Transfer of Property Prior to Suit Bars Attachment Under Order 38 Rule 5 CPC

Attachment before judgment is an extraordinary remedy granted to a plaintiff to secure satisfaction of a future decree. However, the law places clear limits on the circumstances in which such attachment can be ordered. A critical safeguard embedded in Order 38 Rule 5 CPC ensures that attachment cannot be used to defeat already-existing and genuine proprietary rights of third parties.

In L.K. Prabhu @ L. Krishna Prabhu (Died) Through Legal Representatives vs. K.T. Mathew @ Thampan Thomas & Others (2025), the Supreme Court emphatically reaffirmed that where a property has already been transferred prior to the filing of the suit, an attachment before judgment cannot operate against such property – unless the transfer itself is shown to be fraudulent under Section 53 of the Transfer of Property Act.

Factual Matrix

The dispute arose out of a civil suit filed in December 2004. Defendant No. 3 entered into an agreement for sale with the original applicant (L.K. Prabhu) in 2002. Payments were made, and a registered sale deed was executed on 28.06.2004, transferring 5.100 cents of property to the purchaser. The purchaser took possession and operated guest houses on the property.

Later, the plaintiff filed a suit for recovery of money and applied for attachment before judgment, arguing that the property still belonged to Defendant No. 3. The attachment was granted on 13.02.2005, though the purchaser came to know of it only in 2007 and filed a claim petition for release of the property.

The trial court and High Court dismissed the claim, holding that the transfer was fraudulent under Section 53 TPA. The matter reached the Supreme Court.

Issue

The Supreme Court identified the central question:

• Whether a sale deed executed prior to institution of the suit can be subjected to attachment before judgment, and whether the validity of such sale can be examined within Rule 8 CPC claim proceedings or only under Section 53 TPA.

This required analysis of the stage of attachment, scope of adjudication, and fraudulent transfer doctrines.

Doctrine Reaffirmed: Transfer Prior to Suit = No Attachment

The Court made the legal position unambiguous:

“As on the date of filing of the suit, the property already stood transferred to the original applicant… the essential condition for attachment under Order 38 Rule 5 CPC was absent.”

The Court reiterated that attachment before judgment:

1. Is merely protective
2. Does not create rights in favour of the plaintiff
3. Cannot override prior proprietary interests of third-party transferees

Since the transfer to the purchaser was completed before suit was instituted, no attachment could legally operate on it.

Arguments

Appellants (Purchaser’s LRs) contended:

• Attachment cannot apply to property not owned by defendant on suit date.
• Only remedy for creditor alleging fraud is a Section 53 TPA suit, not claim proceedings.
• Suspicion ≠ Proof; sale deed was supported by genuine consideration.

Respondent argued:

• Post-1976 amendment, Order 21 Rule 58 allows full adjudication of fraudulent transfers in claim proceedings.
• Courts were correct in treating the transfer as designed to defeat creditors.

Statutory Framework Applied

1. Order 38 Rule 5 CPC – Attachment Before Judgment

The provision is preventive—not punitive. It may operate only when:

1. The property belongs to the defendant, and
2. He is attempting to obstruct or delay execution by disposing/removing property.

The Court emphasised that the remedy cannot apply where property is no longer owned by the defendant on the date of suit.

2. Order 38 Rule 8 Read With Order 21 Rule 58 CPC

Rule 8 mandates that objections to attachment before judgment must be adjudicated as if they were objections in execution proceedings. After the 1976 amendment, Order 21 Rule 58 empowers the court to determine all questions of title, right, or interest in property under attachment.

However, the Supreme Court clarified:

Adjudication under Rule 8 cannot replace a substantive challenge under Section 53 TPA where fraud is alleged.

3. Section 53 of the Transfer of Property Act, 1882 – Fraudulent Transfer

A transfer made with the intent to defeat creditors is voidable, not void.

The burden of proving fraud lies strictly on the creditor.

Suspicion is not proof.

In this case:

• There was no evidence showing fraudulent intent.
• Consideration was partly in cash and partly by adjustment of past liability.
• Sale was through a registered deed and followed by possession.

Thus, the transfer could not be set aside under Section 53 TPA.

Key Judgments Relied Upon

Vannarakkal Kallalathil Sreedharan v. Chandramaath Balakrishnan (1990)

• An agreement for sale creates an obligation enforceable even against attaching creditors.
• Attachment cannot override pre-existing contractual rights.

Hamda Ammal v. Avadiappan Pathar (1991)

• If sale precedes suit, Order 38 Rule 5 cannot apply.
• Fraud can only be challenged under Section 53 TPA.

These authorities strongly influenced the Court’s conclusion.

Why the Attachment Was Invalid

The Supreme Court’s reasoning can be summarised as follows:

The Court held:

Attachment before judgment cannot extend to property already transferred before institution of the suit.

Final Holding

The Supreme Court set aside orders of the High Court & Trial Court.

1. Sale Deed dated 28.06.2004 was declared valid.
2. Attachment order dated 13.02.2005 held inapplicable.
3. Claim petition succeeds; property must be released.
4. Without proof of malafide intent, property cannot be seized merely because a debt existed.

Conclusion

The Supreme Court judgment in L.K. Prabhu v. K.T. Mathew (2025) is a landmark reaffirmation of property rights and procedural fairness. It prevents creditors from retrospectively attaching property already sold to a genuine purchaser. Where creditors believe a transfer was fraudulent, they must seek a remedy under Section 53 TPA, not through summary attachment proceedings.

The ruling restores clarity:

Property transferred before institution of suit cannot be attached under Order 38 Rule 5 CPC – unless proven fraudulent under Section 53 TPA.

The decision is poised to be widely cited in banking recovery suits, executory disputes, and injunction-based proceedings involving third-party transferees.

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