2025 Supreme(SC) 1978

SUPREME COURT OF INDIA
B.V. NAGARATHNA, R. MAHADEVAN, JJ.
L.K. Prabhu @ L. Krishna Prabhu (Died) Through Lrs – Appellants
Versus
K.T. Mathew @ Thampan Thomas & Ors. – Respondents
Civil Appeal No. of 2025 (Arising out of SLP (C) No.15592 of 2023)
Decided On : 28-11-2025

IMPORTANT POINTS
(1) Attachment before judgment cannot extend to properties which have already been alienated prior to institution of suit – Attachment before judgment cannot override a prior completed transfer.
(2) Executing Court shall adjudicate all questions relating to right, title, or interest of the property attached between the parties to the claim proceedings, and its determination has the force of a decree.
(3) Fraudulent transfer – Mere suspicion, inadequacy of consideration or existence of a relationship between parties, cannot, by themselves, constitute proof of such intent.
(4) Attachment before judgment – An attaching creditor cannot acquire rights higher than those of judgment-debtor.

Headnote:

(A) Civil Procedure Code, 1908 – Order XXXVIII Rules 5 and 8 read with Rule 58 – Transfer of Property Act, 1882 – Section 53 – Attachment before judgment – Attachment before judgment is only an ancillary, protective relief to secure decree, subject to adjudication of independent claims, and cannot prejudice pre-existing rights or confer any substantive advantage upon plaintiff beyond securing satisfaction of decree – Mechanism under Rule 8, being a protective procedure designed for third-party claimants asserting independent rights in property attached before judgment, cannot be expanded to transform attachment procedure into a substantive enquiry under Section 53 of T.P. Act – Attachment before judgment being an extraordinary and protective remedy, cannot extend to property already alienated to a bona fide third party prior to filing of suit – Any adjudication in claim petition that ignores this statutory pre-condition would be contrary to scheme of CPC and settled principles governing attachment before judgment – Allegation of fraud falls squarely within ambit of Section 53 of T.P. Act and cannot be addressed merely through claim petition under Order XXXVIII Rule 8 CPC. (Paras 11.3, 13 and 14)

(B) Civil Procedure Code, 1908 – Order XXXVIII Rules 5 and 8 read with Rule 58 – Transfer of Property Act, 1882 – Section 53 – Attachment before judgment – Attachment before judgment cannot extend to properties which have already been alienated prior to institution of suit – Attachment before judgment cannot override a prior completed transfer – Agreement for sale creates an equitable obligation attached to ownership of property – An attaching creditor cannot acquire rights higher than those of judgment-debtor; attachment is always subject to pre-existing contractual obligations such as agreement to sell executed prior to attachment – Attachment does not override prior contractual obligations – Any claim under Order XXXVIII Rule 8 read with Order XXI Rule 58 CPC must be adjudicated recognizing protective and procedural nature of attachment before judgment, without prejudicing pre-existing rights of bona fide third parties. (Paras 17, 18 and 19)

(C) Transfer of Property Act, 1882 – Section 53 – Civil Procedure Code, 1908 – Order XXXVIII Rule 8 – Fraudulent transfer – Onus to establish that transfer was made with intent to defeat or delay creditors lies squarely upon party alleging fraud – Mere suspicion, inadequacy of consideration or existence of a relationship between parties, cannot, by themselves, constitute proof of such intent – While conclusion for fraud must rest on established facts and legitimate inferences drawn therefrom, every device or artifice need not be fully unravelled to sustain finding of fraud – Determination of whether sale deed is fraudulent is exclusively governed by Section 53 of T.P. Act and claim petition procedure under Rule 8 cannot substitute or override statutory safeguards and requirements of such substantive proceedings – In present case, Respondent No. 1 (creditor) has failed to produce cogent evidence showing that dominant purpose of impugned transfer was to defeat his rights – Circumstances relied upon, such as community ties, financial difficulties of Defendant No. 2, and partial cash consideration, may give rise to suspicion, but suspicion cannot substitute legal proof – Property was transferred for stated consideration under duly registered deed and possession duly followed – There is no evidence to prove that transfer rendered transferor insolvent or that creditor suffered any actual and irretrievable prejudice – No such fraudulent intent has been proved in present case – Impugned judgment and order passed by courts below set aside.(Paras 15, 16, 20 and 21)

Facts of the case:

The principal issue that arises for consideration in this appeal is, whether registered sale deed dated 28.06.2004 executed in favour of the original applicant constitutes a fraudulent transfer under Section 53 of T.P. Act, and consequently, whether attachment before judgment ordered by trial Court in O.S. No. 684 of 2004 could validly operate against property in question.

Findings of Court:

Registered sale deed dated 28.06.2004 executed in favour of original applicant is valid. Consequently, attachment before judgment ordered on 13.02.2005 could not legally extend to said property. The claim petition filed by original applicant under Order XXXVIII Rule 8 CPC read with Order XXI Rule 58 CPC is therefore sustainable. Accordingly, impugned judgment and order passed by courts below are set aside.

Result : Civil Appeal allowed.