K.T. Sankaran, J.
1. The question of law involved in this appeal is the following: While disposing of an application under Order XXXVIII Rule 8 read with Order XXI Rule 58 of the Code of Civil Procedure, is it obligatory to determine the question whether the transfer made by the judgment debtor is a fraudulent transfer within the meaning of Section 53 of the Transfer of Property Act
2. Rajan, the appellant, instituted the suit, O.S. No. 78 of 2006 on the file of the Court of the Subordinate Judge of Mavelikkara, against the second respondent Leela, for realisation of a sum of Rs. 8,69,000/- on the basis of the promissory note allegedly executed by Leela in favour of Rajan for Rs. 6,60,000/-. The suit was filed on 4.4.2006. I.A. No. 522 of 2006 was filed by the plaintiff under Order XXXVIII Rule 5 of the Code of Civil Procedure for attachment before judgment of an extent of 8.083 cents of land situated in Elamkulam Village in Ernakulam. The court below passed an order of attachment dated 12.4.2006. The attachment was effected on 17.4.2006. The first respondent, Dr. Jayasree Nayar, filed I.A. No. 2044 of 2006 for lifting the order of attachment before judgment made in I.A. No. 522 of 2006. The application was filed under Order XXI Rule 58 of the Code of Civil Procedure. The court below, by the order dated 24.6.2008, allowed the application and the attachment was lifted, which is under challenge in this appeal filed by the plaintiff.
3. Dr. Jayasree Nayar, the claimant, contended that the property under attachment had been sold by the defendant to one Dileep on 12.1.2006. Dileep sold the property to the claimant on 6.10.2006. The claimant stated that she is a bona fide purchaser for value. The property was purchased by Dileep before the institution of the suit. The claimant purchased the property after making due enquiries and believing that the property is free from mortgage, charge or attachment. The application for attachment before judgment was filed making a false statement that the property belonged to the defendant Leela at the time of making the application. She had no right in the property at the time of instituting the suit or at the time of passing the order of attachment.
4. The plaintiffs contended in the objection to I.A. No. 2044 of 2006 that the document dated 6.10.2006 was executed in favour of the claimant as a result of the collusion between the defendant, Dileep and the claimant. In the document dated 6.10.2006, the defendant Leela is also one of the executants. The sale deed in favour of the claimant is a fraudulent transfer and it does not bind the plaintiff, a creditor of the defendant.
5. Before this Court, a counter affidavit is filed by the claimant Dr. Jayasree Nayar in I.A. No. 3065 of 2008, the application filed by the plaintiff for staying the order passed by the court below. The plaintiff has filed a reply affidavit as well. Several facts which are not disclosed in the application and objection filed by the parties before the court below are revealed in the counter affidavit and reply affidavit. Arguments were advanced by the counsel on either side based on the averments in the affidavits as well. We think it fit to briefly refer to the averments in the affidavits as well.
6. In the counter affidavit, Dr. Jayasree Nayar states, inter alia, as follows: An extent of 13.253 cents of land belonged to one Thomas who sold that property to the defendant as per the sale deed dated 6.10.1977. The defendant was also granted the right of user of the pathway situated on the southern side of the property for convenient access to the property sold to the defendant. Subsequently, the defendant sold an extent of 5.170 cents of land to a stranger on 8.5.1990. The defendant retained the balance extent of 8.083 cents. She constructed a building in that property. The defendant made an advertisement in the newspaper inviting the prospective buyers for the purchase of 8.083 cents of land and the building. The property was sold to Dileep. It is understood that Dileep purchased the property for Rs. 45 lakhs. Dileep is a successful businessman. Dileep made an advertisement in the newspaper when he intended to sell the property. The claimant, a qualified medical practitioner, and her husband who is a Chartered Accountant decided to purchase the property. Accordingly, the property was purchased as per sale deed dated 6.10.2006, for a consideration of Rs. 56,50,000/-. Mutation was effected in the name of the claimant. Land tax and property tax are being paid by the claimant. The circumstances in which the defendant also was shown as an executant in the sale deed dated 6.10.2006, in spite of the fact that she had already transferred the property to Dileep on 12.1.2006, were explained in the counter affidavit as follows:
The defendant was made to join the execution of the sale deed in my favour only since there was no specific mention of the easement right over the pathway in the sale deed dated 12.01.2006 in favour of Sri. Dileep and that by way of abundant caution I thought of including that right also in the sale deed in my favour..The contention that Sri. Dileep was not given possession of the land and building is not correct. Sri. Dileep was using the building as his guest house after making suitable modifications after his purchase. The easement right over the pathway was specifically provided by the original owner while executing sale deed dated 6.10.1977 in favour of the defendant and when the defendant sold the property to Sri. Dileep the latter got the easement right also even if it was not specifically referred to in the sale deed. When I purchased the property by sale deed dated 06.10.2006 it was by abundant caution that I wanted conveyance of the easement right also and it was for that reason the defendant also joined execution of the sale deed dated 06.10.2006.
