Attachment Before Judgment Cannot Extend To Property Already Transferred Prior To Initiating Suit: Supreme Court

The Apex Court was hearing an appeal arising from a rejection of a claim petition filed by a purchaser of property that had been subjected to attachment before judgment, despite the sale deed having been executed months before the underlying suit was filed.

A Division Bench comprising Justice B.V. Nagarathna and Justice R. Mahadevan, while deciding the matter, observed: “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 essential condition, however, is that 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".

The Bench further clarified that "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".

Senior Advocate Anil Kaushik represented the appellants, while Advocate Aakashi Lodha, AOR, appeared on behalf of the respondents.

Background

The predecessor-in-interest of the appellants had entered into an agreement with the debtor acknowledging outstanding dues. Upon default, a registered sale deed was executed in favour of the purchaser several months before a creditor initiated a suit for recovery and obtained an attachment before judgment.

The purchaser, who claimed to have been in possession since the purchase, sought the lifting of the attachment under Order XXXVIII Rule 8 of the CPC. The plaintiff resisted the plea, alleging the sale to be collusive and fraudulent, purportedly hit by Section 53 of the T.P. Act. Both the trial court and the High Court upheld this objection, treating the transfer as fraudulent.

In appeal, the Supreme Court examined whether attachment before judgment could prevail over a sale deed executed before the filing of the suit, and whether such proceedings could be used to adjudicate allegations of fraud under Section 53 TPA.

Court’s Observations

The Supreme Court, upon hearing the matter, analysed the statutory schemes of Order XXXVIII, Rules 5–10, CPC, Order XXI, Rule 58, CPC, and Section 53 of the Transfer of Property Act. 

Attachment Before Judgment Cannot Cover Pre-Suit Transfers

The Bench held that the scheme of Order XXXVIII Rule 5 CPC presupposes the existence of property belonging to the defendant at the time of filing of the suit. Since the sale deed in the present case existed prior to the institution of the suit, the property did not belong to the judgment-debtor when attachment was ordered.

The Court observed that “attachment before judgment is only an ancillary, protective relief to secure the decree, subject to adjudication of independent claims, and cannot prejudice pre-existing rights or confer any substantive advantage upon the plaintiff beyond securing satisfaction of the decree”.

The Bench held that since the sale deed in favour of the appellant was executed before the institution of the recovery suit, the property no longer belonged to the debtor at the time of attachment. Holding that in the present case, “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”, the Apex Court concluded that the Executing Court and the High Court erred in sustaining an attachment that was legally non-existent from inception.

“Attachment before judgment being an extraordinary and protective remedy, cannot extend to property already alienated to a bona fide third party prior to the filing of the suit. Any adjudication in the claim petition that ignores this statutory pre-condition would be contrary to the scheme of the Code and settled principles governing attachment before judgment”, the Court underscored.

Fraudulent Transfer Allegations Must Be Tried Under Section 53 TPA, Not Order XXXVIII Rule 8 CPC

Having negated the application of Rule 5 to the present case, the Apex Court observed that “while the trial Court and High Court examined the claim petition under Order XXXVIII Rule 8 CPC read with Order XXI Rule 58 CPC, the adjudication of the sale deed’s validly as a fraudulent transfer necessarily required determination under Section 53 of the T.P. Act”.

Such an inquiry, the Court stated, requires a full adjudication, complete pleadings, framing of issues, and opportunity to lead evidence.

The Bench further elaborated that “the mechanism under Rule 8, being a protective procedure designed for third-party claimants asserting independent rights in the property attached before judgment, cannot be expanded to transform the attachment procedure into a substantive enquiry under Section 53 of the T.P. Act.”

In the present case, the Court noted that the sale deed executed in favour of the appellant was duly registered and the transfer stood completed before the institution of the suit. The documents available on record did not demonstrate that the original applicant was a party to any collusion or mala fide transaction to defraud the plaintiff.

Therefore, the allegation of fraud, the Court held, fell squarely within the ambit of Section 53 of the T.P. Act and could not have been addressed merely through a claim petition under Order XXXVIII Rule 8 CPC.

Conclusion

Holding that the attachment could not extend to property already conveyed through a duly registered sale deed executed before the suit, the Supreme Court set aside the orders of the courts below and upheld the appellant-purchaser’s claim.

The Civil Appeal was accordingly allowed, with no order as to costs.

Cause Title: L.K. Prabhu @ L. Krishna Prabhu (Died) Through LRs v. K.T. Mathew @ Thampan Thomas & Ors. (Neutral Citation: 2025 INSC 1364)

Appearances

Appellants: Senior Advocate Anil Kaushik, with Advocates Mohammed Sadique AOR, Nishe Rajen Shonker, Anu K Joy and others

Respondents: Aakashi Lodha, AOR

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