Post-Award Property Purchasers Have No Right To Resist Execution Of Arbitral Award : Supreme Court

The Supreme Court has reaffirmed that a transferee who purchases property from a judgment-debtor during the pendency of proceedings has no locus to resist or object to the decree passed in favour of the judgment-creditor. A bench comprising Justice Pankaj Mithal and Justice S. V. N. Bhatti considered the matter, where the appellant, having purchased the property from Respondent No. 2 (the judgment-debtor) after an arbitral award had been passed in favour of Respondent No. 1, sought to resist the enforcement of that award. The dispute traces back to a 1998 cotton supply agreement between Respondent No. 1, The Cotton Corporation of India Limited (CCI), and Respondent No.2-M/s Lakshmi Ganesh Textiles Limited. After non-payment of dues, CCI initiated arbitration proceedings in 1999. An arbitral award passed on June 11, 2001, directed the textile company to pay over ₹26 lakh with interest. Though a challenge to the award under Section 34 of the Arbitration and Conciliation Act, 1996 was dismissed in 2013, CCI initiated execution proceedings only in 2019. By then, the judgment-debtor had sold one of its properties in 2015 to the appellant, R. Savithri Naidu, the mother of the company's Managing Director and a former non-executive director.aWhen the executing court ordered conditional attachment of the property in 2021, the appellant objected under Order XXI Rule 58 CPC, claiming absolute ownership as a purchaser for value. Both the executing court and the High Court rejected her claim, leading to the appeal before the Supreme Court. The issue was whether a post-award purchaser could resist execution of a money decree, and whether the doctrines of lis pendens and Order XXI Rule 102 CPC apply only to property-specific decrees or also to money decrees. Affirming the impugned ruling, the judgment authored by Justice Bhatti rejected the Appellant's argument of allowing the her being a pendente lite transferees to object to the decree/award passed in favor of the Respondent No.1. The Court said that even no proof was submitted by the Appellant, to show that she was not aware of the award, as the property was transferred to her post-award. Moreover, the Court accepted the Respondent No.1's contention holding the transaction to be collusive, noting that the appellant, being the mother of the director of Respondent No. 2, had entered into the arrangement with the intent of defeating and frustrating the benefits flowing from the arbitral award in favour of Respondent No. 1. “If the argument of the appellant is accepted allowing pendente lite purchasers or third parties to bypass these strict procedural safeguards and institute separate suits or raise belated objections long after the execution processes (like attachment and sale) have advanced, it would completely derail the statutory machinery. Judgment-debtors would be incentivized to systematically defeat decrees by transferring properties or planting surrogate objectors to initiate endless collateral litigation.”, observed. In essence, the Court held that the appellant was bound by the doctrine of lis pendens embodied in Section 52 of the Transfer of Property Act, 1882. Consequently, the property purchased by the appellant from Respondent No. 2 after the arbitral award had been passed against the latter was squarely hit by Section 52, preventing the appellant from acquiring absolute ownership so as to justify her attempt to resist the attachment of the property. “To sum up, we note that the Appellant is a purchaser post-arbitral award for recovery of the amount. The execution proceeding was pending when the sale deed was entered into between Respondent No. 2 and the Appellant. Moreover, the Appellant failed to discharge the onus on the sale being without notice of the existing claim. The arbitral award remains unrealised till date. Therefore, in the circumstances of this case, and by following the ratio in Danesh (supra) we hold that the claim petition of the Appellant is rightly dismissed by the courts below.”, the court held. Accordingly, the appeal was dismissed.HeadnoteArbitration and Conciliation Act, 1996 – Section 36 – Code of Civil Procedure, 1908 – Order XXI Rule 58 and Rule 102 – Execution of Arbitral Award – Transferee Pendente Lite – The Supreme Court upheld the dismissal of a claim petition filed by a third-party purchaser who acquired property after an arbitral award (money decree) was passed against the vendor – held that an arbitral award is a "deemed decree" enforceable under Section 36 of the 1996 Act - Under Order XXI Rule 102 CPC, the protections for bona fide claimants do not extend to a transferee pendente lite—defined as one to whom property is transferred after the institution of the suit/proceeding.Doctrine of Lis Pendens in Money Decrees – Supreme Court rejected the argument that lis pendens does not apply to simple money suits - If Section 52 of the Transfer of Property Act were excluded from money suits, a judgment-debtor could...

Post-Award Property Purchasers Have No Right To Resist Execution Of Arbitral Award : Supreme Court

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Yash Mittal

Post-Award Property Purchasers Have No Right To Resist Execution Of Arbitral Award : Supreme Court

Yash Mittal

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