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Solvex Properties & Services Pvt. Ltd. v/s Marco Polo Restaurants Pvt. Ltd.

    GA. No. 02 of 2020 & CS. No. 32 of 2016
    Decided On, 08 January 2021
    At, High Court of Judicature at Calcutta
    By, THE HONOURABLE MR. JUSTICE DEBANGSU BASAK
    For the Appellant: Jishnu Saha, Sr. Advocate, Emon Bhattacharya, Ishan Saha, Advocates. For the Respondent: Reetobrata Mitra, Advocate.


Judgment Text
1. In a suit for recovery of money from the defendant, on the basis of a written contract, the plaintiff has sought for relief under Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908.2. Learned Senior Advocate appearing for the plaintiff has submitted that, the defendant was a lessee in respect of an immovable property. The lease of the defendant is governed by the lease agreement dated April 22, 2004 entered into between the lessors and the defendant. The lessors had terminated the lease of the defendant and filed a suit for recovery eviction. In the suit for eviction, the Court had passed an Order dated August 27, 2014 requiring the defendant to pay occupation charges month by month. He has submitted that, the defendant is in breach of such order.3. Learned Senior Advocate appearing for the plaintiff has submitted that, the plaintiff herein is the service provider of the building. The plaintiff and the defendant entered into a service agreement dated April 22, 2004. He has drawn the attention of the Court to Clauses 1 to 10 of the service agreement and submitted that, the defendant is obliged to pay the rates, taxes and surcharges in respect of the immovable property concerned to the plaintiff. The plaintiff had paid the same to the lessors. It is the obligation of the defendant, on a true and proper construction of the service agreement dated April 22, 2004, that the defendant is required to pay the same to the plaintiff. The defendant has not been paying the same for a considerable period of time. A sum in excess of Rs. 1.90 crores has become due and payable by the defendant to the plaintiff on such account. On investigation of the assets available to the defendant, the plaintiff has learnt that, the defendant has no tangible assets. There is only one bank account existing in favour of the defendant which does not contain adequate amount to cover the eventual decree that the defendant is likely to suffer in the instant suit.4. Learned Senior Advocate appearing for the plaintiff has submitted that, although, an application under Chapter XIIIA of the Original Side Rules was not allowed by the Hon’ble Court, the plaintiff is entitled to relief under Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908 as the defendant has no asset to satisfy the eventual decree that may be passed in favour of the plaintiff. He has relied upon All India Reporter 1951 Cal page 156 (Premraj Mundra v. Md. Maneck Gazi & Ors.) in support of his contentions.5. Learned Advocate appearing for the defendant has submitted that, the reliefs sought for by the plaintiff in the interim application under consideration are beyond the scope of the suit. He has drawn the attention of the Court to the prayers made in the plaint. He has submitted that, the claim of the plaintiff is for a sum of Rs. 40 lakhs and odd in the prayers of the plaint. In the interim application, the plaintiff has sought relief with regard to a sum in excess of Rs. 1.90 lakhs. According to him, the claim of the plaintiff made in this application is beyond the prayers of the plaint.6. Learned Advocate appearing for the defendant has drawn the attention of the Court to various clauses of the service agreement dated April 22, 2004 and in particular to clause 15 thereof. Referring to the correspondence between the parties, he has submitted that, the plaintiff had stopped providing any service to the defendant. He has submitted that, it was the obligation of the defendant to provide services to the defendant. The plaintiff having failed to do so, the defendant is not liable to pay any service charges to the plaintiff. According to him, the defendant had paid for the services received. He has submitted that, Clause 2 of the service agreement dated April 22, 2004 has not foisted any liability on the defendant to pay the municipal taxes. The defendant cannot be said to be a precarious financial position so as not to pay its liability. In fact, there is no liability of the defendant to pay the service charges as the plaintiff did not provide any services to the defendant. He has relied upon All India Reporter 1974 Supreme Court page 1265 (Union of India v. Raman Iron Foundry) in support of the contention that, an order for security need not be passed when the claim is on account of damages.7. In answer to a query from the Court learned Advocate for the defendant has submitted that, the defendant has been complying with the order dated August 27, 2014 and has been making over cheques drawn in favour of the landlord and submitting such cheque with the landlord from time to time. The landlord may or may not have presented such cheques for encashment. However, the defendant had tendered rent to the landlord, in terms of the order of the Court.8. As has been noted, the present application is under Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908 is as follows :-“Rule 5. Where 1908 Where defendant may be called upon to furnish security for production of property.-(1) Where, at any stage of a suit, the Court is satisfied, by affidavit or otherwise, that the defendant, with intent to obstruct or delay the execution of any decree that may be passed against him.