In short. If a defendant is getting ready to sell or shift its property while your commercial suit is pending, the court can stop it. The tool is attachment before judgment under Order XXXVIII Rule 5 of the Code of Civil Procedure. The court either freezes named property or tells the defendant to put up security instead. But you'll need real material showing the debtor is about to dispose of assets to beat a future decree. A worry isn't enough. You can apply with the suit or later, and urgent applications get heard within days. Start by collecting proof of the sale and pinning down the exact property.
Is this your situation?
- A customer owes you Rs 3 lakh or more, and someone at the market tells you its factory is up for sale.
- You found the debtor's office on a property portal last night, marked "urgent sale". A week earlier its owner told another supplier they're winding up.
- The watchman next door says trucks have been loading machinery out of the unit after 10 pm.
- The same directors have opened a new firm at a new address, selling the same goods to the same customers.
- Your recovery suit is already filed. What keeps you up is the thought that there'll be nothing left to collect by the time the decree comes.
- You want your claim secured, but you don't want to push the debtor into shutting down either.
Yes, the court can freeze assets. It wants proof first.
A commercial court can stop a defendant from selling its property while your case is going on. The usual route is attachment before judgment under Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908 (CPC). The court does one of two things. It tells the defendant to furnish security for the amount you're claiming, or it attaches named property so it can't be sold, mortgaged or gifted until the suit is decided.
The hard part is proof. A big unpaid bill won't do it. The judge has to be satisfied that the defendant is about to dispose of or remove its property, and that it's doing this to obstruct or delay the decree you may get. Courts see this as strong medicine. So they want specific facts, dated documents and an identified asset. A general feeling that the debtor might disappear gets you nowhere.
If the danger is real and you can show it, you can get the order fast, sometimes on the first day the suit is listed. Can't show it yet? There are other orders that can do much the same job: an injunction, a receiver, or an affidavit in which the defendant has to disclose its assets. Below we go through each of them as they work in the commercial courts of Delhi, Noida, Ghaziabad, Gurugram and Faridabad, what they cost, and what you should start collecting this week.
What the law actually says
Order XXXVIII Rule 5, CPC
Where the defendant, intending to obstruct or delay execution of a decree, is about to dispose of all or part of its property, or take it out of the court's local limits, the court can direct it to furnish security, or to appear and show cause why it shouldn't. You, as plaintiff, have to specify the property and give its estimated value. The court can conditionally attach that property straight away while the show cause is pending. And sub-rule (4) is blunt. An attachment made without following this procedure is void.
Order XXXVIII Rules 6 to 11A, CPC
Under Rule 6 the court confirms the attachment if the defendant shows no cause and gives no security, and withdraws it if security comes in. Rule 8 sends third-party claims to the same claims procedure used in execution. Rule 9 says the attachment has to be withdrawn once security is furnished or the suit is dismissed. Rule 10 protects rights that strangers held before the attachment. Rule 11 is the useful one if you win: you don't have to attach the same property again in execution. Rule 12 keeps an agriculturist's agricultural produce out of it.
Section 64, CPC
After property is attached, any private transfer, mortgage or delivery of it is void against claims enforceable under the attachment. That's what gives the order its bite. Someone who buys attached property takes it subject to your claim. There's one exception. A transfer under a contract registered before the attachment is protected.
Section 95, CPC
If you get an attachment or injunction on insufficient grounds, or your suit fails and there was no reasonable ground to bring it, the court can award the defendant compensation of up to Rs 50,000 (within the court's pecuniary limit). It's why a careful plaintiff doesn't ask for attachment just to turn the screw.
Order XXXIX Rule 1(b) and Order XL, CPC
Order XXXIX Rule 1(b) lets the court grant a temporary injunction where the defendant threatens to remove or dispose of its property to defraud its creditors. Order XL lets the court appoint a receiver to take charge of property where that's just and convenient. Both sit next to Order XXXVIII. We often ask for them in the same application.
What do you have to prove?
