1990 JTR(SC) 138
1990 AllCJ 529 ; 1990 2 APLJ 34 ; 1990 1 AWC 569 ; 1990 BankJ 671 ; 1990 BBCJ(SC) 72 ; 1990 92 BomLR 358 ; 1990 CivCC 526 ; 1990 1 CurCC(SC) 678 ; 1990 2 CurLJ 351 ; 1990 41 DLT 314 ; 1991 1 GLH 140 ; 1990 ISJ(Banking) 537 ; 1990 1 JT 390 ; 1991 9 LCD 238 ; 1990 2 MhLJ(SC) 1134 ; 1990 1 OLR 410 ; 1990 1 RRR 366 ; 1990 1 Scale 519 ; 1990 3 SCC 291 ; 1990 1 SCR 832 ; 1990 KHC 984 ; 1990 1 KLT(Online) 1019
SUPREME COURT OF INDIA
K. JAGANNATHA SHETTY AND R.M. SAHAI, JJ.
VANNARAKKAL KALLALATHIL SREEDHARAN
Versus
CHANDRAMAATH BALAKRISHNAN AND ANOTHER.
Civil Appeal No. 1349 of 1990, decided on March 6,1990
Advocates appeared
S. Padmanabhan, Senior Advocate (R.N. Keshwani, Advocate, with him) for the Appellant.
Act
Referred
:CIVIL PROCEDURE CODE : S.64, O.38 R.10
TRANSFER OF PROPERTY ACT : S.54, S.40
TRUSTS ACT : S.91
(A) The dispute involves an 80-cent land sale agreement dated October 9, 1978, where the property was attached by a third party in execution of a decree on November 16, 1978, and the sale deed was executed thereafter on November 23, 1978, raising the question of whether the sale prevails over the attachment. The analysis is governed by Order XXXVIII Rule 10 of the Code of Civil Procedure, which preserves rights existing prior to attachment for non-parties; Section 40 of the Transfer of Property Act, which allows a purchaser under a contract of sale to enforce obligations against a transferee with notice; and Section 91 of the Trusts Act, recognizing that a transferee with notice of an existing enforceable contract must hold the property for the contract beneficiary. These provisions establish that a contract of sale creates an obligation enforceable against attaching creditors unless specific interest arises under Section 54 of the Transfer of Property Act, while attachment only affects the debtors right, title, and interest and cannot confer superior rights upon the attaching creditor.
(B) The core legal principles are that an antecedent agreement for sale creates an obligation capable of overriding attachment, the attaching creditor is limited to the debtors existing rights, and a subsequent conveyance in pursuance of such agreement transfers good title despite attachment.
Facts of the case:
A sale agreement for 80 cents of land was executed in 1978, property was attached in November 1978 before the sale deed, and the sale deed was completed after attachment.
Findings of Court:
The sale deed executed after attachment under a prior agreement is valid and prevails over the attachment, as the attaching creditor cannot override the contractual obligation arising from the antecedent agreement; the view that such sales are void against attaching creditors is incorrect.
Issues:
Whether a sale deed executed after attachment under a pre-existing agreement prevails over the attachment.
Ratio Decidendi:
An antecedent agreement for sale creates an obligation that must prevail over attachment, and attachment cannot confer higher rights on the attaching creditor than those held by the judgment-debtor at the time of attachment.
Result:
The appeal is allowed, the High Court order is reversed, and the trial courts order is restored.
(A) The dispute involves an 80-cent land sale agreement dated October 9, 1978, where the property was attached by a third party in execution of a decree on November 16, 1978, and the sale deed was executed thereafter on November 23, 1978, raising the question of whether the sale prevails over the attachment. The analysis is governed by Order XXXVIII Rule 10 of the Code of Civil Procedure, which preserves rights existing prior to attachment for non-parties; Section 40 of the Transfer of Property Act, which allows a purchaser under a contract of sale to enforce obligations against a transferee with notice; and Section 91 of the Trusts Act, recognizing that a transferee with notice of an existing enforceable contract must hold the property for the contract beneficiary. These provisions establish that a contract of sale creates an obligation enforceable against attaching creditors unless specific interest arises under Section 54 of the Transfer of Property Act, while attachment only affects the debtors right, title, and interest and cannot confer superior rights upon the attaching creditor.
(B) The core legal principles are that an antecedent agreement for sale creates an obligation capable of overriding attachment, the attaching creditor is limited to the debtors existing rights, and a subsequent conveyance in pursuance of such agreement transfers good title despite attachment.
Facts of the case:
A sale agreement for 80 cents of land was executed in 1978, property was attached in November 1978 before the sale deed, and the sale deed was completed after attachment.
Findings of Court:
The sale deed executed after attachment under a prior agreement is valid and prevails over the attachment, as the attaching creditor cannot override the contractual obligation arising from the antecedent agreement; the view that such sales are void against attaching creditors is incorrect.
Issues:
Whether a sale deed executed after attachment under a pre-existing agreement prevails over the attachment.