(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, the Court may direct the defendant, within a time to be fixed by it, either to furnish security, in such sum as may be specified in the order, to produce and place at the disposal of the Court, when required, the said property or the value of the same, or such portion thereof as may be sufficient to satisfy, the decree, or to appear and show cause why he should not furnish security.(2) The plaintiff shall, unless the Court otherwise directs specify the property required to be attached and the estimated value thereof.(3) The Court may also in the order direct the conditional attachment of the whole or any portion of the property so specified.(4) If an order of attachment is made without complying with the provisions of sub-rule (1) of this rule such attachment shall be void.”9. Premraj Mundra (supra) has considered the provisions of Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908 and held as follows :-10. 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 defts. 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 deft. 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 deft. 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 pltf's 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 liability 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.10. The plaintiff has relied upon the service agreement dated April 22, 2004 in support of its contention that, the defendant is liable to pay the municipal rates, taxes and surcharges which the defendant is not paying. In particular, the plaintiff has relied upon Clause 2 of the service agreement.11. Clause 2 of the service agreement is as follows :-“2. The Service Contractor shall pay and/or cause the Lessors to pay all lawful existing and future municipal and all other rates, taxes, surcharges, cesses, assessments and outgoings and any increases thereof (including any interest or penalty arising out of nonpayment or delay in payment thereof) payable to any government, statutory or local authority or other service providers in respect of the demised space and whether the same be levied on or payable by the Lessors or the Lessee PROVIDED that any new impositions not presently payable, shall be paid by whosoever is liable to pay.”12. Clause 2 of the service agreement has cast an obligation upon the plaintiff as the service contractor to pay all lawful existing and future municipal rates, taxes and surcharges. It has also permitted the plaintiff to cause the lessors to pay the municipal rates, taxes and surcharges. The plaintiff has claimed that the defendant is not paying the lawful municipal rates, taxes and surcharges. The plaintiff has relied upon a schedule which the plaintiff claims is the amount due and payable by the defendant on account of municipal rates, taxes and surcharges along with interest thereon. The plaintiff has however not produced any document to establish that the plaintiff has paid such amount to the lessee or to the Kolkata Municipal Corporation. The plaintiff has not produced any document to establish that, municipal rates, taxes and surcharges remains unpaid in respect of the area under occupation of the defendant.13. The defendant has denied its liability to pay any amount to the plaintiff under the service agreement. Under the service agreement, any services that the plaintiff provides to the defendant, is payable additionally by the defendant upon the plaintiff raising a bill in respect thereof. The plaintiff has not produced any document to establish that, any bills raised by the plaintiff on the defendant on such score has remained unpaid. Moreover, the plaintiff has by a letter dated May 16, 2013 stated that, the plaintiff shall stop all services to the defendant on and from the month of June, 2013. The plaintiff, has not produced any document to establish that, the plaintiff had provided services subsequent to June, 2013 to the defendant and that, the plaintiff raised bills on the defendant for such purpose and that such bills remain unpaid.14. In Raman Iron Foundry (supra), the Supreme Court has considered a claim for damages in an arbitration proceedings governed by the Arbitration Act, 1940. It has held that, a claim for damages for breach of contract is not a claim for a sum pr

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esently due and payable.15. In the suit for eviction filed by the landlord, being CS No. 221 of 2013, the landlord had failed to secure a decree for eviction under Chapter XIIIA of the Original Side Rules against the defendant. The Division Bench by the judgement and order dated August 23, 2017 had disallowed the application of the landlord for such purpose. As on date, the defendant is contesting two suits namely, a suit for eviction and the present suit. At the interim stage, I am not in a position to quantify the amount due and payable by the defendant to the plaintiff. There are no bills of the plaintiff that are outstanding. At least none has been produced. The issue as to the quantum of municipal rates, taxes and surcharges that the defendant is liable to pay, if any, requires consideration and in my view, should best be decided at trial. At this stage, the claims of the plaintiff lacks sufficient clarity for the Court to embark on an investigation under Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908 at the invitation of the plaintiff.16. Since there are issues as to the quantum of claim, if any, of the plaintiff in the suit, it would not be appropriate to invoke provisions of Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908 in favour of the plaintiff.17. In such circumstances, the application of the plaintiff being IA GA No. 2 of 2020 in CS No. 32 of 2016 fails. There will be no order as to costs.
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