The Supreme Court has held that a registered sale deed executed prior to the institution of a suit cannot be subjected to attachment before judgment, and any allegation of fraudulent intent must be established in an independent and substantive enquiry under Section 53 of the Transfer of Property Act, 1882. 1
The Bench observed that Order 38 Rule 5 CPC applies only when the property still belongs to the defendant on the date of filing of the suit. Where title has already been transferred, any protection sought by a creditor lies exclusively under Section 53 TPA. 1
The Court further emphasized that mere suspicion, inadequacy of consideration or community ties cannot substitute legal proof of fraud. It reiterated that a registered conveyance supported by valuable consideration and followed by possession prevails over a subsequent attachment, as attachment does not create any proprietary rights in favour of the creditor. 1
Holding thus, the Bench comprising Justices B.V. Nagarathna and R. Mahadevan set aside the Kerala High Court’s finding that the sale to the appellant was collusive and fraudulent, and allowed the claim petition under Order 38 Rule 8 read with Order 21 Rule 58 CPC. 1
“Suspicion cannot be a substitute for proof… Attachment before judgment does not override pre-existing rights of a bona fide transferee.” — Supreme Court 1
The judgment reinforces that a creditor cannot secure a better title than the judgment-debtor possessed, and attachment cannot retroactively defeat a valid completed sale. 1
Background
The dispute arose from a 2002 sale agreement between the original applicant (purchaser) and Defendant No.3, acknowledging a liability of ₹17.25 lakhs and stipulating conveyance upon default. After part-payments were made, a registered sale deed was executed on 28.06.2004 and the purchaser took possession, using the property as tourist guest houses. 1
Subsequently, the plaintiff-creditor filed a suit on 18.12.2004 seeking recovery of over ₹43 lakhs, and obtained attachment before judgment on 13.02.2005. The creditor alleged that the sale was fraudulent and intended to defeat his claim. 1
The trial court and High Court accepted the fraud allegation and rejected the claim petition. This led to the present appeal. 1
Supreme Court’s Analysis
✔ Property was not owned by the debtor when the suit was filed
✔ Order 38 Rule 5 CPC cannot operate on property already alienated
✔ Burden to prove fraud under Section 53 TPA lies on the creditor
✔ Antecedent debt constitutes valid consideration under Contract Act
✔ Claim petition procedure cannot substitute a full Section 53 adjudication
✔ Attachment is only protective — creates no charge or title
Conclusion
- Sale deed dated 28.06.2004 upheld as valid
- Attachment before judgment declared inapplicable
- Impugned orders of trial court and High Court set aside
- Civil Appeal allowed, with no costs
Case Title: L.K. Prabhu @ L. Krishna Prabhu (Dead) through LRs vs. K.T. Mathew @ Thampan Thomas & Ors.
Citation: 2025 INSC 1364
Court: Supreme Court of India
Date: 28 November 2025