machinery to another premises by itself is not a ground for granting attachment before judgment. A plaintiff should show, prima facie, that his claim is bonafide and valid and also satisfy the court that the defendant is about to remove or dispose of the whole or part of his property, with the intention of obstructing or delaying the execution of any decree that may be passed against him, before power is exercised under Order 38 Rule 5 CPC. Courts should also keep in view the principles relating to grant of attachment before judgment (See - Prem Raj Mundra v. Md. Maneck Gazi, AIR (1951) Cal 156, for a clear summary of the principles.)