P LD 1969 Supreme Court 349 (PLP)

QADEERUDDIN AHMAD, J.‑--Leave to prefer this appeal was granted by this Court in order to examine the question whether the first appeal to the High Court from the order dated 31‑7‑1968, passed by the Administration Judge, Rahimyar Khan was competent. The relevant portion of the order granting leave to appeal is as follows:- "The question raised in this petition for special leave to appeal (to this Court) is whether an order withdrawing conditional attachment effected under Order XXXVIII, rule 5, C. P. C. on furnishing security by the defendant is appealable. An order withdrawing attachment under Order XXXVIII, rule 6(2) is appealable under Order XLIII, rule 1, clause (q), C. P. C. It is however, contended that the order withdraw ing conditional attachment in the present case was made under Order XXXVIII, rule 9 from which no appeal is provided." Mr. A. K. Brohi argued this appeal, and stated almost all the facts of the case, and also referred to almost all the contentions which are embodied in the fairly lengthy memorandum of appeal. The memorandum consists of two parts. The background of facts is stated in 22 paragraphs and 12 reasons are set out in the 23rd paragraph in support of the appellants' stand that the impugned order is bad. The background is meant to create an impression on this Court that the appellants were good customers of the National Bank of Pakistan for one and a half decades, but were unlucky in their business in 1967‑68; with the result that the National Bank of Pakistan became indifferent towards them. This compelled them to seek the help of the Habib Bank Ltd., therefore, the National Bank of Pakistan became jealous, and promised to help them if they mortgaged Rehmani Factory as a collateral security, and discontinued their dealings with the Habib Bank Ltd. But after they mortgaged the factory, and were in the clutches of the National Bank of Pakistan, it let them down by firstly violating the terms of the contract (paragraph 9 of the petition), and then by harassing them by taking criminal action against them and getting their property attached.

2. The above grievances, even if correct, are irrelevant to the legal merits of this appeal, but they are themselves mostly wrong, and seem to arise from misconceptions. Since they have been made with a deep seated sense of injury, it would be proper to remove at least some of the misconception. The relevant part of the agreement, Annexure " A" dated 11‑1‑1968, which is alleged to have been violated, is as follows:‑ "

2. Security: (i) Pledge of bales, ginned and unginned cotton, cotton seed oil and oil cakes. (ii) 2nd collateral registered mortgage of Rehmat Factory

3. Margin: 25 % on cotton bales. 30 % on cotton seeds. 35% on ginned cotton and oil. 40%. on Kappas and oil cakes.

4. Interests : 3 % above Bank rate min. 8 % per annum.

5. Period : Up to 31‑5‑1968." The above terms are said to have been violated by the Bank when it wrote the letter Annexure " C " dated 17‑2‑1968, as follows:- "We have to advise that henceforth deliveries of the stocks pledged with us will be allowed to you only against payment of 100 % market value thereof. The amount of margin will be credited to your old account to facilitate adjust ment thereof." A comparison of the two quotations will show that they relate to two different sets of circumstances. The first one deals with the margin kept by the Bank for, its safety. This was done by taking more security than the amount of money which was advanced, so that the difference be available for recover ing interest, charges, expenses and shortfalls. The second quotation deals with the terms on which the borrowers was allowed to get the pledged goods released from the possession of the Bank. The contents of the second quotations could not violate the terms embodied in the first quotation.

3. This is not all. The position of the Bank is better than this, because it allowed the petitioners, vide the letter, Annexure " D " dated 19th or 20th of June 1968, to lift the pledge goods against the payment of 75 % and 80 % of their value. The petitioners proceeded to avail themselves of this facility, documents were accordingly drawn and the petitioners were asked by the officers of the Bank to endorse the R. Rs. in favour of the Bank, but they refused to do. They demanded that the Bank should first settle the question of their losses and damages‑See paragraph 13 of the petition. This attitude rightly "infuriated" the Officers of the Bank, because it amounted to completely depriving the Bank of the security of the goods which were being consigned, and to pocketing their entire value, thus converting to the extent of the value of the goods, a part of the secured advance into an unsecured debt. Not only that the petitioners un reasonably refused to endorse the documents, but they managed, in spite of the Bank's opposition, to rail them exclusively for their own benefit to Larkana and Karachi. The Bank, there fore, lodged a report of theft or embezzlement, and was able to get the goods seized through Court‑See paragraph 15 of the petition. The criminal action brought the situation partly under control, but the Bank had also to file a Civil Suit to recover its debt, which ran into six figures. It was. Rs. 7,43,820.

