In a significant ruling delivered on 28 November 2025, the Supreme Court of India, in L.K. Prabhu @ L. Krishna Prabhu (Died) Through LRs v. K.T. Mathew @ Thampan Thomas & Ors., set aside concurrent findings of the Kerala High Court and the trial court, offering crucial clarity on the interplay between Order XXXVIII CPC, Order XXI Rule 58 CPC, and Section 53 of the Transfer of Property Act, 1882.
The decision reiterates and strengthens long-standing jurisprudence: an attachment before judgment cannot override a prior completed transfer, unless the transfer is duly established as fraudulent under Section 53 of the Transfer of Property Act (TPA). Importantly, the Court held that the protective mechanism under Order XXXVIII cannot be expanded into a full-fledged enquiry into allegations of fraudulent transfer without the procedural safeguards contemplated under Section 53.
This judgment will have far-reaching consequences on creditor-debtor disputes, claim petitions, and property transfers executed before litigation.
Background of the Case
The dispute arose from a property transaction in Ernakulam:
The original applicant, L.K. Prabhu, entered into an agreement for sale in 2002 with Defendant No. 3 (V. Ramananda Prabhu).
After part-payments and adjustments towards an existing debt, a registered sale deed was executed on 28 June 2004.
Months later, on 18 December 2004, the plaintiff (K.T. Mathew) filed a suit for recovery of money and obtained an order of attachment before judgment on 13 February 2005, claiming the property still belonged to the debtor.
The purchaser filed a claim petition in 2007, which the trial court dismissed, branding the sale as fraudulent under Section 53 TPA.
The High Court upheld this rejection but remanded the matter to assess how much actual consideration could be recovered.
The purchaser’s legal heirs challenged these findings before the Supreme Court.
Key Legal Questions
Can property already transferred before filing of a suit be attached before judgment under Order XXXVIII Rule 5 CPC?
Does a claim petition under Order XXXVIII Rule 8 read with Order XXI Rule 58 allow courts to adjudicate allegations of fraudulent transfer under Section 53 TPA?
What is the burden of proof in establishing fraud under Section 53?
Supreme Court’s Analysis
1. Attachment Before Judgment Cannot Extend to Pre-Transferred Property
The Court reaffirmed a foundational rule:
Attachment under Order XXXVIII Rule 5 applies only to property belonging to the defendant at the time of institution of the suit.
Since the sale deed in favour of the purchaser was executed months before the suit, the essential precondition for invoking attachment failed.
Any grievance about such transfer must be raised under Section 53 TPA, not via attachment proceedings.
This is consistent with precedents such as:
Hamda Ammal v. Avadiappa Pathar (1991)
Vannarakkal v. Chandramaath Balakrishnan (1990)
Rajender Singh v. Ramdhar Singh (2001)
2. Claim Petition Proceedings Cannot Substitute a Section 53 TPA Suit
The Court clarified that:
Order XXI Rule 58 (as applied via Order XXXVIII Rule 8) allows a summary adjudication of right, title, or interest, but cannot replace a detailed enquiry required under Section 53.
For a transaction to be declared fraudulent, specific pleadings, burden of proof, and procedural safeguards must be satisfied—none of which were adhered to here.
3. Suspicion Is Not Proof: High Burden of Establishing Fraud
The Court stressed that:
Fraud under Section 53 TPA must be clearly proved.
Mere suspicion—such as community ties, strained finances, or timing of transfer—does not establish fraudulent intent.
The purchaser had paid consideration, had a pre-existing agreement, and had been in open possession; these factors strengthened the genuineness of the transaction.
4. Transferee in Good Faith Is Protected
The proviso to Section 53(1) TPA safeguards transferees in good faith and for consideration.
The Court found no evidence that the purchaser colluded to defeat creditors.
Final Holding
The Supreme Court held:
The sale deed dated 28 June 2004 is valid and genuine.
The attachment before judgment dated 13 February 2005 cannot extend to the property.
The claim petition under Order XXXVIII Rule 8 should have been allowed.
Judgments of the trial court and High Court stand set aside.
The appeal is allowed, protecting the purchaser’s rights fully.
Significance of the Judgment
1. Reinforces Protection of Prior Bona Fide Transfers
Creditors cannot use attachment proceedings to nullify legitimate prior transactions.
2. Prevents Misuse of Attachment Before Judgment
Order XXXVIII is a protective remedy and cannot be used as a tool to bypass Section 53 TPA.
3. Strengthens Predictability in Property Transactions
Purchasers who act in good faith can rely on registered deeds without fear of later attachments.
4. Clarifies Scope of Summary Proceedings
Claim petitions cannot be converted into substantive trials on fraudulent transfer.
Conclusion
The Supreme Court’s ruling provides much-needed clarity on a recurring issue in civil litigation. The judgment strikes a balance between:
protecting creditors from fraudulent alienations, and
safeguarding bona fide purchasers who acquire property before litigation.
By insisting that allegations of fraud be proven strictly and through proper legal channels, the Court has reaffirmed the stability and reliability of registered transactions—an essential element for commercial certainty and property law integrity.