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Motilal Ravichand Vs. Utam Jagjivandas - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtMumbai
Decided On
Judge
Reported in(1889)ILR13Bom434
AppellantMotilal Ravichand
RespondentUtam Jagjivandas
Excerpt:
.....on the sale being a bond-fide transaction between plaintiff and chunilal. and although, having regard to the circumstance of its having been entered into on the eve of the failure of the firm, it may be regarded as one by which plaintiff obtained an unfair preference over the general body of the firm's creditors, there are no circumstances in the case which show that plaintiff in entering into it was a party to any scheme by chunilal to delay the creditors, and we have already said that we do not think the sale can be impeached by the defendant, on the ground of undue preference, in this suit......is that the purchase-money was retained by all the purchasers for the purpose of settling the firm's debts after he has absconded; and, supposing this to have been the case, we entirely agree with the assistant judge that it would be difficult to arrive at any other conclusion than that the purchasers were parties to the scheme for delaying the creditors of the firm. this is, however, distinctly denied by the plaintiff so far as he is concerned, and he, moreover, repudiates all knowledge of the sale to the other parties until they met at chunilal's mill for the purpose of registration. the other vendees were not called by either party; and as no direct evidence was given by the defendant, connecting plaintiff with chunilal's transactions with the other vendees, he was not, we think,.....
Judgment:

Charles Sargent, C.J.

1. The plaintiff has brought this suit to establish his right to the property in question, conveyed to him by a sale-deed of 27th February 1886, executed by the firm of Ranchhod Jamna. The defendant, on the other hand, who claimed to be entitled to attach it in execution of his decree obtained against the above firm, contends that the plaintiff's conveyance was fraudulent, as having been made with intent to defeat and delay the creditors of the firm. The following facts are not in dispute. The plaintiff, who is a shroff doing business at Ahmedabad, had for several years made advances to, and discounted bills for, the banking firm of Ranchhod Jamna. At the close of February 1886, the firm of Ranchhod Jamna was in difficulties and finally stopped payment on the 27th February 1886. However, before the firm stopped payment, four sale-deeds, comprising all the immoveable property of the firm, were executed? one of which was the sale-deed to plaintiff of the 27th February 1886, relating to the property in question, and these deeds were all registered at the same place on the 3rd March 1886, on which day, or the day following, Chunilal Maganlal, the managing member of the firm, absconded and remained away several months, the firm being then in debt to the extent of about Rs. 60,000, including a debt of Rs. 20,000 owing to the Bank of Bombay. The Assistant Judge has found that Chunilal's intention in executing the four sale-deeds was to defeat and delay his creditors, and that plaintiff knew of this intention, and was a party to it--and the plaintiff now appeals against that decision.

2. We entirely agree with the Assistant Judge that upon these facts the only possible conclusion is that the sale of all the immoveable property was a contrivance intended by the firm to delay and embarrass their creditors. But the question, whether any one of the above sales can be avoided, must depend upon how far the particular vendee can be deemed to have been a party to such intent. As Mr. Justice Fry remarks in In re Johnson; Golden v. Gillam L.R. 20Ch. Div. 389 'it could not be contended that the mere fraudulent intent of the vendor could avoid the deed if the purchaser were free from that fraud,' and such is obviously the equitable view of the matter independently of the Statute of Elizabeth. It is necessary, therefore, to consider the nature of the particular sale-deed in question and the circumstances under which it was executed, in order to arrive at a conclusion as to whether the sale to the plaintiff was bond fide as regards creditors.

3. Chunilal Maganlal (witness 65) was the managing member of the firm, and his statement is that the purchase-money was retained by all the purchasers for the purpose of settling the firm's debts after he has absconded; and, supposing this to have been the case, we entirely agree with the Assistant Judge that it would be difficult to arrive at any other conclusion than that the purchasers were parties to the scheme for delaying the creditors of the firm. This is, however, distinctly denied by the plaintiff so far as he is concerned, and he, moreover, repudiates all knowledge of the sale to the other parties until they met at Chunilal's mill for the purpose of registration. The other vendees were not called by either party; and as no direct evidence was given by the defendant, connecting plaintiff with Chunilal's transactions with the other vendees, he was not, we think, bound to call them.

4. It is further to be remarked that plaintiff stood in a perfectly different position as regards the firm from the other vendees. Although connected by his son's marriage with a member of the family constituting the firm, he was an important creditor of the firm who had been admittedly dunning the firm for payment, and there is, therefore, no improbability in his having entered into an arrangement with Chunilal quite independently of the other vendees and in ignorance of Chunilal's negotiations with them. It is true that the deeds were all registered on the same day at Chunilal's mill, hut this is quite consistent with their having been negotiated independently of one another. We think, therefore, that under the circumstances of the case as disclosed by the evidence, the transaction with plaintiff should be considered independently altogether of what may have passed between Chunilal and the other vendees. At the same time we cannot doubt that when the sale to plaintiff was negotiated, he was aware that the firm was in serious difficulties. His dealings with the firm and relationship with the family by marriage make it highly improbable that he should have been ignorant of the financial position, and of the fact that the firm was in a state of serious embarrassment.

