2024 (12) TMI 832 - HC - GST

Requirement to furnish security in failure to attachment of bank accounts of the defendants or an order of injunction restraining the defendants from alienating or encumbering or selling the immovable properties - whether an order is required to be passed requiring the defendants to secure an amount of Rs. 1,14,88,833/- till the disposal of the suit? - HELD THAT - In the present case, the plaintiffs have made complaint to the GST Authority against the defendants on the allegation that the defendants have made illegal uploading Form-3B in the GST Portal. On receipt of the complaint, the GST Authorities have issued notice to the plaintiffs under Section 70 of the Central Goods and Services Tax, 2017 and a show cause notice was issued to the defendants and the defendants have furnished reply to the GST Authority. After receipt of reply, the GST authorities have not proceeded the proceeding against the defendants further and the same is still pending. The allegation of the plaintiffs that the plaintiffs have got information that GST Authorities very soon will issue orders for freezing of all bank accounts and sealing of all the immovable properties of the defendants. The said statement is made by the plaintiffs in the present application in the month of June 2023 but the plaintiffs have not filed any documents to the effect that the GST Authorities have seized and sealed all the bank accounts and immovable properties of the defendants. The plaintiffs have made only a bald statement that the plaintiffs apprehend that the defendants will clandestinely or otherwise remove, encumber or dispose of the assets and properties from the jurisdiction of this Hon ble Court. The claim of the plaintiffs that the plaintiffs are entitle to get the principal amount of Rs 77,05,223/- along with interest at the rate of 18% per annum total amounting to Rs. 1,14,88,833/- and the defence of the defendants that the defendants have returned goods worth of Rs. 55,24,252/- to the plaintiff no.1 company is a matter of trial. This Court finds that the plaintiffs have even not made out any prima facie case against the defendants to say that the defendants are attempting to dispose of or remove the movable or immovable properties from the jurisdiction of this Court to prevent the plaintiffs for realization of the decretal amount, if any, passed in future. Application dismissed.

Issues Involved:

1. Whether the defendants should be required to furnish security for the claimed amount until the suit's resolution.
2. The validity of the goods return claim by the defendants.
3. The implications of GST proceedings on the case.
4. The admissibility of additional documents not initially disclosed in the suit.
5. The applicability of legal precedents regarding injunctions and security in commercial disputes.

Detailed Analysis:

1. Security for Claimed Amount:

The plaintiffs sought an order requiring the defendants to secure an amount of Rs. 1,14,88,833/- until the suit's disposal. The plaintiffs claimed that the defendants owed a principal amount of Rs. 77,05,223/- with interest, totaling Rs. 1,14,88,833/-. The plaintiffs argued that the defendants might clandestinely dispose of assets to obstruct the execution of a potential decree. However, the court found no prima facie evidence that the defendants were attempting to dispose of or remove their assets to prevent realization of any future decree. The court referenced the case of Rahul S. Shah, which allows courts to demand security in appropriate cases but found no basis for such an order in this instance.

2. Validity of Goods Return Claim:

The defendants contended that they returned goods worth Rs. 55,24,252/- to the plaintiffs, supported by a purchase return invoice dated August 30, 2019. The plaintiffs disputed this claim, alleging that the return was fictitious. The court noted that the validity of the return invoice is a subject matter of trial and will be determined during the evidence stage. The court did not find sufficient grounds to rule on this issue at the current stage.

3. GST Proceedings:

The plaintiffs alleged that the defendants engaged in illegal activities by uploading false GST Form-3B, prompting GST authorities to initiate proceedings. The defendants responded to a show cause notice, and no further demands were made by the GST authorities. The court observed that the GST proceedings were based on the plaintiffs' complaint and that no conclusive action had been taken against the defendants. The court emphasized that the GST proceedings and their outcomes were separate from the present suit.

4. Admissibility of Additional Documents:

The plaintiffs relied on documents not disclosed when filing the suit, claiming they received them afterward. The court highlighted the duty to disclose documents as per the Commercial Courts Act, 2015, and noted that the plaintiffs failed to seek leave to introduce these additional documents. Consequently, the court did not consider these documents in its decision.

5. Legal Precedents on Injunctions and Security:

The court referred to several precedents, including Rajendran & Ors. and Harleen Jairath, which discuss the conditions under which courts may order injunctions or security in money claims. The court concluded that the plaintiffs did not present a strong enough case to justify such measures. The court also referenced Raman Tech. & Projects Engg. Co., emphasizing that Order 38, Rule 5 of the CPC aims to prevent defendants from defeating potential decrees by disposing of assets. However, the plaintiffs' allegations were deemed too vague to warrant such orders.

Conclusion:

The court dismissed the application, finding that the plaintiffs did not establish a prima facie case warranting the defendants to furnish security or that the defendants were likely to dispose of assets to obstruct potential decree execution. The court emphasized that many of the issues raised, particularly regarding the validity of the goods return and GST proceedings, are matters for trial.

← Previous