1. Civil Revision Petition against order attaching property for recovery under Chit Fund Act, 1982 — Prior mortgage claim. (Para 1 , 2 , 3 )
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2026 Supreme(AP) 1289
HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
VENKATESWARLU NIMMAGADDA, J.
Jasti Srinivasa Rao, S/o. J. Anjaiah – Petitioner
Versus
M/S Magadarsi Chit Fund Private Limited, Rep. By Its Foreman/Manager – Respondents
C.R.P. No3248 of 2025
Decided On : 24-02-2026
Important Points
A prior secured mortgage does not bar the attachment of a property in execution proceedings, though the attachment remains subject to the mortgage. Subsequent sale of attached property without court permission to defeat a decree is void and fraudulent.
Subject
Civil Law - Execution of Decrees
Act Referred
Headnote
(A) Code of Civil Procedure, 1908 - Order XXI Rules 54, 64 and 66 - Attachment of mortgaged property - Existence of a prior secured mortgage does not bar the attachment of the property by an Execution Court; any such attachment shall be subject to the prior mortgage. (Para 6)
(B) Execution of Decree - Fraudulent transfer - Sale of property after attachment - Creating third-party interest in an attached property without the permission of the Execution Court, with the intention to defeat a decree and award, is a fraudulent transaction and void. (Para 7)
Facts of the case:
A decree holder filed execution proceedings for recovery of money based on an award and recovery certificate issued under the Chit Funds Act, 1982. The execution court allowed the attachment and sale of the judgment debtor's property. The judgment debtor challenged this, contending that the property was mortgaged to a bank prior to attachment and was subsequently sold to a third party after the attachment order was passed.
Findings of Court:
The court held that a prior mortgage is not a bar to attachment, although the attachment remains subject to the prior mortgage. It was further observed that the judgment debtor sold the property after the attachment order was passed, without seeking permission from the court, which was a clear attempt to defeat the decree.
Issues: Whether a property subject to a prior mortgage can be attached in execution proceedings and whether the subsequent sale of such attached property to a third party after attachment is legally sustainable.
Ratio Decidendi: A prior secured mortgage does not preclude the attachment of a property by an Execution Court. Any transfer of the attached property to a third party without the court's permission, intended to obstruct the realization of a decree and award, is fraudulent and void.
Result: CRP is dismissed with costs.
(B) Execution of Decree - Fraudulent transfer - Sale of property after attachment - Creating third-party interest in an attached property without the permission of the Execution Court, with the intention to defeat a decree and award, is a fraudulent transaction and void. (Para 7)
Facts of the case:
A decree holder filed execution proceedings for recovery of money based on an award and recovery certificate issued under the Chit Funds Act, 1982. The execution court allowed the attachment and sale of the judgment debtor's property. The judgment debtor challenged this, contending that the property was mortgaged to a bank prior to attachment and was subsequently sold to a third party after the attachment order was passed.
Findings of Court:
The court held that a prior mortgage is not a bar to attachment, although the attachment remains subject to the prior mortgage. It was further observed that the judgment debtor sold the property after the attachment order was passed, without seeking permission from the court, which was a clear attempt to defeat the decree.
Issues: Whether a property subject to a prior mortgage can be attached in execution proceedings and whether the subsequent sale of such attached property to a third party after attachment is legally sustainable.
Ratio Decidendi: A prior secured mortgage does not preclude the attachment of a property by an Execution Court. Any transfer of the attached property to a third party without the court's permission, intended to obstruct the realization of a decree and award, is fraudulent and void.
Result: CRP is dismissed with costs.
Legal Category Hierarchy
Advocates Appeared:
For the Petitioner: M/s Nimmagadda Revathi
For the Respondents: Sri P. Durga Prasad
For the Petitioner: M/s Nimmagadda Revathi
For the Respondents: Sri P. Durga Prasad
Table of Contents
2. Prior mortgage prevents attachment; property sold after attachment to defeat recovery — decree holder contends no bar. (Para 4 )
3. Prior mortgage does not bar attachment; sale after attachment is fraudulent and void against decree holder. (Para 6 , 7 )
4. Attachment of mortgaged property is permissible; subsequent sale without court permission is fraudulent and void. (Para 6 , 7 )
5. CRP dismissed with costs; petitioner directed to pay costs to District Legal Services Authority. (Para 8 )
6. Can a property already mortgaged to a bank be attached in execution proceedings?
Yes. There is no bar against attaching mortgaged property; any attachment is subject to the prior mortgage. (Para 6 )
7. What is the effect of a sale of attached property without court permission?
Such sale is fraudulent and void against the decree holder, as it is intended to defeat the decree. (Para 7 )
ORDER :
VENKATESWARLU NIMMAGADDA, J.
