Order 38 Rule 5 CPC | Defendant Residing Outside Jurisdiction Or Evasive Written Statement No Ground To Direct Furnishing Of Security Absent Intent To Obstruct Decree: Delhi High Court

"Residence beyond the jurisdiction of the Court does not, in itself, indicate an intention to evade execution, much less an attempt to dispose of or remove assets." Clarifying the strict parameters governing pre-judgment security, the Delhi High Court has held that an order directing a defendant to furnish security under Order 38 Rule 5 of the Code of Civil Procedure, 1908 (CPC) cannot be issued merely because the defendant resides outside the court's territorial jurisdiction or filed allegedly evasive pleadings.

A single bench of Justice Ajay Digpaul, in a judgment delivered on October 28, 2026, held that pre-judgment attachment is a drastic and extraordinary measure requiring specific proof of an overt act or imminent intent to defeat the execution of a potential decree.

The respondent instituted a commercial recovery suit for ₹17,47,110 towards alleged outstanding guest house dues against the petitioner, who resided in Palghar, Maharashtra. The petitioner disputed the liability in his written statement, contending that over ₹28,00,000 had already been paid. Finding that the petitioner held no assets within Delhi and that the respondent had established a prima facie genuine claim, the District Judge (Commercial Court-01), Saket Courts, allowed the respondent's application under Order 38 Rule 5 CPC and directed the petitioner to furnish security of ₹15,00,000 through a Fixed Deposit Receipt.

Whether the absence of property within the court's territorial jurisdiction and the defendant's ordinary residence outside Delhi can independently justify an order directing security under Order 38 Rule 5 CPC?

Whether a prima facie genuine claim and allegedly evasive denials in a written statement satisfy the statutory threshold of proving an overt act to alienate property to defeat execution?

Examining the scope of Order 38 Rule 5 CPC, the High Court observed that the power to direct security before judgment is extraordinary and must be exercised sparingly and in strict conformity with statutory prerequisites.

Prima facie case cannot substitute statutory prerequisites of Order 38 Rule 5 CPC

Reiterating the Supreme Court's decision in Raman Tech. & Process Engg. Co. v. Solanki Traders, the bench highlighted that the existence of a bona fide or prima facie case does not by itself justify directing a defendant to furnish security. The plaintiff must positively establish that the defendant is about to dispose of or remove property with the specific intention of obstructing or delaying execution.

The Court noted that the respondent's application was devoid of any material particulars demonstrating an attempt to dispose of or remove assets. The application merely proceeded on an unfounded presumption that the decree would be frustrated solely because the petitioner was a resident of Maharashtra.

Residence outside jurisdiction does not infer an intention to defeat execution

The Court firmly rejected the reasoning adopted by the Commercial Court, holding that an ordinary place of residence outside the territorial jurisdiction of the trial court cannot be treated as an independent ground for directing security.

Justice Digpaul held that residence beyond the jurisdiction of the court does not indicate an intention to evade execution, much less an attempt to dispose of assets. The bench emphasized that absent any extraneous material demonstrating an attempt to alienate property, the inference drawn by the trial court rested improperly on geography rather than conduct satisfying the statutory threshold.

Proactive participation in proceedings negates presumption of evasion

The High Court observed that the petitioner had proactively participated in the proceedings before the trial court despite residing in Maharashtra, thereby contradicting the trial court's assumption that he would frustrate the proceedings.

The bench stressed that under Order 38 Rule 5 CPC, the intent of the defendant and any consequent overt act to dispose of property constitute the paramount consideration. The court must identify the specific conduct relied upon and determine whether the statutory intent reasonably emerges from the record, rather than acting out of mere precaution against the possibility that a decree may go unsatisfied.

Evasive denials in pleadings do not establish an attempt to alienate assets

Addressing the trial court's reliance on allegedly evasive denials under Order 8 Rules 3 to 5 CPC, the High Court held that the adequacy of pleadings may be relevant when finally adjudicating the suit, but it cannot establish an intention to defeat execution under Order 38 Rule 5 CPC.

The Court further distinguished the respondent's reliance on Rahul S. Shah v. Jinendra Kumar Gandhi, clarifying that directions to disclose assets or furnish security cannot be issued as a matter of course without demonstrable circumstances. The bench also held that leaving a guest house without clearing disputed dues cannot be extrapolated into an intention to defeat court processes.

Setting aside the trial court's order, the High Court held that the direction requiring the petitioner to furnish ₹15,00,000 as security was legally unsustainable, clarifying that its findings were strictly confined to the Order 38 Rule 5 CPC application and would not prejudice the final adjudication of the commercial suit.

Date of Decision: October 28, 2026