Holding

A contractual obligation arising from a pre‑attachment agreement for sale prevails over the rights of the attaching creditor, and the purchaser obtains good title despite the attachment.

Summary

The appellant entered into an agreement on 9 October 1978 to purchase 80 cents of land, but before the sale deed was executed the property was attached on 16 November 1978 by a third‑party creditor. The sale deed was executed on 23 November 1978, after the attachment. The Kerala High Court held that the sale was subject to the attachment, but the Supreme Court allowed the appeal, holding that an agreement for sale creates an enforceable contractual obligation that attaches to the ownership of the property and cannot be overridden by a subsequent attachment. The Court observed that an attaching creditor can only attach the right, title and interest of the judgment debtor as they existed at the date of attachment, and must respect pre‑existing sale obligations. Consequently, the purchaser obtained good title despite the attachment, and the High Court order was reversed, restoring the trial court's decision. No costs were awarded.

Issues considered

Whether a sale executed after attachment, but based on a prior agreement for sale, is subject to the attachment under Order 38 Rule 1 and Section 64 of the CPC.
Whether the purchaser under an antecedent agreement for sale obtains good title notwithstanding the attachment.
Interpretation of Section 64 CPC in relation to the contractual obligations under the Transfer of Property Act, Section 40, and the Trusts Act, Section 91.

Legislation cited

Code of Civil Procedure, 1908s. Order 38 Rule 1, s. Section 64
Indian Trusts Acts. Section 91
Transfer of Property Act, 1882s. Section 40, s. Section 54

Subjects

attachmentsale of immovable propertypre‑attachment agreementCPC Section 64Transfer of Property Act Section 40contractual obligationgood titlecivil procedure

Judgment

V ANNARAKKAL KALLAT A THIL SREEDHARAN
A
V.
CHANDRAMAATH BALAKRISHNAN AND ANR.

MARCH 6, 1990

B [K. JAGANNATHA SHETTY AND R.M. SARAI, JJ.]

Code of Civil Procedure, 1908: S. 64, or 38, Rule JO-Con-
veyance in pursuance of antecedent agreement for sale of attached
property-Whether passes good title.

The land in dispute was agreed to be sold in favour of the appel-
C Ian! under an agreement. Subsequently, a third party in execution of a
decree got the property attached. The sale deed was executed there-
after. A question arose as to the validity of the sale. The High Court
held that the sale would be subject to attachment.

D Allowing the appeal by special leave, the Court,

HELD: The agreement for sale creates an obligation attached to
the ownership of the property. The attaching creditor is entitled to
attach only the right, title and interest of the judgment debtor. Hence, if
an agreement for sale is entered into before attachment, the attachment
E cannot be free from the obligation so incurred, and the attaching ere- ·~
ditor will not get any right higher than the judgment debtor had on th~
date of the attachment. He cannot ignore that obligation and proceed to
bring the property to sale as if it remained the absolute property of the
judgment debtor. [835C, 834F, 835E]

F Accordingly, though s. 64 CPC is intended to protect the attach-
ing creditor, but if the subsequent conveyance is in pursuance of an
agreement for sale which was entered into 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
G from the antecedenl'llgt!lement for sale of the attached property. [8350-E]

Paparaju Veeraraghavayya v. Killaru Kamala Devi & Ors., AIR
1935 Mad. 193; Veerappa Thevar & Ors. v. C.S. Venkataramma Aiyar
& Ors., AIR 1935 Mad. 872; Angu Pillai v. M.S.M. Kasiviswanathan
Chettiar, AIR 1974 Mad. 16; Puma Chandra Basak v. Dau/at Ali
H Mollah, AIR 1973 Cal. 432; Rango Ramachandra v. Gurlingappa

832
V.K. SREEDHARAN v. C. BALAKRISHNAN [SHETfY, J.] 833

Chinnappa, AIR 1941 Bom. 198; Yashvant Shankar Dunakhe v.
A
Prayarji Nurji Tamboli, AIR 1943 Bom. 145 and Kochuponchi Varug-
hese v. Quseph Lonan, AIR 1952 Travancore-Cochin467, approved.

