Telangana High Court Sets Aside Order Directing Swiggy To Furnish ₹58.6 Lakh Security In Recovery Suit

The Telangana High Court has recently set aside an order directing online food delivery platform Swiggy to furnish Rs 58.60 lakh as security or face attachment of its bank account before judgment in a money recovery suit over alleged unpaid dues for supplies. It held that such attachment cannot be ordered in the absence of material satisfying the requirements under Order XXXVIII Rule 5 of the Civil Procedure Code.

Order XXXVIII Rule 5 CPC empowers a court to direct a defendant to furnish security or order attachment before judgment if it is satisfied that the defendant is about to dispose of or remove property with intent to obstruct or delay execution of a possible decree.

Justice P. Sam Koshy observed that the trial court proceeded without any tangible material to justify the exercise of power under the provision.

The court held, “when there is no material to show the essential ingredients with which the Trial Court could have been satisfied of the plaintiff having met with the ingredients envisaged under Order XXXVIII Rule 5(1) of CPC, the orderof attachment made becomes void. Even the impugned order does not indicate the tangible materials which were produced and on the basis of which the Court could reach to a conclusion or be satisfied of the plaintiff having met with the conditions stipulated under Order XXXVIII Rule 5(1) of CPC.”

The court was hearing a revision petition filed by Swiggy in a suit filed by Agromech Industries seeking recovery of Rs 58,60,302. According to Agromech Industries, supplies were made to the defendants, of which Rs. 39,59,664.60 remained unpaid, and with interest at 18% per annum, the claim totalled Rs 58.60 lakh.

During the pendency of the suit, Agromech Industries sought attachment before judgment of Swiggy's bank account maintained with HDFC Bank, Koramangala Branch, Bengaluru.

The Trial Court partly allowed the application, directing Swiggy to furnish security within three days, failing which the bank account would stand attached to the extent of Rs 58,60,302. It relied on invoices, ledger accounts, and statements of calculation produced by Agromech Industries, noted the absence of rebuttal from the defendants; and considered the amount involved to be substantial.

However, the High Court found that these considerations were insufficient in law. It held that the plaint itself contained no averments satisfying the statutory requirements.

The court recorded, “If we read the pleadings of the plaint except for the contention of the default on the part of defendant Nos.1 to 11 there does not seem to be any averment which could meet the ingredients envisaged under Order XXXVIII Rule 5(1) of CPC.”

The court further found that even the affidavit filed in support of the application failed to disclose any material indicating an intention to obstruct or delay execution of a decree.

It held, “the whole reading of the affidavit would not give a single tangible material for the said contention of the plaintiff showing that any act on the part of defendant No.1 trying to obstruct or delay execution of any decree could be passed against him. Neither is there any material to show that the defendants have disposed of their property either in part or in whole, nor is there any averment so far as the defendants trying to remove either in part or whole any part of the property from the local limits of the jurisdiction of the Court. Lastly, there is also no material to show that the defendant No.1 has, in fact, even tried to withdraw substantial portion of the money from the bank account and transferred it malafidely to the account of the family members of the defendant No.1"

The court also noted that there was no material to show that Swiggy had attempted to withdraw a substantial portion of the funds from its bank account or transfer them mala fide to defeat a possible decree.

Relying on the Supreme Court's ruling in Raman Tech. and Process Engg. Co. v. Solanki Traders, the Court reiterated that the power under Order XXXVIII Rule 5 CPC is exceptional in nature and must be exercised sparingly, with caution.

Holding that the trial court's order lacked reasons addressing the mandatory statutory ingredients, the High Court set it aside.

It, however, granted liberty to Agromech Industries to revive the application if it is able to place on record cogent and tangible material satisfying the requirements of Order XXXVIII Rule 5 CPC.