Property Sold Before Filing Of Suit Not Liable To Pre-Judgment Attachment Under Order XXXVIII Rule 5 CPC, Supreme Court
Kiran Raj
The Supreme Court of India Division Bench of Justice B.V. Nagarathna and Justice R. Mahadevan held that immovable property already conveyed by a registered sale deed before a suit is instituted cannot be subjected to pre-judgment attachment under Order XXXVIII Rule 5 of the Code of Civil Procedure. Deciding a dispute between a creditor seeking security for a money claim and a purchaser asserting independent title, the Court recognised that the property had ceased to belong to the defendant when the attachment application was moved. In doing so, it set aside concurrent orders of the Kerala High Court and the trial court, which had nonetheless proceeded with attachment against property earlier transferred to a bona fide purchaser.
The dispute arises from an agreement for sale executed in May 2002 between a debtor and a purchaser, under which the debtor acknowledged a monetary liability and agreed that, in case of default, he would convey a specified extent of land with a building for an agreed consideration. Endorsements on the agreement record further payments made in June 2004, followed by execution of a registered sale deed later that month. The purchaser claims to have taken possession and to be using the property as guest houses, with revenue and municipal records standing in his name.
In December 2004, a creditor instituted a suit for recovery of money against the debtor and others and sought attachment before judgment of the same property under Order XXXVIII Rule 5 CPC, asserting that it still belonged to the debtor. Attachment was ordered in February 2005. After learning of the attachment, the purchaser moved a claim petition under Order XXXVIII Rule 8 CPC, contending bona fide purchase for value, which the creditor opposed alleging a fraudulent transfer under Section 53 of the Transfer of Property Act. The trial court rejected the claim; the High Court substantially upheld this while directing determination of any amount payable to the purchaser, leading to the present appeal where the parties invoked Order XXXVIII Rules 5–10 CPC, Order XXI Rule 58 CPC, Section 53 of the Transfer of Property Act, and Section 25 of the Contract Act.
The Court considered whether property conveyed before suit institution could be subjected to attachment before judgment under Order XXXVIII Rule 5 CPC. It recorded that the provision is provisional and protective, confined to property forming part of the defendant’s estate on the date the suit is filed.
The Court relied on the precedent of Hamda Ammal v. Avadiappa Pathar for the maintainability test. “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.”
On the governing legal principle, the Court stated while restating settled position: “It is well settled that attachment before judgment cannot extend to properties which have already been alienated prior to the institution of the suit. Accordingly, the sale would not be subject to the attachment.”
The Court stated “the property sought to be attached must belong to the defendant on the date of institution of the suit; property already transferred prior to the suit cannot be attached under this provision.”
Applying the settled legal test to the timeline, the Court recorded: “the registered sale deed in favour of the original applicant was executed on 28.06.2004… whereas the suit was instituted only on 18.12.2004 and the order of attachment was passed subsequently on 13.02.2005. Thus, as on the date of filing of the suit, the property already stood transferred.”
On the effect of the prior conveyance, the Court recorded: “Consequently, at the time of filing of the suit, the property stood transferred and was no longer in the possession or ownership of Defendant No. 3.”
Recording the consequence of the missing jurisdictional condition, the Court recorded: “In such circumstances, the essential condition for invoking attachment before judgment under Order XXXVIII Rule 5 CPC – that the property belongs to the defendant on the date of institution of the suit – is absent.”
On the statutory separation between attachment proceedings and fraud challenges, the Court recorded: “the plaintiff’s remedy, if any, lies exclusively under Section 53 of the Transfer of Property Act, which provides for setting aside a transfer made with intent to defraud creditors.”
Explaining the boundaries of Rule 5 CPC, the Court recorded: “the scope of Rule 5 is confined to securing the plaintiff’s prospective decree by preventing the defendant from frustrating execution through alienation or concealment of his property during pendency of the suit.” The Court again recorded: “property already transferred prior to the suit cannot be attached under this provision. In cases where such prior transfer is alleged to be fraudulent, the remedy lies under Section 53 of the T.P. Act and not under Order XXXVIII Rule 5 CPC.”
The Court examined the creditor’s allegation that the transfer was collusive or fraudulent. The judgment recorded the legal principle that “the rights of the attaching creditor cannot override the contractual obligation arising from the antecedent agreement.” The Court considered the comparison drawn from another precedent referenced in the judgment, Vannarakkal Kallalathil Sreedharan v. Chandramaath Balakrishnan, for the principle that an attaching creditor may attach only the judgment-debtor’s subsisting rights and cannot ignore obligations created before attachment when specific performance was already enforceable.
The Court considered objections relating to consideration, including adjustment of earlier liabilities and discharge of bank dues. The judgment recorded that advancing contractual timelines by mutual consent is not invalid by itself unless fraud is proved by evidence. The Court recorded that “no such fraudulent intent has been proved in the present case.”
On the burden of proof, the Court recorded the settled legal principle: “the onus to establish that the transfer was made with an intent to defeat or delay creditors lies squarely upon the party alleging fraud. Mere suspicion… cannot substitute proof.” No evidence demonstrated insolvency of the transferor caused by the transfer or actual and irretrievable prejudice suffered.
The Court stated: “In view of the foregoing, it is evident that: (a) The original applicant’s sale deed dated 28.06.2004 pre-dates the institution of the suit, and therefore, the property did not belong to the defendant on the date of filing of the suit; (b) Attachment before judgment under Order XXXVIII Rule 5 CPC could not be extended to the property already transferred; (c) Any claim under Order XXXVIII Rule 8 read with Order XXI Rule 58 CPC must be adjudicated recognizing the protective and procedural nature of attachment before judgment, without prejudicing the pre-existing rights of bona fide third parties; (d) Determination of whether the sale deed is fraudulent is exclusively governed by Section 53 of the T.P. Act and the claim petition procedure under Rule 8 cannot substitute or override the statutory safeguards and requirements of such substantive proceedings.”
“Accordingly, the impugned judgment and order passed by the courts below are set aside. In the result, the Civil Appeal stands allowed.”
Advocates Representing the Parties
For Petitioner(s): Mr. Anil Kaushik, Sr. Adv. Adv. Mr. Mohammed Sadique T.A., AOR Mr. Nishe Rajen Shonker, Mrs. Anu K Joy, Adv. Mr. Alim Anvar, Adv. Mr. Santhosh K, Adv. Mrs. Devika A.l., Adv. Mr. Rahul Narang, Adv. Mrs. Rao Vishwaja, Adv. Mr. Harshed Sundar, Adv. Mr. Nihar Dharmadhikari, Adv. Mr. Rajat Rana, Adv. Mr. Mayank Gautam, Adv. Mrs. Shashi Sharma, Adv.
For Respondent(s): Ms. Liz Mathew, Sr. Adv. Ms. Aakashi Lodha, AOR Mr. Omkar Hemanth, Adv. Mr. Namanjeet Bhatia, Adv.
Case Title: L.K. PRABHU @ L. KRISHNA PRABHU (DIED) THROUGH LRs VERSUS K.T. MATHEW @ THAMPAN THOMAS & ORS.
Neutral Citation: 2025 INSC 1364
Case Number: Civil Appeal No. of 2025 (Arising out of SLP (C) No.15592 of 2023)
Bench: Justice B.V. Nagarathna, Justice R. Mahadevan
