Doctrine of Lis Pendens U/S. 52 Transfer Of Property Act Doesn’t Exclude Suits For Recovery Of Money: Supreme Court

The Apex Court was considering an appeal filed by the appellant, claiming to be a third party, who filed an application under Order XXI Rule 58 of the Code of Civil Procedure, 1908, praying for the removal of the attachment of the property.

The Division Bench of Justice Pankaj Mithal and Justice S.V.N. Bhatti held, “Order XXI Rule 102 of the CPC explicitly states that the protections available to bona fide claimants under Rules 98 and 100 do not apply to a transferee pendente lite. A transferee pendente lite is defined as someone to whom the property is transferred after the institution of the suit in which the decree was passed. The suit, i.e., the arbitration proceeding, was instituted in 1999, and the Appellant purchased the property on account of a sale deed dated 23.04.2015. Since the transfer occurred after the institution of the proceedings and the passing of the award, the Appellant is a transferee pendente lite/post arbitral award purchaser, and is barred by Order XXI Rule 102 from resisting the execution.”

The Bench referred to the judgment in Usha Sinha v. Dina Ram (2008) wherein it has been held that the doctrine of lis pendens is recognised by Section 52 of the Transfer of Property Act, 1882. Reference was also made to the judgments in Danesh Singh and others v. Har Pyari (Dead) Thr. LRs. (2025) and Annakkili v. Murugan & Anr. (2021) wherein it has been held that Section 52 does not state that it is not applicable to suits for recovery of money.

Factual Background

In the year 1998, a sale agreement was entered into between the first respondent, Cotton Corporation of India Limited, and the second respondent M/s Lakshmi Ganesh Textiles Limited, for the sale of cotton bales. On account of a dispute in the recovery of the sale price of cotton bales supplied under the sale agreement, the first respondent raised an arbitral dispute for recovery of Rs 37,51,380 with interest and cost. The arbitrator passed an award for a sum of Rs 26,00,572.90 with future interest. In 2001, the second Respondent filed an AOP before the Court of Principal District Judge, Coimbatore, under Section 34 of the Arbitration and Conciliation Act, 1996.

The second Respondent company was a borrower of ICICI Bank. For default of payment of the sums borrowed, ICICI Bank initiated recovery proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and attached the properties of the second Respondent. The Execution Petition (EP) Schedule Properties are among the properties brought for sale by ICICI Bank. A tripartite agreement was entered into between ICICI Bank, the second Respondent and the Appellant, resulting in a Sale Deed. The application filed by the ICICI Bank was closed pursuant to a compromise evidenced by the tripartite agreement.

The first Respondent filed EP before the Court of Principal District Judge, Coimbatore, for executing the award. The Executing Court ordered the conditional attachment of Schedule Property. The Appellant, claiming to be a third party, filed an application under Order XXI Rule 58 of the Code of Civil Procedure, 1908, praying for the removal of the attachment. The Appellant stated that through a registered sale deed executed by the second Respondent to the Appellant, she had become the absolute owner of the EP Schedule Property. The sale in favour of Appellant was for valid consideration and without notice, namely, the existing liability arising out of the arbitral. The claim petition was dismissed. The Appellant carried the order in revision before the High Court, but the same came to be dismissed. It was in such circumstances that the appeal came to be filed before the Apex Court.

Reasoning

The Bench noted that the arbitration proceeding was instituted in 1999, and the Appellant purchased the property on account of a sale deed. Since the transfer occurred after the institution of the proceedings and the passing of the award, the Bench held that the Appellant is a transferee pendente lite/post arbitral award purchaser, and is barred by Order XXI Rule 102 from resisting the execution.

“A judgment debtor cannot defeat a decree by alienating the property after the decree is passed but before the decree is realised. In other words, the steps taken defeat the very fruits of the money decree”, it stated.

The Bench noted that the Appellant presents the case as a third-party stranger, and there is fraud between the Appellant and the second Respondent in the transfer of the EP Schedule Properties by the sale deed. Considering the non-production of a tripartite agreement, which is the genesis for discharging the claim of ICICI Bank, as has been held by the Executing Court, the Bench concluded that the sale in favour of the Appellant, even if for consideration, cannot be without notice of the existing liability of the second respondent Company. “The recovery proceedings under SARFAESI Act are independent and does not give any shield of protection to other claims against the Judgment Debtor/Borrower in default. In the circumstances of the case, we reject the argument that the sale in favour of the Appellant is without notice”, it added.

The Bench held, “We need a shift in mindset: the goal of the legal system should not just be to dispose of cases, but to ensure that the litigant enjoys the reliefs. The provisions in the CPC must be employed to secure actual relief, not just a formal decree. We must ensure that the legal process results in justice not just appearing to be done, but justice actually being done.”

On a perusal of the facts of the case, the Bench noted that the Appellant is a purchaser post-arbitral award for recovery of the amount. The execution proceeding was pending when the sale deed was entered into between the second Respondent and the Appellant. It was also noticed that the Appellant failed to discharge the onus on the sale being without notice of the existing claim. “The arbitral award remains unrealised till date. Therefore, in the circumstances of this case, and by following the ratio in Danesh (supra) we hold that the claim petition of the Appellant is rightly dismissed by the courts below”, it added.

Thus, dismissing the Civil Appeal, the Bench ordered, “The executing court disposes of Execution Proceedings within two months from today.”

Cause Title: R. Savithri Naidu v. M/s The Cotton Corporation of India Limited (Neutral Citation: 2026 INSC 150)

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