The Supreme Court has held that a person who purchases property from a judgment-debtor after an arbitral award cannot obstruct the execution of that award.
A Bench of Justice Pankaj Mithal and Justice S.V.N. Bhatti dismissed an appeal filed by R. Savithri Naidu. She had purchased property from M/s Lakshmi Ganesh Textiles Limited (Respondent No. 2) after an arbitral award was passed in favour of The Cotton Corporation of India Limited (CCI) (Respondent No. 1). She attempted to resist the enforcement of the award by claiming ownership of the attached property.
Background of the Dispute
The dispute arose from a cotton supply agreement executed in 1998 between CCI and M/s Lakshmi Ganesh Textiles Limited. When the textile company failed to clear its dues, CCI initiated arbitration in 1999.
On June 11, 2001, the arbitral tribunal directed the textile company to pay more than ₹26 lakh along with interest. The company challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. However, the court dismissed the challenge in 2013.
CCI initiated execution proceedings in 2019. Meanwhile, in 2015, the judgment-debtor sold one of its properties to R. Savithri Naidu. She is the mother of the company’s Managing Director and a former non-executive director.
In 2021, the executing court ordered conditional attachment of the property. The appellant then filed objections under Order XXI Rule 58 of the Code of Civil Procedure. She claimed that she had purchased the property for value and held absolute ownership. Both the executing court and the High Court rejected her objections. She then approached the Supreme Court.
Issues Before the Court
The Court examined whether a purchaser who acquires property after an arbitral award can resist execution of a money decree. It also considered whether the doctrine of lis pendens and the bar under Order XXI Rule 102 CPC apply only to property-specific decrees or also to money decrees.
Supreme Court’s Findings
Justice S.V.N. Bhatti authored the judgment. The Bench upheld the findings of the lower courts and rejected the appellant’s claim.
The Court noted that the appellant failed to prove that she purchased the property without notice of the arbitral award. The award had already been passed when she acquired the property. Execution proceedings were also pending at the time of the sale.
The Bench accepted CCI’s submission that the transaction was collusive. It observed that the appellant’s relationship with Respondent No. 2 — as the mother of its Managing Director — indicated an attempt to defeat the arbitral award.
The Court warned that allowing pendente lite purchasers to raise objections would undermine the execution framework. Such a practice would encourage judgment-debtors to transfer properties and delay enforcement through surrogate objectors.
Doctrine of Lis Pendens
The Court applied the doctrine of lis pendens under Section 52 of the Transfer of Property Act, 1882. It held that the transfer took place after the arbitral award and during pending execution proceedings. Therefore, Section 52 squarely applied.
Summarising its conclusion, the Court observed:
“To sum up, we note that the Appellant is a purchaser post-arbitral award for recovery of the amount. The execution proceeding was pending when the sale deed was entered into between Respondent No. 2 and the Appellant. Moreover, the Appellant failed to discharge the onus on the sale being without notice of the existing claim. The arbitral award remains unrealised till date. Therefore, in the circumstances of this case, and by following the ratio in Danesh (supra) we hold that the claim petition of the Appellant is rightly dismissed by the courts below.”
Accordingly, the Supreme Court dismissed the appeal.
Cause Title and Appearances
Case Title: R. Savithri Naidu v. M/s The Cotton Corporation of India Limited and Another
For the Petitioner:
Mr. Gopal Sankarnarayanan, Senior Advocate (argued by);
Mr. Udian Sharma, AOR;
Mr. Anirudh Sriram, Advocate;
Mr. Manav Mitra, Advocate;
Ms. Harsha Sadhwani, Advocate;
Mr. Sahil Saraswat, Advocate.
For Respondent No. 1:
Ms. Sunita Singh, Advocate (argued by);
Mr. Abhigya Kushwah, AOR;
Mr. Pradeep Kumar Dubey, Advocate;
Mr. Siddharth Rajkumar Murarka, Advocate;
Mr. Rohan Rohatgi, Advocate;
Ms. Shubhangini Rohatgi, Advocate.
For Respondent No. 2:
Mr. Rohan Dewan, Advocate;
Mr. Rudra Deosthali, Advocate;
Ms. Garima Jain, AOR.
