The Supreme Court has dismissed an appeal challenging the attachment of property in the execution of an arbitral award, ruling that a property purchased after the passing of an award is liable for attachment. The Court held that the doctrine of lis pendens applies to money decrees to prevent judgment-debtors from defeating the fruits of a decree by alienating assets.
A Division Bench comprising Justice Pankaj Mithal and Justice S.V.N. Bhatti observed that the protections available to bona fide third-party claimants under the Code of Civil Procedure (CPC) do not extend to a transferee pendente lite.
Background of the Case
The dispute originated from a sale agreement dated January 22, 1998, between The Cotton Corporation of India Limited (CCI/Respondent No. 1) and M/s Lakshmi Ganesh Textiles Limited (Respondent No. 2) for the supply of cotton bales. Following a payment dispute, the matter was referred to arbitration. On June 11, 2001, an arbitrator passed an award directing Lakshmi Ganesh Textiles to pay Rs. 26,00,572.90 with interest. Respondent No. 2 challenged this award under Section 34 of the Arbitration and Conciliation Act, 1996, which was dismissed on January 21, 2013.
Separately, Lakshmi Ganesh Textiles defaulted on loans from ICICI Bank. The bank initiated proceedings under the SARFAESI Act, 2002. Consequently, a tripartite agreement was executed, leading to a Sale Deed dated April 23, 2015, in favor of the Appellant, R. Savithri Naidu. The Appellant is the mother of the Managing Director of the defaulting company.
In 2019, CCI filed an Execution Petition (EP) to enforce the 2001 arbitral award. The Executing Court ordered the conditional attachment of the property purchased by the Appellant. The Appellant filed an application under Order XXI Rule 58 of the CPC seeking removal of the attachment, claiming to be a bona fide third-party purchaser for valid consideration without notice of the dispute. The Executing Court dismissed the claim in 2022, and the High Court dismissed the subsequent revision in 2024.
Submissions of the Parties
Senior Advocate Gopal Sankaranarayanan, appearing for the Appellant, argued that the Appellant is the absolute owner of the property under the 2015 Sale Deed. He contended that the Appellant could not be treated as a pendente lite purchaser because, on the date of purchase, no legal proceeding was pending (the Section 34 challenge had ended in 2013, and the EP was filed in 2019). Furthermore, it was argued that since the arbitral award was a money decree not specifically concerning the property, the attachment was illegal.
Advocate Sunita Singh, representing CCI, argued that the Appellant is the mother of the Managing Director of the judgment-debtor company and could not claim lack of notice. She submitted that the sale occurred after the arbitral award, making the Appellant a post-award purchaser. Reliance was placed on Order XXI Rule 102 of the CPC, which bars transferees pendente lite from resisting execution.
Court’s Analysis and Observations
The Supreme Court rejected the Appellant’s contention that she was a purchaser without notice. The Court noted that the non-production of the tripartite agreement was crucial, leading to the inference that the sale was not without knowledge of the existing liability.
Applicability of Order XXI Rule 102 CPC
The Court analyzed whether the sale fell within the purview of pendente lite. It referred to Order XXI Rule 102 of the CPC, which excludes transferees pendente lite from the protections of Rules 98 and 100.
Justice Bhatti, writing for the Bench, observed:
“Since the transfer occurred after the institution of the proceedings and the passing of the award, the Appellant is a transferee pendente lite/post arbitral award purchaser, and is barred by Order XXI Rule 102 from resisting the execution.”
The Court clarified that the argument under Rule 102 does not depend on the pendency of the Section 34 challenge, but on the fact that the transfer occurred after the institution of the suit in 1999 and the passing of the decree in 2001.
Lis Pendens in Money Decrees
Addressing the argument that lis pendens does not apply to money decrees, the Court relied on its recent decision in Danesh Singh and others v. Har Pyari (Dead) Thr. LRs (2025 INSC 1434), which approved a Madras High Court ruling. The Court held that if Section 52 of the Transfer of Property Act were interpreted to exclude money suits, decrees would be rendered meaningless as parties would be free to alienate property, leaving nothing for execution.
Judicial Observations on Execution Delays
The Court made significant observations regarding the difficulties faced by decree-holders in India, citing the Privy Council’s century-old observation that the “true difficulties of a litigant begin only after they have obtained a decree.”
The Court stated:
“It is generally stated that a suit may take 5 years to conclude, but its execution takes 10 years… If the argument of the appellant is accepted allowing pendente lite purchasers or third parties to bypass these strict procedural safeguards… it would completely derail the statutory machinery.”
The Bench emphasized that the legal system’s goal is to ensure litigants enjoy reliefs, not just obtain formal decrees.
“We need a shift in mindset: the goal of the legal system should not just be to dispose of cases, but to ensure that the litigant enjoys the reliefs… We must ensure that the legal process results in justice not just appearing to be done, but justice actually being done.”
Verdict
The Supreme Court held that the Appellant failed to discharge the onus that the sale was without notice of the existing claim. As a post-arbitral award purchaser, the Appellant’s claim was rightly dismissed by the courts below.
The Civil Appeal was dismissed, and the Executing Court was directed to dispose of the Execution Proceedings within two months.
Case Details
- Case Title: R. Savithri Naidu v. M/s The Cotton Corporation of India Limited and Another
- Case No.: Civil Appeal No. of 2026 (Arising out of SLP (Civil) No. 19779 of 2024)
- Coram: Justice Pankaj Mithal and Justice S.V.N. Bhatti