Two things. A claim that looks genuine on the papers, and a real attempt by the defendant to put its assets beyond your reach. In Raman Tech and Process Engineering Co. v. Solanki Traders (2008), the Supreme Court called the Rule 5 power drastic and extraordinary. It isn't meant to turn an unsecured debt into a secured one, the Court said, and a just claim or a prima facie case doesn't by itself entitle you to attachment. A defendant that's been sued can still deal with its property in the ordinary course of business.
So what do judges actually look for? Something the defendant is doing now, or is about to do, that it wouldn't be doing if it meant to pay you. The only factory shed listed online. A board resolution to sell the plant. The company's main asset suddenly transferred to a director's brother-in-law. Machinery carted off to an unknown place, or the registered office shut. Facts like these move a court. Lines like "the defendant is in financial difficulty" or "we apprehend it may sell" almost never do.
Intent, the second part, is read from conduct. Timing matters most. Say the debtor stopped paying, ignored your legal notice and then listed its property for a quick sale within a few weeks. That's a strong inference. If it's been selling old stock every month for years as part of its trade, the inference is weak. Your application should tell the story in dates, with a document behind each one.
Signs your debtor may be moving its assets
- Property listings. Soon after your demand, the factory, godown, showroom or office turns up on a property portal or with a local broker. Take dated screenshots and save the listing link.
- Fresh charges or quick sales on the Registrar of Companies records. The MCA portal's master data and charge records show a new charge on the company's assets, or a charge satisfied and then a sale. It's all public, and downloading it costs very little.
- Machinery and stock leaving. You hear of trucks loading equipment at night, you see the godown half empty, or the landlord mentions the tenant is vacating. A short affidavit from whoever saw it, with photographs, counts for a lot.
- A twin business. The same promoters register a new company or proprietorship with a near-identical name at a new address. Then customers start getting invoices from the new entity.
- Changes among directors and partners. A director resigns, a partner retires, or shares move to family members right after the dispute starts.
- GST and bank signals. The GST registration gets cancelled or suspended. Cheques come back marked "account closed". These point to a business being wound down, not run.
- Things they've put in writing. An email or WhatsApp saying "we're closing this unit", or "the plant is being sold, you'll get paid from the proceeds when possible". Keep the phone itself, and take a chat export.
The evidence that actually works on a judge
When an attachment brief lands on Advocate B.K. Singh's desk, the first question is simple. Can the client name the property? Rule 5(2) makes the plaintiff specify the property and its estimated value. A loose prayer to "attach all assets of the defendant" often fails for that reason alone. Give the plot number and address, the vehicle registration numbers, where the stock is kept, and the bank and branch where the defendant's customers pay it. That's what turns a worry into something the court can act on.
Then comes proof that a disposal is coming. Print the property listing and keep a saved copy of the page. Download the company's MCA master data and charge details. If a broker or an ex-employee has told you about the sale, get their statement on affidavit, if they'll give one. Repeating what they said in your own affidavit is hearsay, and it's weak. Photographs of goods being taken away should carry the date. Hold on to the phone that took them, because the defendant may dispute them. Relying on WhatsApp messages brings in the rules on certificates for electronic records. We've explained those in our guide to proving emails and WhatsApp chats in a commercial court.
Last, the claim itself has to look solid. A judge hearing an urgent application may have twenty minutes with your file. Maybe less. Put the invoices, the purchase order or contract, delivery proof, the ledger and any acknowledgment of the debt into a neat, indexed set. If the claim looks disputed on its face, say the defendant has written you several letters complaining of defective goods, the court will be far less willing to freeze anything before trial. Haven't checked yet what the debtor owns? Our guide on finding out whether a debtor has assets before you sue lists the public records worth searching.
Applying for attachment before judgment, step by step
In a Delhi NCR commercial suit for recovery of money, it usually goes like this.
Get the proof together and fix on the property
Gather your claim documents along with the evidence of the threatened sale or removal. Then list each item you want attached: what it is, where it is, and an honest estimate of what it's worth. Inflating values, or listing property you can't tie to the defendant, costs you credibility.
