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2024 Supreme(Online)(MAD) 21382
HIGH COURT OF MADRAS
Hon`ble Mr.Justice R.VIJAYAKUMAR
K.GUNASEKARAN – Appellant
Versus
SRI JEMBU KRISHNAMOORTHY – Respondent
A fraudulent transfer under Section 53 of the Transfer of Property Act can be actionable in execution proceedings, and such claims must be carefully examined by the executing court.
Headnote:
CPC - Claim Petition - Order 21 Rule 58, Transfer of Property Act Sections 52, 53 - The court analyzed a claim petition concerning the attachment of property sold by a judgment debtor to determine fraudulent transfers, concluding that the Executing Court improperly allowed the claim without addressing Section 53 implications for fraudulent transactions.
Fact of the Case:
A court auction purchaser appealed a claim petition under Order 21 Rule 58 of the Code of Civil Procedure filed by a third party claiming ownership over a property sold by the judgment debtor prior to attachment.
Finding of the Court:
The court identified that the judgment debtor fraudulently transferred property after notice of a pending suit, which the Executing Court overlooked, thus failing to address its duties regarding fraudulent transfers under Section 53 of the Transfer of Property Act.
Issues: Whether the execution court properly handled a claim petition concerning property sold by a judgment debtor and whether the transfer constituted a fraudulent transaction under Section 53 of the Transfer of Property Act.
Ratio Decidendi: The execution court erred by not scrutinizing the fraudulent transfer issue under Section 53; hence, the order allowing the claim was set aside for further consideration.
Final Decision: The Civil Miscellaneous Appeal is allowed, the lower court's order is set aside, and the matter is remitted for further review.
JUDGMENT
A third party Court auction purchaser in a money suit is the appellant herein, challenging the allowing of a claim petition filed under Order 21 Rule 58 of Code of Civil Procedure.
2. The 2nd respondent herein as plaintiff had filed the above said suit for recovery of money. The suit was decreed on 31.10.2007. He filed E.P.No.3 of 2009 to bring the properties for sale in order to realize the money decree. The property was sold on 26.04.2010.
3. Before confirmation of sale, a third party who is arrayed as the
1st respondent in the appeal had filed E.A.No.22 of 2010 under Order 21 Rule 58 of Code of Civil Procedure making a claim over the property. A perusal of the claim petition indicates that the claim petitioner had purchased the property on 17.09.2007 from the judgment debtor. However, the property was attached in execution proceedings only on 29.07.2008 and it was sold on Court auction on 26.04.2010. Therefore, on the date of attachment and on the date of sale of the property, the judgment debtor did not have any title over the property. Hence, he had filed the claim petition to raise the order of attachment.
4. Admittedly, the Court auction purchaser was not impleaded as one of the respondents in the claim petition eventhough the sale has already taken place. The decree holder has filed a counter contending that the summons in the main suit was sent to the defendants on 10.08.2007 and it was affixed on 04.08.2007. The private notice addressed to the defendant was returned as “refused” on 03.09.2007. Thereafter, paper publication was effected in the application for attachment before judgment. Therefore, the judgment debtor was very well aware of the pendency of the suit as well as the pendency of an application for attachment before judgment. Knowing fully well, he had fraudulently transferred the property in favour of the claim petitioner.
Hence, he had prayed for dismissing the application.
5. The Executing Court after considering the submissions on either side, has arrived at a finding that the suit being money suit , Section 52 of the Transfer of Property Act will not be applicable. The Executing Court further found that on the date when the property was attached, it had already been sold by the judgment debtor in favour of the claim petitioner. Therefore, there is no bar for the defendant to execute the sale deed in respect of a suit property. Based upon the above said findings, the claim petition was allowed. Challenging the same, the present appeal has been filed by the Court auction purchaser.
6. The learned counsel appearing for the Court auction purchaser /
appellant had contended that when the defendant was aware of the pendency of the suit and he has refused to receive notice in the attachment before judgment application, the sale effected by them should only be consumed as a fradulent sale to defraud the creditor. In such circumstances, the Executing Court ought not to have allowed the claim petition based upon the fact that the sale has been effected much prior to the date of order of attachment. Hence, he prayed for allowing the appeal.
7. Even though the claim petitioner has been served, he has not chosen to appear either in person or through counsel.
8. I have carefully considered the submissions made on the side of teh appellant and perused the material records.
9. Along with the suit for recovery of money, the plaintiff had filed I.A.No.316 of 2007 for effecting attachment before judgment. Notice was ordered in the said application on 01.07.2007. The suit summons could not be served in person and they were affixed on 04.09.2007. The said affixture has been marked as Exhibit R.4. The private notice sent by the plaintiff's counsel in the attachment before application was refused by the defendant on 03.09.2007. The said refusal cover has been marked as Exhibit R.5. Two weeks thereafter, the judgment debtor has sold the property in favour of the claim petitioner on 17.09.2007. The suit summons have been served u
