Attachment before Judgment is an extraordinary legal remedy under Order XXXVIII, Rules 5-13, and section 60 – 64 of the Code of Civil Procedure (CPC), aimed at preventing defendants from disposing assets that might otherwise satisfy a potential court decree. The primary objective of this mechanism is to secure the plaintiff's interest by restraining the defendant from transferring or disposing of assets during suit proceedings, especially when the defendant's actions suggest an intent to frustrate the execution of a potential judgment.

This remedy plays a critical role in civil proceedings by ensuring that plaintiffs are not left with unenforceable decrees due to defendants deliberately moving assets outside the jurisdiction of the court. However, the application of attachment before judgment is not to be granted by the courts without careful deliberation.

Courts have repeatedly cautioned against its misuse as a coercive tactic and stressed that it should only be invoked when a strong prima facie case is established and there is clear evidence of the defendant's intent to hinder the execution of the decree. The judiciary has also insisted on a balanced approach, considering both the plaintiff's right to safeguard their potential decree and the defendant's right to freely enjoy their property until liability is conclusively determined.

The principles of attachment before judgment extend beyond conventional civil suits to arbitration proceedings, particularly under the Arbitration and Conciliation Act, 1996, reflecting its importance in preventing asset dissipation across diverse legal domains.

This paper explores the legal framework, judicial interpretations, and practical applications of attachment before judgment under the Code of Civil Procedure (CPC) and its intersection with the Arbitration and Conciliation Act. The author will: firstly, explain the legal provisions governing attachment before judgment under the CPC; secondly, examine judicial interpretations and case law establishing the requirements for attachment; thirdly, analyse the balancing of plaintiff's and defendant's rights, third-party claims, and arbitration proceedings; lastly, conclude by addressing the cautious application of attachment before judgment to prevent misuse and ensure fairness.

Judicial Interpretation and Application
Attachment before Judgment is a punitive remedy enshrined under order XXXVIII Rule 5 to 13 read with section 60, 61, 63 & 64 of the Code of Civil Procedure.[1] The aim/object of attaching a property before judgment is to prevent a defendant from hindering the enforcement of a potential decree in favour of the plaintiff by trying to dispose of or move their movable assets outside the court's jurisdiction.[2]

Establishing Prima Facie Case and Defendant's Intent
Courts have cautioned against the misuse of attachment before judgment as a means of coercion. It cannot be used as a leverage by the plaintiff to coerce the defendant to agree to his terms or settle the suit out of court.[3]

In Raman Tech. and Process Engg. Co. and Ors. vs. Solanki Traders,[4] the Hon'ble Apex Court laid down the twin principles that need to be established before a court grants relief of attachment of property before judgment. First, the plaintiff needs to establish a strong prima facie case for succeeding in the suit, and second, the court should be prima facie satisfied that the defendant is acting in a manner so as to defeat the realization of the decree that ultimately may be passed.

The Calcutta High Court, in Prem Raj Mudra v Md. Maneck Gazi,[5] laid down the guiding principle for application for the provisions, namely:

• Orders for attachment of property before judgment can only be issued if specific circumstances exist, which must be proven with supporting affidavits that must be clear, detailed, and properly verified. Orders should not be issued simply because they cause no harm or prejudice to the defendant.

• Mere allegations of property disposal are insufficient; specific details are required. The court must be satisfied with the facts presented.
• Transfer of property alone is not enough; additional evidence of intent to delay or defeat the plaintiff's claim is required. Pre-suit transactions may be considered if they suggest future intent to defraud. Isolated property sales do not imply fraudulent intent without further evidence. Multiple or significant property disposals after notice of the claim may indicate intent to defraud.
• Insolvency or financial distress is relevant but not conclusive. Caution is needed in business-related cases; diminished business activity alone is insufficient.
• The defendant has no special duty to protect assets simply because a claim is pending.
• Sales at undervalue or benami transfers suggest intent to defeat the claim, but evidence must be strong and specific.
• Removing property outside jurisdiction may warrant adverse inference, especially if done suddenly and without reason.

Attachment of Property Outside Jurisdiction
The court in Raman Tech[6] observed that the purpose of Order XXXVIII Rule 5 of the CPC also includes preventing the defendant from relocating the suit property beyond the jurisdiction of the court thereby obstructing a potential decree that might in favour of the plaintiff. The intentions become obvious if done without any reason or all of a sudden.[7] Section 136 empowers the court to attach property (before judgment) outside its jurisdiction through issuing an order to the District court in which the property is located.

The Apex court, in Rajender Singh v Ramdhar Singh & Ors., [8] noted that non-compliance with Rule 5(1) of Order XXXVIII can void an attachment, but Section 136 does not contain a similar provision. Section 136 is a procedural step, and failure to comply does not invalidate the attachment unless timely objection is raised. Therefore, procedural errors in sending attachment orders to the District Court do not automatically invalidate the attachment.