Decide if it's urgent enough to skip mediation
If the suit genuinely contemplates urgent interim relief, like attaching property that's being sold, you can file without first going through Section 12A pre-institution mediation. The urgency has to show from the plaint and documents. If it doesn't, mediation comes first. The attachment application waits.
Draft the plaint and the Order XXXVIII application
The plaint carries the full claim, the statement of truth and the documents Order XI requires. The application under Order XXXVIII Rule 5 (people just say Order 38 Rule 5, and it's often clubbed with Order XXXIX Rule 1(b) and Section 151) sets out the facts of the threatened disposal and the specific property with its value. An affidavit supports it.
File, and ask for urgent listing
The suit and application go in together, usually by e-filing, with a request for urgent listing. In the Delhi High Court and the district commercial courts, urgent matters can be mentioned for listing the same or next working day. It depends on the court's practice that day.
First hearing: conditional attachment or notice
At the first hearing the judge may order the defendant to furnish security or show cause, and under Rule 5(3) may conditionally attach the named property meanwhile. Sometimes the court just records a direction not to alienate the property till the next date. The order is then served along with the summons.
Reply, rejoinder, arguments
The defendant files a reply. Often it offers security, or attacks the claim. You file a rejoinder dealing with any new facts. After hearing both sides, the court confirms the attachment, accepts security, or vacates the interim order.
Keep the attachment going
A confirmed attachment usually stays until the suit is decided. Once you have a decree, Rule 11 lets you go straight to selling the attached property in execution. No second attachment needed.
You don't have to apply on the day you file. If the sale plan surfaces six months into the suit, you can apply then.
How long each stage takes, and what it costs
| Stage | Typical time | Costs (other than lawyer fees) |
|---|---|---|
| Gathering proof and searching records | A few days, up to two weeks | Small fees for MCA records and certified copies of property papers, plus photographs and affidavits |
| Section 12A mediation (only if the suit isn't urgent) | Up to three months, which can be stretched by two more | Rs 1,000 application fee plus a one-time mediation fee by claim slab under the 2018 Rules, split with the other side; check the current schedule |
| Filing the suit with the application | Usually one to three weeks to draft; a day to file | Ad valorem court fee on the claim under state law, and a small fixed fee on the application; check the current schedule |
| First hearing and interim order | Same day, or a few days if listed urgently | Process fee for serving the defendant |
| Carrying out the attachment | A few days to a few weeks after the order | Bailiff or process charges, transport, and custody or warehousing for seized movables; the court may ask you to deposit these |
| Reply, rejoinder and decision on the application | Usually one to six months, longer in a busy court | Affidavits and copies; the losing side may be ordered to pay costs |
| Attachment through a court in another district or state | A few extra weeks | Process fee, and local counsel in the transferee court |
Which court do you file in?
The Order XXXVIII application goes to whichever court is hearing your suit. In Delhi, commercial suits up to Rs 2 crore are heard by the District Judge (Commercial Court) at the district complexes: Saket, Tis Hazari, Karkardooma, Rohini, Dwarka and Patiala House. Above Rs 2 crore, it's the Commercial Division of the Delhi High Court. There's been a proposal to raise the district court limit, so check where it stands before you value the suit. How value and territory are worked out is on our page about which commercial court will hear your case.
In Uttar Pradesh and Haryana, you file before the court designated as the Commercial Court for that district. That's Ghaziabad, Surajpur for Gautam Buddh Nagar, Gurugram or Faridabad, for instance. The suit is filed where the defendant carries on business or where the cause of action arose. In a supply contract, that's often where the order was placed, where delivery happened, or where payment was due.
The property needn't be within the court's territory. Suppose the debtor's warehouse is in Sonipat and your suit is in Delhi. The court can still order attachment and send it for execution to the district court where the property sits, under Section 136 of the CPC. It takes a bit longer and needs a local filing. But a debtor can't slip away just by keeping its assets in another state.
Is Section 12A mediation needed first?
Not if the suit really needs urgent interim relief. Section 12A of the Commercial Courts Act, 2015 makes pre-institution mediation compulsory only for suits that don't contemplate urgent interim relief. A plaint showing a debtor actively selling its only significant asset is a textbook urgent case. Three months of mediation, and the asset could be gone.
