Summary
A person who bought the judgment-debtor company's property in 2015, after an arbitral award for money had been passed against the company in 2001, is a transferee pendente lite. Order XXI Rule 102 CPC bars such a buyer from resisting execution, and lis pendens applies even to a money award. Because the buyer had not shown that she bought without notice, the dismissal of her claim petition against the attachment was upheld.
Issues
- Whether a person who bought the judgment-debtor's property after an arbitral award for recovery of money, and after the Section 34 challenge to it had been dismissed, can resist attachment of that property in execution of the award.
- Whether the appellant bought the property for consideration and without notice of the judgment-debtor's existing liability.
- Whether the principle of lis pendens applies where the arbitral award is only for recovery of money and does not concern the attached property.
Provisions considered
- Section 36, Arbitration and Conciliation Act, 1996The Court noted that under Section 36 an arbitral award is enforceable as if it were a decree of a court, so it is a deemed decree and the arbitration proceeding stands in the place of the suit for Order XXI Rule 102. (¶ 10)
- Order XXI Rule 102, Code of Civil Procedure, 1908Rule 102 withholds the protection of Rules 98 and 100 from a person to whom the judgment-debtor transferred the property after the suit was instituted. The arbitration began in 1999 and the award was made in 2001, so the appellant's 2015 purchase made her a transferee pendente lite who is barred from resisting execution, whether or not the Section 34 challenge was still pending. (¶¶ 6.2, 10, 14)
- Order XXI Rules 58, 98 and 100, Code of Civil Procedure, 1908The appellant's claim petition seeking removal of the attachment was filed under Rule 58. The Court held that the protection Rules 98 and 100 give to bona fide claimants is not available to a transferee pendente lite. (¶¶ 6, 10)
- Section 52, Transfer of Property Act, 1882Following Danesh Singh v. Har Pyari, which approved the Madras High Court's view, the Court held that the doctrine of lis pendens is not excluded merely because the decree is for money, since under the Explanation pendency continues until the decree is fully satisfied. (¶¶ 10, 12, 14)
Held
- An arbitral award is a deemed decree under Section 36 of the 1996 Act. A person who takes the judgment-debtor's property after the arbitration was instituted and the award was passed is a transferee pendente lite. Order XXI Rule 102 CPC bars such a person from resisting execution, and it makes no difference that the Section 34 challenge had been dismissed before the purchase. A judgment-debtor cannot defeat a decree by alienating property after the decree and before it is realised. (¶ 10)
- Lis pendens is not excluded for money decrees. Following Danesh Singh, the sale of the judgment-debtor's property after an award for recovery of money falls within the purview of pendente lite transfers. (¶¶ 12, 14)
- The appellant was the mother of the judgment-debtor's managing director and a former non-executive director, and she did not produce the tripartite agreement with the bank that preceded the sale deed. On these facts the sale, even if for consideration, could not be held to be without notice of the company's existing liability. The appellant failed to discharge the onus of proving that she bought without notice. Recovery proceedings under the SARFAESI Act are independent and do not shield the borrower from other claims. (¶¶ 11, 14)
- Order XXI CPC works as a self-contained code for execution. Allowing pendente lite purchasers or third parties to bypass its safeguards would let judgment-debtors defeat decrees by transferring property. The provisions of the Code must be used to secure actual relief to the decree-holder, not just a formal decree. (¶¶ 13, 13.1)
Result
Appeal dismissed; dismissal of the appellant's claim petition against attachment upheld; executing court directed to dispose of the execution proceedings within two months; no order as to costs.