4. A suit was filed at Rahimyar Khan, and along with the plaint an interlocutory application was made under Order XXKVIII, rule 5, and Order XXXIV, rules 1 and 2, C. P. C. for the attachment of 1131 bales of cotton and 830 maunds of cotton oil, which were consigned by the appellants to Rahimyar Khan and Karachi, and for restraining, them from interfering with the Bank's possession of the ‑ "goods wherever lying including oil‑cakes which are lying in the respondent's factory under Bank's lock and key, in any manner whatsoever during the pendency of the suit." The orders which were made, and the events which followed are relevant to the second part of the memorandum of this appeal. They are not a part of the background, and directly affect the merits of the question for the determination of which, leave to prefer this appeal was granted.

5. The trial Court made the following orders on the applica tion of the Bank:- " . . . . . the Court is satisfied that conditions attracting the applicability of Order XXXVIII, rule 5, C. P. C. prima facie exist. Conditional attachment of the goods mentioned in the petition in the manner indicated herein is therefore hereby ordered in the interest of justice, with a. notice to the respondents for 16‑9‑68." And‑ "It is further ordered that the respondents would not pending final disposal of this petition attempt to interfere with the goods presently lying in possession of the petitioner. Bank." The date of the above orders is 29‑7‑1968. On the 30th of July 1968, the present appellants, who were the defendants, applied, vide Annexure I to the memorandum of this appeal, for withdrawal of the attachment by alleging inter alia that the Bank had violated the terms on which money was advanced (See paragraph 1 of the memorandum of this appeal), that it had caused a huge loss to them, that attachment before judgment was unjustified, because they had furnished security to the Bank, the face value of which was more than double of the amount claimed by the Bank. (See paragraph 2 of the memorandum of the appeal), and offered two sureties for the satisfaction of the Court in substitution of the pledged goods which they had sent away to Rahimyar Khan and Karachi.

6. The trial Judge ordered notice to the Bank for the following day, i e., the 31st of August 1968 and on that day readily agreed with the report of the bailiff that the represent atives and counsel of plaintiff (Bank)," have evaded service and avoided appearance," and accepted the application of the appellants. He held that there was no "risk of non‑satisfaction of the decree even if the suit succeeds," and accepted the sureties as "the required security." He then withdrew the attachment, but maintained the order of injunction as follows:- "I hereby order withdrawal of the attachment and release of the attached goods . . . . . The Order of the interim injunction, will, however, stand. The defendants (who are the present appellants) shall not, pending final disposal of the petition, interfere with the plaintiff's posses sion of their goods lying under Bank's lock and key." The petitioners applied on the same day for the clarification of the order of injunction, and the trial Judge supplied it promptly as follows‑ "by the word `goods ' . . . . . the Court naturally meant mortgaged goods, and not pledged goods."

7. The Bank went in appeal to the High Court, which was accepted. The order withdrawing the attachment was set aside, and the order of attachment was restored:- "on the condition that it shall always be open to the respondents to apply for the release of the attached goods on furnishing the surety of a scheduled Bank to the satisfaction of the High Court below for the payment of the suit." The High Court has rightly pointed out that the trial Judge "acted hastily," "failed to apply his mind fully", and "did not act discreetly" in accepting the sureties, and releasing the pledged goods. He should have known that there was no justification for him to treat any part of the security as superfluous. He has impliedly acted on a presumption that the face value of the property which formed the security, represented the market value prevailing at that time, and was also going to prevail at the time of the recovery of the debt, and that as such it was more than necessary. He was aware that, according to the borrowers themselves, their financial state was critical, and that the prices of the goods were falling. It is true that a factory was mortgaged, but factories do not have the sellers' market. Moreover, the value of all fixed assets falls heavily when they are put to auction under distress. The clarification which he gave of the order injunction had no basis. The property which was mortgaged could not be "good", because the mortgage was created by a registered document, and essentially related to fixed assets. Goods are pledged and immov able property is mortgaged. The clarification robbed the order of injunction of most of its utility to the Bank, though in name it was maintained.