7. In the reply affidavit filed by the wife and power of attorney holder of the plaintiff/appellant, it is reiterated that the sale deed in favour of the claimant is a sham document and it never took effect and that the claimant is not a bona fide purchaser for value without notice. It is also averred that the sale deed in favour of the claimant 'is ab initio void and of no effect'.
8. Before going into the merits, we notice that in the sale deed in favour of Leela, the consideration shown was only Rs. 15,00,000/-. Though the claimant stated that she purchased the property for Rs. 56,50,000/-, the consideration shown in the sale deed in her favour was only Rs. 15 lakhs. That there was evasion of stamp duty is clear.
9. Sri. S. James Vincent, learned Counsel appearing for the appellant, submitted that the order passed by the court below is unsustainable and that the matter requires reconsideration, on remand. The counsel submitted that the question whether the transaction is a fraudulent transfer within the meaning of Section 53 of the Transfer of Property Act was not considered by the court below. While disposing of an application under Order XXI Rule 58 of the Code of Civil Procedure, all questions, including the questions relating to right, title or interest in the property attached, arising between the parties to a proceeding or their representatives and relevant to the adjudication of the claim or objection, shall be determined by the Court.
10. Sri. P.G. Parameswara Panicker, learned senior counsel appearing for the first respondent/claimant contended that an application for attachment before judgment under Order XXXVIII of the Code of Civil Procedure would be maintainable only in a case where the defendant, with an intention to obstruct or delay the execution of the decree that may be passed against him, is about to dispose of the whole or any part of his property. The property in question having already been transferred before the institution of the suit, the application under Order XXXVIII Rule 5 of the Code of Civil Procedure is not maintainable at all. The question whether the transfer is a fraudulent transfer need not be considered while disposing of a claim to attachment before judgment and such question would arise for consideration only in execution or in a properly constituted suit with the purchaser on the party array.
11. The counsel on either side cited several decisions of the Supreme Court and of different High Courts. We shall refer to the relevant decisions in the course of the judgment.
12. We would like to extract Rules 5,8 and 10 of Order XXXVIII of the Code of Civil Procedure for the sake of convenience.
5. Where defendant may be called upon to furnish security for production of property: (1) Where, at any stage of a suit, the Court is satisfied, by affidavit or otherwise, that the defendant, with intent to obstruct or delay the execution of any decree that may be passed against him, --
(a) is about to dispose of the whole or any part of his property, or
(b) is about to remove the whole or any part of his property from the local limits of the jurisdiction of the Court,
the Court may direct the defendant, within a time to be fixed by it, either to furnish security, in such sum as may be specified in the order, to produce and place at the disposal of the Court, when required, the said property or the value of the same, or such portion thereof as may be sufficient to satisfy the decree, or to appear and show cause why he should not furnish security.
(2) The plaintiff shall, unless the Court otherwise directs, specify the property required to be attached and the estimated value thereof.
(3) The Court may also in the order direct the conditional attachment of the whole or any portion of the property so specified.
(4) If an order of attachment is made without complying with the provisions of Sub-rule (1) of this rule, such attachment shall be void.
8. Adjudication of claim to property attached before judgment: Where any claim is preferred to property attached before judgment, such claim shall be adjudicated upon in the manner hereinbefore provided for the adjudication of claims to property attached in execution of a decree for the payment of money.
10. Attachment before judgment not to affect rights of strangers, nor bar decree-holder from applying for sale: Attachment before judgment shall not affect the rights, existing prior to the attachment, or persons not parties to the suit, not bar any person holding a decree against the defendant from applying for the sale of the property under the attachment in execution of such decree.
