R. Savithri Naidu vs M/s The Cotton Corporation of India Limited and Another

Held: Impugned order upheld – The non-production of tripartite agreement, which is the genesis for discharging the claim of ICICI Bank, as has been rightly held by the Executing Court, shows that the sale in favour of Appellant, even if for consideration cannot be without notice of the existing liability of the Company/Respondent No. 2 – The recovery proceedings under SARFAESI Act are independent and does not give any shield of protection to other claims against the Judgment Debtor/Borrower in default – In the circumstances of the case, the argument that the sale in favour of the Appellant is without notice, rejected – 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 – Appellant is a transferee pendente lite/post arbitral award purchaser, and is barred by Or.XXI r.102 from resisting the execution – 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, the claim petition of the Appellant was rightly dismissed by the courts below – If the argument of the appellant is accepted allowing pendente lite purchasers or third parties to bypass the strict procedural safeguards and institute separate suits or raise belated objections long after the execution processes (like attachment and sale) have advanced, it would completely derail the statutory machinery – Judgmentdebtors would be incentivized to systematically defeat decrees by transferring properties or planting surrogate objectors to initiate endless collateral litigation – Transfer of Property Act, 1882 – s.52 – Arbitration and Conciliation Act, 1996. [Paras 10, 13, 13.1, 14]

Code of Civil Procedure, 1908 – Or.XXI r.102 – On facts, Appellant is a transferee pendente lite/post arbitral award purchaser, and is barred by Or.XXI r.102 from resisting the execution: Held: In the facts and circumstances of the present case, the arbitral proceeding was instituted in 1999, and the award is dated 11.06.2001 – U/s.36 of the Arbitration and Conciliation Act, 1996, an arbitral award is enforceable in the same manner as if it were a decree of a court, essentially, a deemed decree – Or.XXI r.102 of the CPC explicitly states that the protections available to bona fide claimants under rr.98 and 100 do not apply to a transferee pendente lite – A transferee pendente lite is someone to whom the property is transferred after the institution of the suit in which the decree was passed – The suit, i.e., the arbitration proceeding, was instituted in 1999, and the Appellant purchased the property on account of a sale deed dated 23.04.2015 – 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 Or.XXI r.102 from resisting the execution – Arbitration and Conciliation Act, 1996 – s.36. [Para 10]

Code of Civil Procedure, 1908 – Order XXI:

Held: A suit may take 5 years to conclude, but its execution takes 10 years – Or.XXI was comprehensively amended in 1976 specifically to cure this mischief, operating as a self-contained code that strictly bars separate suits (u/s.47, rr.92(3), and 101) and imposes rigid limitation periods for raising objections – If the argument of the appellant is accepted allowing pendente lite purchasers or third parties to bypass these strict procedural safeguards and institute separate suits or raise belated objections long after the execution processes (like attachment and sale) have advanced, it would completely derail the statutory machinery – Judgment-debtors would be incentivized to systematically defeat decrees by transferring properties or planting surrogate objectors to initiate endless collateral litigation – Consequently, execution proceedings would not merely take 10 years, but would get trapped in an infinite loop and practically never get completed, reducing the hard-won decrees of competent courts to mere “paper tigers” – The provisions in the CPC must be employed to secure actual relief, not just a formal decree. [Paras 13, 13.1]