8. After the High Court restored the order of attachment, the present appellants applied for leave to appeal to this Court, which petition was granted, as stated in the first paragraph of this judgment, for examining the contention that the appeal to the High Court was not competent. Mr. A. K. Brohi, appearing for the appellants, has argued that the order of the trial Court withdrawing the attachment, and accepting two sureties in substitution of the pledged goods, was not appealable to the High Court because only orders made under rules 2, 3 and 6 of Order XXXVIII, C. P. C. are appealable in terms of Order XLIII, rule (1)(q), C. P. C. and that the order was not made under any of these three rules. It could not be made under rules 2 and 3, because they relate to arrest before judgment, and it was not made under rule 6 because under that provision either unconditional attachment [See Order XXXVIII, rule 6(l)] could be made, or withdrawal of attachment could take place [See Order XXXIII, rule 6(2)]. He referred to Dular Singh v. Ramchander and another (A I R 1934 All. 165 at p. 167), in support of the proposition that‑ "before an order of attachment can be made it is incum bent on the Court to direct the defendant to furnish security or to show cause why he should not furnish security. Rule 6 provides that if the defendant fails to give security or to show cause, then, the Court may order the attachment of the property specified in the application of the plaintiff. In Nathu Mal v. Kishori Lal A I R 1914 All. 511 a Bench of two learned Judges of this (i.e. Allahabad High) Court held that an order of attachment before judgment could only be made after a defendant had failed to show cause to the contrary or to furnish the security required. In this case, according to counsel, unconditional attachment was never ordered, and no attachment was physically made; therefore, A It followed that neither the order of attachment was made under Order XXXVIII, rule 6 (1), nor withdrawal of the attachment took place under Order XXXVIII, rule 6 (2). Since nothing was physically attached, the order dated the 31st of August, 1968, purporting to withdraw the attachment amounted to withdrawal of the order of attachment only. It could be made' only under rule 9 of Order XXXVIII. C. P. C. because the' words "has been attached" do not occur in it, and should be taken to have been so made. Moreover, according to counsel, the Bank's action in moving the Court to get the goods attached, was contrary to the agreement dated the nth of January 1968 because under it a margin of 25 % to 40 % was allowed, and the appellants had arranged with Lever Bros. Ltd. and Habib & Sons to protect the interest of the Bank by doing business with the appellants on the difference between that margin and the margin of 15 % to 30 % allowed by those two parties‑See paragraph 11 of the memorandum of this appeal. In this view of the situation, the Bank's application under Order XXXVIII, rule 5, C. P C. was, according to counsel, misconceived, and the order of conditional attachment made by the Court was wrong on the face of it, because in the arrangement which the appellants had made for consigning the goods to Lever Bros. Ltd., and Habib & Sons, there was no question of any obstruction or delay taking place in the execution of any decree of the Bank, if a decree was granted in the suit. It was particularly so, because a factory was also mortgaged, and the interest of the Bank was amply protected.

9. The above reasoning looks plausible so long as the errors of the underlying presumptions are not brought to light. To begin with it is important to see, as explained above, that the margin of safety retained by the Bank in the value of security was not intended to be used by the debtors for trading on it, yet the appellants arranged to use a part of it for their trade. The fact that a factory was also mortgaged did not make the security superfluous because the parties had agreed that all that security was required. Moreover, the face value of a security, whether it be goods or fixed assets, is no B test of its final efficacy, because, prices can fall, deterioration in the goods can set in, interest can accumulate and expenses of litigation can be incurred. Additionally, the appellants purported not merely to reduce a part of the Bank's valuable security by trading on the difference of two margins, but they actually deprived the Bank entirely of the security of 1131 bales of cotton and 830 maunds of cotton oil when they consigned those goods for their exclusive benefit. The Bank's application under Order XXXVIII, rule 5, C. P. C. was therefore, fully justified and so was the order of conditional attachment.