The Supreme Court has said urgency is judged from the plaint, the documents and the facts. A prayer for interim relief can't be used as a mask to dodge mediation. So your evidence of disposal works twice over. It gets you the attachment, and it justifies filing without mediation. If the application is thin and the court isn't convinced, there's a real risk of the plaint being rejected under Order VII Rule 11 for not complying with Section 12A. That would hurt. Our guide on getting an injunction in a commercial suit without mediation goes into how courts test urgency.
Security in place of attachment: what the defendant can offer
Rule 5 gives the defendant a choice. Furnish security, or show cause. Plenty of defendants, once served, would rather offer security than see their property locked up. What they usually offer is a bank guarantee in favour of the court's registrar, a fixed deposit pledged to the court, cash deposited in court, or an undertaking not to sell or encumber a particular property until the suit is decided. Courts generally record that undertaking in the order sheet. Breaking it can bring contempt proceedings.
Frankly, from where you sit, security is often better than attachment. After a decree, a bank guarantee for the claim amount is much easier to cash than a half-occupied industrial plot with a bank's charge on it. An undertaking about a property is only worth having if the property is unencumbered and the title is clean. Check the title papers or the charge register before you accept one.
With files that come to Advocate B.K. Singh, the client hears one thing plainly at the start. The court's order is there to secure your money, not to shut the debtor down. That changes the drafting. We ask for security first and attachment in the alternative. And we pick property whose freezing won't stop the defendant's ordinary trade. Courts are more willing to grant a request that balanced.
Bank accounts, stock and receivables: can those be frozen?
In principle, yes. Anything attachable can be attached before judgment: land and buildings, plant and machinery, vehicles, stock in trade, shares, money in bank accounts, and debts the defendant's own customers owe it. An agriculturist's agricultural produce is excluded. Section 60 of the CPC also protects some property from attachment, like artisans' tools and necessary household items.
Bank accounts need care. Courts don't like freezing a running business account outright. It stops salaries, GST payments and supplier dues, and it can kill a business that might otherwise have paid you. A more realistic ask is that a fixed sum, equal to all or part of your claim, stays in the account, or that the bank is told not to allow withdrawals below that balance. Receivables work much the same way. The court can direct a named customer of the defendant to pay a particular invoice into court instead of to the defendant.
Immovable property is what gets attached most. Courts commonly direct that a copy of the order be pasted on the property and, often, sent to the sub-registrar's office so any buyer is on notice. If a bank already holds a mortgage, your attachment ranks behind the bank's charge. Rule 10 says it doesn't touch rights that existed before. So don't count a mortgaged factory as your security until you've checked the encumbrance position.
Other orders that stop asset stripping
Attachment isn't the only route. Sometimes it's the wrong one. A temporary injunction under Order XXXIX Rule 1(b) can restrain the defendant from selling, transferring or charging named property without formally attaching it. Judges often find that an easier order to make at the first hearing, and if the defendant breaches it, it can be turned into attachment later. How these applications get argued is on our page on urgent injunctions to stop harm to your business.
Is the asset earning money that the defendant is diverting, like rent from a commercial building or sale proceeds from a stockpile? Then the court can appoint a receiver under Order XL to collect and hold it. That's a bigger step, and courts use it sparingly. Our page on appointment of a court receiver explains when it fits.
In suitable commercial cases, Delhi courts have also directed defendants at the interim stage to file an affidavit disclosing their assets and bank accounts. That affidavit pays off later. If the defendant hides or sells assets it disclosed, its own sworn statement is evidence against it. When you suspect stripping but can't yet name the property, asking for disclosure is often a sensible first move.
What happens to the attachment if you win, lose or settle?
Win, and the attached property stays attached. You go straight to sale in execution under Order XXI, and because of Rule 11 of Order XXXVIII, you don't attach it all over again. That saves months. In most execution cases the hardest part is finding and catching assets. The steps after judgment are on our page about execution of a decree.
