Harikumar v. Laila Beevi and others

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE K.T.SANKARAN & THE HONOURABLE MR. JUSTICE P.D.RAJAN WEDNESDAY, THE 19TH DAY OF NOVEMBER 2014/28TH KARTHIKA, 1936 ## **Ex.FA.No. 17 of 2014 (D)** AGAINST THE ORDER DATED 28.11.2013 IN I.A.NO.1322 OF 2008 IN OS. NO. 200/2008 ON THE FILE OF THE SUB COURT, KOTTARAKKARA ## APPELLANT/1ST COUNTER PETITIONER/PLAINTIFF: HARIKUMAR, AGED 41 YEARS S/O.PARAMESWARAN PILLAI RESIDING AT PRASANNA MANDIRAM, THRIKKANNAMANGAL MURI KOTTARAKARA VILLAGE, KOTTARAKARA TALUK. BY ADVS. SRI.R.S.KALKURA SRI.M.S.KALESH SMT.R.BINDU SMT.A.V.PRIYA SRI.HARISH GOPINATH SMT.M.K.LEELAKUMARI SRI.GENS GEORGE ELAVINAMANNIL SRI.SANIL KUNJACHAN SRI.JOHNSON JOSE PANJIKKARAN ## RESPONDENTS/PETITIONERS/CLAIMANTS AND 2ND COUNTER ## PETITIONER/DEFENDANT: 1. LAILA BEEVI, W/O.ALAVUDEEN, MURUKKUMAN, J.A.MANZIL NILAMEL MURI, NILAMEL VILLAGE, KOTTARAKARA - 691 535. 2. V.K.ISSAC, S/O.KUNJUKUNJU, PAZHANGOTTU VEEDU, VAYALA MURI MANNOOR, KOTTUKAL VILLAGE, KOTTARAKARA - 695 501. 3. SATHEESAN, S/O.KUTTAN PILLAI, NJETTARA VEEDU THRIKANNAMANGAL MURI, KOTTARAKARA VILLAGE KOTTARAKARA - 695 016. R1 BY ADV. SRI.S.K.BALACHANDRAN R2 BY ADV. SRI.SYAM J SAM THIS EXECUTION FIRST APPEAL HAVING BEEN FINALLY HEARD ON 19-11-2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **K.T.SANKARAN & P.D.RAJAN, JJ.** **---------------------------------------------------Ex. F.A. NO. 17 OF 2014 (D)** **---------------------------------------------------Dated this the 19[th] day of November, 2014** ## **JUDGMENT** ## **K.T.Sankaran, J.** The appellant filed O.S.No.200 of 2008 on the file of the Court of the Subordinate Judge of Kottarakkara against the third respondent for realisation of money. Pending suit, the plaintiff filed an application for attachment before judgment of an item of immovable property allegedly belonging to the defendant. An order of attachment was passed on 16.8.2008. Respondents 1 and 2 filed I.A.No.1322 of 2008 under Rule 8 of Order XXXVIII of the Code of Civil Procedure claiming that they purchased the property from the defendant as per a registered assignment deed dated 8.2.2008, prior to the filing of the suit. Respondents 1 and 2, the claimants, prayed for lifting the order of attachment on the ground that at the time when the suit was filed the property did not belong to the defendant and that they are bona fide purchasers. 2. The plaintiff contended that the document executed by the defendant in favour of the claimants is not valid and it is a sham ## **Ex. F.A. NO. 17 OF 2014 (D)** :: 2 :: document. The contentions raised in the counter statement would also disclose that the transfer in favour of the claimants was a fraudulent transfer. 3. The court below, as per the order dated 28.11.2013 allowed the claim petition and vacated the order of attachment. The court below held that though PW1 was cross examined at length, nothing was brought out to show or to find positively that the document in favour of the claimants is a sham document. It was also found that long before the Court passed the order of attachment, the claimants acquired title to the property. 4. It is contended by the appellant that the findings arrived at by the court below were without properly referring to the pleadings and documentary and oral evidence in the case. The court below has not arrived at any independent finding as to whether the assignment deed in favour of the claimants is valid, whether it is supported by consideration or whether it is a sham transaction or whether it is a fraudulent transfer. ## **Ex. F.A. NO. 17 OF 2014 (D)** :: 3 :: 5. The suit was subsequently decreed exparte, by the judgment and decree dated 10.12.2013. 6. In **Rajan** v. **Jayashree Nayar (2010 (1) KLT 142)** , a Division Bench of this Court held that: “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 ## **Ex. F.A. NO. 17 OF 2014 (D)** :: 4 :: 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 ## **Ex. F.A. NO. 17 OF 2014 (D)** :: 5 :: 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 ## **Ex. F.A. NO. 17 OF 2014 (D)** :: 6 :: “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 ## **Ex. F.A. NO. 17 OF 2014 (D)** :: 7 :: 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 ## **Ex. F.A. NO. 17 OF 2014 (D)** :: 8 :: 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.” ## 7. In view of the decision in **Rajan** v. **Jayashree Nayar (2010** **(1) KLT 142)** , the finding arrived at by the court below that the claim petition was liable to be allowed, cannot be interfered with, since the transfer in favour of the claimants took place even before filing the ## **Ex. F.A. NO. 17 OF 2014 (D)** :: 9 :: suit and before the date of attachment. But the finding of the court below that the transfer is not a sham transaction was not required for the purpose of disposal of the application. That finding is hereby set aside. The contention raised by the plaintiff that the transaction in favour of the claimants is a fraudulent transfer is also left open to be considered in the execution proceedings, if it becomes necessary, in the light of the dictum laid down in **Rajan** v. **Jayashree Nayar (2010 (1) KLT 142).** Accordingly, the Execution First Appeal is allowed in part and while upholding the finding that the claim petition is liable to be allowed, the finding arrived at by the court below that there is nothing to indicate that the transfer is a sham transaction is set aside. The question whether the transfer is a fraudulent transfer is also left open to be decided in the execution proceedings. ## **(K.T.SANKARAN) Judge** ## **(P.D. RAJAN) Judge** ahz/