Mohinder Singh & Anr. v. Nanak Singh & Anr., AIR 1971 Pb. &
Haryana 38 l, overruled.
B
..l.~ · The sale in the instant case would not thus be subject to the attach-
ment. The purchaser would get good title despite attachment. [833F, 834D]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1349
of 1990

From the Judgment and Order dated 18.8.1988 of the Kerala c
High Court in E.S.A. No. 23 of 1987.

S. Padmanabhan and R.N. Keshwani for the appellant.

The Judgment of the Court was delivered by D

K. JAGANNATHA SHETTY, J. Special leave granted.

An extent of 80 ·cents of land which is in dispute in this appeal
was agreed 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?
E

'-,,.-··· The High Court of Kerala in the judgment under appeal has held
' that the sale would be subject to attachment. This appears from the F
following 0bservation:

"The sale deed was executed at a time when the property
was already under attachment. It is true that even before
affecting attachment there was an agreement for sale by
Sarojini Ramakrishnan in favour of the appellant. But the G
agreement for sale will not create any interest in the pro-
perty. The fact that Ext. 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 Ext. A-12 only subject to the
attachment." H
834 SUPREME COURT REPORTS [ 1990] 1 S.C.R.

The correctness of the view taken by the High Court has been
A . "(
called into question in this appeal.

We may first draw attention to some of the relevant statutory
provisions bearing on the question. Order 38 Rule W of the Code of
Civil Procedure provides that attachment before judgment shall not
B 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 pur- ....J,
chaser 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 obliga-
tion 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
c 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 ·within the meaning of Section 54 of the Trans- ).- ...
fer 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
D held by the Madras High Court that the purchaser of an antecedent
agreement gets good title despite attachment. See Paparaju Veerarag-
havayya v. Ki/laru Kamala Devi & Ors., AIR 1935 Mad. 193, Vee-
rappa Thevar & Ors. v. C.S. Venkataramma Aiyar & Ors., AIR 1935 '
Mad. 872 and Angu Pillai v. M.S.M. Kasiviswanathan Chettiar, AIR ""-~
1974 Mad. 16.
E
There is a useful parallel from the decision of the Calcutta High
Court in Puma Chandra Basak v. Dau/at Ali Mollah, AIR 1973 Cal.
432 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
F attachment.
y
Hence, if under a contract of sale entered into before attach-
ment, the conveyance after attachment in pursuance of the contract
passes on good title inspite of the attachment. To the same effect are
the decisions of the Bombay High Court in Ran go Ramachandra v.
G Gurlingappa Chinnappa, AIR 1941 Born. 198 and Yashvant Shankar
Dunakhe v. Prayarji Nurji Tamboli, AIR 1943 Born. 145. The High . 1
Court of Travancore-Cochin in Kochuponchi Varughese v. Quseph ,.,...___
Lonan, AIR 1952 Travancore-Cochin 467 has also adopted the same
reasoning.

H The Pun jab & Haryana High Court however, has taken a con-
V.K. SREEDHARAN v. C. BALAKRJSHNAN [SHETIY, J.J 835

trary view in Mohinder Singh and Anr. v. Nanak Singh and Anr., AIR A
1971 Pb. & Haryana 381. 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. Jn
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 B
the observation of the Lahore High Court in Buta Ram & Ors. v.
Sayyed Mohammad, AIR 1935 Lahore 71.

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 agree- c
ment 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 the obligations incurred under the contract for sale. Sec.
64 CPC no doubt was intended to protect the attaching creditor, 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 from ari antecedent agree-
ment for sale of the attached property. The attaching creditor cannot
ignore that obligation and proceed to bring the property to sale as if it E
remained the absolute property of the judgment-debtor. We cannot,
therefore, agree with the view taken by the Punjab and Haryana High

r Court in Mohinder Singh's case AIR 1971 Pb. & Haryana 381.

In the conclusion that we have reached, this appeal must be
F
T allowed and is accordingly allowed. The order of the High Court is
reversed and that of the trial court is restored.

In the circumstances of the case, we make no order as to costs.

P.S.S. Appeal allowed.
G