The Supreme Court has ruled that property transferred through a registered sale deed prior to the filing of a civil suit cannot be subjected to attachment before judgment under Order 38 Rule 5 of the Code of Civil Procedure. The attachment remedy applies only to property that belonged to the defendant on the date the suit was instituted. Allegations of fraud must be pursued through independent proceedings under Section 53 of the Transfer of Property Act.
A bench of Justice B.V. Nagarathna and Justice R. Mahadevan delivered the ruling while deciding a civil appeal arising out of SLP (C) No. 15592 of 2023. The judgment set aside the Kerala High Court’s order of February 13, 2023, which had rejected the claim of a purchaser who acquired property months before the filing of the suit and remanded the case to consider possible recovery from the debtor.
The dispute arose from a sale agreement dated May 10, 2002 between L.K. Prabhu and Defendant No. 3, who acknowledged liability of Rs 17.25 lakh. When the defendant failed to pay within three years, a registered sale deed was executed on June 28, 2004. On December 18, 2004, K.T. Mathew filed a suit for recovery of Rs 43,82,767 against several defendants and sought attachment before judgment, asserting that the property still belonged to the debtor. Attachment was ordered in February 2005.
The purchaser sought release of the property in 2007, but the trial court dismissed his claim, holding the sale fraudulent under Section 53 of the Transfer of Property Act. The High Court agreed, though it partly modified the directions. On appeal, the Supreme Court held that because the sale was completed months before the suit was filed, the property was no longer owned by the defendant on the date of institution. The attachment was therefore without legal basis.
The bench held that fraud allegations cannot be resolved within attachment proceedings and must be tried through proper pleadings and evidence under Section 53. It also noted that the respondent failed to prove fraud and that antecedent debt constitutes valid consideration. Citing Vannarakkal Kallalathil Sreedharan, the Court reiterated that an attaching creditor can attach only the right and interest remaining with the debtor and cannot override prior contractual obligations.
Finding the trial court and High Court orders unsustainable, the Supreme Court set aside the attachment and upheld the validity of the sale deed dated June 28, 2004. The appeal was allowed without costs.
Case Title: L.K. Prabhu @ L. Krishna Prabhu (Died) through LRs v. K.T. Mathew @ Thampan Thomas & Ors.
