Supreme Court rules that property transferred via registered sale deed before suit filing cannot be attached before judgment - creditor's remedy lies in separate suit under Section 53 of Transfer of Property Act for fraudulent transfer claims, not through attachment proceedings.
Can a creditor attach a property that was already sold to someone else through a registered sale deed before the creditor filed their lawsuit?
No, this is legally impermissible and beyond the scope of attachment proceedings.
The Supreme Court has established that attachment before judgment under Order XXXVIII Rule 5 CPC cannot extend to property already transferred via registered sale deed prior to the institution of the suit because:
The court set aside the High Court and trial court orders, holding that the registered sale deed dated 28.06.2004 is valid and the subsequent attachment on 13.02.2005 could not legally affect the property.
Original Agreement: L.K. Prabhu enters agreement with V. Ramananda Prabhu acknowledging liability of Rs. 17.25 lakhs with property transfer clause for default
Payment Endorsements: Rs. 3 lakhs cash and Rs. 2.5 lakhs cheque paid to vendor as evidenced by endorsements on agreement reverse
Registered Sale Deed: Property transferred to L.K. Prabhu via registered sale deed Document No. 3752/2004 at SRO, Ernakulam
Suit Filed: K.T. Mathew files O.S. No. 684 of 2004 for recovery of Rs. 43.82 lakhs from defendants including property owner
Attachment Ordered: Trial court orders attachment before judgment of the property under Order XXXVIII Rule 5 CPC
Claim Petition: L.K. Prabhu files I.A. No. 2627 of 2007 under Order XXXVIII Rule 8 CPC seeking property release from attachment
Trial Court Rejection: Trial court dismisses claim petition, holds transfer fraudulent under Section 53 T.P. Act
High Court Judgment: High Court partly allows appeal but upholds attachment, directs trial court to determine genuine consideration
Supreme Court Victory: Sets aside all lower court orders, validates sale deed, quashes attachment
| Situation | Your Rights | Proper Legal Action |
|---|---|---|
| Property transferred before suit filing | Cannot attach property under Order XXXVIII Rule 5 CPC | File separate suit under Section 53 T.P. Act alleging fraudulent transfer |
| Property transferred after suit filing | May attach property if transfer intended to defeat creditors | Proceed with attachment and challenge transfer in same suit |
| Suspicion of fraudulent transfer | Burden to prove fraud with cogent evidence | Gather evidence of fraudulent intent, not just suspicious circumstances |
| Bona fide purchaser with consideration | Limited rights against purchaser - must prove purchaser's collusion | Focus on proving purchaser's knowledge of fraudulent intent |
Provisional seizure of defendant's property during lawsuit pendency to secure potential decree, governed by Order XXXVIII CPC.
Legal provision allowing court to attach defendant's property before judgment if defendant intends to obstruct decree execution.
Statutory provision making fraudulent transfers voidable at creditor's option, with protection for bona fide transferees.
Person who buys property in good faith, for valuable consideration, without notice of any defects in title or fraudulent intent.
"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. Any adjudication in the claim petition that ignores this statutory pre-condition would be contrary to the scheme of the Code and settled principles governing attachment before judgment."
"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 when the property stands transferred prior to suit filing. The plaintiff's remedy, if any, lies exclusively under Section 53 of the T.P. Act."
This landmark judgment reaffirms that property rights created through registered instruments cannot be arbitrarily interfered with through attachment proceedings. It establishes clear boundaries between different legal remedies and protects the sanctity of property transactions completed in accordance with law.
This content is for informational purposes only and does not constitute legal advice. Consult a qualified legal professional for specific legal guidance. The information provided is based on judicial interpretation and may be subject to changes in law.
Making Supreme Court judgments accessible and actionable for every Indian citizen navigating legal challenges.
This analysis decodes a complex property rights judgment to help citizens understand their protection against arbitrary attachment of legally acquired properties and the proper legal remedies available to all parties.