In the case of Mohit Bhargava vs. Bharat Bhushan Bhargava and Ors.,[9] the dispute involves the execution of a final decree passed by the District Court of Gwalior in a partnership dissolution case. The executing court in Gwalior ordered the sale of the property, but the judgment debtor objected, arguing that the court lacked territorial jurisdiction. The High Court upheld the objection, ruling that the Gwalior court did not have jurisdiction to order the sale of property outside its territory and transferred the execution to the appropriate court in Indore.

However, the High Court refused to interfere with earlier orders restraining the transfer of the property and bank accounts. Both the judgment debtor and the decree holder appealed to the Supreme Court, challenging various aspects of the High Court's decision. The Hon'ble Supreme Court held that "Pending a suit, the court approached with the suit, may have jurisdiction to order attachment of a property even outside its jurisdiction."[10]

Proportionality and the Need for a Balanced Approach
Institution of a suit does not bar a defendant from enjoying his rights on the property.[11] The remedy of attachment before judgment infringes on a defendant's right to freely use and enjoy their property, which is why it is considered an extraordinary measure.[12] The intention behind Order 38 Rule 5 is not to transform an unsecured debt into a secured one.[13] Courts must ensure that the remedy is applied cautiously and only when the necessary conditions are fulfilled with supporting affidavits.

The courts have, time and again, stressed that attachment before judgment should not be applied automatically or simply upon request but must be used cautiously and strictly in line with the Rule.[14] In Prem Raj Mudra,[15] the Calcutta HC highlighted that while deciding whether a property should be attached or not, courts should strike a balanced approach between protecting the plaintiff's potential decree and safeguarding the defendant's property rights by carefully considering the facts and circumstances of each case to determine whether a reasonable person would suspect that the defendant's actions were intended to undermine the plaintiff's claim.

Under Order XXXVIII Rule 6, if the defendant fails to provide security or justify why they should not, the court may order attachment of their property. The defendant has the option to either furnish security or provide a valid explanation, and if they do so, the court is required under Order 38 Rule 6(2) to lift any previously ordered attachment. [16]

In Vareed Jacob v. Sosamma Geevarghese & Ors.,[17] the Supreme Court addressed whether the power to order attachment before judgment is an ancillary or supplemental power. Justice S.B. Sinha in his dissenting opinion observed that the provisions of Order 38 (attachment before judgment) and Order 39 (injunctions) are not fundamentally different in terms of the reliefs they provide, as both relate to interlocutory proceedings. He emphasized that an attachment before judgment is not part of the execution process but is instead a measure to secure the plaintiff's claim. Order 38 Rule 9 of the CPC provides a defendant with the right to request the court to lift an attachment if they can furnish security to cover the plaintiff's claim.

Third-Party Claims and Interference with Attachment
Attachment before judgment may also impact third parties such as those who have an agreement with the defendant involving the attached property or those who claim that the attached property belongs to them, not the defendant.[18] The CPC addresses these disputes through provisions that allow third parties to challenge the attachment, asserting their rights over the property.

Resolution of Disputes Over Attached Property
Under Order XXXVIII, Rule 8, disputes raised by third parties regarding attached property are adjudicated as a suit, as highlighted by the Delhi High Court in Value Advisory Services vs. ZTE Corporation and Ors.[19] The court held that CPC allows for the attachment of a defendant's property before an order is passed under Order 38 Rule 6, even if the property is not in the defendant's possession but belongs to them and is held by a third party. The attachment rules at this stage are the same as those for executing a decree.

Such attachment of the judgment debtor's property in the hands of others is permissible under Section 60 of the CPC.[20] When such an attachment is made, third parties may contest it, claiming the property belongs to them or resisting the attachment on other grounds. Order 38 Rule 8 provides for the court to adjudicate such disputes. The relevant provisions of Order 38 and Order 21 (concerning execution) apply to attachment before judgment, ensuring that disputes raised by third parties regarding the attachment are tried as a suit under Rule 46C of Order 21.[21]

Consequences of Dismissal of Suit and Revival of Attachment
Automatic Cessation of Attachment on Suit Dismissal
Attachment before judgment ceases automatically upon the dismissal of a suit, a precautionary measure by the legislature.[22]

The Madras High Court in Gangappa v. Boregowda.[23] held that an attachment before judgment is an interlocutory and extraordinary relief granted to a plaintiff before their claim is adjudicated. If a suit is dismissed, the attachment automatically ceases. The court emphasized that such interlocutory orders, like temporary injunctions, do not automatically revive or continue after a suit's dismissal without further court orders. However, the plaintiff still has remedies available, such as applying for a new attachment if the suit is restored or seeking relief from an appellate court. The court stressed that the explicit provisions of Order 38 Rule 9 of the CPC, which state that attachment before judgment ceases upon the suit's dismissal, must be upheld, despite potential hardships.

