The Supreme Court has set aside the Kerala High Court’s order that had upheld the rejection of the appellant’s claim to a property attached before judgment. The Bench of Justice B.V. Nagarathna and Justice R. Mahadevan held that a registered sale deed executed prior to the filing of the suit cannot be subjected to attachment, and any allegation of fraudulent transfer must be adjudicated strictly under Section 53 of the Transfer of Property Act, not through attachment proceedings.
The dispute arose after the deceased (appellant) purchased 5.100 cents of land with a building on June 28, 2004, pursuant to an earlier agreement. Months later, the plaintiff filed a money recovery suit and obtained an order of attachment before judgment in February 2005. He sought release of the property, claiming that he learnt of the attachment only in 2007. Appellant asserted that the transfer pre-dated the suit and was supported by genuine consideration. Both the trial court and the High Court rejected his claim, branding the sale as a fraudulent attempt by the debtor to defeat creditors.
Before the Supreme Court, the appellants argued that courts cannot treat attachment proceedings as a substitute for a full enquiry into fraud under Section 53 TPA. They stressed that the sale deed was executed months before the suit was registered, supported by contemporaneous endorsements, and accompanied by possession and continued enjoyment of the property as guest houses. They further contended that mere suspicion, such as community ties or timing of payments, cannot establish fraud. Relying on Hamda Ammal v. Avadiappa Pathar, (1991) 1 SCC 715, they submitted that where execution of a sale deed is complete on the date of institution of the suit, an application under Order XXXVIII Rule 5 CPC is not maintainable
The respondent-creditor countered that under Order XXXVIII Rule 8 read with Order XXI Rule 58 CPC, the court is empowered to examine fraudulent transfers, and that the High Court rightly treated the sale as collusive.
The Supreme Court disagreed, emphasising that attachment before judgment cannot extend to property that no longer belongs to the defendant on the date of suit. The Court held that whether the sale deed is fraudulent is exclusively governed by Section 53 of the TPA, and the claim petition procedure under Rule 8 cannot substitute or override the statutory safeguards and requirements of such substantive proceedings.
Under Section 53(1) of the T.P. Act, the transaction would be voidable only if it is proved to have been made with an intent to defeat or delay creditors. However, the court held that no such fraudulent intent had been proved in the present case.
Allowing the appeal, the Court held the sale valid, restored the purchaser’s rights, and declared that the attachment could not operate against the property.
Appearances
Petitioner: Mr. Anil Kaushik, Sr. Adv. Mr. Mohammed Sadique T.a., AOR Mr. Nishe Rajen Shonker, Adv. Mrs. Anu K Joy, Adv. Mr. Alim Anvar, Adv. Mr. Santhosh K, Adv. Mrs. Devika A.l., Adv. Mr. Rahul Narang, Adv. Mr. Harshed Sundar, Adv. Mr. Nihar Dharmadhikari, Adv. Ms. Aishwarya Mishra, Sr. Adv.
Respondents: Ms. Aakashi Lodha , AOR