5. Assuming, however, that this transaction was negotiated in contemplation of the approaching failure of the firm, and that it might possibly be regarded as amounting to a fraudulent preference in favour of the creditor and impeached as such, in a suit framed of the purpose by a person representing the body of creditors, it cannot, we think, be ground for impeaching the sale in the present suit, the object of which is to determine whether the defendant, an individual creditor, was entitled to attach and sell the property in execution of his own judgment-debt. If the sale is to be avoided in this suit, it must be because it was not effected bond fide, but with the intention of assisting Chunilal in delaying the creditors of the firm; and we proceed to consider it from that point of view. The sale purports to be in consideration of an existing debt, the amount of which has not been questioned, and a sum of Rs. 3,400 in cash. A part of the debt was probably, as found by the Assistant Judge, barred at the time of the sale. The Rs. 2,500 paid in samvat 1941, would be appropriated to the balance of Rs. 6,772-4 at the end of samvat 1939. But the residue of that balance would have been barred at the date of sale. However, Chunilal, who was certainly a hostile witness to the plaintiff, does not allude, in his examination, to any part of the debt being barred; but he insinuates, rather than alleges, that plaintiff had other security for the debt at the time in the shape of ornaments. The Assistant Judge has come to the conclusion that this was so, but beyond Chunilal's statement, which is very vague, there is no evidence to establish it satisfactorily. There are no entries in support of it in the books either of plaintiff or the firm, and it is distinctly denied by the plaintiff. It is true that plaintiff admits that ornaments had been deposited with him some two years before by Mahakore, the mother of his daughter-in-law, but he says the deposit was only for safe custody owing to a family dispute, and that the ornaments had been returned to Mahakore and the receipt for them was given in evidence, and not impugned; and Bhogilal's deposition shows that plaintiff made the same statement ten days after the sale, when the former went to try and get an advance on the security of the ornaments. We think, therefore, that it would be unsafe to conclude, upon the evidence in the case, that plaintiff had other security for the balance of debt when the sale took place.

6. As to the Rs. 3,400 to be paid in cash, Chunilal's account is that it was brought by plaintiff to the mill where the registration took place, but was taken back by him; the payment is, however, endorsed by Chunilal on the sale-deed; and there is no evidence, but Chunilal's statement, that it was taken back by the plaintiff, as opposed to the latter's distinct denial that such was the case. On the other hand, there is satisfactory evidence to show that the sale was intended to be completed by possession. It is in evidence that blank kabulayats to be signed by the tenants were obtained by plaintiff at the time of sale, and that plaintiff's karkum took immediate steps to obtain their signatures until obstructed by Chunilal some ten or fifteen days after the sale. The plaintiff and Chunilal differ as to the cause of the dispute which led to this conduct on the part of Chunilal. The plaintiff says it was owing to his refusing to advance Rs. 10,000 to Chunilal on his being threatened with criminal proceedings by the Bank of Bombay, who were his creditors for the amount of Rs. 20,000. Chunilal, on the contrary, says it was owing to plaintiff's refusal to settle his debts, as he had promised to do, and for which express purpose he had kept back the Rs. 3,400. There is no independent evidence as to this; and it is difficult to suppose that had the Rs. 3,400 been retained, as Chunilal Bays, by plaintiff for the purpose of settling his debts, plaintiff who occupies a respectable position as a banker, could have acted as he did, when Chunilal was threatened by the Bank of Bombay. It may be that there was some vague understanding between plaintiff and Chunilal that the former would assist the firm in settling with its creditors, but the evidence affords no sufficient reason for holding that the Rs. 3,400 were retained by the plaintiff, as alleged by Chunilal.

7. Lastly, although the Rs. 10,000 fixed as the price of the property may have been somewhat favourable to the plaintiff, there is no reliable evidence which shows that it was so much below the real value as to cast doubt on the sale being a bond-fide transaction between plaintiff and Chunilal.

8. Upon the whole of the evidence we see no reason to doubt that the sale to plaintiff was not a sham transaction, but a bond-fide one in consideration of a debt still due and Rs. 3,400 in cash; and although, having regard to the circumstance of its having been entered into on the eve of the failure of the firm, it may be regarded as one by which plaintiff obtained an unfair preference over the general body of the firm's creditors, there are no circumstances in the case which show that plaintiff in entering into it was a party to any scheme by Chunilal to delay the creditors, and we have already said that we do not think the sale can be impeached by the defendant, on the ground of undue preference, in this suit. We must, therefore, reverse the decree of the Court below, and direct that plaintiff be put into possession of the property in question. But under the special circumstances of the case, we shall order that parties pay their own costs throughout.


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