The Supreme Court has ruled that attachment before judgment cannot legally apply to any property already transferred before a suit is filed, reaffirming that prior registered sale deeds override later proceedings and remain fully protected.
New Delhi: The Supreme Court delivered an important ruling regarding attachment before judgment, asserting that a registered sale deed executed prior to the initiation of a civil suit cannot be set-aside by a subsequent attachment order.
This decision arose from the case L.K. Prabhu @ L. Krishna Prabhu (Died) Through LRs vs. K.T. Mathew @ Thampan Thomas & Others, Civil Appeal stemming from SLP (C) No.15592 of 2023, which was decided on 28 November 2025.
The Court granted the appeal and nullified the orders of both the Kerala High Court and the trial court, affirming the validity of the sale deed dated 28.06.2004 in favor of the original applicant and ruling that the attachment order dated 13.02.2005 could not be legally enforced against this property.
A Division Bench, consisting of Justice B.V. Nagarathna and Justice R. Mahadevan, stated in their ruling,
“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.”
The Bench further clarified that,
“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.”
The situation began when the predecessor of the appellants, L.K. Prabhu @ L. Krishna Prabhu, entered into a sales agreement on 10.05.2002 with Defendant No. 3, V. Ramananda Prabhu, wherein the defendant acknowledged a liability of Rs. 17,25,000 and agreed to convey 5.100 cents of property with a building in Ernakulam for Rs. 35 lakhs in the event of default.
The appellants claimed that endorsements on the agreement indicated a payment of Rs. 3,00,000 in cash and Rs. 2,50,000 by cheque on 25.06.2004. When Defendant No. 3 failed to honor his commitments, a registered sale deed was executed on 28.06.2004. Since then, the original applicant has been in possession of the property and managing nine guest houses there.
Subsequently, on 18.12.2004, plaintiff K.T. Mathew filed a suit for recovery of Rs. 43,82,767 and sought attachment before judgment, asserting that the property still belonged to Defendant No. 3. The court issued an attachment order on 13.02.2005.
The original applicant became aware of this only in 2007 and filed a claim petition, which the trial court rejected, ruling that the sale was fraudulent under Section 53 of the Transfer of Property Act.
The High Court upheld this rejection, returning the matter solely to assess any potential recovery amount for the purchaser from the debtor.
In the Supreme Court, the appellants contended that attachment before judgment cannot apply to property transferred prior to the suit’s filing.
They referenced legal precedents indicating that when a valid sale deed exists before the lawsuit, it cannot be deemed collusive or fraudulent without an independent proceeding under Section 53 of the Transfer of Property Act.
They argued that findings of fraud were based solely on speculation, emphasizing that “suspicion cannot be a substitute for proof” no matter how dubious a transaction may appear.
The respondents, however, maintained that a claim petition under Order XXXVIII Rule 8 must be settled like claims under Order XXI Rule 58, allowing creditors to contest fraudulent transfers under Section 53 of the Transfer of Property Act in such contexts.
They cited precedential cases that broadened the interpretation of these provisions following the 1976 amendment, claiming that challenges to fraudulent transfers need not occur through separate lawsuits.
The Supreme Court closely evaluated the relevant provisions of Order XXXVIII Rules 5 to 10, Order XXI Rule 58, and Section 53 of the Transfer of Property Act.
It concluded that attachment before judgment serves merely as a protective measure to secure a potential future decree and cannot infringe upon rights that third parties have already established prior to attachment.
The Court emphasized that as of 18.12.2004, the date the suit was filed, the property had “already stood transferred to the original applicant,” thus negating the fundamental condition for attachment ownership by the defendant at the time of the lawsuit.
It further explained that any claims of fraudulent transfer fall strictly within the scope of Section 53 of the T.P. Act and cannot be resolved merely through a claim petition, which cannot be converted into an extensive Section 53 adjudication.
The Court determined that there was insufficient evidence to show that the sale deed was executed with the intention of defrauding creditors.
It noted that,
“However suspicious a transaction may appear, suspicion cannot be a substitute for proof, and that community ties, financial hardships, or partial cash payments do not establish fraud.”
Furthermore, it allowed that past liabilities are recognized as valid consideration in law and that the previous agreement and subsequent payments convincingly indicated that consideration existed. Altering the performance timeline of the agreement did not render the sale fraudulent.
Reiterating established legal principles, the Court maintained that a completed sale or agreement for sale prior to attachment constitutes an obligation tied to the property, and thus an attaching creditor can solely attach the rights, title, and interest of the judgment debtor.
Consequently, a completed sale predating the initiation of a suit or attachment must take precedence.
Ultimately, the Supreme Court affirmed the validity of the sale deed executed on 28.06.2004 and ruled that the attachment order dated 13.02.2005 could not apply to the property in question. It found the claim petition filed by the original applicant to be valid and criticized both lower courts for their rejection of it.
The Court concluded with the declaration that “the impugned judgment and order passed by the courts below are set aside,” allowing the appeal without any order regarding costs.
Case Title: L.K. Prabhu @ L. Krishna Prabhu (Died) Through LRs v. K.T. Mathew @ Thampan Thomas & Ors. (Neutral Citation: 2025 INSC 1364)
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