Sub Rules (1) and (2) of Rule 58 of Order XXI of the Code of Civil Procedure read thus:
58. Adjudication of claims to, or objections to attachment of, property:- (1) Where any claim is preferred to, or any objection is made to the attachment or, any property attached in execution of a decree on the ground that such property is not liable to such attachment, the Court shall proceed to adjudicate upon the claim or objection in accordance with the provisions herein contained:
Provided that no such claim or objection shall be entertained --
(a) Where, before the claim is preferred or objection is made the property attached has already been sold; or
(b) where the Court considers that the claim or objection was designedly or unnecessarily delayed.
(2) All questions (including questions relating to right, title or interest in the property attached) arising between the parties to a proceeding or their representatives under this rule and relevant to the adjudication of the claim or objection, shall be determined by the Court dealing with the claim or objection and not by a separate suit.
13. In Hamda Ammal v. Avadiappa Pathar : (1991) 1 SCC 715, the appellant Hamda Ammal purchased the property in question as per a sale deed dated 9-9-1970. The sale deed was registered on 26-10-1970. Meanwhile, a money suit was filed against the vendor of the property on 13-9-1970. In that suit, the property in question was attached before judgment on 17-9-1970. After referring to Rule 5 of Order XXXVIII C.P.C., the Supreme Court held:
The above provision itself makes it clear that the attachment before judgment would be made where the court is satisfied that the defendant is about to dispose of the whole or any part of his property or is about to remove the whole or any part of his property from the local limits of the jurisdiction of court with the intention to obstruct or delay the execution of any decree that may be passed against him. Thus this provision would not apply where the sale deed has already been executed by the defendant in favour of a third person. A transaction of sale having already taken place even prior to the institution of a suit cannot be said to have been made with the intention to obstruct or delay the execution of any decree. It would be a different case altogether if a creditor wants to assail such transfer by sale under Section 53 of the Transfer of Property Act, 1882 (hereinafter referred to as 'the Act') on the ground of a fraudulent transfer. Such suit would be decided on totally different considerations in accordance with the provisions of Section 53 of the Act.
It was also held that Rule 10 of Order XXXVIII CPC makes it clear that attachment before judgment shall not affect the rights, existing prior to the attachment, of persons not parties to the suit.
14. Advocate Sri. James Vincent submitted that the decision in Hamda Ammal's case was rendered in respect of a case which was decided before the C.P.C. Amendment Act of 1976 by which substantial changes were made in Rule 58 of Order XXI. The counsel contended that before the amendment, a suit could be filed under Rule 63 of Order XXI by the defeated party in the claim petition filed under Rule 58. The question regarding title was to be decided only in that suit and not in the claim petition. But, after the amendment of 1976, all questions including questions relating to right, title or interest in the property attached shall be determined by the Court dealing with the claim or objection and not by a separate suit. If so, the case put forward by the plaintiff that the transfer in favour of the claimant is a fraudulent transfer should also be decided in the claim petition. The court below has not decided the question of fraudulent transfer under Section 53 of the Transfer of Property Act and therefore, the matter requires a remand.
15. Sri. James Vincent heavily relied on the decision of the Bombay High Court in SBI Home Finance Ltd. v. Credential Finance Ltd. and Ors. : A.I.R. 2001 Bombay 179. In that case, in a money suit, immovable property was attached before judgment. The property was transferred to third parties before the order of attachment was made. The learned Single Judge dismissed the application for attachment before judgment. On appeal to the Division Bench, the order was set aside and the notice of motion was restored. It was held:
10. Undoubtedly, the properties in question were agreed to be and actually sold to the third and the fourth respondents much before the date on which the Suit was brought by the appellant. Normally, therefore, by reason of Rule 10 of Order XXXVIII, an attachment before judgment could not be levied against the properties which had already been sold to the third and the fourth respondents. Do the provisions of Section 53 of the Transfer of Property Act, 1882 make any change?, is the issue raised in the present Appeal.