10. The order of the trial Judge dated the 31st of Julvi 1968, by which he withdrew the attachment speaks of "release of the attached goods", and there is nothing on the record to prove that no goods were attached, but presuming for the sake of argument that attachment was not made physically, it cannot be said that Order XXXVIII, rule 6 (2), C. P. C. was inappli cable. This interpretation needs an explanation because Mr. A. K. Brohi has argued to the contrary by relying on the following words of sub‑rule (2) "Where . . . the property . . . . has been attached, the Court shall order the attachment to be withdrawn." He contended, as briefly mentioned above, that the words "property . . . . . has been attached" mean that property has been physically attached and without the fulfilment of this condition the sub‑rule is inapplicable, but as these words do not occur in rule 9 of Order XXXVIII, C. P. C., the Court can withdraw an order of attachment under rule 9 even if no attachment is actually made. Thus in this case, according to counsel, the order of the trial Court fell under rule 9 and no appeal lay to the High Court in terms of Order XLIII (1) (q), C. P. C. It is correct that an order made under Order XXXVRI, rule 9, C. P. C. is not appealable, but it is not correct that the' order from which the appeal was preferred to the High Court was made under that rule. The reasons are that firstly, under that rule an unconditional order of attachment and not a conditional order is withdrawn. A conditional order o attachment made under Order XXXVIII, rule 5 (3), C. P. C. is either made absolute under sub‑rule (1) of rule 6 of Order XXXVIII, C. P. C. or is withdrawn under sub‑rule (2) of rule 6 of Order XXXVIII, C. P. C., but if a conditional order is not made absolute under sub‑rule (1) of rule 6 then it remains D conditional and cannot be withdrawn under rule

9. Secondly, his emphasis on the words "the property . . . has been attached," is inappropriate, because its purpose is to press the distinction between the withdrawal of absolute and conditional attachments. But this distinction is inapplicable to rule 6 (2) of Order XXXIII, C. P. C. because the words "has been attached" refer to the accomplishment of the act of attachment, and not to conditional or unconditional nature of attachment. They refer to the process of making attachment. An order of attachment may be conditional or absolute, but the mode of attaching property is the same in either case. The mode is provided by rule 7 of Order XXXVIII, C. P. C. as follows: "Save as otherwise expressly provided, the attachment shall be made in the manner provided for the attachment of property in execution of a decree." Since sub‑rule (2) of rule 6 refers to the factum of attachment, it could not, consistently with strict accuracy of language, refer to conditional or unconditional attachment. When a property is attached, the process that is followed in doing so, is the same whether it is attached in pursuance of an order of conditional attachment or of an order of unconditional attachment. The words "has been attached" are neutral. Thirdly, the emphasis on the words "has been attached" leaves out of consideration the words "such" and "required" which refer to orders made under Order XXXVIII, rule 5 (1), C. P. C. It also leaves out of consideration the words: "or make such other order as it (the Court thinks fit)". The defendant is ordered under sub‑rule (1) of rule 5 of order XXXVIII, C. P. C. to furnish security in such sum as may be specified; or to show cause against furnishing that security. The words or make such other order as it thinks fit" were added to rule 6 (2) of Order XXXVIII, C. P. C. in 1908. `They did not exist in section 485 which was the corres ponding rule in the C. P. C. of 1882. These words make the provision much wider as well as flexible.

11. Let me reproduce rules 5, 6 and 9 of Order XXXVIII, C. P. C. and show in italics the key‑words in order to elucidate the foregoing interpretation‑See rule 5 "5‑(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." The words in' italics would show that under sub‑rule (1) the Court may call upon the defendant to show cause why security should not be furnished by him or may require him to furnish security. Under sub‑rule (3) it may also direct "conditional attachment" of his property to be made. No withdrawal of attachment can take place under these sub-rules. The condition of such attachment is that it lasts until the required security is furnished or cause is shown against the order of attachment See Nathu Mal v. Kishori Lal (A I R 1914 All. 511) and Basappa Chanbasappa Chekki v. Hanmappa Ramappa Manaur (A I R 1939 Bom. 492).