Restoration of Attachment After Appeal or Revival of Suit
In situations where a suit is restored on appeal, the attachment does not automatically revive. However, disputes may arise when property that was previously attached is sold at auction before the appeal is resolved, as discussed in Sardar Govindrao Mahadik and Ors. vs. Devi Sahai and Ors.[24]

The Supreme Court, in the above case, discussed the nature and consequences of attachment before judgment under Order XXXVIII, Rule 5 of the CPC. If a property is attached and a decree is eventually passed, the attachment serves as a guarantee for the satisfaction of the decree. The court explained that once a suit is dismissed, any attachment before judgment generally ceases, and even if the suit is later restored, the attachment does not automatically revive.

This applies even in cases of appeals. If a trial court's decree is overturned on appeal, any prior attachment fails. However, a unique issue arises when the attached property has been sold at a court auction before the appeal is disposed of. Here, the rights of an auction purchaser may create an equitable situation. If the appeal succeeds and the suit is dismissed, questions arise about the auction purchaser's rights, as the auction would have occurred pursuant to a valid decree at the time. The court acknowledged the complications in such situations, particularly when appellate courts are hesitant to stay money decrees, and properties are sold before appeals are resolved.

Additionally, the order of attachment automatically ends when a suit is dismissed, However, there is a conflict of opinion regarding whether an attachment is automatically restored if a dismissed suit is later decreed in appeal. Sinha J. also mentioned that the dismissal of a suit does not render an attachment void ab initio, implying that any sale of attached property remains invalid even after the suit's dismissal if the attachment is subsequently withdrawn.

Attachment Before Judgment in Arbitration Proceedings
Indian courts have had a conflicting view on the point of applicability of the twin principles laid down in Raman Tech[25] while passing an order for an application under Section 9(1)(ii) (b) or Section 17(1) (ii)(b) of the Arbitration and Conciliation Act[26] or not.

In Essar House Private Limited vs. Arcellor Mittal Nippon Steel India Limited,[27] the Supreme Court held that Section 9 of the Arbitration Act gives courts broad powers to secure disputed amounts in arbitration, whether before, during, or after the arbitral proceedings but before enforcement of the award. The court must evaluate if the applicant has a strong prima facie case, if the balance of convenience favours granting interim relief, and if the applicant acted promptly. "If a strong prima facie case is made out and the balance of convenience is in favour of interim relief being granted, the Court exercising power Under Section 9 of the Arbitration Act should not withhold relief on the mere technicality of absence of averments, incorporating the grounds for attachment before judgment Under Order 38 Rule 5 of the Code of Civil Procedure."[28]

In Sanghi Industries Limited vs. Ravin Cables Ltd.,[29] the Supreme Court took a contrary view from Essar House[30] and reversed the Gujarat HC judgment that erred in passing an order under Section 9 of the Arbitration Act without satisfying the preconditions of Order XXXVIII Rule 5 of the CPC. The Court emphasized that such orders can only be issued when there is clear evidence that the party is likely to dispose of assets to obstruct the enforcement of a potential arbitral award. Since serious disputes over the claimed amount still needed to be resolved by the arbitral tribunal, the interim measure by the Court was deemed inappropriate.[31]

In Value Advisory Services vs. ZTE Corporation and Ors.,[32] the Delhi High Court held that CPC rules on attachment apply to arbitration as well, allowing the court to attach a defendant's property held by third parties to secure a potential arbitral award. When an attachment is made, third parties may contest it, claiming the property belongs to them or resisting the attachment on other grounds. While O. XXXVIII Rule 8 provides for the court to adjudicate such dispute, the court must also resolve the proceeding under section 9 of the Arbitration Act.

It is important to recognize that while Section 19 of the Arbitration Act provides that an arbitral tribunal is not bound by the CPC, it does not prohibit the tribunal from referring to established principles under the CPC. In Sahyadri Earthmovers vs. L & T Finance Limited and Anr.,[33] the Bombay High Court opined that although the strict application of the CPC may not apply in arbitration proceedings, their well-established principles remain relevant.[34]

It is widely recognized that certain individuals exploit these provisions to expedite arbitration and misuse it as a recovery mechanism. Given the dire consequences and rigid nature of the reliefs involved, the solution lies in striking a balance between the two conflicting views held by courts. Instead of entirely disregarding the established principles of Order 38 Rule 5, courts or tribunals should apply these principles as a preliminary filter when adjudicating applications under Sections 9 or 17 of the Arbitration Act.

This approach would help identify and eliminate malicious or frivolous claims. Courts and tribunals would still retain the discretionary power to grant relief in cases with special considerations, thus preventing abuse while safeguarding the provision's intended purpose.

