Facts Of The Case:
The dispute originated from a sale agreement dated May 10, 2002, between the original appellant, L.K. Prabhu, and the third defendant, V. Ramananda Prabhu, who acknowledged a liability of ₹17.25 lakhs. It was stipulated that upon default, the defendant would convey 5.100 cents of property with a building for ₹35 lakhs. On June 28, 2004, following further payments, a registered sale deed was executed in favor of the original appellant.Subsequently, on December 18, 2004, the respondent-plaintiff filed a suit for money recovery against the defendants and obtained an order of attachment before judgment on February 13, 2005, concerning the same property, claiming it belonged to the third defendant. The original appellant, claiming ignorance of the attachment until 2007, filed a claim petition for release of the property. The trial court dismissed the petition, holding the transfer fraudulent under Section 53 of the Transfer of Property Act. The High Court upheld the rejection but remanded the matter to determine any genuine consideration payable. Aggrieved, the appellants approached the Supreme Court.
Procedural History:
The procedural history began with the trial court’s order dated February 24, 2009, in I.A. No. 2627 of 2007 in O.S. No. 684 of 2004, where the Sub Court, Ernakulam, dismissed the claim petition filed by the original applicant, L.K. Prabhu, holding that the sale deed in his favor was a fraudulent transfer intended to defeat creditors and was squarely hit by Section 53 of the Transfer of Property Act, 1882.Aggrieved by this dismissal, the original applicant preferred RFA No. 347 of 2009 before the High Court of Kerala at Ernakulam. During the pendency of this first appeal, the original applicant passed away, and his legal heirs were brought on record as the appellants. The High Court, by its final judgment dated February 13, 2023, partly allowed the appeal. While it upheld the trial court’s rejection of the claim petition, it remanded the matter back to the trial court with a direction to determine the extent, if any, of the purchaser’s entitlement towards recovery from the debtor, including any part of the genuine sale consideration, and to dispose of the matter within two months.Thereafter, being dissatisfied with the High Court’s judgment, the legal heirs of the original applicant approached the Supreme Court by filing Special Leave Petition (C) No. 15592 of 2023. The Supreme Court granted leave on July 14, 2023, converting the petition into Civil Appeal No. of 2025, and directed the parties to maintain status quo. The Supreme Court then heard the matter and delivered the final judgment on November 28, 2025.
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Court Observation:
The Supreme Court made several critical observations regarding the scope and limitations of attachment before judgment. The Court observed that Order XXXVIII Rule 5 CPC operates only at the stage of ordering attachment and requires 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 Court further observed that Rule 8 of Order XXXVIII, read with Order XXI Rule 58 CPC, governs the adjudication of third-party objections, but this mechanism cannot be expanded to transform attachment proceedings into a substantive inquiry under Section 53 of the Transfer of Property Act.The Court significantly observed that attachment before judgment is merely a protective measure to secure the plaintiff’s prospective decree and does not create any charge or ownership in favor of the plaintiff. It observed that Rule 10 of Order XXXVIII expressly safeguards the rights of strangers by clarifying that attachment before judgment does not affect pre-existing rights of non-parties. The Court emphasized that the combined reading of Rules 5 to 10 makes it clear that attachment before judgment is only an ancillary, protective relief and cannot prejudice pre-existing rights or confer any substantive advantage upon the plaintiff beyond securing satisfaction of the decree.Regarding fraudulent transfers, the Court observed that the onus to establish that a transfer was made with intent to defeat or delay creditors lies squarely upon the party alleging fraud. Mere suspicion, inadequacy of consideration, or the existence of a relationship between parties cannot constitute proof of such intent. The Court observed that while the conclusion for fraud must rest on established facts, suspicion cannot substitute legal proof. The Court further observed that under Section 53 of the T.P. Act, a transaction would be voidable only if it is proved to have been made with intent to defeat or delay creditors, and in the absence of such proof, a registered sale deed must prevail.
Final Decision & Judgement:
The Supreme Court allowed the civil appeal and set aside the impugned judgment and order passed by the High Court of Kerala and the trial court. The Court held that the registered sale deed dated June 28, 2004, executed in favor of the original applicant, was valid and that the attachment before judgment ordered on February 13, 2005, could not legally extend to the said property since the transfer had been completed nearly six months prior to the institution of the suit. The Court declared that the claim petition filed by the original applicant under Order XXXVIII Rule 8 CPC read with Order XXI Rule 58 CPC was sustainable, as the property did not belong to the defendant on the date of filing of the suit. Consequently, the Court directed that the attachment before judgment shall not operate against the property in question, thereby upholding the rights of the appellants as bona fide purchasers for valuable consideration. The Court also clarified that any pending applications stood disposed of, and ordered no costs.
Case Details:
Case Title: L.K. Prabhu @ L. Krishna Prabhu (Died) Through LRs v. K.T. Mathew @ Thampan Thomas & Ors. Civil Appeal No.: (Arising out of SLP (C) No. 15592 of 2023) Date of Judgment: November 28, 2025 Judges/Justice Names: Justice B.V. Nagarathna & Justice R. Mahadevan
Download The Judgement Here