12. The next procedure is provided in rule

6. It is as under: "6‑(1) Where the defendant fails to show cause why he should not furnish security, or fails to furnish the security required, within the time fixed by the Court, the Court may order that the property specified or such portion thereof as appears sufficient to satisfy any decree which may be passed in the suit, be attached. (2) Where the defendant shows such cause or furnishes the required security and the property specified or any portion of it has been attached, the Court shall order the attachment to be withdrawn, or make such other order as it thinks fit." The words will show that if the defendant does not furnish the security required of him to be furnished under sub‑rule (1) of rule 5 of Order XXXVIII, C. P. C. or fails to show cause against making an order of attachment, the Court may order leis Property to be unconditionally attached under sub‑rule (1) of rule 6‑See Mohammad Ali Ismail v. Baldeo Singh (A I R 1955 Pat. 115). Under the provision, the attachment is unconditional because a conditional order is made earlier under rule 5 (3). But is the defendant shows cause against furnishing the security which was required of him under rule 5 (1) or does actually furnish the required security, then no order of unconditional attachment is made. On the contrary the attachment of his property, if attachment was actually made, is compulsorily withdrawn. This much is provided expressly and wads also similarly provided in section 485 of the C. P. C. of 1882.

13. But several other possibilities could be envisaged. For instance‑‑ (a) attachment might not have been actually made before sufficient cause was shown against., attachment or before security was furnished, or (b) the required security which was furnished "might be found to be defective or insufficient or otherwise objectionable, or (c) the defendant might offer an alternative property as security, or (d) he might propose a scheme partly of a payment and partly of adjustments. All of such eventualities are met by the words‑‑‑"or make such other order as the Court may think fit." These words enlarge the scope of sub‑rule (2) of rule 6 of Order XXXVIII, C. P. C. in order to deal with all eventualities arising from orders made under rule

5. They soften the effect of the words "the property . . . . . has been attached." If the words which have been added are omitted, then only one situation is conceivable under the provision, and in that eventuality the Court is bound to withdraw the attachment. It can do nothing else because no other circumstance is contem plated and no other order is envisaged. In order to temper that rigidity with the flexibility of the unforseen variety of circumstances, the words: "or make such other order as it thinks fit,"‑ have been added. It is necessarily implied in them that situations other than the one rigidly described in the provision could arise and could be dealt with by making suitable orders.

14. Now have a look at rule 9 "

9. Where an order is made for attachment before judgment, the Court shall order the attachment to be with drawn when the defendant furnishes the security required, together with security for the costs of the attachment, or when the suit is dismissed." Obviously the above rule does not contemplate orders of conditional attachment such as are made under sub‑rule (3) of' rule 5 of Order XXXVIII, C. P. C. On the contrary it refers to unconditional orders of attachment which are made under' sub‑rule (1) of rule 6 of Order XXXVIII, C. P. C. If in the present case, according to counsel, no order was made under rule 6 of Order XXXVIII, C. P. C. then no order could be made under rule 9 of Order XXXVIII, C. P. C.

15. As I see the situation the appellants came to know of the order of conditional attachment dated the 29th of July 1968, and appeared before the Court on the 30th of that month to show cause against it. One of the reasons, which they placed before the Judge for his consideration, was that in spite of the value of the security which they had furnished being, according to them much more than adequate, they were prepared to offer for the satisfaction of the Court, personal bonds of two allegedly rich men. They placed that reason for the consideration of the Court under sub‑rule (2) of rule 6 of Order XXXVIII, C. P. C. as a cause for the withdrawal of the order of conditional attachment. The trial Judge agreed with them and, accepting the offer of personal bonds, withdrew the order of conditional attachment. He could do so in exercise of authority conferred on him by the words: "or make such other order as it thinks fit. "

16. There is one more aspect of this case which needs to be mentioned. It is that no objection was separately taken before the High Court to the maintainability of the appeal which was before it. Mr. Brohi said that according to his client the objection was raised but there is no mention of it in the order of the high Court and, no grievance has beer made in the memorandum of this appeal that the High Court omitted to discuss any objection. 4he fact that the objection was not raised was apparently not brought to the notice of the Bench of the Court which granted the leave to appeal. Had the attention of the Bench been drawn to this omission and to the fact that a new contention was being raised in this Court for the first time without any justification for it, it is likely that leave to prefer this appeal would not have been granted particularly because a revision did lie to the High Court under suction 115, C. P. C., if an appeal did not‑Sec Messrs Madan Theatres Ltd. v. Hari Das (A I R 1936 Lah. 33).

17. In conclusion I would dismiss the appeal with costs. K. B. A. Appeal dismissed.