Ratio Decidendi:
An antecedent agreement for sale creates an obligation that must prevail over attachment, and attachment cannot confer higher rights on the attaching creditor than those held by the judgment-debtor at the time of attachment.
Result:
The appeal is allowed, the High Court order is reversed, and the trial courts order is restored.
R.N.KESHWANI, S.Padmanabhan
Judgment
K. JAGANNATHA SHETTY, J.- Special leave granted.
2. An extent of 80 cents of land which is in dispute in this appeal was jagreed to be sold in favour of the appellant under an agreement dated [October 9, 1978. Before the sale deed was executed, a third party in execution of a decree got the property attached on November 16,1978. The sale deed was executed on November 23, 1978. The question is: Does the sale prevail over the attachment?
3. The High Court of JOrala in the judgment under appeal has held that the sale would be subject to attachment This appears from the following observation:
"The sale deed was executed at a time when the property was already under attachment. It is true that even before effecting attachment there was an agreement for sale by Sarojini Ramakrish-: nan in favour of the appellant. But the agreement for sale will not create any interest in the property. The fact that Ex. A-12 sale deed was executed on the basis of an agreement executed before the attachment will not place the appellant in any better position. He could take the 80 cents under Ex. A-12 only subject to the attachment."
4. The correctness of the view taken by the High Court has been called into question in this appeal.
5. We may first draw attention to some of the relevant statutory provisions bearing on the question. Order XXXVIII Rule 10 of the Code of Civil; Procedure provides .that attachment before judgment shall not affect the rights existing prior to the attachment of persons not parties to the suit. Under Section 40 of the Transfer of Property Act, a purchai under a contract of sale of land is entitled to the benefit of an obligation, arising out of that .contract and it provides that that obligation may be enforced inter alia against a transferee with notice. Section 91 of the Trusts Act also recognises this principle that the transferee with notice of an existing contract of which specific performance can be enforced must hold the property for the benefit of the party to the contract. These are ; equitable rights though not amounting to interest in immovable property i within the meaning of Section 54 of the Transfer of Property Act which declares that a contract of sale does not create an interest in the property. On this line of reasoning it has been held by the Madras High Court that the purchaser of (sic under) an antecyent Sgoiftl UlteespltetTOach^ Kamala Devi Veerappa Thevarv. C.S. VenkataramaAiyar andAngu Pil-i lai v. M.S.M. Kasiviswanathan Chettiar3.
6. There is a useful parallel from the decision of the Calcutta High Court in Puma Chandra Basak v. Daulat All Mollah* wherein it was observed that the attaching creditor attaches only the right, title and interest of the debtor and attachment cannot confer upon him any higher right than the judgment-debtor had at the date of attachment.
7. Hence under a contract of sale entered into before attachment the conveyance after attachment in pursuance of the contract passes on j good title in spite of the attachment To the same effect are the decisions of the Bombay High Court in Rango Ramachandra Kulkami v. Gurlingappa chinnappa Muthal and Yeshvani Shankar Dunakhe v. Pyaraji Nurji Tambou". The High Court of Travasc Cochin in Kochupc Varughese v. Ouseph Lonan1 has also adopted the same reasoning.
8. The Punjab & Haryana High Court, however, has taken a contrary view in Mohinder Singh v. Nanak Singh. It has been held that a sale in pursuance of a pre-attachment agreement is a private alienation of property and must be regarded as void against the claim of the attaching creditor. In support of this proposition, Section 64 of the Code of Civil Procedure was relied upon which according to the High Court was intended to protect the attaching creditor against private alienation. This was also the observation of the Lahore High Court in Buta Ram v. Sayyad Mohairimad.
9. In our Opinion, the view taken by the High Courts of Madras, Bombay, Calcutta and Travancore-Cochin in the aforesaid cases appears to be reasonable and could be accepted as correct. The agreement for sale indeed creates an obligation attached to the ownership of property ; and since the attaching creditor is entitled to attach only the right, title and interest of the judgment-debtor, the attachment cannot be free from to ...bligatiors incurred yprfer "he contract for sale. S^rtion 64 CPC no doubt was intended to protect the arching cieduor, but if the subsequent conveyance is in pursuance of an agreement for sale which was before the attachment, the contractual obligation arising therefrom must be allowed to prevail over the rights of the attaching creditor. The rights of the attaching creditor shall not be allowed to override the contractual | obligation arising bom an antecedent agreement for sale of the attached " property. The attaching creditor cannot Ignore that obligation and 4 proceed to bring the property to tale as If It remained the absolute property of the judgment-debtor. We cannot, theretbre, agree with &e | view taken by the Punjab and Haryana High Court in Mohinder Singh case.
10. In the conclusion that we have reached, this appeal must be allowed and is accordingly allowed. The order of the High Court is reversed arid that of the trial court restored.
11. In the circumstances of the case, we make no order as to costs.
For Citation : (1990) 3 SCC 291.