11. Section 53 of the Transfer of Property Act, 1882 enables a creditor to avoid the transfer of immovable property which has been made with intent to defraud, defeat or delay and such a transfer would be voidable at the option of any creditor so defrauded, defeated or delayed. In the instant case, if the appellant can show that the transfer of the office premises at Nariman Point, Mumbai was made by the first respondent to the third and the fourth respondents under circumstances which would fall within the ambit of Section 53 of the Transfer of Property Act, 1882, the appellant would be entitled to avoid the transfer. In such a situation, the said properties shall be treated as properties of the first respondent itself, and the fact that a fraudulent attempt was made to put them beyond the reach of the appellant creditor, would be good reason to make an order of attachment before judgment under Order 38, Rule 5 of the Civil Procedure Code. We would have, therefore, thought that the issue as to whether the circumstances contemplated by Section 53 of the Transfer of Property Act, 1882 existed would have been first determined. .....
17. In our view, the situation after 1977 has radically changed. Gone is the summary procedure for determination of claims or objections to properties under attachment. Every such claim or objection has now to be adjudicated and no substantive Suit can be brought for such adjudication. The order made on such adjudication would have the force of a decree subject to Appeal. There is nothing in the provisions of the Transfer of Property Act, 1882 which requires the issue to be raised by a substantive Suit as Section 53 does not prescribe the mode by which the issue is to be determined. Under the present procedure of determination of such claims to property attached in execution or before attachment, when a person makes a claim or objection to the property under attachment, the Court has to finally adjudicate such claim or objection. If upon such claim or objection being preferred, the creditor raises the issue that such claim or objection has no substance because the transfer to the claimant/ objector is hit by Section 53, then the said issue also has to be adjudicated as it would involve adjudication of the title or right to or interest in the property. The Court deciding the claim would have to adjudicate all these issues and render a final decision which would have the force of a decree subject to Appeal...
16. The Bombay High Court in SBI Homes's case, referred to the decision of the Supreme Court in Hamda Ammal, and held thus:
19. In Hamda Ammal v. Avadiappa Pathar : (1991) 1 SCC 715, also the Supreme Court emphasised that order XXXVIII Rule 5 would not apply where a sale- deed had already been executed by the Defendant in favour of third person. It was pointed out that a transaction of sale, having already taken place even prior to the institution of a Suit, it could not be said to be made with intention to obstruct or delay the execution of any decree. Interestingly, the Supreme Court further observed, 'It would be a different case altogether if a creditor wants to assail such transfer by sale under S.53 of the Transfer of Property Act, 1882.' The Supreme Court no doubt emphasised Order XXXVIII Rule 10 to show that an attachment before judgment shall not affect the rights existing prior to the attachment of persons not parties to the Suit. We are unable to accept the contention of the Respondents that this case indicates that the issue of alienation could not be raised in the proceedings for adjudication of the claim to the property or that it could be raised only in a substantive Suit. The Supreme Court has merely indicated that S.53 is a different cup of tea, without indicating the manner in which S.53 had be pressed forward.
17. Sri. James Vincent also relied on the decision in Alamelu Ammal v. Chinnaswamy Reddiar A.I.R. 1989 Mad 311 and Abdul Jalal v. Mariya Financiers 2002 (2) KLT 107. In A.I.R. 1989 Mad 311, in a suit on promissory note filed on 6-7-1978, attachment before judgment was ordered on 12-9-1978. Decree was passed on 19-11-1979. In execution, a claim petition was filed by the transferee of the property who purchased the property on 11.6.1978. The decree holder contended that the transfer was a fraudulent transfer. The executing court held that the transfer was a fraudulent transfer. The appellate court reversed that order holding that the question could not be decided in execution and that it could be decided in a separate suit. On further Appeal, the High Court of Madras held:
But the learned Judge failed to consider the effect of the amended provisions of Order 21, Rule 58, C.P.C in view of Act 104 of 1976. In Southern Steelmet and Alloys Ltd. v. B.M. Steel AIR 1978 Mad 270, a Bench of this Court held that 'the adjudication referred to under Order 21, Rule 58 C.P.C. (as amended in 1976) is not summary and it is the intention of legislature under the amended C.P. Code that it should be a decision as if rendered in a regular suit resulting in an appealable decree, the fuller examination of the rights of parties has to be held after giving them adequate opportunity to place all relevant materials before the court so that the Court could ultimately decide and adjudicate on all questions including question relating to title or interest in the property attached. It is clear from the ratio laid down in the above said decision that in view of the amended provisions of Order 21, Rule 58, C.P.C. the question of filing a separate suit is barred and all questions relating to title or interest in the property attached have to be decided and adjudicated only in the claim proceedings and not by a separate suit.