This instant Civil Revision Petition is filed by the 2nd JDr/petitioner herein against the decretal order dated 28.07.2025 passed in E.P.No.2/2023 in Dispute No.264/2022 on the file of the Court of the Learned Civil Judge (Senior Division), Addanki wherein the petition filed by the Decree Holder/Respondent No.1 herein under Order XXI Rule 54, 64 and 66 of CPC seeking to attach and sell the petition schedule property of the 2nd JDR/petitioner herein was allowed.
2. The petitioner herein is 2nd Judgment Debtor and respondents herein are decree holders in dispute No.264/2022. For the sake of convenience and clarity, parties arrayed as they were referred in Execution Proceedings. Respondent Nos.2 to 5 arrayed as not necessary parties in the present CRP.
3. The brief facts of the case
The Decree Holder filed arbitration case in Dispute No.264/2022 before the Hon’ble Deputy Registrar of Chits, Narasaraopet under Section 64 of the Chit Fund Act, 1982 praying to pass an award for recovery of chit amount of Rs.25,82,336/- against the 2nd JDr and 4 others, who are Respondent Nos.2 to 5 herein. Accordingly the Deputy Registrar of Chits, Narasaraopet passed an award dated 19.12.2022 which reads as under:
“a. That the dispute be and the same is hereby decreed with costs.
b. That the Opponents 1 to 5 jointly and severally do pay to the Disputant Company a sum of Rs.25,82,336/- (Rupees TWENTY FIVE LAKHS EIGHTY TWO THOUSAND THREE HUNDRED AND THIRTY SIX ONLY) with subsequent interest @ 18% p.a. on the principal amount of Rs.20,38,786/- (Rupees TWENTY LAKHS THIRTY EIGHT THOUSAND SEVEN HUNDRED AND EIGHTY SIX ONLY) from the date of Dispute till the date of Award and thereafter 12% p.a. from the date of Award till the date of realization.
c. That the Opponents 1 to 5 jointly and severally do also pay to the Disputant a sum of Rs.50,419/- (Rupees FIFTY THOUSAND FOUR HUNDRED AND NINETEEN ONLY) towards costs of the dispute.
The Deputy Registrar of Chits, Narasaraopet also issued recovery certificate on the same day i.e,. on 19.12.2022 under Section 71(A) of the Chit Funds Act, 1982 which shows as under:
“RECOVERY CERTIFICATE
(Under Section 71(A) of the Chit Funds Act, 1982)
This is to certify that on 19.12.2022 an award passed in the above dispute, thereby it is ordered that the opponents 1, 2, 3, 4 and 5 do pay jointly and severally to the disputant company. The total claim amount of Rs.25,82,336/- (Rupees TWENTY FIVE LAKHS EIGHTY TWO THOUSAND THREE HUNDRED AND THIRTY SIX ONLY) with entire costs and interest at the rate of 18% per annum on the principal amount of Rs.20,38,786/- from the date of filing of the dispute i.e., 24.06.2022 till the date of Award and thereafter at 12% p.a from the date of Award till realization against the Opponents 1, 2, 3, 4 and 5 with joint and several liability. Any other payment made shall be adjusted in aforesaid quantified entitled amount. This dispute is Accordingly Awarded in favour of Disputant and against the Opponents. Costs of the dispute of Rs.50,419/- are also awarded.”
Pursuant to the award and recovery certificate, the Decree Holder filed E.P.No.2/2023 on the file of Senior Civil Judge Court, Addanki in Dispute No.264/2022, in which the 2nd JDr filed counter-affidavit and after conducting a detailed enquiry, recording evidence, and marking the documents, the court below allowed E.P. No. 2 of 2023 by order dated 28.07.2025 and the same was assailed in the present Civil Revision Petition.
4. Learned counsel for 2nd JDr submits that the property attached in E.P.No.2/2023 on 03.03.2023 was mortgaged in favour of Andhra Bank prior to filing of E.P itself. Now the said bank was merged with Union Bank of India. Subsequently the 2nd JDr sold the EP schedule property under a registered sale deed dated 01.09.2023 in favour of 3rd party i.e., Gundapaneni Kavitha for Rs.21,00,000/-. The said amount was credited towards mortgage loan amount with the Union Bank of India and remaining amount of Rs