Lose, and the attachment has to be withdrawn. If it was obtained without reasonable grounds, the defendant can claim compensation under Section 95, up to Rs 50,000, and may ask for costs as well. One trap to know about. If the suit is dismissed for default and later restored, the attachment doesn't automatically come back to life. Keep your dates.
Settle? Then make the settlement deed say what happens to the attachment. Usually it stays until the last instalment is paid, or a bank guarantee replaces it. Many creditors, relieved, withdraw the attachment on the first instalment. If the second cheque bounces, they've got nothing to fall back on.
There's one more risk: insolvency. If the defendant company is admitted into the corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016, the Section 14 moratorium stops your suit and the attachment. You file your claim with the resolution professional instead. And an attachment before judgment won't make you a secured creditor in that process. We discuss that choice in our guide on when insolvency is better than a recovery suit.
Mistakes that sink attachment applications
- Asking for everything. A prayer to attach "all movable and immovable assets of the defendant", with no list and no values, rarely gets granted. Name the property.
- Fear with no facts. The application is full of "apprehension" and "likely" but there's no document behind any of it. Each allegation of disposal should point to an annexure.
- Sitting on it. You knew about the sale plan in March and filed in October. The court will want to know why it became urgent only now.
- Hiding the defendant's side. They've complained about quality or short supply? Say so, and answer it. A judge who finds out the dispute was concealed won't trust the rest of what you've written.
- Using attachment as a squeeze. Judges can tell when the real aim is to freeze a bank account and force a settlement. You risk costs and compensation.
- Not checking prior charges. If a bank holds a full mortgage on the property, attaching it gives you very little. Look at the charge register first.
- Letting the order die quietly. If nobody serves it, registers it or executes it, an attachment order doesn't do much. Chase the process server, the sub-registrar and the bank.
Papers to get ready before you apply
To prove your claim
- Purchase orders, the contract or work order
- Tax invoices and e-way bills
- Delivery challans, goods receipt notes or completion certificates
- The defendant's ledger account from your books
- Any acknowledgment, part payment or balance confirmation
- Your legal notice, and their reply if they sent one
To prove the threatened disposal
- Dated screenshots of property or machinery listings, with links
- MCA master data, charge records and filings on director changes
- Photos or videos of stock or equipment being taken out
- Affidavits from people who saw the sale happening or heard about it
- Emails or chats where the debtor talks about closing or selling
- The debtor's GST registration status
About the property you want attached
- Address, plot or khasra number for land and buildings
- Vehicle registration numbers
- The debtor's bank and branch, if you know them
- Names of the debtor's main customers who owe it money
- An honest estimate of what each item is worth
- Whatever you know about existing mortgages or charges
How it looks for different kinds of creditor
A raw material, components or packaging supplier usually has the cleanest claim. Invoices, delivery proof, a ledger. Where it struggles is the second limb, because it often hears about the asset sale late. Suppliers who keep talking to the debtor's other vendors and transporters tend to hear early. Early is what makes the application work.
A lender who gave an inter-corporate loan or a business advance has a written agreement and bank transfers, but often no security. Where the borrower is a company, the charge register on the MCA portal can tell the asset-stripping story very clearly. A landlord chasing rent from a commercial tenant who's quietly moving out has one advantage. He sees the removal himself and can photograph it that same day.
Startups and service firms owed money by a much bigger client rarely need attachment. Large clients don't usually strip assets. The order matters more against small and mid-sized debtors, proprietorships and closely held companies, where one property or one stockpile may be all there is. An MSME supplier should also look at the MSME Facilitation Council under the MSMED Act, 2006. But that forum can't freeze assets the way a civil court can, which is one reason some suppliers who fear a disposal file a suit instead.
Delhi, UP and Haryana all apply the same CPC provisions. Listing practice is where they differ. Urgent mentioning is routine in the Delhi High Court and the Delhi district commercial courts. In Ghaziabad, Gautam Buddh Nagar, Gurugram and Faridabad, an urgent application usually comes up on filing or the next working day, depending on the court's roster. Find out how that particular court works before you fix a filing date.