18. In Abdul Jalal v. Mariya Financiers 2002 (2) KLT 107, an item of immovable property was attached before judgment on 11.3.1994. The defendant had sold the property on 4-3-1994 to a stranger. The sale deed was registered on 11-3-1994. Later, he sold the property to the claimant, who filed the claim petition under Rule 58 of Order XXI. The suit was decreed. The claim petition was filed not at the trial stage, but in execution. The executing court dismissed the claim petition. The Division Bench relied on the decision of the Supreme Court in Hamda Ammal's case and held that since the sale deed was executed prior to the attachment, it cannot be ignored. After holding thus, the Division Bench remanded the case to the executing court to consider the question whether the transfer was made to defeat the creditors. However, the Division Bench did not decide the question of law as presently posed in this case.
19. In 1989 Madras 311 and in 2002 (2) KLT 107, the claim petition was filed in execution, though the property was attached before judgment. It is well settled that a transfer can be avoided on the ground that it is fraudulent transfer, even by way of defence. (See Abdul Shukoor Saheb v. Arji Papa Rao : A.I.R. 1963 S.C. 1150; George Antony v. Kerala State Financial Corporation 1989 (1) KLT 486). In Ithakku Abraham v. Kesavan Damodaran 1987 (1) KLT 704, it was held that a plea based on Section 53 of the Transfer of Property Act can be raised by way of defence in a petition under Rule 58 of Order XXI C.P.C. In that case also, the question arose in execution and not in a claim under Rule 8 of Order XXXVIII C.P.C.
20. We are of the view that the question whether the transfer is hit by Section 53 of the Transfer of Property Act need not be considered in a claim made by a transferee under Rule 8 of Order XXXVIII C.P.C. Rule 5 of Order XXXVIII C.P.C. would apply only when the Court is satisfied that the defendant, with intent to obstruct or delay the execution of any decree that may be passed against him, is about to dispose of the whole or any part of his property. If the property had already been transferred by the defendant, Rule 5 would not apply at all. Rule 5 provides that the court can direct the defendant to produce and place at the disposal of the Court, when required, the said property or value of the same, or such portion thereof as may be sufficient to satisfy the decree. The defendant cannot do this if he had transferred the property before passing the order under Rule 5. Rule 10 of Order XXXVIII makes it abundantly clear that attachment before judgment shall not affect the rights existing prior to the attachment, or persons not parties to the suit. The purpose of Rule 5 is to interdict the defendant from disposing of his property with intent to obstruct or delay the execution of any decree that may be passed against him. If he had already transferred the property, such a contingency would not arise. The question whether the transfer is a fraudulent transfer attracting Section 53 of the Transfer of Property Act is a different matter. That question has to be adjudicated upon at the appropriate stage or in appropriate proceedings. What is that stage or the proceedings, is the crucial question. Is it at the trial stage or in execution The answer to that question would depend upon Rules 8 and 10 of Order XXXVIII read with Rule 58 of Order XXI C.P.C. as well. The claim to an attachment, whether it is made before judgment or in execution, has to be dealt with under Rule 58 of Order XXI C.P.C. Rule 8 of Order XXXVIII C.P.C. makes it clear that the claim preferred to the property attached before judgment shall be adjudicated in the manner provided in Rule 58 of Order XXI C.P.C.