Conclusion
Attachment before judgment, as delineated under the Code of Civil Procedure (CPC), is a powerful and exceptional legal remedy aimed to thwart defendants from evading the execution of prospective decrees by liquidating or relocating assets. This mechanism is pivotal in protecting plaintiffs' interests but also substantially affects defendants' property rights. Consequently, courts have underscored the necessity for cautious application of this remedy, mandating adherence to the stringent conditions prescribed under Order XXXVIII Rule 5 of the CPC before issuing attachment orders.

Judicial precedents have elucidated that mere property transfer does not suffice to warrant attachment before judgment; courts must be convinced by concrete evidence indicating a defendant's intent to obstruct the decree. Furthermore, courts have emphasized the principle of proportionality, ensuring a balanced consideration of both parties' rights while upholding the integrity of the judicial process.

In the realm of arbitration, the doctrines of attachment before judgment remain pertinent under Sections 9 and 17 of the Arbitration and Conciliation Act, 1996. Indian judiciary has exhibited divergent stances on the applicability of the rigorous criteria of Order XXXVIII Rule 5 to arbitration-related attachments. Nonetheless, it is evident that while the CPC may not directly govern arbitral tribunals, its foundational principles are instrumental in averting the abuse of interim relief provisions.

Attachment before judgment is a crucial legal safeguard that must be exercised judiciously, ensuring it does not become a means of coercion or unjustly encumber the defendant's property rights.

End Notes:

1. Code of Civil Procedure, 1908 (CPC).
2. Raman Tech. and Process Engg. Co. and Ors. vs. Solanki Traders, MANU/SC/8119/2007. In this case, the plaintiff filed an application requesting that the defendants be directed to provide security for the suit claim, and if they fail to do so, to seek attachment before judgment.
3. ibid; T. Srinivasan and Ors. vs. V. Srinivasan MANU/TN/0155/1985.
4. Raman Tech (n 2).
5. 1951 Cal 156. Petitioner, in this case, filed an application seeking an order for the defendants to furnish security for the suit claim by attaching the suit property before the judgment under the provision of O. XXXVIII, R. 5 & 6 This case has been referred to/relied in more than a 100 cases for the application of the aforementioned provision.
6. Raman Tech (n 2).
7. Prem Raj Mudra (n 5).
8. 2001 (6) SCC 213.
9. MANU/SC/7320/2007.
10. ibid, Para 7.
11. Raman Tech (n 1).
12. M/s. K. C. V. Airways Ltd. & Anr. Vs. Wg. Cor. R. K. Blaggana AIR 1998 Delhi 70.
13. Raman Tech (n 1); Vandana Verma v Roop Singh & Ors. 2022 LiveLaw (Del) 252: The plaintiff filed an application seeking a direction to restrain the defendants from carrying out construction on the property or sell, dispose it or create a third-party interest.
14. Vandana Verma (supra).
15. Prem Raj Mudra (n 4).
16. Muthoot Leasing and Finance Ltd. vs. N.P. Asiya and Ors. MANU/KE/0142/2011 The appellant sought attachment of the respondents' properties under Section 9 of the Arbitration and Conciliation Act, 1996, based on a hypothecation agreement and outstanding dues.
17. MANU/SC/0410/2004.
18. Muthoot Lease (n 16).
19. MANU/DE/1032/2009. The petitioner, here, sought interim measures under Section 9 of the Arbitration Act, 1996, related to an ongoing International Commercial Arbitration with respondents. In the current petition, the petitioner requested that respondent No. 3 be directed to deposit the amount of USD 3,476,258 or its equivalent in Indian currency into the court.
20. ibid Para 16.
21. ibid para 17.
22. Vareed Jacob (n 17).
23. MANU/KA/0032/1955.
24. MANU/SC/0253/1982; the plaintiffs sought redemption of a mortgaged property, while the defendant mortgagee claimed possession under part performance of an unregistered sale deed. Motilal, who had purchased the equity of redemption at an auction, was allowed to join the appeal, asserting his interest in the property despite his earlier suit being partially dismissed.
25. (n 2).
26. Arbitration and Conciliation Act, 1996 (Arbitration Act).
27. MANU/SC/1165/2022 the Bombay High Court's Commercial Division ordered Essar Services to deposit ₹47.41 crores with the court. Essar appealed against this order while contended that interim relief under Section 9 of the Arbitration Act required Arcellor to have a strong claim and that Essar was not attempting to dispose of assets to obstruct enforcement.
28. ibid, Para 49.
29. MANU/SC/1266/2022.
30. (n 27).
31. Sanghi Ltd (n 29), para 4 & 4.1.
32. (n 19).
33. MANU/MH/1550/2011.
34. ibid para 6.