Attachment of property of the third person in a Recovery Suit

Nov. 16, 2020, 11:54 a.m.   madhavgawri1  
Pens of Law students    


INTRODUCTION

It is well known that in a suit for recovery of the amount the property either movable or immovable belong to the borrower/debtor can be attached either in execution proceedings initiated by the lender/creditor after the judgment in a suit for the recovery or in a pending suit before pronouncing the judgment. But in some specific and distinct circumstances, the property of a third property who is not a borrower can also be attached in the proceedings of a recovery suit. Section 51 of the Civil Procedure Code specifies the power of the executing court in respect of the decree for recovery for the amounts in whose favour the court passes the decree.

Whereas Section 60 of CPC clearly indicates the properties either movable or immovable of which nature can be attached and which properties cannot be attached. So far the executing proceedings are concerned Order XXI of CPC clearly deals with the procedures to be adopted in execution proceedings of decrees and orders including attachment of properties after the decree is passed. Regarding the attachment of property before judgment, the procedure is laid down under Order XXXVIII of CPC..

ATTACHMENT OF PROPERTY OF THIRD PERSON

A third person is neither the lender nor the borrower and practically, there may not be any executable decree passed against such third person. But the third person who comes forward under certain circumstances to protect the person or the property of the borrower from the immediate action of the court in the proceedings of a recovery suit as a surety offering his own properties as security to the debt owed by the borrower can be made liable in the case of failure of the borrowers to discharge the debt and the property of such third person is liable to be attached and proceeded with for recovery of the amount under the law.

In other words, it is a risk which is accepted by the third person by involving his property to the debt or liability of the borrower to make the court believe that the debt can be recovered against the borrower at the first instance and on his failure, it can be against the property of the third person to offer security for the debt.

Section 60 of CPC clearly says that certain kinds of properties either movable or immovable belonging to the judgment debtor are the profits derived thereunder in which he is having the power to dispose of the same can be attached. Nowhere it is provided in Section 60 of CPC that the property either movable or immovable of a third person can be attached in recovery proceedings. But in Section 145 of CPC, it is specifically mentioned that the liability of a surety can be enforced against him if any person stands as surety by furnishing security or guarantee in respect of performance/execution of any decree or for the payment of money or fulfilment of condition imposed against the person by a court in the proceedings of a suit or any other consequential proceedings thereon.

It is very clear that in case if any person takes the role of surety by furnishing security to the liability of the debtor or the borrower, though the surety is a third-person, the decree or order against the borrower is equally executable against the third person as if it is a personal decree executable against such third person and such person shall be deemed to be a party while executing the decree to the extent of his liability as aforesaid.

In the same manner, the property of such third person is equally liable for attachment if it is furnished as security towards the liability arisen under any decree or order against the debt of a person for which the third person offers his property as security.

So far the attachment of the property of a third person in execution proceedings is concerned Rule 46 of Order XXI of CPC provides for attachment of the property not being in the possession of judgment debtor and in possession and control of a third person. By virtue of Rule 46A of Order XXI of CPC, a court can issue a notice to such third person directing him to pay into the court the debt which he owes to the judgment debtor while executing a decree against the debtor. If such third person fails to comply with such notice issued by the court, Rule 46B of Order XXI of CPC empowers the court to order execution against him as if such order is a decree against such third person. In such circumstances, the court can invoke the provisions of CPC for attachment of property which is applicable in case of a judgment debtor in case of the property of a third person.

JUDICIAL PRONOUNCEMENTS

As per Section 145 of CPC, which is brought as a remedial provision for enforcing of the liability of a surety who is a third person as if he is as a party to the decree or order, the court can proceed against such third person being a surety or his property which is furnished as security to the court. The same was held in the case of Rajivi Heggadathi v. Rathnavathi Heggadathi [1].

In P. Babulal v. Hyderabad Municipal Corp. [2] and Howrah Insurance Co. v. Sachindra Mohin [3], the court held that the objective of Section 145 of CPC is to provide the remedy to the creditor for enforcing the liability of surety arisen under any decree or order against the debt of a person for which the third person offers his property as security.

In Chouthi Prasad Gupta v. Union of India [4], the Supreme Court held that Section 145 of CPC provides the right to execute an order or decree against the third person viz., surety by the means of execution as a part of recovery proceedings.

The court held that the liability of the surety may not only be limited to the decree or order but also may extend to him personally as held in the case of S.M. Kunja Moyee Dassi v. Akshoy Kumar Das [5]. But in the case of P. Babulal v. Hyderabad Municipal Corp. [6], it was held that Section 145 of CPC has provided the procedure applicable to make the third person liable to the extent of the surety for which he is personally liable.

It was held in Sardar Singh v. Kishorilal [7] that in a case of dismissal of the suit for default where the liability of the surety viz., the third person is involved, on the restoration of such suit the liability of the surety shall automatically be revived and his liability should be treated as if it was prior to the dismissal for default.

In Bank of India, Madras v. M/s Vijaya Transport [8], it was held that where a guarantor executes a surety bond in favour of the court, it can be enforced against him by the court by virtue of Section 151 of CPC in execution proceedings.

Section 145 of CPC can not be applied for the proceedings for enforcing the surety bond if it is executed outside the court in favour of decree-holder as held in the case of Sardar Singh v. Kishorilal [8]. In the case of Maung Po Aung v. M.V. Thet Pon. [9], it was held by the court that Section 145 of CPC has no application in a case where suit proceedings initiated by a surety for recovery of money which was forfeited from him by the court due to non-appearance of the party.

CONCLUSION

The courts are empowered by the provisions laid down under the Civil Procedure Code to attach the property either movable or immovable of the third person in recovery proceedings even though he is not a party to the proceedings, in the circumstances specifically provided as above viz., where the third person comes to the rescue of the judgment debtor as a surety and in cases where the third person failed to comply with the order under which he is ordered to pay the amount which is due to the judgment debtor, into the court in execution proceedings against the judgment debtor.

FOOTNOTES

  1. ILR 1985 Kar. 3038.
  2. 1960 ALT 1062 : AIR 1961 AP 413.
  3. AIR 1971 Tripura 40.
  4. AIR 1967 SC 1081.
  5. AIR 1961 Cal. 43.
  6. 1960 ALT 1062 : AIR 1961 AP 413.
  7. 48 IC 940.
  8. 1988 (2) APLJ 28 : AIR 1990 NOC 112 (AP).
  9. 48 IC 940.
  10. AIR 1927 Rang 316 : 5 Rons 494.

Key Words- Attachment, debtor, creditor, CPC, recovery suit, surety, Order XXXVIII of CPC.

Profile of the author- Sri Vaishnavi.M.N. is a third-year student in DSNLU, Visakhapatnam and has a keen interest in criminal law, constitutional law, human rights and legal developments.

FAQs -

  1. In what cases shall the attachment of the property of a third person can be made in a recovery suit?

A. Attachment of property of a third person in a recovery suit can be done in the cases where there is a surety given the third person by offering his own properties as security and in the cases under Rule 46 of Order XXI of CPC. In such cases, the third party can be made liable for the debt of the borrower/debtor.

2.What are the legal provisions which deal with the attachment of property before judgment and after judgment or a decree?

A. Order XXI of CPC deals with the procedures to be adopted in execution proceedings of decrees and orders including attachment of properties after the decree is passed while the procedure for attachment of property before judgment is laid down under Order XXXVIII of CPC.


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