The court determined that a pre-attachment transfer of property is valid if no evidence demonstrates fraud under Section 53 of the Transfer of Property Act.

JUDGMENT :

EASWARAN S., J.

This appeal is at the instance of a claim petition an application under Order 21 Rule 58 of the Code of Civil Procedure. The appellant claimed title over the petition schedule property by virtue of a registered assignment in her favour by the second respondent herein on 26.08.2002. The first respondent took out execution proceedings for execution of judgment and decree in O.S.No.256 of 2006, which is a decree for recovery of money against the third respondent company, of which the second respondent is the Managing Director. The appellant claimed that the property absolutely vested in her by the transfer effected way back in 2002 and that the attachment before judgment obtained in O.S.No.256 of 2006 cannot operate against her interest. Thus, it was contended that as on the date of attachment, there is no interest subsisting on the petition schedule property in favour of the second respondent, who is the judgment debtor in the suit. The executing court, however, rejected the claim by holding that transfer under Ext.A1 is vitiated and is hit by Section 53 of the Transfer of Property Act and accordingly dismissed the claim petition. Aggrieved, the appellant preferred A.S.No.164 of 2014, which was dismissed by the II Additional District Court, Kozhikode and hence the present appeal. On 09.10.2015, this Court admitted the appeal and granted on the substantial questions of law framed in the memorandum of appeal, which reads as follows:

“i. Was not the courts below bound to consider the issue as to whether the liability of a private limited company can be fastened on its directors?

ii. Whether for realization of amounts due from the company, the property of the appellant that was transferred much prior to the institution of the suit and much prior to the order of attachment be proceeded against?

iii. In the absence of any existing debt, attachment or charge on the property as on the date of transfer, whether the property transferred much before the institution of the suit be said to be hit by S.53 of the Transfer of Property act?

iv. In the absence of any evidence to show that the transfer effected years before the suit was instituted, the property was undervalued, was not the court below in error in arriving at a presumption that the transfer was with an intend to defeat or delay the creditors?

v. When transfer of a property is effected before the attachment and when the 2nd respondent had no right over the property attached, were not the courts below wrong in not allowing the claim for the said reason alone?

vi. Whether in the light of the fact that transfer was made before the attachment was effected, the courts below were required and justified in going into the question whether the said transfer was fraudulent or not and hence hit by Section 53 of the Transfer of Property Act?

vii. Was not the courts below not in error to have found that the contention raised by the 1st respondent regarding Ext.A1 to be a sham document is contrary to the contention raised by the 1st respondent basing on S.53 of the T.P Act in so far as if the contention of the 1st respondent is that Ext.A1 is a sham document, then S.53 will have no application, for a challenge based on S.53, the decree holder must admit the transfer as a real one, but with fraudulent intention?

viii. Whether the transfer of the claim petition schedule property made by the 2^nd respondent vide Ext.A1 in favour of the appellant is a fraudulent transfer as defined in S.53 of the Transfer of Property Act? ”

2. Heard Sri.L.Rajesh Narayan Iyer, learned counsel for the appellant and Sri.P.V.Shailajan, learned counsel for the first respondent.

3. Sri.L.Rajesh Narayan Iyer, learned counsel for the appellant pointed out that in respect of the sale transaction, in O.S.No.97 of 2005, there was an attachment and that a claim petition preferred under Order 21 Rule 58, was allowed and that an appeal preferred in A.S.No.58 of 2014 was dismissed by the first appellate court and ther