An invented example: the aluminium supplier and the factory shed
This one is made up, to show how the pieces fit. An aluminium extrusion unit in Bawana supplies sections to a window-systems contractor in Sahibabad, Ghaziabad. By March, Rs 68 lakh is outstanding on nineteen invoices. The contractor stops picking up the phone. In April a transporter tells the supplier's sales manager that the contractor's shed is being shown to buyers. He checks, and finds it listed on a property portal for "urgent sale".
The supplier pulls together the invoices, e-way bills, signed goods receipts and the ledger. There's also a WhatsApp message from the contractor's partner: "the shed is going, we'll settle after that". It downloads the listing, gets an affidavit from the transporter and identifies the shed by its industrial plot number. A search shows no bank charge on it.
The suit goes into the commercial court along with an application under Order XXXVIII Rule 5 and Order XXXIX Rule 1(b). It asks for security of Rs 68 lakh or, failing that, attachment of the shed. The plaint shows an active sale, so it's filed without pre-institution mediation. At the first hearing, the court directs the contractor not to sell or encumber the shed till the next date and issues notice. On the next date, the contractor offers a bank guarantee for part of the amount and an undertaking about the shed for the rest. The court records both. Then the suit goes to trial, with the money secured.
It's only an illustration. Outcomes turn on the facts, the evidence and the court.
What to do this week
Write down every sign that the debtor is selling or moving assets, each with a date, and put a document or photo against each one. If it's a company, download its MCA records. Work out exactly which property you want protected and put an honest value on it. Then get your invoices, delivery proof, ledger and correspondence into one indexed folder.
Next, decide which order fits you. Security, attachment, injunction, a receiver, or disclosure. Not sure? A short consultation on the papers usually settles it. How we prepare these applications is on our page about freezing the defendant's assets before judgment, and the suit that goes with it is covered on the money recovery suit page.
If you'd like the papers looked at before the debtor's sale goes through, send them to Advocate B.K. Singh's team through the contact page.
Frequently asked questions
Can a court stop my debtor from selling its property before the case is decided?
Yes. Under Order XXXVIII Rule 5 CPC, the court can make the debtor furnish security, or attach named property, once you show it's about to dispose of assets to defeat the decree. You'll need specific evidence of the threatened sale and details of the property.
Is attachment before judgment available in a summary suit?
It is. The CPC provisions on attachment before judgment apply to summary suits under Order XXXVII too. The tests don't change: a genuine claim, and real evidence that the defendant is getting rid of its property.
How quickly can an attachment order be passed?
In an urgent case the court can pass a conditional attachment, or a direction not to sell, at the first hearing. That can be the day you file or a few days later. The final decision comes later, once the defendant has replied.
What if the property is already mortgaged to a bank?
Then your attachment sits behind the bank's existing charge and doesn't affect it. Whatever is left once the bank has been paid in full, that's what you get. Check the charge records before you count that property as security.
Can the defendant still run its business after attachment?
Usually, yes. Courts prefer to attach specific property or fix a sum to be kept aside rather than shut the business. The defendant can also give a bank guarantee or other security and get the attachment lifted.
Do I need to pay anything to the court for an attachment order?
There's a small fixed court fee on the application. You may also pay process and bailiff charges, and custody costs if goods are seized. The main court fee is on the suit itself, and it depends on the claim value and the state's schedule.
Can I be penalised for asking for attachment?
You can. If the attachment was obtained on insufficient grounds, the court can award the defendant compensation of up to Rs 50,000 under Section 95 CPC, and may order costs as well. That's why the application has to rest on facts, not suspicion.
Does an attachment survive if the debtor company goes into insolvency?
No. Once the company is admitted into insolvency under the IBC, the moratorium stops both the suit and the attachment, and you file your claim with the resolution professional. The attachment doesn't make you a secured creditor.
Advocate B.K. Singh
Founder of B.K. Singh & Associates. MCA, LL.B., LL.M. More than twenty years in practice before the Supreme Court, the Delhi High Court, district and commercial courts in Delhi NCR, and tribunals.
This guide explains the law in general terms and is not legal advice. For advice on your own papers, contact the team.