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2025 Supreme(Online)(AP) 1518
HIGH COURT OF ANDHRA PRADESH
Venuthurumalli Gopala Krishna Rao, J
Kanneganti Durganand – Appellant
Versus
Yuvaraj Finance Pvt Ltd – Respondent
First Appeal No: 677/2006
For the Appellants/Petitioners: K A Narasimham
For the Respondents: T V Jaggi Reddy
A sale executed after the attachment of property is void against creditors, especially when the seller is aware of the attachment.
Headnote:(A) Code of Civil Procedure - Section 96 and Order XXI Rule 58 - Appeal challenging dismissal of application for recognition of right and release from attachment - Appellant claimed to be bona fide purchaser of property - Attachment was validly executed prior to sale - Court held that alienation after attachment is void against enforceable claims - No evidence of collusion between Judgment Debtor and Decree Holder proved. (Paras 23-24)
(B) Attachment - Legal implications - Attachment must be acknowledged and any sale post-attachment is ineffective against creditors unless prior registration before attachment executed. (Paras 23, 24)
Facts of the case:
Appellant purchased property under a deed executed two years after attachment; claims were dismissed due to failure to prove bona fides and knowledge of ongoing attachment, leading to inference of collusion with Judgment Debtor.
Findings of Court:
Appellant is not a bona fide purchaser as sale was executed while attachment was active, thus not entitled to relief from attachment.
Issues: 1) Whether the appellant has a right to the property as a bona fide purchaser despite existing attachment? 2) Was the Executing Court justified in its dismissal of the application?
Ratio Decidendi: The court affirmed that a sale executed after an attachment, known to the selling party, is void and does not confer rights against creditors.
Result: Appeal dismissed.
| Table of Content |
|---|
| 1. appeal challenges execution proceedings. (Para 1 , 2 , 3) |
| 2. claim based on purchase under sale deed. (Para 4 , 5 , 6) |
| 3. arguments on dismissal of claim application. (Para 10 , 11 , 12 , 14) |
| 4. legality of sale after attachment. (Para 18 , 20 , 21) |
| 5. decision based on findings on bona fide purchase. (Para 24 , 26 , 27) |
JUDGMENT: -
This Appeal Suit under Section 96 of the Code of Civil Procedure (“C.P.C.” for short) is filed by the appellant challenging the order and decree, dated 21.09.2006 in E.A.No.261 of 2005 in E.P.No.43 of 2002 in Arbitration Application No.66 of 1999 passed by the I Additional District Judge, East Godavari District at Rajahmundry (“Executing Court” for short).
2. The appellant herein is the petitioner-3rd party claimant and the 1st respondent herein is the Decree Holder and 2nd respondent herein is the Judgment Debtor in E.A.No.261 of 2005 in E.P.No.43 of 2002 in Arbitration Application No.66 of 1999.
3. The appellant/petitioner-3rd party claimant filed E.A.No.261 of 2005 in E.P.No.43 of 2002 in Arbitration Application No.66 of 1999 praying for recognizing the right, title and possession of the petitioner-3rd party claimant over the petition schedule property and to raise attachment over the schedule property effected in the Execution Petition.
4. Both the parties in the Appeal will be referred to as they are arrayed before the Executing Court.
5. The brief averments in E.A.No.261 of 2005 in E.P.No.43 of 2002 in Arbitration Application No.66 of 1999, are as under:
The petitioner-3rd party claimant is the owner of the petition schedule property having purchased the same under a registered sale deed, dated 11.06.2004 for a sum of Rs.25,00,000/-. He took possession of the schedule property on the date of execution of sale deed and since then he is in possession and enjoyment of the same. The petitioner is a bona fide purchaser of the property for a valuable consideration. The recitals of the sale deed also disclose that 2nd respondent-Judgment Debtor is the owner of the petition schedule property and it is free from all encumbrances. Sale notice was affixed on the suit schedule property by affixing on the wall of the schedule property. On enquiry, the petitioner came to know the respondent Nos.1 and 2 herein colluded together and bring the schedule property for sale behind the back of the petitioner. If the respondents are allowed to sell the property, the petitioner-claimant will sustain loss which cannot be compensated. Hence, the application is filed to recognize the right, title and possession of the petitioner-third party claimant over the schedule property.
6. The 1st respondent/decree-holder filed counter denying the averments mentioned in the petition and further contended as under: -
The Execution Petition was filed on 13.06.2002 and the attachment of the property was effected on 02.08.2002 and the matter is adjourned for return of warrant. The Judgment Debtor put up his appearance and failed to file the counter in spite of good amount of time, so the Judgment Debtor-2nd respondent was set ex parte and the Execution Petition was posted for sale papers. For the sale notice also publication was taken for appearance of 2nd respondent-Judgment Debtor and through his counsel filed memo of appearance and failed to file the counter. As the Judgment Debtor failed to respond, again the court directed for filing sale papers and encumbrance certificate and ordered for valuation of Execution Petition schedule property. Thus, the 1st respondent put up his appearance at various stages of proceedings, but failed to file the counter. The sale deed was obtained by the third party-petitioner on 11.06.2004 from the 2nd respondent, it is a long after attachment. The 2nd respondent, who was served with notice and aware of the attachment proceedings of the property and the proceedings of the Execution Petition sold the property on 11.06.2004. The 2nd respondent- Judgment Debtor in collusion with the petitioner
