Property Transferred Prior To Filing Of Suit Cannot Be Attached Under Order 38 Rule 5 CPC : Supreme Court

The Supreme Court held that a property transferred through a registered sale deed prior to the filing of a suit cannot be subjected to attachment before judgment under Order XXXVIII Rule 5 of the Code of Civil Procedure (CPC).

“It is well settled that attachment before judgment cannot extend to properties which have already been alienated prior to the institution of the suit…the property sought to be attached must belong to the defendant on the date of institution of the suit; property already transferred prior to the suit cannot be attached under this provision (Order 38 Rule 5 CPC).”, observed a bench of Justices BV Nagarathna and R Mahadevan while overturning the concurrent findings of the Kerala High Court and the Trial Court, which had entertained an application for attachment before judgment under Order XXXVIII Rule 5 CPC despite the fact that the property no longer belonged to the defendant on the date of the application, having already been sold to a bona fide purchaser through a registered sale deed.

The case arose from a transaction between the Appellant-purchaser and the debtor, who executed an agreement for sale in 2002 and a registered sale deed in June 2004. The Appellant-purchaser took possession and began operating a guesthouse on the property. Months later, in December 2004, the Respondent-creditor filed a money suit against the debtor and obtained an attachment before judgment over the same property in February 2005. Contesting the attachment, the Appellant-purchaser filed a claim petition under Order 38 Rule 8 CPC read with Order XXI Rule 58 CPC, which was rejected by the trial court on the ground that the sale was a fraudulent transfer under Section 53 of the Transfer of Property Act (TPA). The High Court substantially upheld the trial court's reasoning but remanded the matter on the limited question of consideration.

Aggrieved by the High Court's decision, the purchaser approached the Supreme Court, contending that once the defendant had already transferred the property to them through a registered sale deed prior to the filing of the suit, it was impermissible for the respondent to seek attachment before judgment. They argued that the essential condition under Order XXXVIII Rule 5 CPC, that the property must belong to the defendant at the time of the application, was not satisfied.

Finding force in the Appellant's contention, the judgment authored by Justice Mahadevan said an “attachment before judgment being an extraordinary and protective remedy, cannot extend to property already alienated to a bona fide third party prior to the filing of the suit.”

The Court observed since “the registered sale deed in favour of the original applicant was executed on 28.06.2004 i.e., several months prior to the institution of the suit...Consequently, at the time of filing of the suit, the property stood transferred and was no longer in the possession or ownership of Defendant No. 3. In such circumstances, the essential condition for invoking attachment before judgment under Order XXXVIII Rule 5 CPC – that the property belongs to the defendant on the date of institution of the suit – is absent. The plaintiff's remedy, if any, lies exclusively under Section 53 of the T.P. Act, which provides for setting aside a transfer made with intent to defraud creditors.”

The Court referred to the case of Hamda Ammal v. Avadiappa Pathar, (1991) 1 SCC 715, to held that “where execution of a sale deed is complete on the date of institution of the suit, an application under Order XXXVIII Rule 5 CPC is not maintainable.”

Allegation Of Prior Transfer To Be Fraudulent Must Be Addressed Under Section 53 TPA

The Court rejected the Respondent's argument that the transfer was fraudulent, intended to defeat Respondent creditors and unsupported by genuine consideration, stating that “the scope of Rule 5 is confined to securing the plaintiff's prospective decree by preventing the defendant from frustrating execution through alienation or concealment of his property during pendency of the suit. The essential condition, however, is that the property sought to be attached must belong to the defendant on the date of institution of the suit; property already transferred prior to the suit cannot be attached under this provision. In cases where such prior transfer is alleged to be fraudulent, the remedy lies under Section 53 of the T.P. Act and not under Order XXXVIII Rule 5 CPC.”

According, the appeal was allowed, holding that claim petition filed by the Appellant-original applicant before the trial court to be sustainable.

Cause Title: L.K. PRABHU @ L. KRISHNA PRABHU (DIED) THROUGH LRs VERSUS K.T. MATHEW @ THAMPAN THOMAS & ORS.

Citation : 2025 LiveLaw (SC) 1154

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Appearance:

For Petitioner(s) : Mr. Anil Kaushik, Sr. Adv. Adv. Mr. Mohammed Sadique T.A., AOR Mr. Nishe Rajen Shonker,  Mrs. Anu K Joy, Adv. Mr. Alim Anvar, Adv. Mr. Santhosh K, Adv. Mrs. Devika A.l., Adv. Mr. Rahul Narang, Adv. Mrs. Rao Vishwaja, Adv. Mr. Harshed Sundar, Adv. Mr. Nihar Dharmadhikari, Adv. Mr. Rajat Rana, Adv. Mr. Mayank Gautam, Adv. Mrs. Shashi Sharma, Adv.

For Respondent(s) : Ms. Liz Mathew, Sr. Adv. Ms. Aakashi Lodha, AOR Mr. Omkar Hemanth, Adv. Mr. Namanjeet Bhatia, Adv.