21. In order to answer the question whether the defence under Section 53 of the Transfer of Property Act should be adjudicated in a claim to the property attached before judgment, we have to read the provisions of Rules 5 to 11-A of Order XXXVIII C.P.C. alongwith Rule 58 of Order XXI. The purpose of attachment before judgment is distinct and different from attachment in execution, though the attachment before judgment would enure to the stage of execution as well in view of Rule 11 of Order XXXVIII C.P.C. The attachment before judgment would cease when the suit is dismissed on the merits or when it is dismissed for default. Rule 11 A (2) of Order XXXVIII C.P.C. mandates that attachment before judgment would not revive on setting aside the order for the dismissal of the suit for default and on restoration of the suit. Sub Rule (2) of Rule 58 of Order XXI provides for determination of all questions including questions relating to right, title or interest in the property attached, arising between the parties or their representatives. But it is further qualified by the expression, namely, 'relevant to the adjudication of the claim or objection'. What is relevant to the adjudication depends on the question whether it is an adjudication under Order XXXVIII or under Order XXI. If the determination of the question is to be made in execution, certainly the question of applicability of Section 53 of the Transfer of Property Act would arise, since once for all it is to be determined whether the property is available to be proceeded against in execution. In the case of an attachment before judgment, that question need not be decided, going by the scheme of Order XXXVIII. The expression 'relevant to the adjudication of the claim or objection' occurring in Rule 58 of Order XXI assumes importance in that context. At the stage of passing an order for attachment before judgment, nobody is sure whether the suit would be decreed. There are various situations in which the attachment before judgment may cease to exist. For example, the suit may be dismissed on merits, or it may be dismissed for default. Or else, the court may hold that it has no jurisdiction to decide the suit. Or, the suit may be dismissed on the ground of limitation. Why should 'all questions including questions relating to right, title and interest in the property attached' be determined, irrespective of whether it is 'relevant to the adjudication of the claim or objection' To our mind, only those questions which are relevant to the adjudication need be determined, as provided in Rule 58 of Order XXI, in the matter of a claim to the property attached before judgment. Rule 58 of Order XXI speaks of 'claims' and 'objections' whereas, Rule 8 of Order XXXVIII speaks of only 'claim'. Objection, if any, to attachment before judgment shall be determined under Order XXXVIII itself and not by recourse to Rule 58 of Order XXI. At the stage of determining the claim to the property attached before judgment, the requirements and limitations of Rule 5 of Order XXXVIII are relevant. But such requirements or limitations need not be relevant while adjudicating a claim to the property attached in execution. Rule 10 of Order XXXVIII is relevant while considering a claim to the property attached before judgment. But the ingredients constituting Rule 10 would not be conclusive at the stage of execution. It would be subject to further scrutiny under Section 53 of the Transfer of Property Act.
22. Sub Rule (1) Rule 58 of Order XXI CPC contemplates a claim or objection on the ground that 'such property is not liable to such attachment'. The expression 'relevant to the adjudication of the claim or objection' occurring in Sub Rule (2), is to be read along with Sub Rule (1) and also along with Order XVIII Rule 5. If so, it could be seen that all questions which may otherwise arise in a properly constituted suit need not necessarily arise in an adjudication under Rule 58 of Order XXI. The limitations under Rule 5 of Order XXXVIII cannot be got over by recourse to a defence in a claim petition, when such defence is not relevant for adjudication at that stage. It is also relevant to note that a fraudulent transfer is not void but only voidable. In the case of a fraudulent transfer, the creditor is not without remedy. He can file a suit to avoid the transfer. Or else, he can avoid the same in execution as well. A suit coming under Section 53 of the Transfer of Property Act shall be instituted on behalf of, or for the benefit of, all the creditors. Sub Rule (4) of Rule 58 of Order XXI which provides that the order made on adjudication shall have the same force as if it were a decree, is not a conclusive test as to the scope of enquiry in the matter of a claim made to the property attached before judgment. A decree would be conclusive and binding on the questions decided in the suit or which might and ought to have been raised. When the court allows a claim to the property attached before judgment, on the ground that the transfer took place before the order of attachment, that would not preclude the attaching creditor from contending that the transfer is hit by Section 53 of the Transfer of Property Act in appropriate proceedings. We are of the view, such a contention of fraudulent transfer would not attract Explanation IV of Section 11 of the Code of Civil Procedure so as to bar the attaching creditor from raising the question in appropriate proceedings.
23. We respectfully disagree with the view taken by the Bombay High Court in S.B.I. Home Finance Ltd.'s case : A.I.R. 2001 Bombay 179. We are also of the view that the decisions in 2002 (2) KLT 107 : 1987 (1) KLT 704 and AIR 1989 Mad 311 are distinguishable as in those cases, the question arose only in execution.
Hence we are of the view that the court below was right in allowing the claim petition. For the aforesaid reasons, we dismiss the Appeal, however, without costs.