The Bombay High Court has clarified that a transfer of immovable property by a judgment debtor to a close relative, without consideration, after a decree has been passed and execution proceedings have commenced, is considered a fraudulent transfer intended to defeat or delay the creditor. Such a transfer is voidable at the option of the creditor so defeated.
The Court pointed out that when the fraudulent nature of the transaction is patently clear from the timing and circumstances on record, the court can make a determination without the need for a full trial. It emphasised that an executing court, under Order XXI Rule 58 of the CPC, has the jurisdiction to determine whether a transfer of property is fraudulent under Section 53 of the Transfer of Property Act, 1882.
Accordingly, the Court held that the Gift Deed executed by Judgment Debtor in favour of the Applicants, is a fraudulent transfer under Section 53 of the Transfer of Property Act, 1882, made with the intent to defraud the Judgment Creditor. The Court declared the transfer voidable at the option of the Judgment Creditor, sustained the attachment of the flat, and directed the Sheriff of Bombay to proceed with the sale of the property as per the Proclamation of Sale.
A Single Judge Bench of Justice Abhay Ahuja acknowledged the legal principle that a company is a separate legal entity and its directors are generally not liable for its debts. However, it observed that in this specific case, the decree was explicitly passed against the directors as well, and the Judgment Debtors had neither defended the suit nor appealed the decree. Therefore, the Bench said that an executing court cannot go behind the decree.
The Bench observed that under Order XXI Rule 58 of the CPC, it is empowered to comprehensively adjudicate all questions relating to the right, title, or interest in the attached property. This includes the power to investigate whether a transfer is fraudulent under Section 53 of the Transfer of Property Act, 1882. The Bench noted that if a transfer is made with the intent to defeat or delay creditors, it is voidable at the option of the creditor.
Further, the Bench noted the suspicious timing of the Gift Deed, that it was executed on 9th March 2020, which was after the decree was passed (30th July 2018) and, crucially, after the execution proceedings were initiated (19th September 2019). The Bench considered this a “hollow/related party transaction” that raises serious doubts about the bona fides of the said transaction. It observed that the effect of this transfer to family members was to prevent the property from being reached by the Judgment Creditor, thus defeating or delaying their claim.
Lastly, the Bench opined that a full trial was unnecessary. Since the facts regarding the timing of the decree, the execution application, and the subsequent gift were admitted and clear from the record, the Bench could adjudicate the matter based on the available documents without directing the parties to lead further evidence.
Briefly, the case involves an Interim Application filed by the wife and son of Judgment Debtor No. 3, seeking to exclude a residential flat in Mumbai from attachment and sale in an execution proceeding. The Claimant/Decree Holder had obtained a money decree against Baba Mungipa Steel Industry Pvt Ltd. and its two directors, one of whom is Judgment Debtor No. 3. The decree was passed in a Commercial Summary Suit after the defendants failed to seek leave to defend.
An Execution Application was filed on 19th September 2019. Subsequently, on 9th March 2020, Judgment Debtor No. 3 executed a registered Gift Deed for the said flat in favour of the Applicants. Accordingly, a Warrant of Attachment for the flat was issued on 1st February 2024, followed by a Proclamation of Sale on 15th July 2025. The Applicants then filed this application under Order XXI Rule 58 of the Code of Civil Procedure, 1908, to release the flat from attachment, claiming they are the lawful owners by virtue of the Gift Deed.
Appearances:
Advocates Ryan D’Souza, Shivam Laturiya, and Pranchali Kandre, for the Applicants
Advocates Vivek Kantawala, Amey Patil, and Manav Kantawala, for the Claimant/ Decree Holder
